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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant ý |
Filed by a Party other than the Registrant o |
Check the appropriate box: |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under §240.14a-12
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American Apparel, Inc. |
(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
Payment of Filing Fee (Check the appropriate box): |
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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June 17, 2015
Dear
Fellow Stockholder:
You are cordially invited to the 2015 Annual Meeting of Stockholders of American Apparel, Inc. (the "Annual Meeting") to be held on July 16, 2015, at 9:00 a.m.,
Central Time, at the Chicago office of Skadden, Arps, Slate, Meagher & Flom LLP, 155 N. Wacker Dr., Chicago, IL 60606.
The
matters to be considered and voted upon at the Annual Meeting are described in the Notice of Annual Meeting of Stockholders and the Proxy Statement that accompany this letter.
It
is very important that your shares be represented and voted at the Annual Meeting. Please read the attached Proxy Statement and vote your shares as soon as possible.
If
you have any questions or need assistance in voting your shares, please call our proxy solicitor, Innisfree M&A Incorporated, toll-free at 888-750-5834.
Thank
you for your continued support of American Apparel.
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Sincerely, |
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/s/ COLLEEN B. BROWN
Colleen B. Brown Chairperson of the Board |
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AMERICAN APPAREL, INC.
747 Warehouse Street
Los Angeles, California 90021
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on July 16, 2015
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Time and Date: |
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9:00 a.m., Central Time, on Thursday, July 16, 2015 |
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The Chicago office of Skadden, Arps, Slate, Meagher & Flom LLP, 155 N. Wacker Dr., Chicago, IL 60606 |
Items of Business:
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1. To elect Laura A. Lee, Thomas J. Sullivan and Lyndon Lea to the Board of Directors, each to serve for a term of three years and until his or her successor is duly
elected and qualified, or such director's earlier death, resignation or removal.
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2. To ratify the appointment of Marcum LLP as our independent auditors for the fiscal year ending December 31, 2015.
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3. To approve an amendment to our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of our common stock that we may
issue.
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4. To consider and transact such other business as may properly come before the Annual Meeting.
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Board of Directors Recommendation: The Board of Directors recommends that you vote "FOR"
the election
of each nominee for the Board of Directors and "FOR" Items 2 and 3.
Adjournments and Postponements: Any action on the items of business described above may be considered at the Annual Meeting at the time
and on the
date specified above or at any time and date to which the Annual Meeting may be properly adjourned or postponed.
Record Date: You are entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof only if you were
a holder of
record of shares of American Apparel, Inc. common stock as of the close of business on June 15, 2015. If your shares are held in an account at a brokerage firm, bank or similar
organization, that organization is considered the record holder for purposes of voting at the Annual Meeting and will provide you with instructions on how you can direct that organization to vote your
shares.
Voting: Your vote is very important. Whether or not you plan to attend the Annual Meeting, we encourage you to read the accompanying Proxy Statement
and our 2014 Annual Report on Form 10-K and vote as soon as possible. You may submit your proxy for the Annual Meeting by using the telephone or Internet voting system or by completing,
signing, dating and returning your proxy card. For specific instructions on how to vote your shares, please refer to the section entitled "Questions and
Answers about the Proxy Materials and Annual Meeting" beginning on page 1 of the accompanying Proxy Statement.
Admission: Space limitations make it necessary to limit attendance at the Annual Meeting to stockholders of record. If your shares are
held in an
account at a brokerage firm, bank or similar organization and you wish to attend the Annual Meeting, you must obtain a letter from that brokerage firm, bank or similar organization confirming your
ownership of the shares as of the record date and bring it to the Annual Meeting. Admission to the Annual Meeting will be on a first-come, first-served basis. Cameras, mobile phones and recording
devices will not be permitted at the Annual Meeting.
The Annual Meeting will begin promptly at 9:00 a.m., Central Time.
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Registration will begin at 8:30 a.m., Central Time.
Sincerely,
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/s/ CHELSEA A. GRAYSON
Chelsea A. Grayson Executive Vice President, General Counsel and Secretary |
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Los Angeles, California
June 17, 2015
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDERS MEETING TO BE HELD ON JULY 16, 2015: The Proxy Statement and Annual Report to stockholders
will be available at www.americanapparel.net/aboutus/investorrelations/.
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AMERICAN APPAREL, INC.
747 Warehouse Street
Los Angeles, California 90021
PROXY STATEMENT
FOR 2015 ANNUAL MEETING OF STOCKHOLDERS
To be held on July 16, 2015
Q: Why am I receiving these materials?
- A:
- This
proxy statement (this "Proxy Statement"), together with our Annual Report on Form 10-K for the year ended December 31, 2014 (our "Annual
Report"), is being mailed to stockholders commencing on or about June 17, 2015 in connection with the solicitation by the Board of Directors (the "Board of Directors" or the "Board") of
American Apparel, Inc. (the "Company" or "American Apparel") of proxies for use at the 2015 Annual Meeting of Stockholders and any adjournments or postponements thereof (the "Annual Meeting")
to be held at the Chicago office of Skadden, Arps, Slate, Meagher & Flom LLP, 155 N. Wacker Dr., Chicago, IL 60606 on Thursday, July 16, 2015, at 9:00 a.m., Central
Time, for the purposes set forth in this Proxy Statement and in the accompanying Notice of Annual Meeting of Stockholders.
Q: What items will be voted on at the Annual Meeting?
- A:
- (1)
The election of each of Ms. Lee, Mr. Sullivan and Mr. Lea to the Board of Directors, each to serve for a term of three years and
until his or her successor is duly elected and qualified, or such director's earlier death, resignation or removal. This proposal is referred to as "Proposal 1."
(2)
The ratification of the appointment of Marcum LLP as our independent auditors for the fiscal year ending December 31, 2015. This proposal is referred to as "Proposal 2."
(3)
The approval of an amendment to our Amended and Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), to increase the number of authorized shares of the Company's
common stock ("Common Stock") that we may issue. This proposal is referred to as "Proposal 3."
(4)
Such other business as may properly come before the Annual Meeting.
The
stockholders of the Company have no dissenters' or appraisal rights in connection with any of the proposals to be voted on at the Annual Meeting.
Q: How does the Board recommend I vote on the proposals?
- A:
- The
Board recommends a vote FOR the election of each of Ms. Lee, Mr. Sullivan and Mr. Lea to the Board of Directors, each to serve for a
term of three years and until his or her successor is duly elected and qualified, or such director's earlier death, resignation or removal.
The
Board recommends a vote FOR the ratification of Marcum LLP as our independent auditors for the year ending December 31, 2015.
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The
Board recommends a vote FOR the amendment to our Certificate of Incorporation to increase the number of shares of Common Stock that we may issue.
Q: How do I vote?
- A:
- There
are four ways to vote:
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- Voting in
Person. To vote in person, you must attend the Annual Meeting and follow the procedures for voting announced at the Annual Meeting. If
your shares are held in an account at a brokerage firm, bank or similar organization, you must present a signed proxy from that organization in order to be able to vote at the Annual Meeting.
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- Voting by
Internet. You may vote by proxy over the Internet by following the instructions provided in the proxy card or voting instruction form,
as applicable.
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- Voting by
Telephone. You may vote by proxy by calling the toll free number found on the proxy card or voting instruction form, as applicable.
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- Voting by
Mail. You may vote by proxy by mail by following the instructions on the proxy card or voting instruction form, as applicable.
Q: Who is entitled to vote?
- A:
- Only
holders of record of our Common Stock as of the close of business on June 15, 2015 (the "Record Date") are entitled to vote at the Annual
Meeting.
If
your shares are held in an account at a brokerage firm, bank or similar organization, that organization is considered the record holder for purposes of voting at the Annual Meeting and will provide
you with instructions on how to direct that organization to vote your shares. See "What if my shares are held in an account at a brokerage firm, bank or similar organization?" below.
Q: How many shares can I vote?
- A:
- As
of the Record Date, 179,982,122 shares of Common Stock, the only outstanding voting securities of the Company, were issued and outstanding. Each record
holder of Common Stock is entitled to one vote for each share held.
Q: Can I change my vote after I have voted?
- A:
- You
may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting by voting again by proxy as described above (only your
latest, properly completed proxy submitted, whether by mail, telephone or the Internet, prior to the Annual Meeting will be counted) or by attending the Annual Meeting and voting in person. However,
your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting or specifically request in writing that your prior proxy be revoked by
delivering to the Company's Secretary at 747 Warehouse Street, Los Angeles, California 90021 a written notice of revocation prior to the Annual Meeting.
Q: How can I get electronic access to the 2015 Annual Meeting materials?
- A:
- This
Proxy Statement and our Annual Report are also available without charge on the Company's website at www.americanapparel.net/aboutus/investorrelations/ and the SEC's website at sec.gov. By referring to our
website, we do not incorporate the website or any portion of the website by reference into this Proxy Statement.
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The
proxy card or voting instruction form contains instructions on how you can elect to receive future proxy materials electronically by e-mail. Choosing to receive future proxy materials by e-mail
will save the Company the cost of printing and mailing documents to you and will reduce the impact of the Company's annual meetings on the environment. If you choose to receive future proxy materials
by e-mail, you will receive an e-mail message next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials by
e-mail will remain in effect until you terminate it.
