Execution Copy

 

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into as of the
date set forth on the signature page hereto, by and between True Religion
Apparel, Inc., a Delaware corporation (“TRA”), and Lynne Koplin, an individual
(“Executive”).

R E C I T A L S

TRA and Executive desire to enter into an employment agreement setting forth the
terms and conditions of Executive’s employment with TRA.

A G R E E M E N T

NOW, THEREFORE, in consideration of the foregoing recitals and the terms,
covenants and conditions contained herein, TRA and Executive agree as follows:

1.             EMPLOYMENT
 

As of January 4, 2010 (the “Effective Date”) of this Agreement, TRA employs
Executive, and Executive accepts such employment, as Chief Operating Officer of
TRA, on the terms and subject to the conditions set forth herein.
Notwithstanding the foregoing, the effectiveness of this Agreement shall be
conditioned upon Executive reporting to work as a full-time employee of the
Company on January 4, 2010, after first completing all pre-employment
administrative procedures in accordance with TRA’s employment policies
applicable to executive-level employees. If for any reason Executive does not
report to work as a full-time employee of the Company as of the Effective Date,
this Agreement will be null and void and without effect.

2.             CAPACITY AND DUTIES
 

(a)       Executive shall serve TRA as its Chief Operating Officer, and shall
report directly to the Chief Executive Officer of TRA (the “CEO”).

(b)       Subject to the direction and control of the CEO and the Board of
Directors of TRA (the “Board”), Executive shall perform such employment duties
as are usual and customary for such position and such other duties as the Board
or the CEO shall from time to time reasonably assign to Executive.

(c)       At TRA’s request, Executive shall serve TRA and/or its subsidiaries
and affiliates in other offices and capacities in addition to the foregoing. In
the event that Executive, during the Employment Period (as defined herein),
serves in any one or more of such additional capacities, Executive’s
compensation shall not be increased beyond that specified in Section 4 of this
Agreement. In addition, in the event Executive’s service in one or more of such
additional capacities is subsequently terminated, Executive’s compensation, as
specified in Section 4 of this Agreement, shall not be diminished or reduced in
any manner as a result of such termination for so long as Executive otherwise
remains employed under the terms of this Agreement.

(d)       During the Employment Period Executive agrees to devote substantially
all of Executive’s business time, energy, skill and best efforts to the
performance of Executive’s duties

 

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hereunder in a manner that will faithfully and diligently further the business
and interests of TRA. Notwithstanding the foregoing, during the Employment
Period it shall not be a violation of this Agreement for Executive to (i) serve
on corporate, civic or charitable boards or committees consistent with TRA’s
conflicts of interests policies and corporate governance guidelines in effect
from time to time, (ii) deliver lectures or fulfill speaking engagements or
(iii) manage Executive’s personal investments, so long as such activities do not
interfere with the performance of Executive’s responsibilities as an executive
officer of TRA. It is expressly understood and agreed that to the extent that
any such activities have been conducted by Executive prior to the Effective Date
and fully disclosed in writing and agreed to by TRA in writing, the continued
conduct of such activities subsequent to the Effective Date shall not thereafter
be deemed to interfere with the performance of Executive’s responsibilities to
TRA.

(e)       Executive agrees that Executive will not take personal advantage of
any business opportunity that arises during Executive’s employment by TRA which
may be of benefit to TRA unless all material facts regarding such opportunity
are promptly reported by Executive to the Board for consideration by TRA and the
disinterested members of the Board determine to reject the opportunity and to
approve Executive’s participation therein.

(f)        The terms of this Section 2 shall not prevent Executive from
investing or otherwise managing Executive’s assets in such form or manner as
Executive chooses and spending such time, whether or not during business hours,
as Executive deems necessary to manage Executive’s investments, so long as
Executive is able to fulfill Executive’s duties pursuant to this Section 2.

(g)       Except for routine travel incident to the business of TRA, Executive
shall perform Executive’s duties and obligations under this Agreement
principally from an office provided by TRA in Vernon, California or the
surrounding area.

3.             TERM
 

Subject to the provisions for earlier termination hereinafter provided,
Executive’s employment hereunder shall be for a term (the “Employment Period”)
ending on the third anniversary of the Effective Date (the “Initial Termination
Date” ); provided, however, that this Agreement shall be automatically extended
for one additional year on the Initial Termination Date and on each subsequent
anniversary of the Initial Termination Date, unless either Executive or TRA
elects not to so extend the term of this Agreement by notifying the other party,
in writing, of such election not less than ninety (90) days prior to the last
day of the term as then in effect. For the avoidance of doubt, non-renewal of
this Agreement pursuant to the provisions contained in the preceding sentence
shall not be deemed to give rise to any payment to Executive as might be the
case in connection with a termination of this Agreement.

