EMPLOYMENT AGREEMENT
EMPLOYMENT
AGREEMENT, made as of January 27, 2009, by and between American
Apparel, Inc., a Delaware corporation (herein referred to as the
“ Company ”), and Glenn A. Weinman (herein
referred to as the “ Executive ”) (the “
Agreement ”).
W
I T N E S S E T H:
WHEREAS, the
Company and the Executive deem it to be in their respective best
interests to enter into an agreement providing for the
Company’s employment of the Executive pursuant to the terms
herein stated;
NOW, THEREFORE, in
consideration of the premises and the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1.
Employment; Position and Duties; Exclusive Services.
(a)
Employment . The Company agrees to employ the
Executive, and the Executive agrees to be employed by the Company,
for the Term provided in Section 2 below and upon the other
terms and conditions hereinafter provided.
(b)
Position and Duties . During the Term, the
Executive (i) agrees to serve as the General Counsel and Secretary
of the Company and to perform such reasonable duties as may be
delineated in the By-Laws of the Company and as may be assigned to
him from time to time by the Board of Directors of the Company (the
“ Board ”), including, without limitation, the
management of the legal affairs of the Company, (ii) shall report,
as General Counsel of the Company, only to the Board, the Chairman
of the Board and the Chief Executive Officer of the Company, (iii)
shall be given such authority as is appropriate to carry out the
duties described above, it being understood that, in his capacities
as General Counsel and Secretary of the Company, his duties will be
consistent in scope, prestige and authority with the duties of
General Counsel of the Company as demonstrated by the
Company’s existing practices as of the effective date of this
Agreement, and (v) agrees to serve, if elected, at no additional
compensation in the position of officer or director of any
subsidiary or affiliate of the Company; provided ,
however , that such position shall be of no less status
relative to such subsidiary or affiliate as the position that the
Executive holds pursuant to clause (i) of this Section 1(b) is
relative to the Company.
(c)
Exclusive Services . During the Term, and except
for illness or incapacity, the Executive shall devote all of his
business time, attention, skill and efforts exclusively to the
business and affairs of the Company and its subsidiaries and
affiliates, shall not be engaged in any other business activity,
and shall perform and discharge the
duties which may be assigned to him from time
to time by the Board or the Chief Executive Officer;
provided , however , that nothing in this Agreement
shall preclude the Executive from devoting time during reasonable
periods required for:
(1) serving, in
accordance with the Company’s policies, as a director or
member of a committee of any company or organization involving no
actual or potential conflict of interest with the Company or any of
its subsidiaries or affiliates,
(ii) delivering lectures and fulfilling
speaking engagements,
(iii) engaging in charitable and community
activities, and
(iv) investing his personal assets in a Passive
Investment. For purposes of this Agreement, a “
Passive Investment ” shall mean an investment in a
business or entity which does not require the Executive to render
any services in the operations or affairs of such business or
entity and which does not materially adversely affect or interfere
with the performance of the Executive’s duties and
obligations to the Company or any of its subsidiaries or
affiliates.
(d)
Place of Employment . The 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 the Executive.
2.
Term of Agreement .
The term of
employment under this Agreement shall initially be the two-year
period commencing on February 17, 2009 (the “ Effective
Date ”) and ending on February 17, 2011, and shall be
automatically extended without further action by either party for
successive one-year periods, unless written notice of the
Company’s intention to terminate this Agreement has been
given to the Executive at least 90 days prior to the expiration of
the Term (including any one-year extension thereof). As
used in this Agreement, the “ Term ” shall mean
the initial two-year term plus any extensions thereof as provided
in this Section 2.
3.
Salary and Bonuses .
The
Executive’s cash compensation for all services to be rendered
by him in any capacity hereunder shall consist of base salary and
other compensation as provided in this Section.
(a)
Salary . The Executive shall be paid a minimum
base salary (the “Salary”) at the rate of $300,000.00
per annum. The Salary shall be payable in accordance
with the customary payroll practices for executives of the
Company. The amount of the Executive’s Salary will
be reviewed not less often than annually by the
Compensation Committee of the Board (the
“ Compensation Committee ”) and may be
increased, but not decreased below such amount, on the basis of
such review.