Q: I share an address with another stockholder, and we received only one copy of the Proxy Statement. How may I obtain a separate copy of the Proxy Statement?
- A:
- The
Company has adopted a procedure called "householding," which the SEC has approved. Under this procedure, the Company may deliver a single copy of the
Proxy Statement and our Annual Report to stockholders who share the same address unless the Company has received contrary instructions from one or more of the stockholders. This procedure reduces the
Company's printing costs, mailing costs and fees. All stockholders have the ability to access the 2015 Annual Meeting materials on the website referred to in the Proxy Statement. If you would like to
receive a separate copy of the Proxy Statement and our Annual Report, please submit your request to:
American
Apparel, Inc.
Attn: Investor Relations
747 Warehouse Street
Los Angeles, California 90021
(213) 488-0226
Similarly,
if you share an address with another stockholder and received multiple copies of the Proxy Statement and our Annual Report, you may write or call us at the above address and phone number to
make arrangements to receive a single copy of the Proxy Statement and our Annual Report at the shared address in the future.
In
addition, if you share the same address with another stockholder and request a printed copy of the Proxy Statement and our Annual Report, you may write or call us at the above address to request
that a separate copy of the Proxy Statement and our Annual Report be delivered to each stockholder at the shared address.
Stockholders
who hold shares in an account at a brokerage firm, bank or similar organization may contact their brokerage firm, bank or other similar organization to request information about
householding.
Q: What does it mean if I get more than one proxy card?
- A:
- If
your shares are registered differently and are in more than one account, you may receive more than one proxy card. Please follow the voting instructions
on the proxy cards or voting instruction forms, as applicable, and vote all proxy cards or voting instruction forms, as applicable, to ensure that all of your shares are voted. We encourage you to
have all accounts registered in the same name and address whenever possible. You can accomplish this by contacting our transfer agent at:
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Q: What if my shares are held in an account at a brokerage firm, bank or similar organization?
- A:
- If
your shares are held in an account at a brokerage firm, bank or similar organization, then you are the beneficial owner of shares held in "street name."
The organization holding your account is considered the record holder for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote
the shares held in your account, and that organization will provide you with instructions on how to do so. You will receive a voting instruction form from your brokerage firm, bank or similar
organization instead of a proxy card, and you should follow the instructions on the voting instruction form.
If
you do not provide the organization that holds your shares with specific voting instructions, under the rules of the NYSE MKT LLC (the "NYSE MKT") in effect as of the date of this Proxy
Statement, that organization generally may vote on routine matters but cannot vote on non-routine matters. The election of Ms. Lee, Mr. Sullivan and Mr. Lea to the Board (Proposal
One) is considered a "non-routine" matter under the applicable rules of the NYSE MKT, and the ratification of the appointment of
Marcum as our independent auditors for the fiscal year ending December 31, 2015 (Proposal Two) and the amendment of our Certificate of Incorporation to increase the number of authorized
shares of Common Stock (Proposal Three) are considered "routine" under the applicable rules of the NYSE MKT. If the organization that holds your shares does not receive instructions from you on how to
vote your shares on a non-routine matter, that organization will inform the inspector of elections that it does not have the authority to vote on that matter with respect to your shares. This is
generally referred to as a "broker non-vote." A broker non-vote will have the effects described under "What quorum and vote is required to approve each proposal?" below.
Q: What quorum and vote is required to approve each proposal?
- A:
- A
quorum must have been established in order to consider any matter.
For
Proposal 1, directors are elected by a plurality of votes cast. Therefore, the three candidates for director receiving the most votes will become directors of the Company. Stockholders may not
cumulate their votes. Any broker non-votes and any proxies marked "Withhold" with respect to the election of one or more directors will not count as "votes cast" with respect to the director or
directors indicated and therefore will be disregarded for purposes of determining the outcome of this proposal.
Proposal
2, the ratification of our independent auditors, requires the affirmative "for" vote of a majority of those shares present in person or represented by proxy and entitled to vote on this
proposal at the Annual Meeting. Any abstentions with respect to this proposal will count as votes against this proposal. Broker non-votes, if any, with respect to the ratification of our independent
auditors will not count as shares entitled to vote on this proposal and therefore will be disregarded for purposes of determining the outcome of the vote on this proposal.
Proposal
3, the approval of an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of Common Stock the Company may issue, requires the affirmative "for"
vote of a majority of outstanding shares entitled to vote on this proposal at the Annual Meeting. Any abstentions and broker non-votes, if any, with respect to this proposal will count as votes
against this proposal.
Q: How will voting on any other business be conducted?
- A:
- Although
we do not know of any business to be considered at the Annual Meeting other than the proposals described in this Proxy Statement, if any other
business is presented at the Annual Meeting, your signed proxy or your authenticated Internet or telephone proxy will give authority to each of Paula Schneider, our Chief Executive Officer, and
Chelsea A. Grayson, our Executive Vice President, General Counsel and Secretary, to vote on such matters at their discretion.
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Q: What is the deadline to propose actions for consideration at next year's annual meeting of stockholders or to nominate individuals to serve as directors?
- A:
- You
may submit proposals, including director nominations, for consideration at future stockholder meetings as follows:
Stockholder Proposals: For a stockholder proposal to be considered for inclusion in the Company's proxy statement for the 2016 Annual
Meeting of Stockholders, the written proposal must be delivered to or mailed and received by the Secretary of the Company at our principal executive offices no later than February 18, 2016. If
the date of the 2016 Annual Meeting of Stockholders is moved more than 30 days before or after the anniversary date of the Annual Meeting, the deadline for inclusion of proposals in our proxy
statement instead will be a reasonable time before we begin to print and mail our proxy materials. Such proposals also will need to comply with Rule 14a-8 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
American
Apparel, Inc.
Attn: Chelsea A. Grayson, Secretary
747 Warehouse Street
Los Angeles, California 90021
(213) 488-0226
For
a stockholder proposal that is not intended to be included in the Company's proxy statement for the 2016 Annual Meeting of Stockholders under Rule 14a-8 under the Exchange Act, written
notice of the proposal, which notice must include the information required by the Company's Amended and Restated Bylaws (the "Bylaws"), must be received by the Company's
Secretary:
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- Not earlier than the close of business on the 90th day prior to the 2016 Annual Meeting of Stockholders; and
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- Not later than the close of business on the 60th day prior to the 2016 Annual Meeting of Stockholders.
If
less than 70 days' notice or prior public disclosure of the date of the 2016 Annual Meeting of Stockholders is given or made to stockholders, then notice of a stockholder proposal that is
not intended to be included in the Company's proxy statement under Rule 14a-8 under the Exchange Act must be received no later than the close of business on the tenth day following the date on
which notice of the date of the 2016 Annual Meeting of Stockholders is mailed to the stockholders or the date on which public disclosure of the date of the 2016 Annual Meeting of Stockholders is made,
whichever is first.
Nomination of Director Candidates: You may propose director candidates for consideration by the Board's Nominating and Corporate Governance
Committee or you may nominate director candidates directly at an annual meeting in accordance with the procedures set forth in the Bylaws, as summarized under the caption "Corporate Governance and
Board MattersConsideration of Director NomineesStockholder Nominees" herein.
Copy of Bylaw Provisions: You may contact the Company's Secretary at our principal executive offices for a copy of the relevant Bylaw
provisions regarding the requirements for making stockholder proposals and nominating director candidates.
Q: How is the Company soliciting proxies for the Annual Meeting?
- A:
- This
solicitation is made by mail on behalf of the Board of Directors. Costs of the solicitation will be borne by the Company. Further solicitation of
proxies may be made by telephone, facsimile or personal interview by the directors, officers and employees of the Company and its affiliates, who will not receive additional compensation for the
solicitation and by certain officers or employees of
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Innisfree
M&A Incorporated, who we have hired to assist us in the solicitation of proxies. The Company will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in forwarding proxy materials to stockholders. The costs of this proxy solicitation are summarized under the caption "Other MattersCost of
Solicitation" herein.
Q: How will Dov Charney's shares of Common Stock be voted at the 2015 Annual Meeting?
- A:
- As
of June 15, 2015, Mr. Charney, the Company's former Chief Executive Officer, owned approximately 41.4% of our outstanding Common Stock.
However, Mr. Charney may not vote such shares at the 2015 Annual Meeting or any adjournments or postponements thereof except as mutually agreed
with Standard General L.P. ("Standard General") under the terms of a cooperation agreement entered into between Mr. Charney and Standard General. In addition, under the terms of the
Standstill Agreement (as defined below under "Background of the Solicitation"), Mr. Charney and Standard General agreed to vote shares in excess of 331/3 percent of the
outstanding Common Stock at the 2015 Annual Meeting or any adjournments or postponements thereof in proportion to the votes for such proposals or other business cast by the other stockholders of the
Company voting at the 2015 Annual Meeting. For further information on the cooperation agreement and Standstill Agreement see "Certain Relationships and Related TransactionsAgreements
between Mr. Charney and Standard General."
