SEPARATION AGREEMENT AND FULL MUTUAL RELEASE OF ALL CLAIMS

This Separation Agreement and Release (“Agreement”) is entered into by and
between American Apparel, Inc. (“Parent”), American Apparel (USA), LLC, American
Apparel Retail, Inc. and/or its subsidiaries and affiliates wherever situated
worldwide (collectively “American Apparel” or “Company”), on the one hand, and
MARTIN STAFF (“Executive”), on the other hand (collectively “the Parties”).

1.           SEPARATION FROM AMERICAN APPAREL

The Parties’ employment relationship shall terminate effective at the end of the
business day on November 4, 2011 (hereinafter, the “Separation Date”).  By
executing this Agreement, Executive hereby resigns, effective as of the
Separation Date, from (i) his position as Chief Business Development Officer of
Parent, and (ii) all positions as a director, officer, employee or otherwise,
and any positions on the board of directors, other governing body or any
committee thereof, of the Company or any subsidiary or affiliated entity of
Company.  Executive agrees he shall execute any and all other documents
necessary to effect such resignations.

Executive shall promptly provide the Company with a press release concerning the
termination of Executive’s employment with the Company for use in any regulatory
filings by the Company and disclosure to the general public.  Such press release
shall not be utilized unless the provisions thereof are agreed upon in writing
by both the Company and Executive, such approval not to be unreasonably withheld
by either party.

2.           PAYMENTS; CONSIDERATION

In consideration of the terms, representations, promises, waivers and releases
contained in this Agreement, and in accordance with (and in full satisfaction
of) Section 6(b) of the Employment Agreement executed March 21, 2011, by Parent
and Executive (the “Employment Agreement”), the Company will provide Executive
(or, in the event of his earlier death, his Estate)  with the following payments
and benefits, conditioned upon Executive’s executing and not revoking this
Agreement and returning it to the Company:

a.           Accrued Salary.  Any unpaid base salary provided for in Section
3(a) of the Employment Agreement, accrued up to and including the Separation
Date;

b.           Severance Payment. A cash amount of $300,000, payable in equal
installments over the course of the six-month period immediately following the
Separation Date in accordance with Company’s usual payment practices;
 

 
 

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c.           Unreimbursed Expenses.  Payment for any unreimbursed business
expenses up to and including the Separation Date to which Executive is entitled
to reimbursement under Company’s expense reimbursement policy;

d.           Cash in Lieu of Restricted Stock Award (RSA).   In lieu of any RSA
for the year in which the Separation Date occurs, a cash payment in the amount
of $300,000, payable in a lump sum on the sixtieth (60th) day following the
Separation Date; and

e.           Benefits Continuation.  Executive (and those eligible dependents
who were participants in the applicable plans as of the Separation Date) shall
be entitled to continued participation in the medical, dental and insurance
plans and arrangements described in Section 4 of the Employment Agreement, on
the same terms and conditions as are in effect immediately prior to the
Separation Date, until the earlier to occur of (i) the last day of six-month
period immediately following the Separation Date and (ii) such time as Executive
is entitled to comparable benefits provided by a subsequent employer.  The
Company shall have no obligation to continue to maintain during the six-month
period immediately following the Separation Date any plan or program solely as a
result of the provisions of this Agreement.  If, during the six-month period
immediately following the Separation Date, (x) Executive is precluded from
participating in a plan or program by its terms or applicable law, (y)
Executive’s participation in a plan or program would cause the Company to be
subject to an excise tax or (z) Company for any reason ceases to maintain such
plan or program, Company shall provide Executive with compensation or benefits
the aggregate value of which, in the reasonable judgment of Company, is no less
than the aggregate value of the compensation or benefits that Executive would
have received under such plan or program had he been eligible to participate
therein or had such plan or program continued to be maintained by Company. Until
the Separation Date, Executive shall be entitled to continued payments,
reimbursements and coverage for other benefits described in Section 5 of the
Employment Agreement, including, but not limited to, a clothing allowance.

f.           Other.   Executive shall be allowed to retain his Company laptop
computer without charge. Executive’s Company email address and office telephone
shall remain in operation until December 31, 2011.

For the avoidance of doubt, the date of termination for purposes of Section 6(b)
of the Employment Agreement shall be the Separation Date.

