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Exhibit 10.2
EMPLOYMENT
AGREEMENT
This Employment Agreement
(the “ Agreement ”) is made between Endeavor
Acquisition Corp. (the “ Company ”), a Delaware
corporation, AAI Acquisition LLC, a wholly owned subsidiary of the
Company (“ Merger Sub ”), and Dov Charney
(“ Executive ”) and is entered into concurrently
with the closing of the merger and related business combination
transactions (collectively, the “ Acquisition ”)
prescribed by the Agreement and Plan of Reorganization (“
Reorganization Agreement ”) entered into as of
December 18, 2006, and thereafter amended and restated as of
November 7, 2007, by and among the Company, Merger Sub, American
Apparel, Inc., a California corporation (“ AAI
”), the various Canadian companies defined in the
Reorganization Agreement as CI, American Apparel, LLC, a California
limited liability company (“ AALLC ” and,
collectively with AAI and CI, the “ Target Companies
”), and all of the stockholders or members of the Target
Companies, which include the Executive. Capitalized terms not
otherwise defined herein shall have the meanings assigned to them
in the Reorganization Agreement.
R E C I T A L
S
WHEREAS, the Company desires
to be assured of the association and services of Executive;
and
WHEREAS, Executive is willing
and desires to be employed by the Company, and the Company is
willing to employ Executive, upon the terms, covenants and
conditions hereinafter set forth.
NOW, THEREFORE, in
consideration of the mutual terms, covenants and conditions
hereinafter set forth, the parties hereto agree as
follows:
1. Employment. The
Company hereby employs Executive, and Executive hereby accepts such
employment, effective as of the Effective Date, upon the mutual
terms, covenants and conditions set forth herein.
2. Term .
2.1 Initial Term. The
initial term of this Agreement is the three (3) year period
beginning on the Effective Date and ending on December 31,
2010, unless terminated earlier pursuant to the provisions of
Section 7 of this Agreement; provided, however, that
Executive’s obligations set forth in Section 11 of this
Agreement shall continue in effect after any such
termination.
2.2 Additional Terms.
Beginning on December 31, 2009, and on each anniversary of
such date, the term of this Agreement will automatically renew for
successive one-year periods unless either party provides notice of
non-renewal at least 90 days prior to such renewal date.
3. Duties. Executive
will serve as Chief Executive Officer and President of each of the
Company, Merger Sub and the CI companies (the “
Constituent Companies ”) and shall have such duties
and responsibilities as may from time to time be assigned to
Executive by the Board of Directors of each of the Constituent
Companies (in each case, the “ Board ”),
commensurate with Executive’s title and position described in
this sentence. Executive shall report directly to the Board of each
of the Constituent Companies. Executive agrees that he shall at all
times conscientiously perform all of the duties and obligations
assigned to him under the terms of this Agreement to the best of
his ability and experience and in compliance with law. Executive
shall perform his duties out of the Company’s Los Angeles,
California office (as same may be relocated in the same
metropolitan area from time to time) or at such other location as
shall be agreed to by the Company and Executive; provided, that,
Executive’s duties will include reasonable travel in the
United States and abroad, including but not limited to travel to
the Company’s domestic and foreign showrooms and offices of
Company and its subsidiaries and affiliates as is reasonably
necessary and appropriate to the performance of Executive’s
duties hereunder. Executive will comply with and be bound by
Company’s operating policies, procedures, and practices from
time to time in effect during Executive’s
employment.
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4. Exclusive Service.
Executive agrees to use his best efforts to promote the interests
of the Constituent Companies and to devote his full business time
and energies to the business and affairs of the Constituent
Companies and the performance of his duties hereunder. Executive
may, however, engage in civic and not-for-profit activities for
which no compensation (other than reimbursement of his actual
expenses incurred in performance of such activities) is paid to
him, so long as such activities do not materially interfere with
the performance of his duties to the Constituent Companies or
directly conflict with the business interests of the Constituent
Companies.
5. Board Membership .
Company will nominate Executive to serve as a member of the
Company’s Board at all times at which Executive is up for
re-election during the term of this Agreement.
6. Compensation and
Benefits .