(b)
Performance Bonuses . The Board will consider the payment to
the Executive of an annual performance bonus as to each fiscal year
during the Term. The Board will also consider the
Executive’s participation in a long-term performance bonus
program being considered by the Board for senior executives of the
Company. The amount and timing of the bonuses, if any,
and criteria therefore shall be at the sole discretion of the
Board.
4.
Stock Options .
Commencing as of
the Effective Date, the Executive shall be eligible for stock and
stock option grants under the Company’s 2007 Performance
Equity Plan and any successor plan thereto (collectively, the
“ Equity Plan ”) for the Company’s
executive officers, in accordance with the terms and conditions
thereof. Stock and stock option grants, if any, will be
at the sole discretion of the Compensation
Committee. Any options granted to the Executive under
the Equity Plan shall be subject to the terms and conditions
specified by the Compensation Committee in accordance with the
provisions of the Equity Plan.
5.
Pension and Welfare Benefits .
During the Term,
the Executive will participate in all pension and welfare plans,
programs and benefits that are applicable to executives of the
Company.
(a)
Travel and Business-related Expenses . During the
Term, the Executive shall be reimbursed in accordance with the
policies of the Company for traveling and other expenses incurred
in the performance of the business of the Company.
(b)
Vacation; Leaves of Absence . The Executive shall
accrue three weeks of paid vacation for each full year of
employment during the Term; provided that the Executive
shall be allowed vacations and leaves of absence with pay on the
same basis as the Company generally provides to other senior
executive employees of the Company.
(c)
State, County and Legal Association Bar Dues and Fees
. During the Term, the Executive shall be reimbursed for
his State and County Bar Dues and for dues and/or fees required to
join legal or trade associations in the furtherance of the
Executive's duties and/or education.
7.
Termination of Employment .
(a)
Termination for Cause; Resignation Without Good Reason .
(i) If
the Executive’s employment is terminated by the Company for
Cause (as defined below in this Section) or if the Executive
resigns from his employment without Good Reason (as defined below
in this Section), prior to the expiration of the Term, the
Executive shall be entitled to receive: (A) the Salary
provided for in Section 3(a) as accrued through the date of
such resignation or termination; (B) any annual performance bonus
or long term performance bonus earned but not yet paid in respect
of any calendar year preceding the year in which such termination
or resignation occurs; and (C) any unreimbursed
expenses. The Executive shall not accrue or otherwise be
eligible to receive Salary payments or to participate in any plans,
programs or benefits described in Section 5
hereof with respect to periods after the date of such termination
or resignation and shall not be eligible to receive any annual
performance bonus or long term performance bonus in respect of the
year of such termination or resignation or any calendar year
following the year in which such termination or resignation
occurs. Any bonus earned in respect of a year prior to
the year in which such termination or resignation occurs shall be
payable at the same time and in the same manner as bonuses are paid
to participants in the applicable bonus plan.
The Executive shall
have no right under this Agreement or otherwise to receive any
other compensation, or to participate in any other plan,
arrangement or benefit, with respect to future periods after such
termination or resignation of employment (except to the extent
provided for under the terms of any such plan, arrangement or
benefit).
(ii) Termination
for “ Cause ” shall mean termination by action
of the Board because of: (A) the Executive’s
willful and continued failure (other than by reason of the
incapacity of the Executive due to physical or mental illness)
substantially to perform his duties hereunder; (B) the conviction
of the Executive or the Executive entering a plea of guilty or nolo
contendere to a crime that constitutes a felony or the perpetration
by the Executive of a serious dishonest act against the Company or
any of its affiliates or subsidiaries; (C) any willful misconduct
by the Executive that is materially injurious to the financial
condition or business reputation of the Company or any of its
affiliates or subsidiaries; or (D) chronic alcoholism or drug abuse
which materially affects the Executive’s performance
hereunder, provided , however , that no event or
circumstance shall be considered to constitute Cause within the
meaning of this clause (ii) unless the Executive has been given
written notice of the events or circumstances constituting Cause
and has failed to effect a cure thereof within 30 calendar days
following the receipt of such notice.