4.             COMPENSATION
 
                (a)       Base Salary.

(i)        During the Employment Period, Executive shall receive a base salary
(the “Base Salary”) of $475,000 per annum, payable in accordance with TRA’s
normal payroll procedures. During the Employment Period, the Base Salary shall
be reviewed at least annually

 

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for possible increase (but not decrease) in TRA’s sole discretion, as determined
by the Board’s compensation committee (the “Compensation Committee”) or the full
Board; provided, however, that Executive shall be entitled to any annual
cost-of-living increases in Base Salary that are generally granted to TRA’s
Named Executive Officers, as such term is defined in TRA’s proxy for its annual
meeting of stockholders (“Senior Executives”).

(ii)       Any increase in Base Salary shall not serve to limit or reduce any
other obligation to Executive under this Agreement.

(iii)      The term “Base Salary” as utilized in this Agreement shall refer to
the Base Salary as so adjusted.

                (b)       Bonuses.

(i)        Annual Cash Bonus. In addition to Base Salary, Executive shall be
eligible, for each fiscal year of TRA ending during the Employment Period, to
participate in TRA’s Executive Cash Incentive Bonus Plan or other cash incentive
plan then in existence and to receive an annual cash performance bonus (an
“Annual Cash Bonus”) in accordance with the terms of such plan or plans. The
amount of such Annual Cash Bonuses and annual target performance goals during
the Employment Period shall be determined by the Compensation Committee, or the
full Board, in its sole discretion; provided, however, Executive’s Annual Cash
Bonus for fiscal 2010 will be 100% of Base Salary, if annual target performance
goals as established by the Compensation Committee for such year are met, with
the potential for an Annual Cash Bonus at higher levels if greater than target
performance is achieved.

(ii)       Annual Equity Incentive Bonus. In addition to the Base Salary,
Executive shall be eligible, for each fiscal year of TRA ending during the
Employment Period, to participate in TRA’s 2009 Equity Incentive Plan or such
other equity incentive plan or plans then in existence for the benefit of
executive officers, and to receive an annual performance equity award (an
“Annual Equity Award”) in accordance with the terms of such plan or plans. The
amount of such Annual Equity Awards, the target performance goals and the
vesting terms of such awards will be determined by the Compensation Committee in
its sole discretion; provided, however, Executive will receive a grant of
restricted stock for 2010 under the 2009 Equity Incentive Plan with a fair
market value on the date of grant of $1,300,000 if annual target performance
goals for 2010 as established by the Compensation Committee for such year are
met, subject to any additional vesting conditions imposed by the Compensation
Committee for length of service.

(iii)      Effective Date Grant of Restricted Stock. Within 30 days following
the Effective Date, TRA will grant to Executive 50,000 shares of common stock of
TRA, which shares will vest in two equal installments on the first and second
anniversaries of the Effective Date so long as Executive is employed by TRA on
the applicable anniversary date.

                (c)       Benefits.

(i)        Incentive, Savings and Retirement Plans. During the Employment
Period, Executive shall be eligible to participate in all other incentive plans,
policies and programs, and

 

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all savings and retirement plans, policies and programs, in each case that are
applicable generally to Senior Executives of TRA.

(ii)       Welfare Benefit Plans. During the Employment Period, Executive and
Executive’s eligible family members shall be eligible for participation in the
welfare benefit plans, practices, policies and programs (including, if
applicable, medical, dental, disability, employee life, group life and
accidental death insurance plans and programs) maintained by TRA for its Senior
Executives; provided, that (i) the life insurance benefit shall be at least
equal to 100% of Executive’s Base Salary plus the Annual Bonus for the most
recent fiscal year (which will be deemed to be, for these purposes only,
$475,000 until the completion of fiscal 2010) and (ii) TRA shall fully pay any
employee funded portion of the health insurance premium.

(iii)      Expenses. During the Employment Period, Executive shall be entitled
to receive prompt reimbursement for all reasonable business expenses incurred by
Executive in accordance with the policies, practices and procedures of TRA
provided to Senior Executives of TRA, which shall include premium class hotel
accommodations, business class air travel for all flights in excess of 4 hours
and upgradeable economy tickets on flights of a shorter duration and executive
car service for ground transportation.