3.           ACKNOWLEDGEMENT OF NO PENDING CLAIMS

OTHER THAN FOR PAYMENTS AND BENEFITS DUE TO EXECUTIVE HEREUNDER FROM COMPANY,
Company and Executive both acknowledge that they do not have any pending claims
of any nature whatsoever against the other.  Accordingly, Executive hereby
acknowledges that he has no pending claims against Company or any Company Agent
(as defined below), including, but not limited to, any claims for any wages
(including any claim(s) for overtime pay), wrongful termination, constructive
discharge, harassment or discrimination based on sex, gender, age, race,
national origin, disability, or any other characteristic protected by federal,
state, or any other applicable law, or any claims that may be brought under the
Civil
 

 
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Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with
Disabilities Act of 1990,  the Family and Medical Leave Act, the California
Family Rights Act, or the California Fair Employment and Housing Act, or any
other claim not specifically named or mentioned herein.  Accordingly, Company
hereby acknowledges that it has no pending claims against Executive, including,
but not limited to, any claims relating to Executive’s employment or engagement
by the Company for any reason whatsoever, past, present or future, known or
unknown.  As used herein, “Company Agent” means any of Company’s parent
corporations, successor entities, present and/or former subsidiaries, divisions,
and affiliated entities, and any of their present and/or former stockholders,
directors, officers, employees, attorneys, agents and representatives.

THE PARTIES UNEQUIVOCALLY CERTIFY THAT THEY HAVE NO PENDING CLAIMS AGAINST THE
OTHER WHATSOEVER, AND THIS AGREEMENT SERVES AS FURTHER PROOF THAT:

a.           EXECUTIVE HARBORS NO PAST, PRESENT OR FUTURE CLAIMS OF ANY NATURE
WHATSOEVER INCLUDING THOSE NAMED ABOVE AGAINST COMPANY; AND

b.           COMPANY HARBORS NO PAST, PRESENT OR FUTURE CLAIMS OF ANY NATURE
WHATSOEVER INCLUDING THOSE NAMED ABOVE AGAINST EXECUTIVE.

4.           FULL MUTUAL RELEASE

In exchange for the payments and other consideration provided in Paragraph 2 of
this Agreement, Executive, on behalf of himself, his heirs, executors, and
assigns (which for purposes of this Paragraph 4 shall be referred to
collectively as “Executive”) and Company on behalf of itself, and its
affiliates, subsidiaries, assigns and administrators hereby settle and release
and forever discharge each other from any and all claims, actions, causes of
action, charges, and complaints of any nature whatsoever past, present and
future, known or unknown  (collectively, “Claims”).  Subject to Company
complying with the terms hereof as to consideration due to Executive by Company,
Executive hereby settles and releases and forever discharges Company and
Company’s Agents from any and all Claims which Executive has, or claims to have,
against Company and/or Company’s Agents, whether known or unknown, because of
any alleged conduct, acts, or omissions, or any transaction whatsoever from the
beginning of time to the date of the execution of this Agreement.

It is intended that the Claims Executive is settling and releasing through this
Agreement include, but are not limited to, Claims of wages (including any
Claim(s) for vacation or overtime pay), discrimination or harassment on account
of race, color, religion, gender, sex, sexual orientation, sexual identity, age,
citizenship, national origin, mental or physical disability, medical condition,
genetic characteristic, marital status, participation in a registered domestic
partnership, pregnancy, veteran status, or any other discrimination or
harassment prohibited by any federal, state or local law, ordinance, regulation
or order (including, but not limited to, Title VII of the Civil Rights Act of
1964, the Americans with Disabilities Act, the Civil Rights Act of 1866, the
 
 
 
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Civil Rights Act of 1991, the Equal Pay Act; the Age Discrimination in
Employment Act, (“ADEA”), the Older Workers Benefit Protection Act, and the
California Fair Employment and Housing Act), for wages, vacation pay, benefits,
penalties, breach of contract, wrongful termination of employment, breach of the
covenant of good faith and fair dealing, any statutory or non-statutory tort or
contractual Claim, Claims that may be brought under California law, including
the California Fair Employment and Housing Act, and any Claim of a violation of
any applicable federal, state, municipal, local statute or ordinance, and all
similar state laws relating to wages, benefits, or harassment or discrimination
in employment, and further including any regulation of an administrative agency
or government authority, relating to wages, benefits, discrimination or
harassment in employment, or any other Claim not named or mentioned herein.

