Document:

EX-10.1

 Exhibit 10.1 

EXECUTION VERSION 

AGREEMENT 
 This Agreement
(“Agreement”), dated March 23, 2015 (“Effective Date”), is by and among OM Group, Inc. (“Company”), FrontFour Capital Group LLC, and the entities and natural persons listed on Exhibit A
(collectively, “FrontFour” and each a “FrontFour Member”). Each of the Company and FrontFour is a “Party” to this Agreement and collectively they are the “Parties.” 

RECITALS 
  

	A.	The Company and FrontFour have engaged in various discussions and communications concerning the Company’s business, financial performance and strategic plans; 

 

	B.	FrontFour is deemed to beneficially own shares of common stock of the Company (“Common Stock”) totaling, in the aggregate 1,785,606 shares, or approximately 5.7%, of the Common Stock issued and
outstanding on the Effective Date; 

  

	C.	FrontFour submitted a letter to the Company dated January 28, 2015 (the “Nomination Letter”) notifying the Company of its intent to nominate candidates for election to the Company’s board of
directors (“Board”) at the 2015 annual meeting of the shareholders of the Company (“2015 Annual Meeting”); 

  

	D.	The Company and FrontFour have determined to come to an agreement with respect to the election of members of the Board, including those to be elected at the 2015 Annual Meeting, certain matters related to the 2015
Annual Meeting and certain other matters, as provided in this Agreement. 

 Accordingly, the Parties agree as follows: 

1. Board Appointments; 2015 Annual Meeting; Board Matters. 

(a) The Company agrees to take all necessary actions to nominate at the 2015 Annual Meeting David A. Lorber (“Lorber”),
Joseph M. Gingo (“Gingo”) and Carl Christenson (“Christenson”, and collectively with Lorber and Gingo, the “Agreed Slate”) for election to serve as directors until the 2018 annual meeting of the
shareholders of the Company. The Company agrees to recommend, support and solicit proxies for the election of Lorber at the 2015 Annual Meeting in the same manner as for all directors on the Agreed Slate, and to otherwise use reasonable best efforts
to cause, the election of all directors on the Agreed Slate. 
 (b) FrontFour hereby irrevocably withdraws the Nomination Letter on the
Effective Date and agrees, except as provided in Sections 1(a) and 1(g), not to: (i) nominate any person for election at the 2015 Annual Meeting, (ii) submit any proposal for consideration at, or bring any other business before, the 2015
Annual Meeting, directly or indirectly, (iii) initiate, encourage or participate in any “withhold” or similar campaign with respect to the 2015 Annual Meeting, directly or indirectly, or (iv) publicly or privately encourage or
support any other shareholder to take any of the actions described in this Section 1(b). 

 (c) At the 2015 Annual Meeting, FrontFour agrees to appear in person or by proxy and vote all of
the shares of Common Stock it beneficially owns (i) in favor of the election of the Agreed Slate, (ii) to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2015,
(iii) in accordance with the Board’s recommendation with respect to the Company’s “say-on-pay” proposal, and (iv) in accordance with the recommendation of Institutional Shareholders Services (ISS) with respect to any
other matter that comes before the 2015 Annual Meeting. 
 (d) FrontFour agrees that it will cause each of its Affiliates and Associates to
comply with FrontFour’s obligations under this Agreement and shall be responsible for the failure of any Affiliate or Associate to do so. As used in this Agreement, the terms “Affiliate” and “Associate” will have the
respective meanings set forth in Rule 12b-2 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or the rules or regulations promulgated thereunder (the “Exchange Act”) and
will include all persons or entities that, subsequent to the Effective Date, become Affiliates or Associates of any person or entity referred to in this Agreement. 

(e) The Company agrees that promptly following the conclusion of the 2015 Annual Meeting, but in any event no later than 5 days thereafter,
the Board will take all action necessary to increase the size of the Board to nine directors with the newly created directorship resulting from such increase to be designated as a director of the Company whose term of office will expire at the 2016
annual meeting of shareholders of the Company (the “2016 Annual Meeting”) and immediately thereafter, appoint Allen A. Spizzo (“Spizzo”) as a director of the Company whose term of office will expire at the 2016
Annual Meeting. 
 (f) FrontFour acknowledges that all members of the Board, including Lorber and Spizzo, are required to comply with all
policies, procedures, processes, codes, rules, standards and guidelines applicable to Board members, including the Company’s code of business conduct and ethics, securities trading policies, director confidentiality policies, and corporate
governance guidelines, and preserve the confidentiality of Company business and information, including discussions of matters considered in meetings of the Board or Board committees. FrontFour further acknowledges that Lorber and Spizzo shall be
required to provide to the Company the information required to be or customarily disclosed for directors, candidates for directors, and their affiliates and representatives in a proxy statement or other filings under applicable law or stock exchange
rules or listing standards, information in connection with assessing eligibility, independence and other criteria applicable to directors or satisfying compliance and legal obligations, and such other information as reasonably requested by the
Company from time to time. FrontFour shall ensure that each of Lorber and Spizzo has provided, and provides, the Company with the information contemplated by this Section 1(f) and otherwise complies therewith, and FrontFour shall provide the
Company with such information concerning FrontFour as is required to be disclosed under applicable law or stock exchange regulations. 

 (g) The Company agrees that if either Lorber or Spizzo is unable to serve as a director, resigns
as a director or is removed as a director during the Standstill Period, then FrontFour shall have the ability to recommend a substitute person(s); provided that any substitute person recommended by FrontFour shall qualify as “independent”
pursuant to New York Stock Exchange listing standards and the Company’s Corporate Governance Principles, and have relevant financial and business experience to fill the resulting vacancy. In the event the Nominating and Corporate Governance
Committee of the Board (the “Nominating Committee”) does not accept a substitute person recommended by FrontFour, FrontFour will have the right to recommend additional substitute person(s) for consideration by the Nominating
Committee. Upon the acceptance of a replacement director nominee by the Nominating Committee, the Board will take such actions as to appoint such replacement director to the Board no later than 5 business days after the Nominating Committee
recommendation of such replacement director. 
 (h) The Company shall use its reasonable best efforts to hold the 2015 Annual Meeting no
later than June 13, 2015. 
 (i) The Company agrees that Lorber shall be appointed to the Nominating Committee, Spizzo shall be
appointed to the Compensation Committee of the Board and further each of Lorber and Spizzo shall be considered along with all other Board members for Board committee appointments in connection with the Board’s annual review of committee
composition. 
 2. Standstill Provisions. 