(iv)      Fringe Benefits. During the Employment Period, Executive shall be
entitled to such fringe benefits and perquisites as are provided by TRA to its
Senior Executives from time to time, in accordance with the policies, practices
and procedures of TRA.

(v)       Vacation. During the Employment Period, Executive shall be entitled to
paid vacation in accordance with the plans, policies, programs and practices of
TRA applicable to its Senior Executives but in no event shall Executive receive
less than three weeks (3) in fiscal 2010 and four (4) weeks paid vacation per
year thereafter.

(vi)      Automobile. During the Employment Period, Executive shall be entitled
to an automobile allowance of $1,200 per month.

5.             INDEMNIFICATION
 

TRA and Executive are parties to an Indemnification Agreement, pursuant to
which, inter alia, TRA has agreed, on the terms and conditions therein set
forth, to indemnify Executive against certain claims arising by reason of the
fact that Executive is or was an officer of TRA.

6.             ADDITIONAL AGREEMENT
 

Executive acknowledges the Confidentiality and Non-Disclosure Agreement, dated
the Effective Date, between Executive and TRA (the “Confidentiality Agreement”).
Executive represents that Executive is not in breach of any of the terms and
conditions of the Confidentiality Agreement, and affirms that the
Confidentiality Agreement remains in full force and effect pursuant to its
terms.

 

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7.             RETURN OF CORPORATE PROPERTY AND TRADE SECRETS
 

Upon termination of this Agreement for any reason, Executive, or Executive’s
estate in the event of Executive’s death, shall turn over to TRA all
correspondence, property, writings or documents then in Executive’s possession
or custody belonging to or relating to the affairs of TRA or any of its
subsidiaries or affiliates.

8.             TERMINATION OF EMPLOYMENT
 
             (a)          Termination by Reason of Death or Disability.
 

(i)        Death or Disability. Executive’s employment hereunder shall terminate
immediately upon the death of Executive. Executive’s employment may be
terminated if Executive suffers a Disability. For purposes of this Agreement,
“Disability” means Executive’s inability by reason of physical or mental illness
to fulfill Executive’s obligations hereunder for ninety (90) consecutive days or
on a total of one hundred fifty (150) days in any twelve (12) month period
which, in the reasonable opinion of an independent physician selected by TRA or
its insurers and reasonably acceptable to Executive or Executive’s legal
representative, renders Executive unable to perform the essential functions of
Executive’s job, even after reasonable accommodations are made by TRA. TRA is
not, however, required to make unreasonable accommodations for Executive or
accommodations that would create an undue hardship on TRA.

                 (b)          Termination by Executive for Good Reason.

 

(i)        Good Reason. Executive’s employment may be terminated by Executive
for Good Reason;provided, however Executive may terminate this Agreement for
Good Reason only within the period of one hundred eighty (180) days following
the occurrence of the event which results in the right of termination
hereunder;provided further (i) Executive provides written notice to TRA of the
occurrence of such event within ninety (90) days of Executive first becoming
aware of its occurrence and (ii) TRA fails to fully cure the circumstances
constituting Good Reason (provided such circumstances are capable of cure) prior
to the Date of Termination (as defined below), which date will be at least
thirty (30) days following the date of such notice. For purposes of this
Agreement, “Good Reason” shall mean the occurrence of any one or more of the
events listed below without Executive’s prior written consent:

(A)      A material reduction in Executive’s title, duties, authority and
responsibilities, or the assignment to Executive of any duties materially
inconsistent with Executive’s position, authority, duties or responsibilities
without the written consent of Executive;

(B)      TRA’s reduction in a material amount of Executive’s Base Salary, as in
effect on the date hereof or as the same may be increased from time to time;

(C)      The relocation of TRA’s office where Executive is required to perform
Executive’s duties to a location more than thirty-five (35) miles from TRA’s
current headquarters in Vernon, California; or

 

(D)

TRA’s material breach of its obligations under this Agreement.

 

 

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             (c)          Termination by TRA for Cause.

