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Amended And Restated Executive Employment Agreement

Executive Employment Agreement

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CHEROKEE INC | Cherokee, Inc

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Title: AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
Governing Law: California     Date: 7/14/2016
Industry: Business Services     Sector: Services

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EXHIBIT 10.1

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

This Amended and Restated Executive Employment Agreement (the “ Agreement ”), dated July 11, 2016 (the “ Effective Date ”), is entered into by and between Cherokee, Inc., a Delaware corporation (the “ Company ”) and Henry Stupp (“ Executive ”) (collectively, the “ parties ”).

RECITALS

WHEREAS, the parties previously entered into an Employment Agreement dated August 26, 2011, which was subsequently amended and restated on July 15, 2013 (the “ Original Agreement ”); and

WHEREAS, the parties wish to amend and restate the Original Agreement and to provide for Executive’s continued employment with Company pursuant to the terms of this Agreement.

NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

I.POSITION AND RESPONSIBILITIES; TERM

A.Position.  As of the Effective Date, Executive shall continue to be employed by the Company to render services to the Company in the position of Chief Executive Officer.  Executive shall perform such duties and responsibilities as are normally related to such position in accordance with the standards of the industry and any additional duties now or hereafter assigned to Executive by the Company.  Executive shall also serve as the most senior executive officer of each of the Company’s subsidiaries, unless otherwise agreed by Executive and the Company.  Executive shall report solely to the Company’s Board of Directors (the “ Board ”).  Executive shall abide by the rules, regulations, and practices as adopted or modified from time to time in the Company’s sole discretion.  As of the Effective Date, Executive shall continue to serve as a member of the Board.  Each year during the Term, the Board shall nominate Executive for election to the Board at the Company’s annual meeting of stockholders.

B.Other Activities.  Except upon the prior written consent of the Company, Executive will not, during the term of this Agreement, (i) accept any other employment while employed by the Company, or (ii) engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that is reasonably likely to interfere in any material respect with Executive’s duties and responsibilities hereunder or create a conflict of interest with the Company.  Notwithstanding the foregoing, Executive shall be permitted to serve on corporate, civic or charitable boards or committees and shall be permitted to engage in personal business and investment activities (including without limitation activities related to Visioneering Marketing), provided that such activities do not materially interfere with the performance of Executive’s duties under this Agreement.

C.No Conflict. Executive represents and warrants that Executive’s execution of this Agreement, employment with the Company, and the performance of Executive’s proposed duties under this Agreement shall not violate any obligations Executive has to any other employer, person or entity, including any obligations with respect to proprietary or confidential information of any other person or entity.


 

D.Term.  This Agreement shall remain in effect from the Effective Date until January 31, 2020 (“ Initial Term ”).  After the Initial Term the Agreement shall automatically be renewed for three-year terms (each a “ Subsequent Term ,” and together with the Initial Term, a “ Term ”), unless either party provides the other party written notice of non-renewal at least ninety (90) days prior to the end of the then current Term.

II.COMPENSATION AND BENEFITS

A.Base Salary.  In consideration of the services to be rendered under this Agreement, the Company shall pay Executive a salary at the rate of Seven-Hundred-Fifty-Thousand Dollars ($750,000.00) per year (“ Base Salary ”). The Base Salary shall be paid in accordance with the Company’s regularly established payroll practice.  Executive’s 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 increased in the sole discretion of the Company.

B.Discretionary Bonus.  Within 60 days from the end of each fiscal year during the Term, the Compensation Committee of the Board shall evaluate Executive’s performance in light of factors that such committee deems relevant.  Based on this evaluation, Executive will be eligible to receive a bonus award of up to $300,000 for performance in each fiscal year.  The amount of the bonus, if any, shall be determined in the sole discretion of the Compensation Committee of the Board and shall be paid in accordance with the Company’s regularly established payroll practice within 75 days of the end of the relevant fiscal year.

C.Performance Bonus.  For each fiscal year during the Term, Executive shall be eligible to receive a performance bonus based on level of achievement of the Company’s EBITDA (inclusive of any amounts payable under this Section II.C) 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 during the relevant fiscal year). The amount of the performance bonus shall be $200,000 at 100% achievement, with a minimum bonus of $50,000 at 80% achievement and a maximum bonus of $350,000 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 during the relevant fiscal year), then Executive shall not be entitled to any performance bonus under this Section II.C. The determination regarding the satisfaction of the criteria for the performance bonus in this Section II.C 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 II.C 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 Section II.C 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 II.C and the terms and conditions of the applicable bonus or equity plan, the bonus or equity plan shall govern.

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D.Benefits.     Executive shall be eligible to participate in the benefits made generally available by the Company to similarly-situated executives, in accordance with the benefit plans established by the Company, and as may be amended from time to time in the Company’s sole discretion.  Executive shall be entitled to vacation of three weeks per annum.

E.Expenses.  The Company shall reimburse Executive for reasonable business expenses incurred in the performance of Executive’s duties hereunder in accordance with the Company’s expense reimbursement guidelines.  Executive agrees to abide by the Company’s Travel and Expense Reimbursement Policy, a copy of which has been delivered to Executive.  The Company shall also reimburse Executive for reasonable legal fees and expenses incurred by him in the negotiation and preparation of this Agreement up to a maximum amount of $20,000.