Standard
General has informed the Company that it will only approve Mr. Charney voting for proposals recommended by the Board of Directors at the 2015 Annual Meeting.
Q: Will Dov Charney's shares be counted for purposes of establishing a quorum at the 2015 Annual Meeting?
- A:
- Yes.
Under the terms of the Standstill Agreement (as defined below under "Background of the Solicitation"), Mr. Charney agreed that his shares will be
counted for purposes of establishing a quorum at the 2015 Annual Meeting.
Q: Is Dov Charney or his representatives permitted to solicit a proxy from me or otherwise encourage me to vote against any of the proposals recommended by the
Company's Board of Directors?
- A:
- No.
Under the terms of the Standstill Agreement (as defined below under "Background of the Solicitation"), Mr. Charney may not solicit proxies, or
encourage, advise, influence or assist any other person in the solicitation of any proxies against any of the proposals recommended by the Company's Board of Directors at the 2015 Annual Meeting.
Moreover, on June 1, 2015, the Delaware Court of Chancery granted the motion of the Company for a temporary restraining order against Mr. Charney, temporarily restraining
Mr. Charney from breaching the terms of the Standstill Agreement. Mr. Charney subsequently agreed that the restraints placed on him by such temporary restraining order are extended until
the conclusion of the 2015 Annual Meeting. If you are contacted by Mr. Charney or any of his representatives in regards to your vote at the 2015 Annual Meeting, please promptly inform the
general counsel of the Company at (213) 542-4993.
Q: How can I find the voting results of the Annual Meeting?
- A:
- We
intend to announce preliminary voting results at the Annual Meeting and will publish final results in our Current Report on Form 8-K within four
business days after the Annual Meeting.
Q: How may I communicate with the Company's Board or the non-management directors on the Company's Board?
- A:
- You
may communicate with the Board by submitting an e-mail to the Company's Board at bod@americanapparel.net.
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BACKGROUND OF THE SOLICITATION
On May 17, 2015, Jeffrey Kolb, a stockholder of American Apparel, notified the Company that he was nominating two candidates for
election as directors at the 2015 Annual Meeting. Mr. Kolb also proposed that the Company adopt a resolution that would repeal any provision of the Company's Bylaws in effect at the time of the
annual meeting that was not included in the Company's Bylaws as of December 22, 2014.
On
May 21, 2015, the Company filed for a temporary restraining order in the Delaware Court of Chancery against Mr. Charney to prevent him from breaching the Nomination,
Standstill and Support Agreement, dated July 9, 2014, among Standard General, Standard General L.P., P Standard General Ltd. and Mr. Charney (the "Standstill Agreement"), through the
pendency of the court's decision on the Company's motion for a preliminary injunction, including, but not limited to, by taking any direct or indirect action seeking to remove the Company's directors,
or by making any disparaging comments about the Company to the press or any other third party.
On
June 1, 2015, the Delaware Court of Chancery granted the motion of the Company for a temporary restraining order against Mr. Charney, temporarily restraining
Mr. Charney from breaching the terms of the Standstill Agreement.
On
June 5, 2015, Mr. Charney agreed that the restraints placed on him by such temporary restraining order are extended until the conclusion of the 2015 Annual Meeting.
On
June 7, 2015, the Company and Mr. Kolb entered into a letter agreement pursuant to which, among other things, (i) the Company will form a new advisory
committee comprised of industry executives, Company employees and other qualified personnel that will provide insights, guidance and strategic input for the Company's Chief Executive Officer ("CEO"),
(ii) the Company will use reasonable efforts to identify a new independent director with significant experience as a member of senior management of retail and/or apparel companies and appoint
the new director to fill a vacancy on the Board prior to the Company's 2016 annual meeting of stockholders, and (iii) Mr. Kolb withdrew his notice of intent to nominate persons for
election as directors of the Company and to present a proposal at the 2015 Annual Meeting. Gene Montesano, the co-founder of Lucky Brand jeans and one of the two director candidates proposed by
Mr. Kolb, will head the new advisory committee if he is willing and able to do so.
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PROPOSAL 1: ELECTION OF CLASS B DIRECTORS
Pursuant to the Company's Certificate of Incorporation, the Board of Directors is divided into three classes of directors serving
staggered terms (Classes A, B and C). One class of directors is elected at each annual meeting of stockholders for a three-year term, and those directors will hold office until their successors
have been duly elected and qualified, or until their earlier death, resignation or removal. The Bylaws authorize a Board of Directors consisting of not less than one or more than nine directors. The
Board of Directors currently consists of nine members: Mses. Colleen B. Brown, Laura A. Lee and Paula Schneider and Messrs. Jeff Chang, David Glazek, Lyndon Lea, Joseph Magnacca, Allan
Mayer and Thomas J. Sullivan. We currently have no vacancies on the Board of Directors.
Ms. Lee
and Mr. Sullivan were designated to serve as Class B directors by Standard General under the Standstill Agreement, effective as of August 2, 2014.
Under the terms of the Standstill Agreement, the Company has agreed to use its reasonable best efforts to cause the election of Ms. Lee and Mr. Sullivan to the Board of Directors at the
2015 Annual Meeting. Mr. Lea was designated to serve as a Class B director by Lion/Hollywood L.L.C. ("Lion") in accordance with the investment agreement the Company entered into with
Lion, dated as of March 13, 2009 (as amended, the "Investment Agreement") (described under "Certain Relationships and Related Party Transactions" herein).
The
terms of Ms. Lee, Mr. Sullivan and Mr. Lea will expire at the Annual Meeting. After careful consideration of the specific experience, qualifications, attributes
and skills of each director and director nominee, the Board has nominated Laura A. Lee, Thomas J. Sullivan and Lyndon Lea (the "Class B Nominees") for reelection at the Annual Meeting. Each of
Ms. Lee and Mr. Sullivan currently meets the criteria to qualify as an independent director according to SEC regulations and NYSE MKT listing standards.
If
elected, each of the Class B Nominees will serve for a term of three years and until his or her successor is duly elected and qualified at the 2018 Annual Meeting of
Stockholders, or such director's earlier death, resignation or removal.
Each
of the Class B Nominees has consented to being named in this Proxy Statement and has agreed to serve as a member of the Board of Directors if elected. If any of the
Class B Nominees is unable to serve, which is not anticipated, the persons named as proxies intend to vote for such other person or persons as the Board of Directors may designate in accordance
with the Investment Agreement and the investment voting agreement, dated as of March 13, 2009, between Mr. Charney and Lion (the "Investment Voting Agreement"), described below. In no
event will the shares represented by the proxies be voted for more than three nominees at the Annual Meeting.
The
names and certain information concerning each of the Class B Nominees, including their experience, qualifications, attributes and skills, are set forth below, and the names
and certain information regarding the continuing directors whose terms expire in 2016 and 2017 are set forth under the heading "Directors and Executive Officers" herein.
Laura A. Lee was appointed to the Board on August 8, 2014 and currently serves as a member of the Nominating and Corporate
Governance Committee of the Board. In July 2015, Ms. Lee will be joining Margaritaville Enterprises as their Chief Digital Officer and President of Margaritaville Media. Ms. Lee
was with Google/YouTube from October 2007 to June 2015, where she served as the Global Head of Top Creators and oversaw relationships with the top YouTube talent worldwide. Previously,
Ms. Lee also was the head of North American Partnerships where she oversaw more than 500 television, film, new media, original entertainment, and U.S. Hispanic partnerships. Prior to joining
Google, she was a Vice President and Head of Business Development & Operations for MTV, where she launched various broadband businesses, spearheaded key acquisitions/JVs and oversaw MTV Puerto
Rico. Ms. Lee holds a B.A. from Brown University and an M.B.A. from the Harvard Business School.
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Ms. Lee's
experience in digital, e-commerce and marketing, combined with the leadership skills and experiences of the other Board members, provides us with the perspectives and judgment
necessary to guide our strategy and monitor its execution.
Thomas J. Sullivan was appointed to the Board on August 2, 2014 and currently serves as the Chair of the Nominating and Corporate
Governance Committee and as a member of the Audit Committee of the Board. Mr. Sullivan has served as a director of Media General since November 2013. He has also served as a member of the
advisory board of Millennium Custodial Trust since 2010 and a Trustee of Accredited Mortgage Loan REIT since 2009. Since 2009, Mr. Sullivan has been the Managing Partner of Smallwood
Partners, LLC, a financial advisory services firm. Prior to the merger of Media General and New Young Broadcasting Holding Co. ("Young"), Mr. Sullivan was a member of the Board of
Directors, as well as of the Audit, Compensation and Nominating Committees, of Young from January 2009 until November 2013. Mr. Sullivan held the position of Executive Chairman of Young from
June 2012 until November 2013 and served as Senior Vice President, Finance and Chief Financial Officer in 2012. Mr. Sullivan's previous experience also includes serving as a Managing Director
with Investcorp International, Inc., an international middle market private equity firm. Mr. Sullivan holds a B.B.S. from Villanova University. Mr. Sullivan has served on numerous
boards for 20 years and has broad leadership, operational and financial restructuring experience as well as experience in the fields of private equity and capital markets. Mr. Sullivan's
experience as a public company director and in the private equity sector, combined with the leadership skills and experiences of the other Board members, provides us with the perspectives and judgment
necessary to guide our strategy and monitor its execution.