(i)        Cause. TRA may terminate Executive’s employment during the Employment
Period for Cause or without Cause. For purposes of this Agreement, “Cause” shall
mean the occurrence of any one or more of the following events:

(A)      Executive’s willful failure to perform, or gross negligence in
performing, Executive’s duties owed to TRA, after fifteen (15) days following
written notice delivered to Executive by the Board, which notice specifies such
failure or negligence;

(B)      Executive's willful engagement in gross misconduct relating to
Executive’s employment that is materially injurious to TRA;

(C)      Executive’s commission of an act of fraud or dishonesty in the
performance of Executive’s duties;

(D)      Executive’s conviction of, or entry by Executive of a guilty or no
contest plea to, any (x) felony or (y) any misdemeanor involving moral
turpitude;

(E)       Any breach by Executive of Executive’s fiduciary duty of care or duty
of loyalty to TRA; or

(F)       Executive’s material breach of any of the provisions of this Agreement
or TRA’s Code of Conduct applicable to executive officers, which, if curabale,
is not cured within thirty (30) days following written notice thereof from TRA.

(d)       Notice of Termination. Any termination by TRA for Cause, or by
Executive for Good Reason, shall be communicated by a Notice of Termination (as
defined herein) to the other party hereto given in accordance with this
Section 8(d). For purposes of this Agreement, a “Notice of Termination” means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Executive’s employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than thirty days
after the giving of such notice). The failure by Executive or TRA to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of Executive or TRA,
respectively, hereunder or preclude Executive or TRA, respectively, from
asserting such fact or circumstance in enforcing Executive’s or TRA’s rights
hereunder.

(e)       Date of Termination. For the purposes of this Agreement, “Date of
Termination” means (i) if Executive’s employment is terminated by TRA for Cause,
or by Executive for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein (which date shall not be more
than 30 days after the giving of such notice), as the case may be, (ii) if
Executive’s employment is terminated by TRA other than for Cause or Disability,
the Date of Termination shall be the date on which TRA notifies Executive of
such termination, (iii) if Executive’s employment is terminated by Executive
without Good Reason (which shall

 

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constitute a breach of this Agreement, the Date of Termination shall be the
thirtieth day after the date on which Executive notifies TRA of such
termination, unless otherwise agreed by TRA and Executive, and (iv) if
Executive’s employment is terminated by reason of death, Disability or
expiration of the Employment Period, the Date of Termination shall be the date
of death or Disability of Executive, as the case may be.

9.             PAYMENTS UPON TERMINATION

(a)       Termination Without Cause or For Good Reason. If, during the
Employment Period, TRA shall terminate Executive’s employment without Cause or
Executive shall terminate Executive’s employment for Good Reason:

(i)        Executive shall be paid, in two separate lump sum payments
(A) Executive’s earned but unpaid Base Salary and accrued but unpaid vacation
pay through the Date of Termination, and any Annual Cash Bonus required to be
paid to Executive pursuant to Section 4(b)(i) above for any fiscal year of TRA
that ends on or before the Date of Termination to the extent not previously paid
(the “Accrued Obligations”), and (B) an amount (the “Severance Amount”) equal to
one and one-half (1.5) (the “Severance Multiple”) times the sum of (x) the Base
Salary in effect on the Date of Termination plus (y) the average Annual Cash
Bonus received by Executive for the two complete fiscal years (or such lesser
number of complete fiscal years as Executive has been employed by TRA) of TRA
immediately prior to the Date of Termination or $712,500 if the Date of
Termination is prior to December 31, 2010; provided, that the Severance Multiple
shall be reduced to 1.0 (one) during the last year of the Employment Period. The
Accrued Obligations shall be paid when due under California law and the
Severance Amount shall be paid no later than March 15 of the calendar year
following the year in which the Notice of Termination is delivered;

(ii)       At the time when Executive’s Annual Cash Bonus would otherwise be
payable pursuant to Section 4(b)(i) of this Agreement for the fiscal year of TRA
in which the Date of Termination occurs, Executive shall, if the applicable
performance goals are satisfied (the highest of such performance goals which is
satisfied being referred to in this paragraph as the “Applicable Performance
Goal”), be paid an Annual Cash Bonus in an amount equal to the greater of: (x)
the product of (I) the amount of the Annual Cash Bonus to which Executive would
have been entitled if Executive’s employment had not been terminated, and (II) a
fraction, the numerator of which is the number of days in such fiscal year
through the Date of Termination and the denominator of which is the total number
of days in such fiscal year, or (y) the product of (I) the amount of the Annual
Cash Bonus to which Executive would have been entitled if Executive’s employment
had not been terminated, and (II) a percentage which represents that percentage
of the Applicable Performance Goal actually satisfied as of the end of the
fiscal quarter immediately preceding the Date of Termination, (a “Pro-Rated
Annual Bonus”);