(a) FrontFour agrees that, from the date of this Agreement until the earlier of (x) the date that is 15 business days before the deadline
for the submission of shareholder nominations for the 2016 Annual Meeting pursuant to the Company’s bylaws or (y) the date that is 60 calendar days prior to the first anniversary of the 2015 Annual Meeting (“Standstill
Period”), neither it nor any of its Affiliates or Associates will, and it will cause each of its Affiliates and Associates not to, directly or indirectly, in any manner: 

(i) engage in any solicitation of proxies or consents or become a “participant” in a “solicitation” (as such terms are
defined in Regulation 14A under the Exchange Act) of proxies or consents (including, without limitation, any solicitation of consents that seeks to call a special meeting of shareholders), in each case, with respect to the securities of the Company;

 (ii) form, join or in any way participate in any “group” (within the meaning of Section 13(d)(3) of the Exchange Act),
with respect to the securities of the Company (other than a “group” that consists exclusively of the persons identified on Exhibit A for purposes consistent with this Agreement), except that nothing in this

 
Agreement will limit the ability of an Affiliate or Associate of FrontFour to join the FrontFour “group” following the execution of this Agreement, so long as any such Affiliate or
Associate has executed and delivered to the Company a written joinder agreeing to be bound by the terms and conditions of this Agreement; 

(iii) deposit any securities of the Company in any voting trust or subject any the securities of the Company to any arrangement or agreement
with respect to the voting of any securities of the Company, other than any such voting trust, arrangement or agreement solely among the members of FrontFour and otherwise in accordance with this Agreement; 

(iv) seek or encourage any person to submit nominations in furtherance of a “contested solicitation” for the election or removal of
directors with respect to the Company or initiate, encourage or participate in any other action with respect to the election or removal of any directors, except as contemplated by this Agreement; 

(v) (A) initiate, encourage or participate in any proposal for consideration by shareholders at any annual or special meeting of shareholders
of the Company or seek or encourage any other person or entity to do so, (B) initiate, encourage or participate in any offer or proposal (with or without conditions) with respect to a merger, acquisition, recapitalization, restructuring,
disposition or other transaction involving the Company, or seek or encourage any third party to do so or to engage in any related activity or (C) initiate, encourage or participate in any public communication in opposition to any merger,
acquisition, recapitalization, restructuring, disposition or other transaction approved by the Board; 
 (vi) institute, solicit, assist or
join, as a party, any litigation, arbitration or other proceeding against or involving the Company or any of its current or former directors or officers (including derivative actions) other than to enforce the provisions of this Agreement; 

(vii) seek, alone or in concert with others, representation on the Board, except as specifically contemplated in Section 1; 

(viii) seek to advise, encourage, support or influence any person with respect to the voting or disposition of any securities of the Company
at any annual or special meeting of shareholders, except in accordance with Section 1; or 
 (ix) initiate, encourage or participate in
any request or submit any proposal to amend or waive the terms of this Agreement other than through non-public communications with the Company that would not trigger public disclosure obligations for any Party. 

(b) FrontFour will cause all FrontFour Members not to (i) take any action, (ii) vote any securities of the Company that it owns or
controls, or (iii) make any public statements regarding the Company, unless FrontFour acts, votes or makes a statement in a manner that is consistent among all FrontFour Members and in compliance with this Agreement. 

 (c) Except as expressly provided in Section 1, Section 2(a) or Section 2(b), each
FrontFour Member will be entitled to: 
 (i) vote its shares on any other proposal duly brought before the 2015 Annual Meeting, or otherwise
vote as each member of FrontFour determines in its sole discretion provided that all members of FrontFour vote their shares in the same manner; 

(ii) disclose, publicly or otherwise, how it intends to vote or act with respect to any securities of the Company, any shareholder proposal or
other matter to be voted on by the shareholders of the Company and its reasons for doing so, so long as all such activity is in compliance with the requirements of this Agreement and that such disclosure is made in a consistent manner and includes
all members of FrontFour; or 
 (ii) engage in private communications with shareholders and other third parties as long as such
communications are in compliance with the requirements of this Agreement. 
 3. Representations and Warranties of the Company. 

The Company represents and warrants to FrontFour that (a) the Company has the corporate power and authority to execute and deliver this
Agreement, (b) this Agreement has been duly and validly authorized, executed and delivered by the Company, constitutes a valid, binding obligation of the Company and is enforceable against the Company in accordance with its terms, except as
such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors or by general equity principles (collectively,
“Enforceability Exceptions”), and (c) the execution, delivery and performance of this Agreement by the Company does not and will not (i) violate or conflict with any law, rule, regulation, order, judgment or decree
applicable to the Company or (ii) result in any breach or violation of or constitute a default (or any event that with notice or lapse of time or both could constitute a breach, violation or default) under or pursuant to, or result in the loss
of a material benefit under, or give any right of termination, amendment, acceleration or cancellation of, any organizational document, agreement, contract, commitment, understanding or arrangement to which the Company is a party or by which it is
bound. 
 4. Representations and Warranties of FrontFour. 

FrontFour represents and warrants to the Company that (a) each of FrontFour’s authorized signatories named on the signature page of
this Agreement has the power and authority to execute and deliver this Agreement and any other documents or agreements to be entered into in connection with this Agreement, (b) this Agreement has been duly and validly authorized, executed and
delivered by each FrontFour 