Lyndon Lea was appointed to the Board on January 13, 2015 as a designee of Lion under the Investment Agreement. Mr. Lea is a
founding partner of Lion Capital LLP, an affiliate of Lion, and serves as its Managing Partner. Prior to founding Lion Capital, Mr. Lea was a Partner of Hicks, Muse, Tate & Furst
where he co-founded its European operations in 1998. Prior to joining Hicks Muse, Mr. Lyndon served at Glenisla, the European affiliate of Kohlberg Kravis Roberts & Co and was an
investment banker. Mr. Lea received his B.A. from the University of Western Ontario in Canada.
The Class B Nominees will be elected by a plurality of the votes cast at the Annual Meeting. Unless
instructed to the contrary in the proxy, the shares represented by the proxies will be voted FOR ALL in favor of the election of each of the Board's nominees.
The Board of Directors recommends a vote FOR each of the Class B Nominees.
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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has selected the firm of Marcum LLP ("Marcum") to act as the Company's independent auditors for the fiscal
year ending December 31, 2015, and recommends that the stockholders vote in favor of such appointment. Marcum has served as the Company's independent auditors since 2010.
Although
stockholder ratification of the selection of Marcum as the Company's independent auditors is not required by the Company's Bylaws or otherwise, the Board of Directors believes
it appropriate as a matter of policy to request that stockholders ratify the selection of the Company's independent registered public accounting firm, and the stockholders ratified the selection of
Marcum in previous years. In the event the stockholders do not ratify the appointment of Marcum, the Audit Committee will reconsider its appointment. In addition, even if the stockholders ratify the
appointment of Marcum, the Audit Committee may in its discretion appoint a different independent public accounting firm at any time if the Audit Committee determines that a change is in the best
interests of the Company and its stockholders. Representatives of Marcum are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement if such
representatives so desire.
The affirmative vote of a majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote on
this proposal is required to ratify the selection of Marcum as our independent auditors for the fiscal year ending December 31, 2015. Unless instructed to the contrary
in the proxy, the shares represented by the proxies will be voted FOR this Proposal 2.
The Board of Directors recommends a vote FOR this Proposal 2.
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RELATIONSHIP WITH INDEPENDENT AUDITORS
Principal Accounting Firm Fees
Aggregate fees billed to us for the fiscal years ended December 31, 2014 and 2013 by the Company's current and former
independent auditors are as follows.
|
|
|
|
|
|
|
|
(in thousands)
|
|
2014 |
|
2013 |
|
Marcum LLP |
|
|
|
|
|
|
|
Audit fees(1) |
|
$ |
1,695 |
|
$ |
1,825 |
|
Audit-related fees(2) |
|
|
|
|
|
120 |
|
Tax fees(3) |
|
|
|
|
|
|
|
All other fees(4) |
|
|
85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,780 |
|
$ |
1,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (1)
- "Audit
fees" consist of fees for professional services rendered by the principal accountant for the audit of the Company's annual financial statements
included in Form 10-Ks, the review of financial statements included in Form 10-Qs and for services that are normally provided by the auditor in connection with statutory and regulatory
filings or engagements for those fiscal years.
- (2)
- "Audit-related
fees" consist of fees for assurance and related activities by the principal accountant that are reasonably related to the performance of the
audit or review of the Company's financial statements and are not reported as audit fees.
- (3)
- "Tax
fees" consist of fees for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning.
- (4)
- "All
other fees" consist of fees for any products and services provided by the principal accountant not included in the first three categories.
In
accordance with Section 10A(i) of the Exchange Act, before the Company engages its independent accountant to render audit or non-audit services, the engagement is approved by
the Company's Audit Committee. All of the Company's independent auditor's fees were pre-approved by the Audit Committee in 2014. The Audit Committee utilizes a policy pursuant to which the audit,
audit-related, and permissible non-audit services to be performed by the independent auditor are pre-approved prior to the engagement to perform such services. Pre-approval is generally provided
annually, and any
pre-approval is detailed as to the particular service or category of services and is generally limited by a maximum fee amount. The independent auditor and management are required to periodically
report to the Audit Committee regarding the extent of services provided by the independent auditor in accordance with this pre-approval, and the fees for the services performed to date. The Audit
Committee considered whether the provision of non-audit services provided by Marcum as described above was compatible with maintaining such accountant's independence, and believes that the provision
of these services is consistent with maintaining such accountant's independence.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee assists the Board in fulfilling its responsibilities for general oversight of the integrity of the Company's
financial statements, the Company's compliance with legal and regulatory requirements, the Company's system of internal control over financial reporting and the qualifications, independence and
performance of the Company's internal audit function and independent auditor. Management is responsible for the financial reporting process, including the Company's system of internal control over
financial reporting, and for the preparation of the Company's consolidated financial statements in accordance with generally accepted accounting principles. The Company's independent auditor is
responsible for performing an independent audit of the Company's financial statements and expressing an opinion as to the conformity of the Company's audited financial statements with generally
accepted accounting principles.
The
Audit Committee reviewed and discussed with management the Company's audited financial statements as of and for the fiscal year ended December 31, 2014. In addition, the Audit
Committee discussed with Marcum the matters with respect to the audit of such financial statements required to be discussed by Statement on Auditing Standards No. 61, as amended and adopted by
the Public Company Accounting Oversight Board in Rule 3200T, pertaining to communications with audit committees. The Audit Committee also received the written disclosures and the letter from
Marcum required by applicable requirements of the Public Company Accounting Oversight Board regarding Marcum's communications with the Audit Committee concerning independence and discussed with Marcum
its independence.
The
Audit Committee met with Marcum, with and without management present, to discuss the overall scope of its audit, the results of its examinations, its evaluations, if any, of the
Company's internal control over financial reporting, and the overall quality of the Company's financial reporting, in each case for fiscal year 2014.
Based
on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2014 for filing with the SEC.
|
|
|
|
|
By the Audit Committee, |
|
|
David Danziger, Chairman
Colleen B. Brown
Thomas J. Sullivan
|
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PROPOSAL 3: AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
At the 2015 Annual Meeting, the stockholders of the Company will be asked to consider and vote in favor of an amendment to the
Certificate of Incorporation that would increase the number of shares of Common Stock that the Company is authorized to issue. In June 2015, the Board voted to approve and recommend to our
stockholders that they approve this amendment.
Proposed Amendment
The Company's Board of Directors has adopted a resolution to amend the Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 230,000,000 to 460,000,000 shares. The form of the amendment is attached as Annex A to this Proxy
Statement. The amendment will replace Article Fourth of the Certificate of Incorporation with the following language:
FOURTH:
The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 461,000,000 of which 460,000,000 shares shall be Common Stock of
the par value of $.0001 per share and 1,000,000 shares shall be Preferred Stock of the par value of $.0001 per share.
The
proposed amendment will not increase or otherwise affect the number of shares of preferred stock that are authorized. In December 2014, the Company authorized the issuance of 200,000
shares of Series B preferred stock that are issuable pursuant to its stockholder rights plan.
If
the proposed amendment is approved by the stockholders, the amendment will be effective upon the filing of the amendment with the Delaware Secretary of State, which filing is expected
to occur promptly after the 2015 Annual Meeting.
Purpose and Background for Increase in Authorized Common Stock
The purpose of the proposed amendment is to increase the number of authorized shares of Common Stock from 230,000,000 to 460,000,000
shares. Of the 230,000,000 currently authorized shares of our Common Stock 179,982,122 were issued and outstanding as of June 15, 2015. After taking into account shares recently sold in our
at-the-market offering (described below) and shares reserved, pursuant to the Company's current employee benefits plans and employment arrangements, for the issuance of or adjustments to our currently
outstanding warrants and stock options, and other current contractual compensation arrangements, the Company estimates that only approximately 4,655,789 of the 230,000,000 authorized shares of Common
Stock remain available for future issuance. In addition, in May 2015, the Company authorized and launched an "at-the-market" offering pursuant to which the Company may, from time to time, issue and
sell up to 15 million shares of Common Stock having an aggregate offering price of up to $10,000,000, which is expected to further reduce the number of shares of Common Stock available for
future issuance. 3,514,989 shares of Common Stock have been sold under the at-the-market offering as of June 15, 2015.
The
Board believes that it is advisable and in the best interests of the Company and its stockholders to increase the number of authorized shares of Common Stock in order to give the
Company greater flexibility in considering and planning for a variety of general corporate purposes that may be identified in the future. These corporate purposes include, but are not limited to,
future equity financings to fund our working capital needs for the continued implementation of our turn-around strategy or other purposes, potential strategic transactions such as mergers,
acquisitions and other business combinations, issuances upon exercise of or adjustments to warrants and stock options, attracting and retaining employees by the issuance of equity under our equity
compensation plans, and other general corporate purposes.