III.AT‑WILL EMPLOYMENT; TERMINATION BY COMPANY WITHOUT CAUSE; TERMINATION BY EXECUTIVE FOR GOOD REASON

A.At‑Will Employment.  Executive’s employment with the Company shall be “at‑will” at all times.  The Company may terminate Executive’s 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.  Executive may terminate his employment with the Company at any time, without any advance notice, for any reason or no reason at all, and all obligations of Executive under this Agreement shall cease, except as otherwise provided herein.

B.Severance.  Except in situations where the employment of Executive is terminated For Cause, By Death or By Disability (as defined in Section IV below), in the event that the Company terminates Executive’s employment at any time or if Executive terminates his employment at any time for Good Reason (as defined in Section V below), Executive will be entitled to receive an amount equal to twelve (12) months (the “ Severance Period ”) of Executive’s then-current Base Salary, payable in the form of salary continuation (“ Severance ”).  In addition, Executive will be entitled to receive: (i) a pro-rated performance bonus for the fiscal year in which such termination occurs (based on the actual achievement for the full fiscal year and then pro-rated to reflect the number of days of employment during such fiscal year) which shall be payable at the same time as performance bonuses are payable to the Company’s other senior executives; (ii) an additional severance payment equal to one times the Executive’s average performance bonuses for the prior two completed fiscal years, which shall be paid in a lump sum within 60 days of termination of employment; and (iii) accelerated vesting of the Executive’s restricted stock units (or other equity awards).  Executive shall not be entitled to any Severance if Executive’s employment is terminated For Cause, By Death or By Disability (as defined in Section IV below) or if Executive’s employment is terminated by Executive for any reason other than Good Reason. 

C.Medical and Dental Benefits. For such portion of the Severance Period as Executive is eligible for and elects COBRA continuation coverage, the Company shall either:  (i) continue Executive’s medical and dental benefits as such benefits are generally offered to the Company’s employees as of Executive’s termination date, or (ii) reimburse Executive for COBRA payments made by Executive to maintain his medical and dental benefits, as applicable under the Company’s insurance policies.

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D.Conditions to Benefits.    

1.Release of Claims Agreement .  The receipt of any severance or other benefits pursuant to Section III.B. will be subject to Executive signing and not revoking a release of claims agreement in the form attached hereto as Annex B, and such release becoming effective within sixty (60) days of Executive’s termination. No severance or other benefits will be paid or provided until the release of claims agreement becomes effective, and any severance amounts or benefits otherwise payable between the date of Executive’s termination and the date such release becomes effective shall be paid on the effective date of such release, subject to Annex A.

2.     Non-solicitation.  The receipt of any severance or other benefits pursuant to Section III.B. will be subject to Executive complying with the provisions of Section VII.B during the Severance Period.

3.Non-disparagement.  The receipt of any severance or other benefits pursuant to Section III.B. will be subject to Executive agreeing that during the Severance Period, Executive will not knowingly and materially disparage, criticize, or otherwise make any derogatory statements regarding the Company. During the Severance Period, the Company will not knowingly and materially disparage, criticize, or otherwise make any derogatory statements regarding Executive. Notwithstanding the foregoing, nothing contained in this Agreement will be deemed to restrict Executive, the Company or any of the Company’s current or former officers and/or directors from (1) providing information to any governmental or regulatory agency (or in any way limit the content of any such information) to the extent they are requested or required to provide such information pursuant to applicable law or regulation or (2) enforcing his or its rights pursuant to this Agreement. 

4.No Duty to Mitigate.  Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment.

IV.OTHER TERMINATIONS BY COMPANY

A.Termination for Cause.  For purposes of this Agreement, “For Cause” shall mean: (i) Executive is indicted or charged in a court of competent jurisdiction for, or pleads nolo contendere to, a felony or crime involving dishonesty, breach of trust, or physical harm to any person; (ii) Executive willfully engages in conduct that is in bad faith and materially injurious to the Company, including but not limited to, misappropriation of trade secrets, fraud or embezzlement; (iii) Executive commits a material breach of this Agreement, which breach is not cured within twenty days after written notice to Executive from the Company; (iv) Executive willfully refuses to implement or follow a lawful policy of the Company, which breach is not cured within twenty days after written notice to Executive from the Company; or (v) Executive engages in misfeasance or malfeasance demonstrated by a pattern of failure to perform job duties diligently and professionally.  The Company may terminate Executive’s employment For Cause only after affording the Executive an opportunity (on notice which may be a little as 24 hours) to appear (with his counsel) before the Board.  The Company shall pay to Executive all compensation to which Executive is entitled up through the date of termination, subject to any other rights or remedies of the Company under law; and thereafter all obligations of the Company under this Agreement shall cease.   Nothing in this Section shall affect Executive’s rights to payment of unreimbursed business expenses, rights under any benefit plan in which Executive is a participant or any rights to indemnification.