 
Member, constitutes a valid, binding obligation of each FrontFour Member and is enforceable against each FrontFour Member in accordance with its terms, except as such enforcement may be limited
by the Enforceability Exceptions, (c) the execution of this Agreement, the consummation of any of the transactions contemplated by the Agreement and the fulfillment of the terms of this Agreement, in each case in accordance with the terms of
this Agreement, will not conflict with or result in a breach or violation of the organizational documents of any FrontFour Member as in effect on the Effective Date, (d) the execution, delivery and performance of this Agreement by each
FrontFour Member does not and will not (i) violate or conflict with any law, rule, regulation, order, judgment or decree applicable to such FrontFour Member or (ii) result in any breach or violation of or constitute a default (or any event
that with notice or lapse of time or both could constitute a breach, violation or default) under or pursuant to, or result in the loss of a material benefit under, or give any right of termination, amendment, acceleration or cancellation of, any
organizational document, agreement, contract, commitment, understanding or arrangement to which such FrontFour Member is a party or by which it is bound, (e) as of the Effective Date, FrontFour is deemed to beneficially own in the aggregate
1,785,606 shares of Common Stock, and (f) except as disclosed in its Schedule 13D filed with the SEC on January 9, 2015, as amended on January 28, 2015, as of the Effective Date, FrontFour does not have, or have any right to acquire,
any interest in any other securities of the Company (or any rights, options or other securities convertible into, exercisable or exchangeable for such securities or any obligations measured by the price or value of any securities of the Company or
any of its Affiliates, including any swaps or other derivative arrangements designed to produce economic benefits and risks that correspond to the ownership of Common Stock, in each case (i) whether or not convertible, exercisable or
exchangeable immediately or only after the passage of time or the occurrence of a specified event, (ii) whether or not any of the foregoing would give rise to beneficial ownership (as determined under Rule 13d-3 promulgated under the Exchange
Act), (iii) whether or not to be settled by delivery of Common Stock, payment of cash or by other consideration, and (iv) without regard to any short position under any such contract or arrangement). 

5. Press Release. 

Promptly following the execution of this Agreement, the Company and FrontFour will jointly issue a mutually agreeable press release (the
“Mutual Press Release”) announcing certain terms of this Agreement, in the form attached as Exhibit B. Before the issuance of the Mutual Press Release, neither the Company nor FrontFour will issue any press release or public
announcement regarding this Agreement without the advance written consent of the other Party. Until the 2015 Annual Meeting, neither the Company nor FrontFour will make any public announcement or statement that is inconsistent with or contrary to
the statements made in the Mutual Press Release, except as required by law or the rules of any stock exchange or with the advance written consent of the other Party. 

 6. Mutual Non-Disparagement. 

Except as required by law, each Party covenants and agrees that, during the Standstill Period, or if earlier, until such time as the other
Party or any of its agents, subsidiaries, affiliates, successors, assigns, officers, key employees or directors has breached this Section 6, neither it nor any of its agents, subsidiaries, affiliates, successors, assigns, officers, key
employees or directors will in any way publicly disparage, call into disrepute, defame, slander or otherwise criticize the other Party or the other Party’s subsidiaries, affiliates, successors, assigns, officers (including any current officer
of a Party or a Party’s subsidiaries who no longer serves in such capacity following the Effective Date), directors (including any current director of a Party or a Party’s subsidiaries who no longer serves in such capacity following the
Effective Date), employees, shareholders, agents, attorneys or representatives, or any of their products or services, in any manner that would damage the business or reputation of such other Party, its products or services or its subsidiaries,
affiliates, successors, assigns, officers (or former officers), directors (or former directors), employees, shareholders, agents, attorneys or representatives. 

7. Expenses. 
 The
Company will reimburse FrontFour for its reasonable, documented out-of-pocket fees and expenses (including legal expenses) paid or payable to third parties as of the Effective Date in connection with the matters related to the 2015 Annual Meeting
and the negotiation and execution of this Agreement, provided that such reimbursement will not exceed $150,000 in the aggregate to FrontFour as a whole. 

8. Specific Performance. 

FrontFour, on the one hand, and the Company, on the other hand, acknowledge and agree that irreparable injury to the other Party would occur
if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached and that such injury would not be adequately compensable by the remedies available at law (including the payment of
money damages). The Parties accordingly agree that FrontFour, on the one hand, and the Company, on the other hand (as applicable, “Moving Party”), will each be entitled to specific enforcement of, and injunctive relief to prevent
any violation of, the terms of this Agreement and the other Party will not take action, directly or indirectly, in opposition to such relief sought by the Moving Party on the ground that any other remedy or relief is available at law or in equity.
This Section 8 is not the exclusive remedy for any violation of this Agreement. 
 9. Severability. 

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement will remain in full force and will in no way be affected, impaired or invalidated. The Parties hereby stipulate and declare it to be their intention
that the Parties would have executed the remaining terms, 

 
provisions, covenants and restrictions without including any such term, provision, covenant or restriction that may after the Effective Date be declared invalid, void or unenforceable. In
addition, the Parties agree to use their best efforts to agree upon and substitute a valid and enforceable term, provision, covenant or restriction for any such term, provision, covenant or restriction that is held invalid, void or unenforceable by
a court of competent jurisdiction. 
 10. Notices. 

Any notices, consents, determinations, waivers or other communications required or permitted to be given under the terms of this Agreement
must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the receiving Party. The addresses and facsimile numbers for such
communications will be: 
  

			
	If to the Company:
		
			OM Group, Inc.
			950 Main Avenue, Suite 1300
			Cleveland, Ohio 44113
			Attention: Valerie Gentile Sachs, Esq.
			Telephone: (216) 263-7465
			Facsimile: (216) 263-7757
	
	with a copy (which will not constitute notice) to:
		
			Jones Day
			901 Lakeside Avenue
			Cleveland, Ohio 44114-1190
			Attention: James P. Dougherty, Esq.
			Telephone: (216) 586-7302
			Facsimile: (216) 579-0212
	
	If to FrontFour or any member thereof:
		
			FrontFour Master Fund, Ltd.
			c/o Ogier Fiduciary Services (Cayman) Limited
			89 Nexus Way, Camana Bay, Grand Cayman
			KY1 9007, Cayman Islands
			Attention: David A. Lorber
			Tel: (203) 274-9052
			Fax: (203) 274-9045

			
	with a copy (which will not constitute notice) to:
		
			Olshan Frome Wolosky
			Park Tower
			65 East 55th Street
			New York, New York 10022
			Attention: Steve Wolosky, Esq.
			Telephone: (212) 451-2333
			Facsimile: (212) 451-2222

 11. Applicable Law. 

This Agreement will be governed by and construed and enforced in accordance with the laws of the State of Ohio without reference to the
conflict of laws principles thereof. Each of the Parties irrevocably agrees that any legal action or proceeding with respect to this Agreement and the rights and obligations arising under this Agreement, or for recognition and enforcement of any
judgment in respect of this Agreement and the rights and obligations arising under this Agreement brought by the other Party or its successors or assigns, will be brought and determined exclusively in the state courts located in Cuyahoga County,
Ohio and any state appellate court therefrom within the State of Ohio (or if any state court declines to accept jurisdiction over a particular matter, the United States District Court for the Northern District of Ohio). Each of the Parties hereby
irrevocably submits, with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to
this Agreement in any court other than the aforesaid courts. Each of the Parties hereby irrevocably waives, and agrees not to assert in any action or proceeding with respect to this Agreement, (i) any claim that it is not personally subject to
the jurisdiction of the above-named courts for any reason, (ii) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (iii) to the fullest extent permitted by applicable legal requirements, any claim that (A) the suit, action or proceeding in
such court is brought in an inconvenient forum, (B) the venue of such suit, action or proceeding is improper, or (C) this Agreement or its subject matter may not be enforced in or by such courts. 