(iii)      For a period of eighteen (18) months following the Date of
Termination, TRA shall continue to provide Executive and Executive’s eligible
family members with group health insurance coverage at least equal to that which
would have been provided to them if Executive’s employment had not been
terminated (or at TRA’s election, pay the applicable COBRA premium for such
coverage); thereafter, Executive shall be entitled to purchase, at Executive’s
sole cost, insurance coverage under COBRA for the period permitted pursuant to

 

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TRA policy and applicable law; provided, however, that if Executive becomes
re-employed with another employer and is eligible to receive group health
insurance coverage under another employer’s plans, TRA’s obligations under this
Section 9(a)(iii) shall terminate and any such coverage shall be reported by
Executive to TRA;

(iv)      All outstanding Annual Equity Awards (except for performance based
awards, which shall vest only upon satisfaction of the performance goals)
granted to Executive (or awards substituted therefore covering the securities of
a successor company) which are scheduled to vest within twelve (12) months
following the Date of Termination, shall become immediately vested and
exercisable in full; and

(v)       To the extent not theretofore paid or provided, TRA shall timely pay
or provide to Executive any vested benefits and other amounts or benefits
required to be paid or provided or which Executive is eligible to receive as of
the Date of Termination under any plan, contract or agreement of TRA and its
affiliates (such other amounts and benefits shall be hereinafter referred to as
the “Other Benefits”) to which Executive is a party.

(vi)      Notwithstanding anything herein to the contrary, it shall be a
condition to Executive’s right to receive the amounts provided for in Sections
9(a)(i)(B), 9(a)(ii) and 9(a)(iii) above that Executive timely execute and
deliver to TRA, and not revoke within the period provided therefor, a release of
claims in a form to be agreed upon by parties hereto. Such execution and
delivery will be deemed timely only if completed within 21 days (or such longer
period as TRA may establish) of TRA’s delivery of such form to Executive.

(b)       Termination For Cause or Without Good Reason; Expiration of Employment
Period. If Executive’s employment shall be terminated by TRA for Cause or by
Executive without Good Reason during the Employment Period or upon expiration of
the Employment Period, TRA shall have no further obligations to Executive under
this Agreement and the obligation to pay to Executive the Accrued Obligations
when due under California law and to provide the Other Benefits.

(c)       Termination by Reason of Death or Disability. Upon termination of
Executive’s employment by reason of death or Disability during the Employment
Period:

(i)        The Accrued Obligations shall be paid to Executive’s estate or
beneficiaries or to Executive, as applicable, in cash when due under California
law;

(ii)       One Hundred Percent (100%) of Executive’s then current annual Base
Salary, as in effect on the Date of Termination, shall be paid to Executive’s
estate or beneficiaries or to Executive, as applicable, within thirty (30) days
of the Date of Termination;

(iii)      The Pro-Rated Annual Bonus shall be paid to Executive’s estate or
beneficiaries or to Executive, as applicable, at the time when Annual Cash
Bonuses are paid to TRA’s other Senior Executives for the fiscal year of TRA in
which the Date of Termination occurs;

(iv)      For a period of eighteen months following the Date of Termination,
Executive and Executive’s eligible family members shall continue to be provided
with group

 

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health insurance coverage at least equal to that which would have been provided
to them if Executive’s employment had not been terminated (or at TRA’s election,
pay the applicable COBRA premium for such coverage); thereafter, if applicable,
Executive shall be entitled to purchase, at Executive’s sole cost, insurance
coverage under COBRA for the period permitted pursuant to TRA policy and
applicable law; provided, however, that if Executive becomes re-employed with
another employer and is eligible to receive group health insurance coverage
under another employer’s plans, TRA’s obligations under this Section 9(c)(iv)
shall terminate, and any such coverage shall be reported by Executive to TRA;
and

(v)       The Other Benefits shall be paid or provided to Executive’s estate or
beneficiaries or to Executive, as applicable, on a timely basis.

(d)       Timing of Payment. Notwithstanding anything to the contrary in this
Agreement, to the extent required to comply with Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), if Executive is deemed to be a
“specified employee” for purposes of Section 409A(a)(2)(B) of the Code,
Executive agrees that any non-qualified deferred compensation payments due to
Executive under this Agreement in connection with a termination of Executive’s
employment that would otherwise have been payable at any time during the
six-month period immediately following such termination of employment shall not
be paid prior to, and shall instead be payable in a lump sum on the first
business day of the seventh month following Executive’s “separation from
service” as that term is defined in Section 1.409A-1(h) of the Treasury
Regulations.

