Exhibit 10.5
American Apparel, Inc.
747 Warehouse Street
Los Angeles, California 90021
March 13, 2009
Lion Capital (Guernsey) II
Limited
PO Box 656
2nd Floor, Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 3PP
Attn: Rob Jones
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RE:
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Extension
of Lock-Up Agreement
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Ladies and Gentlemen:
Reference is made to (i) the
Investment Agreement, dated as of March 13, 2009 (as it may be
hereafter amended, supplemented or modified from time to time, the
“ Investment Agreement ”), between American
Apparel, Inc., a Delaware corporation (the “ Company
”), and Lion Capital (Guernsey) II Limited, a Guernsey
limited company (the “ Investor ”), and
(ii) the Lock-Up Agreement, dated December 12, 2007 (the
“ Lock-Up Agreement ”), executed by Dov Charney
(“ Mr. Charney ”).
This letter agreement is being
delivered by the Company to the Investor pursuant to
Section 1.2(b)(1)(G) of the Investment Agreement.
Capitalized terms used but not defined herein have the respective
meanings set forth in the Investment Agreement.
Mr. Charney hereby agrees the
Restricted Period (as defined in the Lock-Up Agreement) under the
Lock-Up Agreement shall be extended from December 12, 2010 to
December 31, 2013 (the “ Extension Period
”); provided that the Extension Period shall terminate
upon the earliest to occur of the following events (any such event,
an “ Extension Period Termination Event ”):
(i) (A) the Investor and its Affiliates beneficially own
less than 4,000,000 shares of Common Stock issued or issuable upon
exercise of the Warrant and (B) the loans made pursuant to the
Credit Agreement, as it may be hereafter amended, supplemented or
modified from time to time, have been repaid in full,
(ii) Mr. Charney’s employment is terminated by the
Company “without cause” or (iii) Mr. Charney
terminates his employment with the Company for “Good
Reason” (the terms “without cause” and
“Good Reason” having the respective meanings set forth
in the Employment Agreement, dated as of December 12, 2007, as
it may be hereafter amended, supplemented or modified from time to
time, between Mr. Charney and the Company). Except as
expressly provided herein, nothing herein shall modify the terms of
the Lock-Up Agreement, and, for the avoidance of doubt, the
occurrence of any Extension Period Termination Event shall not
apply to or terminate any portion of the Restricted Period which
occurs prior to the beginning of the Extension Period.
Notwithstanding the foregoing,
during the Extension Period, Mr. Charney shall have the right
to Transfer (as defined in the Lock-Up Agreement), in a single
transaction or in multiple transactions
from time to time, a number of shares of Common
Stock otherwise subject to the Lock-Up Agreement not to exceed
twenty-five percent (25%) of the total number of shares of
Common Stock in which Mr. Charney has a legal or beneficial
interest as of December 12, 2010. In addition, for the
avoidance of doubt, Mr. Charney shall have the right during
the Extension Period to make any Transfer that would not be
prevented by or subject to the Lock-Up Agreement during the
Restricted Period.
This letter agreement is not
intended to, and does not, confer upon any person or entity, other
than Investor and its assignees, any rights or remedies
hereunder