6.1 Salary. During the
term of this Agreement, the Company will pay Executive an initial
salary of $750,000 per annum. Annual salary reviews will be
conducted by the Company’s Board at which time
Executive’s base salary may be increased but not
decreased.
6.2 Annual Performance
Bonus. Executive is eligible to receive an annual performance
bonus for each Company fiscal year based on the achievement of
performance and/or revenue goals set by the Company’s Board
or a committee thereof, with a target bonus equal to 150 % of
Executive’s annual base salary. All payments made pursuant to
this Section 6.2 will be made in no event later than the later
of (i) the 15 th day
of the third month following the end of Executive’s taxable
year in which the annual performance bonus is determined or
(ii) the 15 th day
of the third month following the end of the Company’s taxable
year in which the annual performance bonus is
determined.
6.3 Long-Term Performance
Bonus . Executive is eligible to receive a long-term
performance bonus based on achievement of performance and/or
revenue goals set by the Company’s Board or a committee
thereof, covering the three (3) year period beginning on the
Company fiscal year of the Effective Date, in an amount up to
300 % of base salary. All payments made pursuant to this
Section 6.3 will be made in no event later than the later of
(i) the 15 th day
of the third month following the end of Executive’s taxable
year in which the long-term performance bonus is determined or
(ii) the 15 th day
of the third month following the end of the Company’s taxable
year in which the long-term performance bonus is
determined.
6.4
RESERVED
6.5 Benefits.
Executive is eligible to participate (at Company’s cost) in
Company’s employee benefit plans of general application as
they may exist from time to time, including without limitation
those plans covering pension and profit sharing, executive bonuses,
stock purchases, stock options, and those plans covering life,
health, and dental insurance in accordance with the rules
established for individual participation in any such plan and
applicable law. Executive will receive such other benefits,
including vacation, holidays and sick leave, as Company generally
provides to its employees holding similar positions as that of
Executive. The Company reserves the right to change or otherwise
modify, in its sole discretion, the benefits offered herein to
conform to the Company’s general policies as may be changed
from time to time during the term of this Agreement. Executive
shall also be entitled to continue to use the Target
Companies’ residential apartments and vehicles maintained by
the Target Companies for use by its executives and other
employees.
6.6 Expenses. Company
will reimburse Executive for all reasonable and necessary expenses
incurred by Executive in connection with Company’s business,
provided that such expenses are deductible to Company and do not
result in an excise tax to Executive under Section 409A of the
Internal Revenue Code of 1986, as amended (the “ Code
”), are in accordance with Company’s applicable policy
and are properly documented and accounted for in accordance with
the requirements of the Internal Revenue Service.
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7. Termination Events
.
7.1 Permanent
Incapacity. This Agreement and Executive’s employment
with the Company shall automatically terminate on the date on which
Executive dies or becomes permanently incapacitated. “
Permanent incapacity ” as used herein shall mean the
inability to engage in any substantial gainful activity or the
receipt of income replacement benefits for a period of three
(3) months or more under an accident and health plan covering
employees of the Company by reason of any medically determinable
physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not
less than 12 months. Executive shall be deemed to have “
become permanently incapacitated ” on the date 30 days
after the Company has determined that Executive is permanently
incapacitated and so notifies Executive.
7.2 Termination By The
Company With Cause. Executive’s employment may be
terminated by the Company with cause in the event of any of the
following actions by Executive: (i) willful and continued
failure to fully perform material duties under this Agreement
(other than Permanent Incapacity), (ii) willful and continued
failure or refusal to follow material written directions of the
Company’s Board consistent with Executive’s authority,
duties and responsibilities, (iii) the commission by Executive
of an act of fraud or embezzlement against the Company,
(iv) the conviction of Executive or Executive entering a plea
of guilty or nolo contendere to a crime that constitutes a felony
(“ Cause ”). In this regard, the parties
acknowledge that the Executive is a party with respect to the case
captioned as Mary Nelson v. American Apparel, Inc., et al., Case
Number BC333028, filed in Superior Court of the State of California
for the County of Los Angeles, Central District and agree that this
case shall not be used as the basis for a termination with Cause
under this Section 7.2, regardless of the outcome. Executive
shall have a period of thirty (30) days to cure any acts which
would otherwise give the Company the right to terminate employment
with Cause starting at the date of receipt of written notice of the
Company’s Board’s intent to terminate Executive with
Cause. Such notice shall state in reasonable detail the acts which
the Company considers to be grounds for such termination. Executive
shall be provided a reasonable opportunity during such 30-day
period to hear and consider the evidence against him and a
reasonable opportunity to provide information or other defense
relevant to the decision to terminate with Cause.