10.          CHANGE IN CONTROL
 

(a)       Severance Payment. If a Change in Control (as defined herein) occurs
during the Employment Period, and the Executive’s employment is terminated by
TRA without Cause or by the Executive for Good Reason, in each case within one
(1) year after the effective date of the Change in Control, then the Executive
shall be entitled to the payments and benefits provided inSection 9(a), subject
to the terms and conditions thereof; provided, that for purposes of
thisSection 10, (x) the Severance Multiple shall equal three (3.0), and (y) all
outstanding Annual Equity Awards (except for performance based awards, which
shall vest only upon satisfaction of the performance goals) granted to Executive
(or awards substituted therefore covering the securities of a successor company)
shall become immediately vested and exercisable in full.

(b)       Change in Control. For purposes of this Agreement, “Change in Control”
shall mean the occurrence of any of the following events:

(i)        Any transaction, whether effected directly or indirectly, resulting
in any “person” or “group” (as those terms are defined in Sections 3(a)(9),
13(d), and 14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and the rules thereunder) having “beneficial ownership” (as
determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled
to vote generally in the election of directors (“Voting Securities”) of TRA that
represent greater than 35% of the combined voting power of TRA’s then
outstanding Voting Securities, other than:

 

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(A)      any transaction or event resulting in the beneficial ownership of
Voting Securities by a trustee or other fiduciary holding securities under any
employee benefit plan (or related trust) sponsored or maintained by TRA or any
Person controlled by TRA or by any employee benefit plan (or related trust)
sponsored or maintained by TRA or any Person controlled by TRA, or

(B)      any transaction or event resulting in the beneficial ownership of
Voting Securities by TRA or a corporation owned, directly or indirectly, by the
stockholders of TRA in substantially the same proportions as their ownership of
the stock of TRA, or

(C)      any transaction or event resulting in the beneficial ownership of
Voting Securities pursuant to a transaction that would not be a Change in
Control pursuant to Section 10(b)(iii)(A).

(ii)       Individuals who, as of the Effective Date, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election by TRA’s stockholders, or nomination for election
by the Board, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an election contest with respect to the election or removal of
directors or other solicitation of proxies or consents by or on behalf of a
Person other than the Board;

(iii)      The consummation by TRA (whether directly involving TRA or indirectly
involving TRA through one or more intermediaries) of (x) a merger,
consolidation, reorganization, or business combination, (y) a sale or other
disposition of all or substantially all of TRA’s assets, or (z) the acquisition
of assets or stock of another entity, in each case, other than a transaction:

(A)      which results in TRA’s Voting Securities outstanding immediately before
the transaction continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of TRA or the Person that, as a result of
the transaction, controls, directly or indirectly, TRA or owns, directly or
indirectly, all or substantially all of TRA’s assets or otherwise succeeds to
the business of TRA (TRA or such person, the “Successor Entity”)) directly or
indirectly, greater than 50% of the combined voting power of the Successor
Entity’s outstanding Voting Securities immediately after the transaction, and
after which no Person or group beneficially owns Voting Securities representing
greater than 50% of the combined voting power of the Successor Entity;provided,
however, that no Person or group shall be treated for purposes of this Section
10(b)(iii) as beneficially owning greater than 50% of combined voting power of
the Successor Entity solely as a result of the voting power held in TRA prior to
the consummation of the transaction; or

(B)      the approval by TRA’s stockholders of a liquidation or dissolution of
TRA.

 

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(c)       For purposes of Section 10(b)(i) above, the calculation of voting
power shall be made as if the date of the acquisition were a record date for a
vote of TRA’s stockholders, and for purposes of Section 10(b)(iii) above, the
calculation of voting power shall be made as if the date of the consummation of
the transaction were a record date for a vote of TRA’s stockholders.

(d)       The following terms shall have the following meanings for purposes of
thisSection 10:

(i)        “Affiliate” shall mean, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under common control with
such Person. Control of any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of Voting Securities or other interests, by contract or otherwise, and the terms
“controlling” and “controlled” have meanings correlative to the foregoing.

(ii)       “Immediate Family Member” shall mean a natural person’s estate or
heirs or current spouse or former spouse, parents, parents-in-law, children
(whether natural, adopted or by marriage), siblings and grandchildren and any
trust or estate, all of the beneficiaries of which consist of such person or
such person’s spouse, or former spouse, parents, parents-in-law, children,
siblings or grandchildren.