Executive understands and agrees that he is waiving his rights under the ADEA
and thus he:  (a) has been informed and understands and agrees that he has
twenty-one (21) calendar days after receipt of this Agreement to consider
whether to sign it; (b) as been informed and understands and agrees that he may
revoke this Agreement at any time during the seven (7) calendar days after it is
signed and returned to the Company, in which case none of the provisions of this
Agreement will have any effect.  Executive acknowledges and agrees that if he
wishes to revoke this Agreement, he must do so in writing, and that such
revocation must be signed by Executive and received by the Company no later than
the seventh (7th) day after Executive has signed the Agreement.  Executive
acknowledges and agrees that, in the event Executive revokes the Agreement, he
shall have no right to receive any of the consideration payable under Paragraph
2 herein; and (c) understands and agrees that he has been advised in this
writing to consult with an attorney of his choice concerning the legal
consequences of this Agreement and Executive hereby acknowledges that prior to
signing this Agreement he had the opportunity to consult with an attorney of his
choosing regarding the effect of each and every provision of this document.

Executive understands that nothing in this Agreement shall be construed to
prohibit him from filing a charge with, or participating in any investigation or
proceeding conducted by, the EEOC, National Labor Relations Board, and/or any
federal, state or local agency.  Notwithstanding the foregoing, Executive hereby
waives any and all rights to recover monetary damages in any charge, complaint,
or lawsuit filed by him or by anyone else on his behalf based on events
occurring prior to the date of this Agreement.  Executive further understands
that this Agreement does not release: (1) any Claim for vested benefits under
any ERISA plan; (2) any claim that this Agreement has been breached; (3) any
Claim that cannot be released by private agreement, including, but not limited
to, Claims for benefits for occupational injury or illness under California
workers' compensation law or Claims for unemployment insurance benefits; or (4)
any rights to indemnification Executive may have under Section 16 of the
Employment Agreement, Company’s certificate of incorporation, bylaws, or any
indemnification agreement entered into between Executive and Company and any
rights Executive may have under any applicable directors and officers insurance
policies maintained by Company.  Further, Executive understands that nothing
herein prohibits him from bringing Claims against Company based on events that
occur after the date of this Agreement.

It is understood and agreed that all rights under California Civil Code Section
1542, or any other applicable state law which contain similar provisions to
California Civil Code Section 1542, are hereby expressly waived by Executive and
Company. This Section provides that:
 

 
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A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.

BOTH PARTIES UNEQUIVOCALLY CERTIFY THAT THEY COMPLETELY RELEASE EITHER PARTY OF
ANY AND ALL PENDING CLAIMS AGAINST EITHER PARTY FOREVER AND THIS AGREEMENT
SERVES AS FURTHER PROOF THAT NEITHER COMPANY NOR EXECUTIVE HARBOR PAST, PRESENT
OR FUTURE CLAIMS OF ANY NATURE WHATSOEVER INCLUDING THOSE NAMED ABOVE.

5.           MUTUAL NON-ADMISSION OF LIABILITY

Both Parties understand that this Agreement and the consideration provided
hereunder shall not, at any time, for any purpose, be construed as an admission
by the Parties or their agents of any liability, obligation or responsibility to
the other Party, and that the Parties and their agents deny any liability,
obligation or responsibility to the other.

6.           CONTINUING OBLIGATIONS

Executive acknowledges his continuing obligations under Section 8 of the
Employment Agreement with respect to confidentiality of information, proprietary
rights and intellectual property of Company and its subsidiaries and
affiliates.  Executive represents and warrants that he will continue to abide
fully by the terms of Section 8 of the Employment Agreement following the
termination of his employment with Company.

7.           MUTUAL NON-DISPARAGEMENT

Subject to the provisions of Paragraph 1 hereof and the right of Company and
Executive to speak to the press in general terms concerning the termination of
Executive’s employment with Company, assuming always no violation of the
remainder of this Paragraph 7, both Company and Executive hereby agree not to,
in any medium (whether in writing or orally) to any person or entity at any time
issue, circulate, publish or utter any false, defamatory, disparaging, maligning
or criticizing statements, remarks or rumors about, or any statements, remarks
or rumors reflecting adversely or unfavorably on either party, or Company’s
products, services, finances, financial conditions, capabilities or any other
aspect of the business of the Company, in each case, whether respect to its past
or present activities.  As such, Company and Executive shall not make any
negative or disparaging statements about either Party, or Executive’s employment
with, or separation from employment with Company, or do anything that damages
Company or Executive’s or any of its and/or their services, reputation,
financial status, or business relationships.  Furthermore, Executive agrees that
he will not make, directly or indirectly, any defamatory or disparaging oral or
written statements regarding the Company or its affiliates, owners, officers,
stockholders, directors, agents, or employees, whether to any current or
prospective donor, customer, or vendor of the Company, the press or any other
media, any other
 