12. Counterparts. 
 This
Agreement may be executed in multiple counterparts, each of which is an original and which collectively are a single instrument, effective when counterparts have been signed by each Party and delivered to the other Party (including by means of
electronic delivery or facsimile). 

 13. Entire Agreement; Amendment and Waiver; Successors and Assigns; Third Party
Beneficiaries. 
 This Agreement contains the entire understanding of the Parties with respect to its subject matter. There are no
restrictions, agreements, promises, representations, warranties, covenants or undertakings between the Parties other than those expressly set forth in this Agreement. No modifications of this Agreement can be made except in writing signed by an
authorized representative of each of the Company and FrontFour, except that the signature of an authorized representative of the Company will not be required to permit an Affiliate of FrontFour to agree to be listed on Exhibit A and be bound
by the terms and conditions of this Agreement. No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy under this Agreement will operate as a waiver, nor will any single or partial exercise of such
right, power or remedy by such Party preclude any other or further exercise of that or any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. The terms and conditions of
this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their successors, heirs, executors, legal representatives and permitted assigns. No Party will assign this Agreement or any rights or obligations
under this Agreement without the advance written consent of the other Party. This Agreement is solely for the benefit of the Parties and is not enforceable by any other persons. 

[The remainder of this page is intentionally blank.] 

 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized
signatories of the Parties as of the Effective Date. 
  

			
	OM GROUP, INC.
		
	By:		 /s/ Joseph Scaminace

	Name:		Joseph Scaminace
	Title:		Chief Executive Officer

 [Signature Page to Agreement] 

 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized
signatories of the Parties as of the Effective Date. 
  

			
	FRONTFOUR CAPITAL GROUP LLC
		
	By:		 /s/ David Lorber

			Name: David Lorber
			Title:   Authorized Signatory
	
	FRONTFOUR MASTER FUND, LTD.
		
	By:		 /s/ David Lorber

			Name: David Lorber
			Title:   Authorized Signatory
	
	FRONTFOUR OPPORTUNITY FUND LTD.
		
	By:		 /s/ David Lorber

			Name: David Lorber
			Title:   Authorized Signatory
	
	FRONTFOUR CAPITAL CORP.
		
	By:		 /s/ David Lorber

			Name: David Lorber
			Title:   Authorized Signatory
	
	STEVEN E. LOUKAS, individually
	
	         /s/ Steven E. Loukas

	
	DAVID A. LORBER, individually
	
	         /s/ David Lorber

	
	ZACHARY R. GEORGE, individually
	
	         /s/ Zachary R. George

	
	ALLEN A. SPIZZO, individually
	
	         /s/ Allen A. Spizzo

 [Signature Page to Agreement] 

 EXHIBIT A 

FRONTFOUR CAPITAL GROUP LLC 
 FRONTFOUR MASTER FUND, LTD. 

FRONTFOUR OPPORTUNITY FUND LTD. 
 FRONTFOUR CAPITAL CORP. 

STEVEN A. LOUKAS 
 DAVID A. LORBER 

ZACHARY R. GEORGE 
 ALLEN A. SPIZZO 

 EXHIBIT B 

Press Release 
 See attached.Exhibit 10.32 12.31.2014

                                            Exhibit 10.32

EXECUTED VERSION
EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (the “Agreement”), effective as of November 20, 2014 (the “Effective Date”), by and between American Apparel, Inc., a Delaware corporation (the “Company”), and Chelsea A. Grayson (herein referred to as the “Executive”).
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, Executive Vice President and Secretary of the Company and to perform such reasonably related duties as may be assigned to her from time to time by the Board of Directors of the Company (the “Board”), (ii) shall report only to the Board, the Chairman of the Board, the Chief Executive Officer, and the President  of the Company, (iii) shall be given such authority as is appropriate given the Executive’s position in a company the nature and size of the Company to carry out the duties described above, and (iv) agrees to serve, if elected, at no additional compensation in the position of officer or director of any subsidiary or affiliate of the Company.
(c)          Exclusive Services.  During the Term, and except for illness or incapacity and service on non-profit boards, approved by the Board in its discretion, that do 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, the Executive shall devote all of her 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 her from time to time by the Board, the Chairman of the Board or the Chief Executive Officer consistent with her position.
(d)          Place of Employment.  The Executive shall perform her 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 in writing by the Company and the Executive. 

2.            Term of Agreement.
The term of employment under this Agreement shall initially be the twelve months  commencing on December 15, 2014 (the “Effective Date”) and ending on December 14, 2015, and shall be automatically extended without further action by either party for successive one-year periods as of each December 15 (beginning December 15, 2015) (each, an “Extension Date”), unless written notice of either party’s intention to terminate this Agreement has been given to the other party at least 90 calendar 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 one 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 her 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 base salary at the rate of $400,000.00 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 on the basis of such review.  The Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as the “Salary.”
(b)           Performance Bonuses.  The Executive will be eligible to receive an annual incentive compensation award in respect of each fiscal year of the Company during the Term, commencing with fiscal year 2015, with a target payment equal to 50% of Salary during each such fiscal year, subject to the terms and conditions of the Company’s annual bonus plan, and further subject to written sales, EBITDA, net debt and inventory goals, criteria or targets, including, without limitation, the timely delivery of reviewed and audited, as applicable, financial statements and timely required SEC filings, all as determined by the Board or the Compensation Committee in its or their sole discretion in respect of each such fiscal year (each such bonus, an “Annual Bonus”).    Any Annual Bonus earned shall be payable in a lump sum in cash. The Annual Bonus earned in respect of each fiscal year of the Company during the Term, if any, shall be paid to the Executive in the fiscal year immediately following the fiscal year for which the bonus is earned, but in all events no later than the earlier of (A) ten days after the filing of the Company’s Form 10-K with the Securities Exchange Commission, and (B) 90 days after the end of the applicable fiscal year for which the bonus is earned.
4.            Equity Awards.
The Compensation Committee of the Board is in the process of developing a long term incentive plan (the “LTIP”) for senior management.  If an LTIP becomes effective, the Executive shall be entitled to participate in the LTIP at a level commensurate with Executive’s title and responsibilities. Any equity awards pursuant to the LTIP will be at the sole discretion of the Board.   Immediately upon (a) a change of control of the Company, as defined in the LTIP, or (b) a termination of Executive’s employment (i) upon the Executive’s death or Disability (as defined below), (ii) by the Company without Cause (as defined below), or (iii) by the Executive with Good Reason (as defined below), all outstanding  stock-based awards (including without limitation, restricted stock, phantom stock, and performance stock), stock options, and similar equity-based awards, and all restricted cash awards, in each case made to the Executive under the LTIP, shall be payable and/or vest as provided in the LTIP and the award to Executive, as applicable.  
5.           Pension and Welfare Benefits.
During the Term, the Executive will be entitled to participate in all pension and welfare plans, programs and benefits that are applicable to executives of the Company.