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Other
than possible issuances pursuant to the at-the-market offering (as described above), pursuant to the Company's current employee benefits plans and employment arrangements, the
exercise of or adjustments to our currently outstanding warrants and stock options, and other current contractual compensation arrangements, the Company has no immediate plans, understandings,
agreements or commitments to issue additional shares of Common Stock. The Company, however, reviews and evaluates potential opportunities, including financing alternatives, on an ongoing basis to
determine if such actions would be in the best interest of the Company and its stockholders. In addition, the Company may need to conduct future equity financings to fund our working capital needs for
the continued implementation of our turn-around strategy or other purposes, and the Company is actively considering such options. Absent the proposed amendment, the Company may be required to conduct
such future equity financings through direct or indirect sales of its authorized but unissued blank check preferred stock (or fractions thereof) which, among other things, would be senior to the
Common Stock. The additional authorized shares of Common Stock would enable the Company to act quickly in response to corporate and capital-raising opportunities (as described above), in most cases
without the necessity of holding a special stockholders' meeting and obtaining further stockholder approval before such issuance(s) could proceed, except as provided under Delaware law or NYSE MKT
rules.
Possible Effects of the Amendment
Upon issuance, the additional shares of authorized Common Stock would have rights identical to the currently outstanding shares of
Common Stock. Adoption of the amendment would not have any immediate dilutive effect on the proportionate voting power or other rights of our existing stockholders. As is true for shares presently
authorized but unissued, the future issuance of Common Stock authorized by the proposed amendment may, among other things, decrease our existing stockholders' percentage equity ownership and,
depending on the price at which they are issued, could be dilutive to our existing stockholders and may have a negative effect on the market price of the Common Stock. Current stockholders have no
preemptive or similar rights, which means
current stockholders do not have prior rights to purchase any new issue of Common Stock in order to maintain their proportionate equity ownership in the Company.
Although
this proposal to increase the authorized number of shares of Common Stock has been prompted by business and financial considerations and not by the threat of any known or
threatened hostile takeover attempt, the Company would be able to use the additional shares to oppose a hostile takeover attempt or delay or prevent changes of control or management of the Company.
Vote Required
The affirmative vote of a majority of outstanding shares entitled to vote at the Annual Meeting is required for the adoption of this
proposal. Unless instructed to the contrary in the proxy, the shares represented by the proxies will be voted FOR this Proposal 3.
The Board of Directors recommends a vote FOR this Proposal 3.
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DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their ages and positions with the Company as of June 15, 2015, are as
follows:
|
|
|
|
|
|
Name
|
|
Age |
|
Position |
Paula Schneider |
|
|
57 |
|
Chief Executive Officer and Director |
Hassan N. Natha |
|
|
55 |
|
Executive Vice President and Chief Financial Officer |
Martin Bailey |
|
|
55 |
|
Chief Manufacturing Officer |
Chelsea A. Grayson |
|
|
43 |
|
Executive Vice President, General Counsel and Secretary |
Colleen B. Brown |
|
|
56 |
|
Director and Chairperson of the Board |
Jeff Chang |
|
|
34 |
|
Director |
David Glazek |
|
|
37 |
|
Director |
Lyndon Lea |
|
|
46 |
|
Director |
Laura A. Lee |
|
|
39 |
|
Director |
Joseph Magnacca |
|
|
52 |
|
Director |
Allan Mayer |
|
|
65 |
|
Director |
Thomas J. Sullivan |
|
|
52 |
|
Director |
Director Nominees
The names and certain information concerning each of the Class B Nominees' experience, qualifications, attributes and skills are
set forth under "Proposal 1" above.
Director Vacancies
There are currently no vacancies on our Board of Directors.
On
July 9, 2014, in connection with the Standstill Agreement, five (5) of the seven (7) members of the Board resigned, including Dov Charney (the "Resignations"),
effective as of August 2, 2014. In connection with the Standstill Agreement, Allan Mayer and David Danziger were to remain as directors, and each were to continue to serve as Co-Chairman of the
Board. Immediately after such resignations, Messrs. Mayer and Danziger were to appoint the following individuals to fill the vacancies on the Board: one individual designated by Standard
General to the Company to serve as a Class A director of the Company (the "Class A Designee"), two other individuals designated by Standard General to the Company to serve as
Class B directors of the Company (the "Class B Designees" and together with the Class A Designee, the "Standard General Designees") and two other individuals
mutually agreed between Standard General and the Company to serve as Class C directors of the Company (together with the Standard General Designees, the "New Board Designees"). On
July 31, 2014, in accordance with the Standstill Agreement, the Board amended and restated our Bylaws to fix the size of the Board at nine directors.
On
August 2, 2014, immediately following the acceptance of the Resignations, Allan Mayer and David Danziger appointed four (4) individuals to fill the vacancies resulting
from the Resignations in accordance with the terms of the Standstill Agreement: David Glazek, designated by Standard General, to serve as a Class A director, Thomas J. Sullivan, designated by
Standard General, to serve as a Class B director and Colleen B. Brown and Joseph Magnacca, each mutually agreed between Standard General and the Company, to serve as Class C directors.
On
August 8, 2014, the Board appointed Laura A. Lee, designated by Standard General, to serve as a Class B director to fill the remaining vacancy resulting from the
Resignations. Pursuant to the terms of the Standstill Agreement, the Company will use its reasonable best efforts to cause the election of the Class B Designees of the Company at the 2015
Annual Meeting of Stockholders.
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Table of Contents
On
September 15, 2014, the Board appointed Robert Mintz as a Class C director to fill one of the existing vacancies on the Board. Mr. Mintz was a designee of Lion
under the Investment Agreement, which currently permits Lion to appoint two directors to the Board.
On
December 15, 2014, the Board voted to terminate Dov Charney as CEO for cause in accordance with the terms of his employment agreement. Such decision followed a determination by
a special committee of the Board that it was not appropriate for Dov Charney to be reinstated as CEO or serve as an officer or employee of the Company. Mr. Charney's consulting relationship
with us, which began at the time of his suspension as CEO, was also terminated on such date. On such date, the Board also appointed Paula Schneider as our CEO, effective as of January 5, 2015.
On
December 22, 2014, Allan Mayer and David Danziger, our Co-Chairmen of the Board, stepped down from that position and Colleen B. Brown was appointed as the new Chairperson of
the Board.
On
January 13, 2015, the Board appointed Lyndon Lea, as a Class B director to fill one of the existing vacancies on the Board. Mr. Lea is a designee of Lion under
the Investment Agreement.
On
March 6, 2015, Robert Mintz resigned from the Board; on March 24, 2015, the Board elected Jeff Chang, designated by Lion, to fill that vacancy as a Class C
director.
On June 14, 2015, David Danziger provided his resignation to the Company as a member of the Board, effective immediately. On June 14, 2015, following the acceptance of
Mr. Danziger's resignation, the Company's remaining directors appointed Paula Schneider, our CEO, to fill the vacancy resulting from Mr. Danziger's resignation as a Class A
director.
Directors Continuing in Office
The names and certain information regarding each continuing director's experience, qualifications, attributes and skills are set forth
below.
Class A Directors (Terms Expire at the 2017 Annual Meeting of Stockholders)
David Glazek was appointed to Board on August 2, 2014 and serves as a member of
the Compensation and Nominating and Governance Committees of the Board. Mr. Glazek joined Standard General in 2008 and has been a Partner since 2012. Mr. Glazek currently serves as a
director of North Atlantic Holding Company, Inc., a Manager of Standard Carbon LLC, and a board observer of Upstate Power Producers, Inc. Prior to joining Standard General,
Mr. Glazek held investment banking positions at Lazard Freres & Co. LLC, where he focused on mergers and acquisitions and corporate restructurings. Mr. Glazek also
worked at Blackstone Group LP. Mr. Glazek holds a J.D. from Columbia Law School and a B.A. from the University of Michigan. Mr. Glazek has broad experience in investment research
and analysis as well as experience addressing operational, transactional, and financing needs of companies, including Standard General investment portfolio companies.
Allan Mayer was elected a director of the Board on December 12, 2007 and serves as Chair of the Compensation Committee and as a
member of the Nominating and Governance Committee of the Board. Since October 2006, he has been a principal partner, member of the management committee, and head of the Strategic Communications
Division of 42West LLC, a leading public relations firm. Previously, from 1997 until October 2006, Mr. Mayer was managing director and head of the entertainment practice at the crisis
communications firm Sitrick and Company. Mr. Mayer began his professional life as a journalist, working as a staff reporter for The Wall Street
Journal; a writer, foreign correspondent and senior editor for Newsweek, and the founding editor (and later publisher) of Buzz
magazine. He also served as editorial director of Arbor House Publishing Co. and senior editor of Simon & Schuster. Mr. Mayer has authored two
booksMadam Prime Minister: Margaret Thatcher and Her Rise to Power (Newsweek Books, 1980) and Gaston's
War (Presidio Press, 1987)and is co-author, with Michael S. Sitrick, of Spin: How To Turn The Power of the Press to Your
Advantage (Regnery, 1998).