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B.By Death.  Executive’s employment shall terminate automatically upon Executive’s death.  The Company shall pay to Executive’s beneficiaries or estate, as appropriate, any compensation then due and owing. In addition, Executive will be entitled to receive: (i) a pro-rated performance bonus for the fiscal year in which such termination occurs (based on the actual achievement for the full fiscal year and then pro-rated to reflect the number of days of employment during such fiscal year) which shall be payable at the same time as performance bonuses are payable to the Company’s other senior executives; and (ii) accelerated vesting of the Executive’s restricted stock units (or other equity awards).  Thereafter all obligations of the Company under this Agreement shall cease.  Nothing in this Section shall affect any entitlement of Executive’s heirs or devisees to payment of unreimbursed business expenses, the benefits of any life insurance plan or other applicable benefit plans or any rights to indemnification. 

C.By Disability.  If Executive becomes eligible for the Company’s long term disability benefits or if, in the reasonable opinion of the Company (based on advice of a medical doctor reasonably acceptable to Executive and the Company), Executive is unable to carry out the responsibilities and functions of the position held by Executive by reason of any physical or mental impairment for more than ninety consecutive days or more than one hundred and twenty days in any twelve-month period, then, to the extent permitted by law, the Company may terminate Executive’s employment.  The Company shall pay to Executive all compensation to which Executive is entitled up through the date of termination, and thereafter all obligations of the Company under this Agreement shall cease.  In addition, Executive will be entitled to receive: (i) a pro-rated performance bonus for the fiscal year in which such termination occurs (based on the actual achievement for the full fiscal year and then pro-rated to reflect the number of days of employment during such fiscal year) which shall be payable at the same time as performance bonuses are payable to the Company’s other senior executives; and (ii) accelerated vesting of the Executive’s restricted stock units (or other equity awards).  Nothing in this Section shall affect Executive’s rights to payment of unreimbursed business expenses, rights under any disability plan or other applicable benefit plan in which Executive is a participant or any rights to indemnification.

V.OTHER TERMINATION BY EXECUTIVE

A.At-Will Termination by Executive.  Executive may terminate employment with the Company other than for Good Reason at any time for any reason or no reason at all, upon four weeks’ advance written notice.  During such notice period Executive shall continue to diligently perform all of Executive’s duties hereunder.  The Company shall have the option, in its sole discretion, to make Executive’s termination effective at any time prior to the end of such notice period.  Thereafter all obligations of the Company under this Agreement shall cease.  Nothing in this Section shall affect Executive’s rights to payment of unreimbursed business expenses, rights under any benefit plan in which Executive is a participant or any rights to indemnification.

B.Termination by Executive for Good Reason.  Executive may terminate employment with the Company For Good Reason.  For purposes of this Agreement, “For Good Reason” shall mean any of the following without the Executive’s consent:  (i) the assignment to Executive of any duties inconsistent with his position, duties, responsibilities or status with the Company or a reduction of the Executive’s duties or responsibilities; (ii) Executive no longer reports directly to the Board; (iii) a reduction in the Executive’s Base Salary or bonus opportunities; (iv) the Company’s requiring Executive to be based at any office or location more than 50 miles from the location at which he performs his services for the Company, except for travel reasonably required in the performance of Executive’s responsibilities; or (v) material breach by the Company

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of its material obligations under the Agreement or any other agreement with the Executive which breach is not cured within 20 days after written notice thereof by the Executive.

VI.TERMINATION OBLIGATIONS

A.Return of Property.  Executive agrees that all property (including without limitation all equipment, tangible proprietary information, documents, records, notes, contracts and computer-generated materials) furnished to or created or prepared by Executive incident to Executive’s employment belongs to the Company and shall be promptly returned to the Company upon termination of Executive’s employment.  Notwithstanding the foregoing, Executive shall be entitled to retain copies of his personal employment and tax records.

B.Resignation and Cooperation.  Upon termination of Executive’s employment, Executive shall be deemed to have resigned from all offices and directorships then held with the Company.  Following any termination of employment, Executive shall reasonably 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.  Executive shall also reasonably cooperate at the Company’s expense with the Company in the defense of any action brought by any third party against the Company that relates to Executive’s employment by the Company.

VII.INVENTIONS AND PROPRIETARY INFORMATION; PROHIBITION ON THIRD PARTY INFORMATION

A.Proprietary Information Agreement.  Executive agrees that he shall continue to be bound by the terms of the Company’s proprietary information and inventions agreement.

B.Non‑Solicitation.  Executive acknowledges that because of Executive’s position in the Company, Executive will have access to material intellectual property and confidential information.  During the term of Executive’s employment and for one year thereafter, in addition to Executive’s other obligations hereunder or under the proprietary information agreement, Executive shall not, for Executive or any third party, directly or indirectly (i) solicit, induce, recruit or encourage any person employed by the Company to terminate his or her employment or (ii) divert or attempt to divert from the Company any business with any customer, client, member, business partner or supplier about which Executive obtained confidential information during his employment with the Company, by using the Company’s trade secrets or by otherwise engaging in conduct that amounts to unfair competition.

C.Non‑Disclo


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