(iii) Resignation
for “ Good Reason ” shall mean the resignation
of the Executive because of (A) a material reduction in the
Executive’s responsibilities, duties, authority, status or
titles as described in Section 1 above; (B) failure by the
Company to pay or provide the Executive when due any compensation,
benefits
or perquisites to which the Executive is
entitled pursuant to this Agreement or any other plan, contract or
arrangement in which the Executive participates or is entitled to
participate; or (c) a material breach of the Company’s
obligations under this Agreement; provided , however
, that no event or circumstance shall be considered to constitute
Good Reason within the meaning of this clause (iii) unless the
Company has been given written notice of the events or
circumstances constituting Good Reason by the Executive within 30
days of the initial occurrence of such event or circumstance and
the Company has failed to effect a cure thereof within 30 calendar
days following the receipt of such notice.
(iv) The date of
termination of employment by the Company pursuant to this
Section 7(a) shall be the date specified in a written notice
of termination from the Company to the Executive, which, in the
case of a proposed termination to which the 30-day cure period
provided for in subsection (ii) above applies shall be no less than
31 days after the delivery of such notice to the
Executive. The date of a resignation by the Executive
pursuant to this Section 7(a) shall be the date specified in
the written notice of resignation from the Executive to the
Company, which, in the case of a proposed resignation to which the
30-day cure period provided for in subsection (iii) above applies
shall be no less than 31 days after the delivery of such notice to
the Company, or, if no date is specified therein, 61 days after
receipt by the Company of the written notice of resignation from
the Executive.
(b) Termination
Without Cause, Resignation for Good Reason .
(i) If the
Executive’s employment is terminated by the Company without
Cause or if the Executive should resign for Good Reason, prior to
the expiration of the Term, he shall be entitled to
receive: (A) the Salary provided for in
Section 3(a) as accrued through the date of such resignation
or termination and continuing for a period of one year from the
date of such resignation or termination (the “
Continuation Period” ); (B) any bonus earned but not
yet paid in respect of any calendar year preceding the year in
which such termination or resignation occurs; (C) any unreimbursed
expenses and (1) a bonus for the calendar year in which such
termination or resignation occurs equal to the Executive’s
target annual performance bonus, if any, for such year and each
subsequent calendar year included in whole or in part within the
Continuation Period, provided , however , that the
amount of such bonus payable in respect of any partial calendar
year at the conclusion of the Continuation Period shall be prorated
and shall equal such target annual performance bonus multiplied by
a fraction, the numerator of which shall equal the number of days
in such calendar year up to and including the last day of the
Continuation Period and the denominator of which shall equal the
lesser of 365 or the number of days in such final
calendar year up to and including the last day of the Term; and (D)
all stock and stock option grants awarded to the Executive by the
Company, or a successor by merger or acquisition, including, but
not limited to all awards under the Company’s 2007
Performance Equity Plan and any successor plan thereto, shall
become 100% vested
and shall be exercisable as provided in the applicable stock option
agreement.
Except to the
extent required pursuant to Section 21 hereof, during the
Continuation Period, (X) Salary payments to the Executive shall be
payable in accordance with the payroll practices of the Company,
and (Y) bonus payments, if any, shall be made in respect of each
calendar year at the same time and in the same manner as bonuses
are paid to participants in the applicable bonus plan.
The Executive shall
also be entitled to continued participation in the medical, dental
and insurance plans and arrangements described in Section 5
, on the same terms and conditions as are in effect
immediately prior to such termination or resignation, until the
earlier to occur of (i) the last day of the Continuation Period and
(ii) such time as the Executive is entitled to comparable benefits
provided by a subsequent employer. Anything herein to
the contrary notwithstanding, the Company shall have no obligation
to Continue to maintain during the Continuation Period any plan or
program solely as a result of the provisions of this
Agreement. If, during the Con