16
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In
addition, he has written for a wide variety of national publications, ranging from The New York Times Magazine to Vogue. Mr. Mayer is a recipient of
numerous professional honors, including the National Magazine Award, the Overseas Press Club Citation of
Excellence, and six William Allen White Awards. Mr. Mayer serves on the board of directors of Film Independent and has lectured on crisis management and communications at UCLA's Anderson School
of Business and USC's Annenberg School of Communication. Mr. Mayer received his B.A. from Cornell University.
Paula Schneider joined American Apparel as CEO on January 5, 2015. Prior to joining us, Ms. Schneider served as President
and Chief Operating Officer of ESP Group, Ltd. from 2013 to 2014, CEO of Big Strike LLC from 2010 to 2012, Senior Advisor to the Gores Group from 2010 to 2012, and President of Warnaco
Swimwear Group from 2007 to 2010. Ms. Schneider has also previously served as President of Sales of BCBG Max Azria and as President of Laundry by Shelli Segal. Ms. Schneider has a B.A.
in Costume Design and Theater from California State University, Chico. Ms. Schneider's leadership experience and extensive track record in design, merchandising, sales, manufacturing, finance,
licensing and human resources, combined with the leadership skills and experiences of the other Board members, provides us with the perspectives and judgment necessary to guide our strategy and
monitor its execution.
Class C Directors (Terms Expire at the 2016 Annual Meeting of Stockholders)
Colleen B. Brown was appointed to the Board on August 2, 2014 and became
Chairperson of the Board on December 22, 2014. Ms. Brown currently serves as a member of the Audit and Nominating and Corporate Governance Committees of the Board. Ms. Brown has
served as a director of TrueBlue, Inc. since July 2014 and a Managing Director of Newport Board Group since March 2014 where she advises major institutions and institutional investors on
corporate governance issues. In addition, she currently serves as a director of DataSphere Technologies, Inc. and of Port Blakely Companies. Prior to joining TrueBlue, Inc.,
Ms. Brown served as President and CEO of Fisher Communications, Inc. from 2005 to 2013 and as a director of Fisher Communications, Inc. from 2006 to 2013. From 2000 to 2004, she
served as Senior Vice President of Belo Corporation. Earlier in Ms. Brown's career, she was President of the Television Division of Lee Enterprises from 1998 to 2000 and was President and
General Manager of various companies at Gannett Co. Inc., a multinational
media company, from 1980 to 1998. She also served on the board of Career Builder from 2000 to 2004 and on the board of Classified Ventures from 2000 to 2004. Ms. Brown holds a B.S. from the
University of Dubuque and M.B.A. from the University of Colorado. Ms. Brown has extensive management, operations and business experience, as well as proven experience serving on the boards of
public companies.
Jeff Chang was appointed to the Board on March 24, 2015 as a designee of Lion under the Investment Agreement. Mr. Chang has
been a Director of Lion Capital since 2013 and joined Lion Capital in 2008. Prior to joining Lion Capital, Mr Chang was employed by AEA Investors in New York where he focused on industrial and
consumer investments. Prior to this, Mr. Chang worked with Bain & Company in San Francisco and Dresdner Kleinwort Wasserstein, in their Technology M&A Group, also in San Francisco. Jeff
holds a B.S. from the University of California, Berkeley.
Joseph Magnacca was appointed to the Board of Directors on August 2, 2014 and serves as a member of the Compensation Committee of
the Board. Mr. Magnacca served as a director and CEO of RadioShack from February 2013 to May 2015. Prior to joining RadioShack, he served as President of Daily Living Products and
Solutions of Walgreen Co. from 2011 to 2013. Mr. Magnacca also led the Walgreens Retail acquisition team, which acquired Alliance Boots in 2012. From July 2010 to March 2011, he served
as President of Duane Reade Holdings, Inc., and from 2008 to 2010, he served as Senior Vice President and Chief Merchandising Officer of Duane Reade Holdings, Inc. Beginning in 2001 and
until 2008, Mr. Magnacca held the position of Executive Vice President of Shoppers Drug
17
Table of Contents
Mart
Corporation. Mr. Magnacca has extensive marketing and merchandising experience as well as leadership and business skills.
Non-Director Executive Officers
Hassan N. Natha joined American Apparel as Executive Vice President and Chief Financial
Officer ("CFO") on September 29, 2014. Mr. Natha has more than 20 years of experience in finance with both public and private companies, including service as Chief Financial
Officer at Fisher Communications, Inc. and Jones Soda Company. He also spent ten years at Nike's Bauer Nike Hockey, Inc. in various finance and executive operations roles.
Mr. Natha is a Certified Public Accountant and a Canadian Chartered Professional Accountant. He received a bachelor's degree in Commerce from Concordia University and holds a Graduate Diploma
of Public Accountancy from McGill University.
Martin Bailey has been our Chief Manufacturing Officer since 2002 overseeing our textile and apparel production and the planning,
purchasing, sourcing, product development, quality-assurance and distribution departments, as well as nonrelated support departments. Mr. Bailey has been in the apparel industry for over
30 years and brings a wealth of industry experience. He has managed manufacturing services and operations for companies such as Fruit of the Loom and Alstyle Apparel and has earned a reputation
in the apparel industry for his ability to implement cost-effective programs and streamline and organize production growth. Mr. Bailey graduated from Campbellsville College with a B.S. in
Business Administration.
Chelsea A. Grayson joined American Apparel as Executive Vice President, General Counsel and Secretary on December 15, 2014.
Ms. Grayson has more than 15 years of experience in private practice as a corporate attorney with the law firms of Jones Day and Loeb & Loeb LLP, where she was a partner in
the corporate groups of both firms. Her experience includes private placements of equity and debt securities for public and private companies, joint ventures and strategic alliances, and mergers and
acquisitions for clients in a variety of industries, including retail. Ms. Grayson, a Los Angeles native, is a member of the State Bar of California and received a B.A. from the University of
California, Los Angeles and a J.D. from Loyola Law School.
18
Table of Contents
CORPORATE GOVERNANCE AND BOARD MATTERS
Background of American Apparel, Inc.
American Apparel, Inc. including its subsidiaries, is a vertically-integrated manufacturer, distributor, and retailer of branded
fashion basic apparel products and designs. The Company manufactures and sells clothing and accessories for women, men, children and babies. The Company sells its products through the wholesale
distribution channel supplying t-shirts and other casual wear to distributors and screen printers, as well as directly to customers through its retail stores located in the U.S. and internationally.
In addition, the Company operates an online retail e-commerce website. At December 31, 2014, the Company operated a total of 242 retail stores in 20 countries including the U.S. and Canada.
Director Independence
The Board is currently composed of nine directors, six of whom qualify as independent directors as defined under the applicable listing
standards of the NYSE MKT (each an "Independent Director"). Each of Ms. Brown, Mr. Glazek, Ms. Lee, Mr. Magnacca, Mr. Mayer and Mr. Sullivan qualifies as an
Independent Director.
In
establishing independence, the Board affirmatively determines that each director or nominee does not have a relationship that would interfere with the exercise of independent judgment
in carrying out the responsibilities of a director. In addition, the Board has determined as provided in the NYSE MKT rules that the following categories of persons would not be considered
independent: (1) a director who is, or during the past three years was, employed by us, other than prior employment as an interim executive officer (provided the interim employment did not last
longer than one year); (2) a director who accepted or has an immediate family member who accepted any compensation from us in excess of $120,000 during any period of twelve consecutive months
within the three years preceding the determination of independence (unless such compensation falls under exceptions provided for under the NYSE MKT rules); (3) a director who is an immediate
family member of an individual who is, or at any time during the past three years was, employed by us as an executive officer; (4) a director who is an executive officer, partner or a
controlling stockholder, or has an immediate family member who is an executive officer, partner or a controlling stockholder, of an organization to which we made, or from which we received, payments
(other than those arising solely from investments in our securities or payments under non-discretionary charitable contribution matching programs) which, in any of the past three fiscal years, exceeds
or exceeded the greater of $200,000, or 5% of the other organization's consolidated gross revenues; (5) a director who is, or has an immediate family member who is, employed as an executive
officer of another entity where at any time during the most recent three fiscal years any of our executive officers serve on the compensation committee of such other entity; and (6) a director
who is, or has an immediate family member who is, a current partner of our outside auditor, or was a partner or employee of our outside auditor who worked on our audit at any time during any of the
past three years.
Applying these standards, the Board determined that six directors qualify as Independent Directors. In making this determination with respect to Thomas Sullivan, the Nominating and
Corporate Governance Committee considered that Mr. Sullivan serves as a member of the board of directors of Media General, and that Soohyung Kim, Chief Executive Officer of Standard General,
also serves as a member of the board of directors of Media General. In making this determination with respect to Joseph Magnacca, the Nominating and Corporate Governance Committee considered that
Mr. Magnacca served as Chief Executive Officer of RadioShack, and that Standard General is the beneficial owner of approximately 9.8% of the outstanding common stock of RadioShack. In making
this determination with respect to David Glazek, the Nominating and Corporate Governance Committee considered that Mr. Glazek is a partner of Standard General.