6.          Other Benefits.
(a)          Travel and Business-related Expenses.  During the Term, the Executive shall be promptly reimbursed in accordance with the written policies of the Company for traveling and other expenses reasonably incurred in the performance of the business of the Company.
(b)           Vacation; Leaves of Absence.  During the Term, the Executive shall be allowed time away with pay on the same basis as the Company generally provides to other executives of the Company, provided, that the Executive shall be provided with no less than 20 paid vacation days and paid federal holidays.
7.            Termination of Employment.  Upon termination of the Executive’s employment for any reason, the Executive agrees to resign, as of the date of such termination and to the extent applicable, from the Board (and any committees thereof) and the board of directors of any of the Company’s affiliates and direct or indirect subsidiaries (and any committees thereof), if applicable, and agrees to resign as an officer of the Company and each of the Company’s affiliates and direct or indirect subsidiaries.
(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 her employment without Good Reason other than for death or Disability (as defined below in Section 7(d)), 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; and (B) any unreimbursed expenses, each within 30 days following termination.  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.
Subject to Section 18, 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 her duties hereunder; (B) the Executive’s failure (other than by reason of the incapacity of the Executive due to physical or mental illness) to perform such reasonable duties as are assigned to her from time to time by the Board, the Chairman of the Board, the Chief Executive Officer, or the President  of the Company; (C) 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; (D) any willful misconduct by the Executive in connection with the performance of her duties, including, without limitation, conduct that is materially injurious to the financial condition or business reputation of the Company or any of its affiliates or subsidiaries, misappropriation of funds or property of the Company, securing or attempting to secure personally any profit in connection with any transaction entered into on behalf of the Company, misrepresentation to the Company, or any violation of law or regulations on Company premises or to which the Company is subject; (E) commission by Executive of an act involving moral turpitude, dishonesty, theft, unethical business conduct, or conduct that materially impairs or injures the reputation of, or harms, the Company; (F) aiding a competitor to the Company in a manner that adversely affects the Company; (G) failure by Executive to devote her full time and best efforts

to the Company’s business and affairs; (H) misappropriation of a Company opportunity for the Executive’s personal benefit; (I) a material breach of the Executive’s obligations under this Agreement or under any
Company written policy applicable to the Executive; or (J) 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 within 30 calendar days of the Company becoming aware of the initial occurrence of such event or circumstance and, for those events or circumstances capable of cure (but only for those capable of a cure), Executive 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 or any reduction in the Executive’s Annual Salary or Annual Bonus opportunity, or a material reduction in the benefits provided to the Executive; (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; (C) a material change in the Executive’s reporting structure; (D) failure of any successor (whether direct or indirect, by stock or asset purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume this Agreement (either by operation of law or in writing), (E) a relocation of the principal location at which the Executive is required to provide services to any office or location more than fifty (50) miles from the one described in Section 1(d) hereof; or (F) 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 calendar days of the initial occurrence of such event or circumstance and, for those events or circumstances capable of cure (but only for those capable of a cure), 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 calendar 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 or, if no date is specified therein, ten (10) business 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, she shall be entitled to receive:  (A) the Salary provided for in Section 3(a) as accrued through the date of such resignation or termination, payable within 30 days following termination and  (subject to the Executive’s execution and delivery of a general release of all claims against the Affiliated Companies and the expiration of any release revocation period, which release shall be consistent with the terms of this Agreement and in form reasonably acceptable to the Company (the “Release”), within sixty (60) calendar days following termination of employment), continued payment of the Executive’s then-current Salary for a period of six (6) months (the “Continuation Period”), payable in accordance with the Company’s usual payment practices; provided that the first payment shall be made on the sixtieth (60th) calendar day following termination of employment and shall include payment of any amounts that would otherwise be due prior thereto; (B) at the time of, on the terms of, and otherwise consistent with payments to similarly-situated executives, (x) any Annual Bonus earned but not yet paid in respect of any calendar year preceding the year in which such termination or resignation occurs and (y) an Annual Bonus for the calendar year in which the Executive’s termination of employment or resignation occurs equal to a pro rata portion of the Executive’s target Annual Bonus, if any, for such year, determined on the basis of the number of days in such year through the date of the Executive’s termination of employment or resignation, provided, however, that if the Executive’s employment is terminated during the first three months of a fiscal year, no such bonus shall be payable with respect to that fiscal year; and (C) any unreimbursed expenses.  
Except to the extent required pursuant to Section 22 hereof, during the Continuation Period, Salary payments to the Executive shall be payable in accordance with the customary payroll practices of the Company.
Subject to the Executive’s execution and delivery of the Release and the expiration of any release revocation period within sixty (60) calendar days following termination of employment, the Executive (and those eligible dependents who were participants in the applicable plans as of the termination date) 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 Continuation Period, the Executive is precluded from participating in a plan or program by its terms or applicable law or if the Company for any reason ceases to maintain such plan or program, the Company shall provide the Executive with compensation or benefits the aggregate value of which, in the reasonable judgment of the Company, is no less than the aggregate value of the compensation or benefits that the Executive would have received under such plan or program had she been eligible to participate therein or had such plan or program continued to be maintained by the Company.
(ii)             Except as may be provided under the terms of any applicable grants to the Executive under the LTIP, Section 18, any plan or arrangement in which the Executive participates, or as may be otherwise required by applicable law (including, without limitation, the provisions of Section 4980B(f) of the Internal Revenue Code of 1986, as amended (the “Code”)), the Executive shall have no right under this Agreement or any other agreement 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.  In the event of a termination or resignation pursuant to this Section 7(b), the Executive shall have no duty of mitigation with respect to amounts payable to her pursuant to this Section 7(b) or other benefits to which she is entitled pursuant hereto, except as provided in the immediately preceding