(iii)      “Person” shall mean an individual or a corporation, partnership,
limited liability company, trust, unincorporated organization, association or
other entity.

11.          FULL SETTLEMENT

 

In no event shall Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to Executive under any
of the provisions of this Agreement and except as expressly provided, such
amounts shall not be reduced whether or not Executive obtains other employment.
If any party to this Agreement institutes any action, suit, counterclaim,
appeal, arbitration or mediation for any relief against another party,
declaratory or otherwise (collectively an “Action”), to enforce the terms hereof
or to declare rights hereunder, then the Prevailing Party (as defined herein) in
such Action shall be entitled to recover from the other party all costs and
expenses of the Action, including reasonable attorneys’ fees and costs (at the
Prevailing Party’s attorneys’ then-prevailing rates) incurred in bringing and
prosecuting or defending such Action and/or enforcing any judgment, order,
ruling or award (collectively, a “Decision”) granted therein, all of which shall
be deemed to have accrued on the commencement of such Action and shall be paid
whether or not such Action is prosecuted to a Decision. Any Decision entered in
such Action shall contain a specific provision providing for the recovery of
attorneys’ fees and costs incurred in enforcing such Decision. A court or
arbitrator shall fix the amount of reasonable attorneys’ fees and costs upon the
request of either party. Any judgment or order entered in any final judgment
shall contain a specific provision providing for the recovery of all costs and
expenses of suit, including reasonable attorneys’ fees and expert fees and costs
incurred in enforcing, perfecting and executing such judgment. For the purposes
of this paragraph, costs shall include, without limitation, in addition to costs
incurred in prosecution or defense of the underlying action, reasonable
attorneys’ fees, costs, expenses and expert fees and costs incurred in the
following: (a) post judgment motions and collection actions;

 

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(b) contempt proceedings; (c) garnishment, levy, debtor and third party
examinations; (d) discovery; (e) bankruptcy litigation; and (f) appeals of any
order or judgment. “Prevailing Party” within the meaning of this Section 11
includes, without limitation, a party who agrees to dismiss an Action in
consideration for the other party’s payment of the amounts allegedly due or
performance of the covenants allegedly breached, or obtains substantially the
relief sought by such party.

12.          MISCELLANEOUS

 

(a)       Entire Agreement. This Agreement contains the entire understanding of
the parties hereto relating to the subject matter hereof and cannot be changed
or terminated except in writing signed by both Executive and TRA.

(b)       Governing Law. This Agreement has been made and entered into in the
state of California and shall be construed in accordance with the laws of the
State of California without regard to the conflict of law principles thereof.

(c)       Arbitration. To the fullest extent allowed by law, any controversy,
claim or dispute between Executive and TRA (and/or any of its owners, directors,
officers, employees, affiliates, or agents) in any way related to or arising out
of Executive's employment or the cessation of that employment will be submitted
to final and binding arbitration before a retired state or federal judge in the
County of Los Angeles, State of California, for determination in accordance with
the Judicial Arbitration and Mediation Services (“JAMS”) National Rules for the
Resolution off Employment Disputes, as the exclusive remedy for such
controversy, claim or dispute. In any such arbitration, the parties may conduct
discovery in accordance with the applicable rules of the arbitration forum,
except that the arbitrator shall have the authority to order and permit
discovery as the arbitrator may deem necessary and appropriate in accordance
with applicable state or federal discovery statutes. The arbitrator shall issue
a reasoned, written decision, and shall have full authority to award all
remedies which would be available in court. The parties shall share the filing
fees required for the arbitration, provided that Executive shall not be required
to pay an amount in excess of the filing fees required by a federal or state
court with jurisdiction. TRA shall pay the arbitrator’s fees and any JAMS
administrative expenses. The award of the arbitrator shall be final and binding
upon the parties and may be entered as a judgment in any California court of
competent jurisdiction and the parties hereby consent to the exclusive
jurisdiction of the courts of California. Possible disputes covered by the above
include (but are not limited to) unpaid wages, breach of contract, torts,
violation of public policy, discrimination, harassment, or any other
employment-related claims under laws including but not limited to, Title VII of
the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age
Discrimination in Employment Act, the California Fair Employment and Housing
Act, the California Labor Code, and any other statutes or laws relating to an
employee’s relationship with his/her employer, regardless of whether such
dispute is initiated by the employee or TRA. Thus, this bilateral arbitration
agreement applies to any and all claims that TRA may have against an employee,
including but not limited to, claims for misappropriation of TRA property,
disclosure of proprietary information or trade secrets, interference with
contract, trade libel, gross negligence, or any other claim for alleged wrongful
conduct or breach of the duty of loyalty by an employee. However,
notwithstanding anything to the contrary contained herein, TRA and Executive
shall have their respective rights to seek and obtain injunctive relief with
respect to