19
Table of Contents
Board Leadership Structure and Role in Risk Oversight
As discussed more fully above, on June 18, 2014, the Board voted to replace Dov Charney as Chairman of the Board and appointed
Allan Mayer and David Danziger as Co-Chairmen of the Board.
On
December 22, 2014, Allan Mayer and David Danziger, our Co-Chairmen of the Board, stepped down from that position and Colleen B. Brown was appointed as the new Chairperson of
the Board. Accordingly, during 2014, we transitioned to a Board leadership structure that fully separates the positions of Chairman and CEO. In addition, the terms of the Standstill Agreement require
that we separate the positions of Chairman and CEO. By having different individuals serve in these capacities, we believe that our leadership structure will provide additional objective and thoughtful
oversight by the Board and enable our CEO to focus on our operations. This provision survives for as long as any Standard General Designee is a member of the Board. The CEO is responsible for risk
management associated with our day-to-day operations, and the Board, as a whole and through its committees, is responsible for overseeing our overall risk management. In this oversight role, the Board
must ensure that the risk management processes designed and implemented by management are adequate and functioning as designed. We believe that our new leadership structure enables the Board to
perform this role effectively. The Board will continue to consider from time to time the optimal leadership structure for us based on what the Board believes is best for us and our stockholders.
Committee Composition
The Board presently has the following three committees: (1) an Audit Committee, (2) a Compensation Committee and
(3) a Nominating and Corporate Governance Committee. Committee membership during the last fiscal year and the functions of each of the committees are described below. Each of the committees
operates under a written charter adopted by the Board. All of the committee charters are available on our website at www.americanapparel.net/aboutus/investorrelations.
The
Board held twenty-one meetings during fiscal year 2014. The Audit Committee met nine times; the Compensation Committee met seven times and the Nominating and Corporate Governance
Committee met nine times. Pursuant to the Standstill Agreement, the Suitability Committee was established for the purposes of overseeing the investigation into Mr. Charney's alleged misconduct
and determining whether it is appropriate for Mr. Charney to be reinstated as the CEO or serve as an officer or employee of the Company or any of its subsidiaries. The Suitability Committee met
twenty-seven times and was dissolved at the conclusion of the investigation in December 2014. Other than Mr. Chehebar, each director attended, in person or telephonically, at least 75% in the
aggregate of (i) the total number of meetings of the Board held during 2014 and (ii) the total number of meetings held by all committees of the Board on which he served during 2014. In
addition, all of our then directors (other than Mr. Chehebar) attended our 2014 Annual Meeting in person or telephonically. We expect our directors to attend annual meetings of stockholders and
all Board meetings and respective committee meetings and to spend the time needed and to meet as frequently as necessary to properly discharge their responsibilities.
20
Table of Contents
Current Directors:
|
|
|
|
|
|
|
Name of Directors
|
|
Audit
Committee |
|
Compensation
Committee |
|
Nominating and
Corporate
Governance
Committee |
Independent Directors: |
|
|
|
|
|
|
Colleen B. Brown |
|
X |
|
|
|
X |
David Glazek |
|
|
|
X |
|
X |
Laura A. Lee |
|
|
|
|
|
X |
Joseph Magnacca |
|
|
|
X |
|
|
Allan Mayer |
|
|
|
X* |
|
X |
Thomas J. Sullivan |
|
X |
|
|
|
X* |
Other Directors: |
|
|
|
|
|
|
Jeff Chang |
|
|
|
|
|
|
Lyndon Lea |
|
|
|
|
|
|
Paula Schneider |
|
|
|
|
|
|
X =
Committee Member; * = Committee Chair
Audit Committee
The current members of the Audit Committee are Ms. Brown and Mr. Sullivan. The Board has determined that each member of
this Committee is an Independent Director. The Company intends to fill the vacancy in the Audit Committee caused by the resignation of David Danziger prior to the date of the Annual Meeting.
The
Audit Committee's purpose is to provide assistance to the Board in fulfilling its legal and fiduciary obligations with respect to matters involving our accounting, auditing,
financial reporting, internal control and legal compliance functions. The Audit Committee oversees the audit efforts of our independent accountants and internal auditors and, in that regard, takes
such actions as it may deem necessary to satisfy itself that our auditors are independent of management. It is the objective of the Audit Committee to maintain free and open means of communications
among the Board, the independent accountants, the internal auditors and our financial and senior management.
Among
other things, the Audit Committee prepares the Audit Committee report for inclusion in the annual proxy statement; annually reviews the Audit Committee Charter and the Audit
Committee's performance; appoints, evaluates and determines the compensation of our independent auditors; reviews and approves the scope of the annual audit, the audit fees and the financial
statements; reviews our disclosure controls and procedures, internal controls, information security policies, internal audit function, and corporate policies with respect to financial information and
earnings guidance; oversees investigations into complaints concerning financial matters; and reviews other risks that may have a significant impact on our financial statements. The Audit Committee has
the authority to obtain advice and assistance from, and receive appropriate funding from us for, outside legal, accounting and other advisors as the Audit Committee deems necessary to carry out its
duties.
The Audit Committee is a separately-designated standing committee, established in accordance with section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78(c)(58)(A)). The Audit
Committee at all times is required to be composed exclusively of at least three "independent directors" who are "financially literate" as defined under NYSE MKT listing standards. NYSE MKT listing
standards define "financially literate" as being able to read and understand fundamental financial statements, including a company's balance sheet, income statement and statement of cash flows. The
Audit Committee is currently composed of two financially literate Independent Directors: Ms. Brown and Mr. Sullivan. In addition, Ms. Brown and Mr. Sullivan qualify to serve as
the "financial expert" according to the requirements of SEC Regulation S-K Items 407(d)(5)(ii) and 407(d)(5)(iii).
21
Table of Contents
A
copy of the current Audit Committee Charter is available on our website at www.americanapparel.net/aboutus/investorrelations.
Compensation Committee
The current members of the Compensation Committee are Messrs. Glazek, Mayer and Magnacca, with Mr. Mayer as Chairman. The
Board has determined that each member of this Committee is an Independent Director.
The
Compensation Committee is responsible for overseeing our compensation and employee benefit plans and practices, including the executive compensation plans and the
incentive-compensation and equity-based plans. The Compensation Committee reviews and approves our general compensation policies, oversees the administration of all of our compensation and benefit
plans, reviews and approves compensation of our executive officers, prepares the Compensation Committee Report to be filed with the SEC and recommends compensation policies to the Board. For more
information, see "Processes and Procedures for Determination of Executive and Director Compensation" below and the current copy of the Compensation Committee Charter, which is available on our website
at www.americanapparel.net/aboutus/investorrelations.
Nominating and Corporate Governance Committee
The current members of the Nominating and Corporate Governance Committee are Mses. Brown and Lee and Messrs. Glazek, Mayer and
Sullivan, with Mr. Sullivan as Chairman. The Board has determined that each member of this committee is an Independent Director.
The
Nominating and Corporate Governance Committee assists the Board in identifying and recommending individuals qualified to serve as directors. Subject to Lion's right to designate up
to two persons to the Board pursuant to the Investment Agreement, consistent with criteria approved by the Board (as described below under "Consideration of Director Nominees"), the Nominating and
Corporate Governance Committee will select, or recommend that the Board select, the director nominees required for each subsequent annual meeting of stockholders. The Nominating and Corporate
Governance Committee will consider persons identified by its members, management, stockholders and others as nominees.
The
guidelines for selecting nominees, which are specified in the Nominating and Corporate Governance Committee's current charter, generally provide that persons to be nominated should
be evaluated with respect to their experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments,
dedication, conflicts of interest and such other relevant factors that the Nominating and Corporate Governance Committee
considers appropriate in the context of the needs of the Board. Additionally, the guidelines provide that the Nominating and Corporate Governance Committee should consider whether candidates are
independent pursuant to NYSE MKT requirements; accomplished in their fields and maintain a reputation, both personal and professional, consistent with our image and reputation; able to read and
understand financial statements; knowledgeable as to our company and the issues affecting us; committed to enhancing stockholder value; able to understand fully the legal responsibilities of a
director and the governance processes of a public company; able to develop a good working relationship with other Board members and senior management; and able to suggest business opportunities to us.
The Nominating and Corporate Governance Committee will evaluate each individual in the context of the Board as a whole, with the objective of recommending a group of persons that reflects the
appropriate balance of knowledge, experience, skills, expertise and diversity and includes at least the minimum number of independent directors required by the NYSE MKT. The Nominating and Corporate
Governance Committee will not distinguish among nominees recommended by stockholders and nominees recommended by other persons.
In
addition to the responsibilities described above, the Nominating and Corporate Governance Committee currently develops and recommends to the Board a set of corporate governance
principles
22
Table of Contents
for
us, oversees the evaluation of our management and the Board, and makes recommendations to the Board regarding the size and composition of committees of the Board, including identifying individuals
qualified to serve as members of each committee. A copy of the current Nominating and Corporate Governance Committee Charter is available on our website at www.americanapparel.net/aboutus/investorrelations.