paragraph.  Notwithstanding anything to the contrary in this Agreement, the right of the Executive to receive payments provided for in this Section 7(b) shall be subject to Section 8 of this Agreement.  
(iii)             The date of termination of employment by the Company pursuant to this Section 7(b) shall be the date specified in the written notice of termination from the Company to the Executive or, if no date is specified therein, ten business days after receipt by the Executive of the written notice of termination from the Company.  The date of a resignation by the Executive pursuant to this Section 7(b) 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 7(a)(iii) above applies shall be no less than 31 days after the delivery of such notice to the Company; and in the case of a proposed resignation to which the 30-day cure period does not apply and in which no date is specified therein, the date of resignation shall be ten business days after receipt by the Company of the written notice of resignation from the Executive.
(c)           Death.  If the Executive’s employment hereunder terminates by reason of death prior to expiration of the Term, the Executive’s beneficiary (or if no such beneficiary is designated, her estate) shall be entitled to receive:  (i) the Salary provided for in Section 3(a) as accrued through the date of the Executive’s death; (ii) any Annual Bonus earned but not yet paid in respect of any calendar year preceding the year in which the Executive’s death occurs; (iii) an Annual Bonus for the calendar year in which the Executive’s death occurs equal to a pro rata portion of the Executive’s target Annual Bonus, if any, for such year, determined on the basis of the number of days in such year through the date of the Executive’s death; and (iv) any unreimbursed expenses.  Annual Bonus payments provided for in this Section 7(c) shall be made at the same time and in the same manner as bonuses are paid to participants in the applicable bonus plan.  As used in this Section, the term “beneficiary” includes both the singular and the plural of such term, as may be appropriate.
(d)           Disability.  If, the Executive is terminated from employment by the Company as a result of the Executive’s Disability (as defined below in this Section), the Executive, her conservator or guardian, as the case may be, shall be entitled to receive:  (i) the Salary provided for in Section 3(a) as accrued through the date of the Executive’s termination of employment; (ii) any Annual Bonus earned but not yet paid in respect of any calendar year preceding the year in which the Executive’s termination of employment occurs; (iii) an Annual Bonus for the calendar year in which the Executive’s termination of employment occurs equal to a pro rata portion of the Executive’s target Annual Bonus, if any, for such year, determined on the basis of the number of days in such year through the date of the Executive’s termination of employment; and (iv) any unreimbursed expenses.  Annual Bonus payments provided for in this Section 7(d) shall be made at the same time and in the same manner as bonuses are paid to participants in the applicable bonus plan.  For purposes of this Agreement, “Disability” shall mean that the Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than twelve months.  Any dispute as to whether or not the Executive is disabled within the meaning of the preceding sentence shall be resolved by a physician reasonably satisfactory to the Executive and the Company, and the determination of such physician shall be final and binding upon both the Executive and the Company.
(e)           Non-Renewal of the Term.  In the event the Company elects not to extend the Term pursuant to Section 2, unless the Executive’s employment is earlier terminated pursuant to paragraphs (a), (b), (c) or (d) of this Section 7, the expiration of the Term and Executive’s termination of employment hereunder shall be deemed to occur on the close of business on the day immediately preceding the next scheduled Extension Date and the Executive shall be entitled to receive the benefits and payments set forth under Section 7(b)(i)(A)-(D) above.  Following such termination of Executive’s employment under this Section 7(e), except as set forth in this Section 7(e) and Section 18, Executive shall have no further rights to any compensation or any other benefits under this Agreement. 

8.            Tax Withholding.
Payments to the Executive of all compensation contemplated under this Agreement shall be subject to all applicable legal requirements with respect to the withholding of taxes.
9.            Confidentiality and Proprietary Rights.
(a)           Confidentiality.  The Executive acknowledges that as a result of her employment with the Company, the Executive will obtain secret and confidential information concerning the business of the Company, and its subsidiaries and affiliates (all of such entities referred to collectively in this Section as the “Affiliated Companies”).  Other than in the performance of her duties hereunder or if confidential information is required to be disclosed by law, court order or other legal process (provided that the Executive shall give prompt written notice to the Company of such requirement, disclose no more information than is so required, and cooperate with any attempts by the Company to obtain a protective order or similar treatment) or to the extent necessary to enable the Executive to enforce (or defend) her rights under this Agreement or any other agreement with the Company or any affiliate, the Executive agrees not to disclose, either during the Term of her employment with the Company or at any time thereafter, to any person, firm or corporation any confidential information concerning the Company which is not in the public domain or known within the relevant trade or industry (other than as a result of an unauthorized disclosure by the Executive) including trade secrets, budgets, strategies, operating plans, marketing plans, supplier lists, non-public company agreements, employee lists, or the customer lists or similar confidential information of the Company.
(b)           Proprietary Rights.  All records, files, memoranda, reports, price lists, customer lists, drawings, plans, sketches, documents and the like (together with all copies thereof) relating to the business of the Affiliated Companies, which the Executive shall use or prepare or come in contact with in the course of, or as a result of her employment, or as a result of work performed by the Executive for the Company, shall, as between the parties, remain the sole property of the Company. Upon termination of her employment with the Company, the Executive agrees to promptly return all such materials and shall not thereafter cause removal thereof from the premises of the Company. Further, the Executive agrees to disclose and assign, and does hereby assign, to the Company as its exclusive property, all ideas, writings, inventions, discoveries, improvements and technical or business innovations made or conceived by the Executive, whether or not patentable or copyrightable, either solely or jointly with others during the course of her employment with the Company, relating directly to the business, work or investigations of the Company or its subsidiaries (“Company Inventions”).
Notwithstanding the foregoing, the Executive understands that the provisions of this Agreement requiring assignment of Company Inventions to the Company do not apply to any invention that qualifies under the provisions of California Labor Code Section 2870 (as set forth in Exhibit A hereto). The Executive understands that Company will keep in confidence and will not disclose to third parties without the Executive’s consent any confidential information disclosed in writing to Company relating to inventions that qualify under the provisions of Section 2870 of the California Labor Code.
(c)           Except as may be required by applicable law, without the Executive’s prior written consent, the Executive shall not be subject to any restrictions on her activities following termination of employment with the Company other than as expressly set forth in this Agreement or the LTIP.
10.    Cooperation.   
The Executive agrees that following the date of termination of employment, she shall reasonably cooperate with the Company, if so requested, with respect to the Company’s business affairs, as well as any internal or external investigation, claims or litigation (whether or not currently pending) involving the Company, including providing information and assistance and making herself reasonably available for both pre-trial discovery and trial proceedings. The Company shall promptly reimburse Executive for any out-of-pocket expenses incurred by Executive in connection with her cooperation with the Company pursuant to this Section 10, including, without