 

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any controversy, claim or dispute to the extent permitted by law. Claims for
workers’ compensation benefits and unemployment insurance (or any other claims
where mandatory arbitration is prohibited by law) are not covered by this
arbitration agreement, and such claims may be presented by either Executive or
TRA to the appropriate court or government agency. BY AGREEING TO THIS BINDING
ARBITRATION PROVISION, BOTH EXECUTIVE AND TRA GIVE UP ALL RIGHTS TO TRIAL BY
JURY. This arbitration agreement is to be construed as broadly as is permissible
under applicable law.

(d)       Sarbanes-Oxley Act of 2002. Notwithstanding anything herein to the
contrary, if TRA determines, in its good faith judgment, that any transfer or
deemed transfer of funds hereunder is likely to be construed as a personal loan
prohibited by Section 13(k) of the Exchange Act and the rules and regulations
promulgated thereunder, then such transfer or deemed transfer shall not be made
to the extent necessary or appropriate so as not to violate the Exchange Act and
the rules and regulations promulgated thereunder.

(e)       Withholding. TRA may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

(f)        No Waiver. Executive’s or TRA’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right Executive or TRA may have hereunder, including, without limitation, the
right of Executive to terminate employment for Good Reason pursuant to Section
8(b) of this Agreement, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.

(g)       Consultation With Counsel. Executive acknowledges that Executive has
had a full and complete opportunity to consult with counsel and other advisors
of Executive’s own choosing concerning the terms, enforceability and
implications of this Agreement, and that TRA has not made any representations or
warranties to Executive concerning the terms, enforceability or implications of
this Agreement other than as reflected in this Agreement.

(h)       Notices. All notices, requests and other communications given pursuant
to this Agreement shall be in writing, and shall be delivered by facsimile
transmission with a copy delivered by personal service or by United States first
class, registered or certified mail (return receipt requested), postage prepaid,
addressed to the party at the address set forth below:

If to TRA:

True Religion Apparel, Inc.
2263 E. Vernon Avenue
Vernon, CA 90058

with a copy to:

Akin Gump Strauss Hauer & Feld LLP
2029 Century Park East
Suite 2400
Los Angeles, CA 90067
Attn: Frank Reddick

 

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If to Executive:

Executive’s most recent address
on the records of TRA

 

Any notice shall be deemed duly given when received by the addressee thereof,
provided that any notice sent by registered or certified mail shall be deemed to
have been duly given three (3) days from date of deposit in the United States
mails, unless sooner received. Either party may from time to time change its
address for further notices hereunder by giving notice to the other party in the
manner prescribed in this Section 12(h).

(i)        Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

(j)        Severable Provisions. The provisions of this Agreement are severable,
and if any one or more provisions are determined to be judicially unenforceable,
in whole or in part, the remaining provisions shall nevertheless be binding and
enforceable.

(k)       Successors and Assigns. This Agreement and all obligations and
benefits Executive and TRA hereunder shall bind and inure to the benefit
Executive and TRA, their respective affiliates, and their respective successors
and assigns.

(l)        Amendments and Waivers. No amendment or waiver of any term or
provision of this Agreement shall be effective unless made in writing. Any
written amendment or waiver shall be effective only in the instance given and
then only with respect to the specific term or provision (or portion thereof) of
this Agreement to which it expressly relates, and shall not be deemed or
construed to constitute a waiver of any other term or provision (or portion
thereof) waived in any other instance.

(m)      Title and Headings. The titles and headings contained in this Agreement
are included for convenience only and form no part of the agreement between the
parties.

 

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Execution Copy

 

IN WITNESS WHEREOF, this Agreement has been executed as of the date set forth
below.

 

TRUE RELIGION APPAREL, INC.

 

/s/ JEFFREY LUBELL  

Name:    Jeffrey Lubell

Title:      Chief Executive Officer

 

Date:  December 16, 2009

 

 

ACCEPTED AND AGREED TO:

 

 

/s/ LYNNE KOPLIN  

Lynne Koplin

 

 

 

 

Signature page to

Employment Agreement