7.3 Termination Without
Cause. Subject to the terms set forth in Section 8 below,
Executive’s employment may be terminated by the Company
“ without cause ” by providing a (30) day
written notice of such termination.
7.4 Termination for Good
Reason. Executive may terminate his employment for “
Good Reason ” effective upon delivery of written
notice to the Company, which shall be given no later than 90 days
from the date the Company takes one of the following actions
without Executive’s consent: (i) assignment to Executive
of any duties materially inconsistent with his authority, duties or
responsibilities, or any other action which results in a material
diminution or adverse change in such authority, duties or
responsibilities, (ii) a material breach of the
Company’s obligations under this Agreement that is not cured
within thirty (30) days after written notice, or (iii) a
material reduction in Executive’s annual base salary or bonus
opportunities, which is not related to any failure by Executive to
satisfy mutually agreed upon performance goals.
8. Severance
Payments
8.1 Payment On Termination
Upon Permanent Incapacity, With Cause or Death. Upon
termination of Executive’s employment pursuant to
Section 7.1, Section 7.2 or Executive’s death, the
Company shall pay Executive or, to the extent applicable,
Executive’s estate, within ten days after the effective date
of such termination, any unreimbursed expenses then owed by the
Company to Executive and all accrued but unpaid wages. Executive
shall not be entitled to any other consideration or
compensation.
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8.2 Payment Upon
Termination Without Cause Or For Good Reason. In the event that
Executive’s employment is terminated (i) by the Company
without Cause or (ii) by Executive for Good Reason, Executive
shall be entitled to the following: (1) a lump sum payment on
the 15th day following Executive’s termination of employment
of a pro rata portion of his annual and long term performance
bonuses for the year in which he is terminated as if 100% of the
performance targets were met, (2) a lump sum payment on the
15th day following Executive’s termination of employment
equal to the greater of (x) annual base salary for the
remainder of Executive’s employment contract or (y) two
(2) times the sum of Executive’s annual base salary and
maximum annual performance bonus, (3) immediate vesting of all
equity awards granted to Executive by the Company and (4) all
lock-up restrictions on all of Executive’s stock in the
Company shall immediately lapse (collectively referred to as,
“ Severance Benefits ”); provided, however, that
to the extent required under Section 409A of the Code, all
Severance Benefits shall be made or become effective, as
applicable, on the first business day following the six-month
period immediately following the Executive’s date of
termination, plus interest thereon, at a rate equal to the
applicable “Federal short-term rate” (as defined in
Section 1274(d) of the Code) for the month in which such date
of termination occurs, from the respective dates on which such
amounts would otherwise have been paid until the actual date of
payment; except that, in the event of Executive’s death all
Severance Benefits shall be made or become effective, as
applicable, immediately following the date of Executive’s
death.
8.3 Section 409A of
the Code . For purposes of this Agreement, Executive’s
employment shall be treated as having terminated only if the
Executive shall have incurred a “separation from
service” within the meaning of Section 409A of the Code
and applicable guidance issued thereunder.
9. Gross-Up
.
9.1 Whether or not Executive
becomes entitled to payments under Section 8 of this
Agreement, if any of the payments or benefits received or to be
received by Executive in connection with a “ Change in
Control, ” as defined in Section 10 below, or
Executives termination of employment (whether pursuant to the terms
of this Agreement or any other plan, arrangement or agreement with
the Company, any Person, as defined below, affiliated with the
Company, any Person whose actions result in a change in control or
any Person affiliated with the Company or such Person) (all such
payments and benefits, excluding the Gross-Up Payment being
hereinafter referred to as the “ Total Payments
”) will be subject to the excise tax impos
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