 
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business entity or third party, or any current employee of the Company.
Similarly, Company agrees that it will not make, directly or indirectly, any
defamatory or disparaging oral or written statements regarding the Executive, to
any person whatsoever.  This Paragraph 7 shall not restrict American Apparel’s
ability to make any truthful statements as may be required by law or regulation,
including in American Apparel’s public filings with the U.S. Securities and
Exchange Commission and any other filings or communications under the securities
laws or the rules and regulations of the NYSE Amex (or any other securities
exchange) or the Financial Industry Regulatory Authority, Inc.  This Paragraph 7
shall not restrict Executive’s ability to make any truthful public statements in
response to statements by the Company concerning Executive that Executive
believes in good faith to be untrue, disparaging or defamatory. All references
to Company in this Paragraph 7 shall include all members of senior management of
the Company and the Board of Directors of the Company.

8.           ARBITRATION

Executive and Company hereby agree that any claim or dispute between Executive
and Company and/or any of Company’s parent corporations, successor entities,
present and/or former subsidiaries, divisions, and affiliated entities, as well
as each of their present and/or former stockholders, directors, officers,
employees, attorneys, agents and representatives (“Company’s Agents”) arising
out of or related to this Agreement or otherwise relating in any way to
Executive’s employment with, or termination from, American Apparel shall be
determined exclusively by binding arbitration in accordance with the provisions
set forth in Section 13 of the Employment Agreement.

Company and Executive hereby agree that any arbitration proceedings initiated
hereunder shall be kept in the strictest of confidence, meaning that Company and
Executive hereby agree not to file any lawsuit in contravention of this
Paragraph 8, or otherwise disclose or cause to be disclosed to the media the
dispute(s) to be arbitrated hereunder, or any of the underlying facts and
circumstances relating to such dispute(s).  All pleadings, discovery, recorded
proceedings, deposition transcripts and videos, declarations, hearing
transcripts, and all other documents submitted and/or generated during
arbitration (“Arbitration Documents”) shall be kept strictly confidential and
shall not, under any circumstances, be disclosed to the media.

Executive and Company further agree not to disparage each other in public or
online on blogs or any other similar media concerning their dispute. Executive
and Company further agree not to speak with reporters or anyone from the media,
or make any public statements, regarding any dispute that may arise between
them.

Executive and Company acknowledge that their breach of this Paragraph 8 shall
constitute a material breach of this Agreement which shall cause the
non-breaching party irreparable harm.  As such, the Parties agree that in the
event of any breach of this paragraph, the non-breaching party shall have the
right to immediately seek, in addition to all other remedies, a temporary and
permanent restraining order for the enforcement of this paragraph.

9.           MISCELLANEOUS

 
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No employee or other representative of Company can modify this Agreement in any
manner nor enter into any other Agreement that is contrary to this Agreement
unless it is in writing and signed by Company’s Chief Executive Officer and/or
its General Counsel.  If any term, provision, covenant or condition of this
Agreement is held by a court of competent jurisdiction or an arbitrator to be
invalid, void, or unenforceable, the remaining terms and provisions of this
Agreement will remain in full force and effect and shall in no way be affected,
impaired, or invalidated.

10.           RETURN OF PROPERTY.

Except as provided in Paragraph 2(f) hereof, Executive hereby represents and
warrants that, as of the Separation Date, he has returned to Company or
destroyed, and has not retained in any form (whether electronic, hardcopy or
otherwise), all files, data, records, documents, property, materials, credit
cards, keys, automobiles and equipment of or related to or provided by or on
behalf of American Apparel and all other files, documents, property or materials
that Executive received in his capacity as a director or officer of American
Apparel, in each case including all e-mails, electronic documents, copies,
extracts or other reproductions (whatever the form or storage
medium).  Executive acknowledges and agrees that a material breach of this
paragraph shall constitute a material breach of this Agreement which shall cause
Company irreparable harm.  Executive further acknowledges and agrees that in the
event of a material breach of this paragraph, Company shall have the right to
immediately seek legal and equitable remedies thereto, in addition to all other
remedies Company may seek a temporary and permanent restraining order for the
enforcement of this paragraph.

11.           SURVIVAL CLAUSE AND REMEDIES

All terms and conditions of this Agreement shall survive the Separation
Date.  If Executive, in any material way, fails to comply with or otherwise
breaches any of the promises, representations, or releases in this Agreement,
American Apparel may immediately stop any benefits otherwise owing under this
Agreement, may immediately recoup any benefits previously provided to Executive
and may seek additional relief or remedy as provided under applicable law,
including injunctive relief.  Further, if Executive pursues any claim or cause
of action against Company waived pursuant to this Agreement, Company may
immediately recoup any payments previously made to Executive under the terms of
this Agreement.