 limitation, any reasonable attorneys’ fees and travel and lodging costs incurred by the Executive.
11.          Nonassignability; Binding Agreement.
Neither this Agreement nor any right, duty, obligation or interest thereunder shall be assignable or delegable by the Executive without the Company’s prior written consent; provided, however, that nothing in this Section shall preclude the Executive from designating any of her beneficiaries to receive any benefits payable hereunder upon her death or disability, or her executors, administrators, or other legal representatives, from assigning any rights hereunder to the person or persons entitled thereto.  If the Executive should die while any payment, benefit or entitlement is due to her pursuant to this Agreement, such payment, benefit or entitlement shall be paid or provided to her designated beneficiary (or, if there is no designated beneficiary, her estate).  This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, any successors to or assigns of the Company and the Executive’s heirs and the personal representatives of the Executive’s estate.  In addition, the Company shall assign to and require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.
12.          Amendment; Waiver.  This Agreement may not be modified, amended or waived in any manner except by an instrument in writing signed by the parties hereto.  No delay or failure by any party hereto in exercising, protecting or enforcing any of its rights, titles, interests or remedies hereunder, and no course of dealing or performance with respect thereto, shall constitute a waiver thereof. The express waiver by a party hereto of any right, title, interest or remedy in a particular instance or circumstance shall not constitute a waiver thereof in any other instance or circumstance. 
13.          Notices.
Any notice hereunder by either party to the other shall be given in writing by personal delivery, email or certified mail, return receipt requested, to the applicable address set forth below:
	
					
	  
	(a)
	 To the Company:
	 
	American Apparel, Inc.
747 Warehouse Street
Los Angeles, California 90021 
Attention:  Scott Brubaker and/or Chief Executive Officer
Email: scott@AmericanApparel.net

	 
	(b)
	 To the Executive:
	 
	Chelsea A. Grayson
747 Warehouse Street
Los Angeles, California 90021 
Email:  cgrayson@americanapparel.net

(or such other address as may from time to time be designated by written notice by any party hereto for such purpose). Notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by email, on the business day following receipt of confirmation or, if by certified mail, on the date shown on the applicable return receipt.
14.              California Law.
This Agreement is to be governed by and interpreted in accordance with the laws of the State of California, without giving effect to the choice-of-law provisions thereof. If, under such law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation or ordinance, such portion shall be deemed to be modified or altered to conform thereto or, if that is not possible, to be omitted from this Agreement, and the invalidity of any such portion shall not affect the force, effect and validity of the remaining portion hereof.

15.          Arbitration.
The Company and the Executive agree that any and all disputes based upon, relating to or arising out of this Agreement, the Executive’s employment relationship with the Company or any of its subsidiaries or affiliates and/or the termination of that relationship, and/or any other dispute by and between the Executive and the Company or any of its subsidiaries or affiliates, including any and all claims that the Executive may at any time attempt to assert against the Company or any of its subsidiaries or affiliates, shall be submitted to binding arbitration in Los Angeles County, California, pursuant to the American Arbitration Association’s (“AAA”) Employment Arbitration Rules and Mediation Procedures, including the Optional Rules for Emergency Measures of Protection (the “Rules”), provided that the arbitrator shall allow for discovery sufficient to adequately arbitrate any asserted claims, including access to essential documents and witnesses, and otherwise in accordance with California Code of Civil Procedure § 1283.05, and provided further that the Rules shall be modified by the arbitrator to the extent necessary to be consistent with applicable law. The arbitrator shall be a retired judge of the California Superior Court, California Court of Appeal, or United States District Court, to be mutually agreed upon by the parties. If, however, the parties are unable to agree upon an arbitrator, then an arbitrator, who is a retired judge of the California Superior Court, California Court of Appeal, or United States District Court, shall be selected by AAA in accordance with the Rules. The Company and the Executive further agree that each party shall pay its own costs and attorneys’ fees, if any; provided, however, that if either party prevails on a claim which affords the prevailing party an award of attorneys’ fees, then the arbitrator may award reasonable attorneys’ fees to the prevailing party, consistent with applicable law. In any event, the Company shall pay any expenses that the Executive would not otherwise have incurred if the dispute had been adjudicated in a court of law, rather than through arbitration, including the arbitrator’s fee, any administrative fee and any filing fee in excess of the maximum court filing fee in the jurisdiction in which the arbitration is commenced. The Company and the Executive further agree that any hearing must be transcribed by a certified shorthand reporter, and that the arbitrator shall issue a written decision and award supported by essential findings of fact and conclusions of law in order to facilitate judicial review.  Said award and decision shall be issued within thirty (30) calendar days of the completion of the arbitration. Judgment in a court of competent jurisdiction may be had on said decision and award of the arbitrator. For these purposes, the parties agree to submit to the jurisdiction of the state and federal courts located in Los Angeles County, California. 
16.          Injunctive Relief.
The Executive acknowledges and agrees that the services being rendered by the Executive to the Company under this Agreement are of a special, unique and extraordinary character that gives them peculiar value to the Affiliated Companies, the loss of which (in violation of this Agreement) would cause irreparable harm to the Affiliated Companies and affiliates, for which the Affiliated Companies would have no adequate remedy at law.  The Executive further acknowledges and agrees that the trade secrets and confidential and related information referred to in this Agreement each are of substantial value to the Affiliated Companies and that a breach of any of the terms and conditions of this Agreement relating to those subjects would cause irreparable harm to the Affiliated Companies, for which the Affiliated Companies would have no adequate remedy at law. Therefore, in addition to any other remedies (in law or in equity) that may be available to the Company and/or any of its subsidiaries and affiliates under this Agreement or otherwise, the Affiliated Companies shall be entitled to obtain (pursuant to the Rules) temporary restraining orders, preliminary and permanent injunctions and/or other equitable relief (pursuant to the Rules) to specifically enforce the Executive’s duties and obligations under this Agreement, or to enjoin any breach of this Agreement, without the need to post a bond or other security and without the need to demonstrate special damages.
17.          Counterparts.
This Agreement may be executed by either of the parties hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.

18.          Indemnification. With respect to any acts or omissions that may have occurred prior to termination of the Executive’s employment, the Company will indemnify the Executive (and her legal representatives or other successors) to the fullest extent permitted (including payment of expenses in advance of final disposition of a proceeding) by the laws of the State of California, as in effect at the time of the subject act or omission, or by the Certificate of Incorporation and By-Laws of the Company, as in effect at such time, or by the terms of any indemnification agreement between the Company and the Executive, whichever affords greatest protection to the Executive, and the Executive shall be entitled to the protection of any insurance policies the Company maintained by the Company generally for the benefit of its directors and officers (the “D&O Policies) (and the Executive shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company officer or director), against all costs, charges and expenses whatsoever incurred or sustained by her or her legal representatives at the time such costs, charges and expenses are incurred or sustained (including any time following Executive’s termination of employment), in connection with any action, suit or proceeding to which she (or her legal representatives or other successors) may be made a party by reason of her being or having been a director, officer or employee of the Company or any subsidiary thereof, or her serving or having served any other enterprises as a director, officer or employee at the request of the Company.  During the Term and for a customary tail period, the Company shall maintain in full force and effect one or more D&O Policies covering the Executive with coverage amounts customary for a business of the nature and size as the Company.
19.          Cumulative Remedies.
Each and all of the several rights and remedies provided in this Agreement, or by law or in equity, shall be cumulative, and no one of them shall be exclusive of any other right or remedy, and the exercise of any one of such rights or remedies shall not be deemed a waiver of, or an election to exercise, any other such right or remedy.
20.          Headings; Construction.
The section and other headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning and interpretation of this Agreement.  In construing this Agreement, no party hereto shall have any term or provision construed against such party solely by reason of such party having drafted or written such term or provision.
21.          Survival.
Any provision of this Agreement which imposes an obligation after termination or expiration of this Agreement (including but not limited to the obligations set forth in Section 9 hereof) shall, unless otherwise specified, survive the termination or expiration of this Agreement and be binding on the Executive and the Company.
22.          General 409A Compliance.
To the maximum extent applicable, it is intended that the Agreement comply with the provisions of Section 409A of the Code, as amended.  This Agreement will be administered and interpreted in a manner consistent with this intent, and any provision that would cause this Agreement to fail to satisfy Section 409A of the Code will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section 409A of the Code).  Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A, the Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement and no payments shall be due to the Executive under this Agreement which are payable upon the Executive's termination of employment until the Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code.  To the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and

 benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following the Executive's termination of employment shall instead be paid in a lump sum on the first business day after the date that is six months following the Executive's termination of employment (or upon the Executive's death, if earlier).  In addition, for purposes of the Agreement, each amount to be paid or benefit to be provided to the Executive pursuant to this Agreement shall be construed as a separate identified payment for purposes of Section 409A of the Code.  With respect to expenses eligible for reimbursement under the terms of the Agreement, (i) the amount of such expenses eligible for reimbursement in any taxable year shall not affect the expenses eligible for reimbursement in another taxable year and (ii) any reimbursements of such expenses shall be made no later than the end of the calendar year following the calendar year in which the related expenses were incurred, except, in each case, to the extent that the right to reimbursement does not provide for a “deferral of compensation” within the meaning of Section 409A of the Code.
23.  Section 280G.
(a)    Notwithstanding any other provision of this Agreement, in the event that the Executive becomes entitled to receive or receives any payments, options, awards or benefits (including, without limitation, the monetary value of any non-cash benefits and the accelerated vesting of equity-based awards) under this Agreement or under any other plan, agreement or arrangement with the Company, any person whose actions result in a change of control of the Company or any person affiliated with the Company or such person (collectively, the “Payments”), that may separately or in the aggregate constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), or any similar or successor provision (“Section 280G”) and it is determined that, but for this Section 23(a), any of the Payments will be subject to any excise tax pursuant to Section 4999 of the Code or any similar or successor provision, the Company shall pay to the Executive an amount equal to the Payments, reduced by the minimum amount necessary to prevent any portion of the Payments from being an “excess parachute payment” (within the meaning of Section 280G).
(b)    All computations and determinations called for by this Section 23 shall be made and reported in writing to the Company and the Executive by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Advisor”), and all such computations and determinations shall be conclusive and binding on the Company and the Executive. For purposes of such calculations and determinations, the Tax Advisor may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Executive shall furnish to the Tax Advisor such information and documents as the Tax Advisor may reasonably request in order to make their required calculations and determinations. The Company shall bear all fees and expenses charged by the Tax Advisor in connection with its services.
(c)    In the event that Section 23(a) applies and a reduction is required to be applied to the Payments thereunder, the Payments shall be reduced by the Company in its reasonable discretion in the following order: (i) reduction of any Payments that are exempt from Code Section 409A and (ii) reduction of any Payments that are subject to Code Section 409A on a pro-rata basis or such other manner that complies with Code Section 409A, as determined by the Company.
24.          Preemption.  In the event there is a conflict between any provision of this Agreement and any other agreement, plan, policy or program of the Company, the provisions of this Agreement shall control.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above, effective as of the Effective Date.

	
			
	 
	American Apparel, Inc.

	 
	 
	 

	 
	By:
	/s/ Scott Brubaker

	 
	 
	Scott Brubaker, Interim Chief Executive Officer

	 
	 
	 

	 
	 
	 

	 
	 
	/s/ Chelsea A. Grayson

	 
	 
	Chelsea A. Grayson

Exhibit A
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
“(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under Subdivision (a), the provision is against the public policy of this state and is unenforceable.”

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