12.           WAIVER AND ACKNOWLEDGMENT BY EXECUTIVE

I HAVE READ AND UNDERSTAND THIS AGREEMENT AND BY SIGNING BELOW, HEREBY AGREE TO
THE TERMS AND CONDITIONS CONTAINED IN THIS AGREEMENT.  I CERTIFY BY MY SIGNATURE
THAT I COMPLETELY UNDERSTAND AND AGREE TO THE FOREGOING TERMS AND CONDITIONS IN
THEIR ENTIRETY AS SET FORTH HERETO.

I FURTHER CERTIFY BY MY SIGNATURE BELOW THAT I HAVE BEEN AFFORDED A REASONABLE
TIME TO READ AND UNDERSTAND EVERYTHING CONTAINED IN THIS AGREEMENT AND THAT I
UNEQUIVOCALLY AGREE TO
 

 
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ALL OF THE TERMS AND CONDITIONS IN THIS AGREEMENT AS SET FORTH HERETO AFTER
BEING GIVEN A REASONABLE TIME TO READ AND UNDERSTAND THIS AGREEMENT.

I HEREBY CERTIFY BY MY SIGNATURE THAT I WAS GIVEN A FULL AND FAIR OPPORTUNITY
AND A REASONABLE TIME TO CONSULT MY OWN ATTORNEY WITH RESPECT TO THIS AGREEMENT
BEFORE SIGNING IT.

I HEREBY ACKNOWLEDGE THAT I AM SIGNING THIS AGREEMENT KNOWINGLY AND VOLUNTARILY
AND HAVE NOT BEEN PRESSURED OR COERCED IN ANY WAY INTO SIGNING IT.

I FURTHER ACKNOWLEDGE THAT:

(A)           I HAVE BEEN ADVISED TO CONSULT AN ATTORNEY BEFORE SIGNING THIS
AGREEMENT, AND HAD THE OPPORTUNITY TO CONSULT WITH AN ATTORNEY OF MY CHOOSING;

(B)           I HAVE RELIED SOLELY ON MY OWN JUDGMENT AND/OR THAT OF MY ATTORNEY
REGARDING THE CONSIDERATION FOR, AND THE TERMS OF THIS AGREEMENT;

(C)           THE CONSIDERATION I WILL RECEIVE FOR SIGNING THIS AGREEMENT IS IN
ADDITION TO ANYTHING TO WHICH I AM OTHERWISE ENTITLED;

(D)           I HAVE READ THIS AGREEMENT AND I UNDERSTAND THIS AGREEMENT AND
FURTHER UNDERSTAND THAT IT INCLUDES A GENERAL RELEASE OF ANY AND ALL KNOWN AND
UNKNOWN CLAIMS WHICH I MAY HAVE AGAINST THE COMPANY AND ITS AGENTS THROUGH THE
EFFECTIVE DATE OF THE AGREEMENT, INCLUDING, BUT NOT LIMITED TO, CLAIMS FOR AGE
DISCRIMINATION UNDER THE ADEA;

(E)           NO STATEMENTS OR CONDUCT BY THE COMPANY OR ANY OTHER PARTY HAVE IN
ANY WAY COERCED OR UNDULY INFLUENCED ME TO EXECUTE THIS AGREEMENT; AND

(F)           I UNDERSTAND THAT THIS AGREEMENT IS LEGALLY BINDING AND BY SIGNING
IT GIVE UP CERTAIN RIGHTS, INCLUDING MY RIGHT TO PURSUE THE CLAIMS RELEASED IN
THIS AGREEMENT.

[Signature Page Follows]

 
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AGREED AND ACCEPTED
 

   /s/ Martin Staff
 
Date:   
October 24, 2011
 
MARTIN STAFF
       

______________________________________________
ADDRESS

______________________________________________
CITY, STATE, ZIP

(______________)_______________________________
PERSONAL, NON-COMPANY TELEPHONE NUMBER

AMERICAN APPAREL, INC.,
AMERICAN APPAREL (USA), LLC,
AMERICAN APPAREL RETAIL, INC.
and their subsidiaries and affiliates.

By:
     /s/ Glenn A. Weinman
 
Date:   
October 24, 2011
   
     GLENN A. WEINMAN
         
     SENIOR V.P., GENERAL COUNSEL & SECRETARY

 
 
 
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