Consideration of Director Nominees
Stockholder Nominees
Our stockholders may make recommendations to the Nominating and Corporate Governance Committee of candidates for nomination as our
directors or may nominate a person directly for election to the Board, in each case subject to compliance with the procedures described below and further set forth in the charter of the Nominating and
Corporate Governance Committee and in the Bylaws, as the case may be.
However,
pursuant to the Investment Agreement (described under "Certain Relationships and Related Transactions" herein), Lion currently has the right to designate up to two persons to
the Board of Directors and a board observer, subject to maintaining certain minimum ownership thresholds of shares issuable under the "Lion Warrants" described under "Certain Relationships and Related
Transactions" herein. Pursuant to the 2009 Investment Voting Agreement (described under "Certain Relationships and Related Transactions" herein), for so long as Lion has the right to designate any
person or persons to the Board of Directors, Mr. Charney has agreed to vote his shares of Common Stock in favor of Lion's designees, subject to maintaining a certain minimum ownership
threshold, and Lion has agreed to vote its shares of Common Stock in favor of Mr. Charney, subject to termination upon the occurrence of certain events.
Lion
designated Messrs. Lea and Chang to the Board in 2014 and 2015, respectively, in accordance with the terms of the Investment Agreement. In addition, under the terms of the
Standstill Agreement, the Company has agreed to use its reasonable best efforts to cause the election of Ms. Lee and Mr. Sullivan to the Board of Directors at the 2015 Annual Meeting.
Stockholder Recommendations of Nominees. The policy of the Nominating and Corporate Governance Committee is to consider properly
submitted
stockholder recommendations of candidates for election to the Board as described below under "Identifying and Evaluating Nominees for Directors." The Nominating and Corporate Governance Committee will
evaluate a prospective nominee recommended by any stockholder in the same manner and against the same criteria as any other prospective nominee identified by the Nominating and Corporate Governance
Committee from any other source.
In
evaluating recommendations from stockholders, the Nominating and Corporate Governance Committee will seek to achieve a balance of knowledge, experience and capability on the Board and
to address the membership criteria set forth under "Director Qualifications" below.
A
stockholder recommendation of a candidate for election to the Board must be in writing and must be received by us not later than 30 days after the end of our fiscal year. The
recommendation must contain the following information and documentation:
-
- the candidate's name, age, business and current resident addresses, as well as residence address for the past 20 years,
principal occupation or employment and employment history (name and address of employer and job title) for the past 10 years and educational background;
-
- the candidate's permission for us to conduct a background investigation;
-
- the number of shares of our Common Stock beneficially owned by the candidate;
23
Table of Contents
-
- the information that would be required to be disclosed about the candidate under the rules of the Exchange Act in a proxy statement
soliciting proxies for the election of such candidate as a director; and
-
- a signed consent of the candidate to serve as our director, if elected.
Stockholder
recommendations for candidates for membership on the Board should be addressed to:
Stockholder Nominations of Directors. A stockholder that instead desires to nominate a person directly for election to the Board at an
annual meeting
of stockholders must comply with the advance notice procedures of the Bylaws and attend the annual meeting of stockholders to make the necessary motion. Nominations of persons for election to the
Board at a meeting of stockholders may be made at such meeting by any stockholder of the Company entitled to vote for the election of directors at the meeting who complies with the notice procedures
set forth in the Bylaws and described below.
Such
nominations by any stockholder must be made pursuant to timely notice in writing to our Secretary. To be timely, a stockholder's notice must be delivered to or mailed and received
at our principal executive offices not less than 60 days nor more than 90 days prior to the meeting. In the event that less than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder, to be timely, must be received no later than the close of business on the tenth day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs.
Such
stockholder's notice to the Secretary must set forth:
-
- as to each person whom the stockholder proposes to nominate for election or reelection as a director, (a) the name, age,
business address and residence address of the person, (b) the principal occupation or employment of the person, (c) the class and number of shares of our capital stock which are
beneficially owned by the person, and (d) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to the
rules and regulations of the SEC under Section 14 of the Exchange Act; and
-
- as to the stockholder giving the notice (a) the name and record address of the stockholder and (b) the class and number
of shares of our capital stock which are beneficially owned by the stockholder.
We
may require any proposed nominee to furnish such other information as may reasonably be required by us to determine the eligibility of such proposed nominee to serve as our director.
No person nominated by a stockholder will be eligible for election as our director unless nominated in accordance with the procedures set forth above. Our officer presiding at an annual meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he or she should so determine, he or she shall so declare
to the meeting and the defective nomination shall be disregarded.
Director Qualifications
The Nominating and Corporate Governance Committee has the responsibility to review the background and qualifications of individuals
being considered as director candidates, including developing criteria and qualifications for membership on the Board. Among the qualifications considered in the selection of candidates, the
Nominating and Corporate Governance Committee shall consider each candidate's experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time
availability in light of other commitments, dedication, conflicts of interest and such other relevant factors that the Nominating and Corporate Governance Committee considers appropriate in the
context of the needs of the Board.
24
Table of Contents
Additionally,
the Nominating and Corporate Governance Committee considers whether the candidate is:
-
- independent pursuant to NYSE MKT requirements;
-
- accomplished in his or her field and maintained a reputation, both personal and professional, consistent with the image and our
reputation;
-
- able to read and understand financial statements (the Nominating and Corporate Governance Committee will also determine if a candidate
qualifies as an "audit committee financial expert," as defined by the SEC);
-
- knowledgeable as to us and issues affecting us;
-
- committed to enhancing stockholder value;
-
- able to understand fully the legal responsibilities of a director and the governance processes of a public company;
-
- able to develop a good working relationship with other Board members and senior management; and
-
- able to suggest business opportunities to the Company.
Identifying and Evaluating Nominees for Directors
The Nominating and Corporate Governance Committee annually reviews the composition of the Board and reviews the suitability for
continued service as a director of each Board member when his or her term expires and when he or she has a change in status, including but not limited to an employment change, and to recommend whether
or not the director should be re-nominated. The Nominating and Corporate Governance Committee also recommends to the Board the nominees, consistent with the criteria for selecting directors
established by the Board or the Nominating and Corporate Governance Committee, for election as directors by the stockholders or appointment by the Board, as the case may be, pursuant to our Bylaws.
Executive Sessions
Executive sessions of non-management directors are expected to be held on a regular basis. Any non-management director can request that
an additional executive session be scheduled.
Communications with the Board
You may communicate with the Board by submitting an e-mail to the Board at bod@americanapparel.net. All directors have access to this
e-mail address.
Governance Guidelines and Committee Charters
The Company's Governance Guidelines, which satisfy NYSE MKT listing standards for "corporate governance guidelines," as well as the
charters for each of the committees of the Board, are available at www.americanapparel.net/aboutus/investorrelations/. Stockholders may request a copy
of the Company's Governance Guidelines or the charter of any of the committees of the Board, at no cost, by writing to us at the following address: American Apparel, Inc., Attn: General
Counsel, 747 Warehouse Street, Los Angeles, California 90021.
Code of Business Conduct and Ethics
On December 19, 2014, as part of the review by the Board of our corporate governance and policies, the Board adopted a revised
Code of Business Conduct and Ethics ("Revised Code") that amended, restated, and replaced the prior Code of Ethics ("Prior Code") applicable to us, effective as of January 1, 2015. The Revised
Code applies to all directors, employees and officers, including our principal executive officer, principal financial officer and principal accounting officer or controller, or
25
Table of Contents
persons
performing similar functions. The Revised Code is intended to clarify, update or enhance the descriptions of the standards of conduct that are expected of all of our directors, officers and
employees.
The
Revised Code is also published on our website at www.americanapparel.net/aboutus/investorrelations/corporategovernance. In addition,
stockholders may request a copy of the Revised Code free of charge by contacting our investor relations department at investors@americanapparel.net.
Indemnification of Directors
The General Corporation Law of the State of Delaware provides that a company may indemnify its directors and officers as to certain
liabilities. Our Certificate of Incorporation and Bylaws provide for the indemnification of our directors and officers to the fullest extent permitted by law, and we have entered into separate
indemnification agreements with certain directors and officers to effectuate these provisions and have purchased directors' and officers' liability insurance. The effect of such provisions is to
indemnify, to the fullest extent permitted by law, our directors and officers against all costs, expenses and liabilities incurred by them in connection with any action, suit or proceeding in which
they are involved by reason of their affiliation with us.
26
Table of Contents
PROCESSES AND PROCEDURES FOR DETERMINATION OF
EXECUTIVE AND DIRECTOR COMPENSATION
The Compensation Committee of the Board is responsible for overseeing our compensation and employee benefit plans and practices. The
Compensation Committee reviews and approves, either as a committee or together with the other independent directors, our general compensation policies, oversees the administration of all of our
compensation and benefit plans and reviews and approves, either as a committee or together with the other independent directors, the compensation of our executive officers. The Compensation Committee
Charter requires that each member of the committee satisfy all applicable requirements then in effect of the NYSE MKT and any other stock exchange or national securities association on which our
securities are listed or quoted and any other applicable regulatory requirement relating to director independence, nomination and size of the Compensation Committee and that the Compensation Committee
consist of no fewer than two Board members who qualify as "non-employee directors" within the meaning of Rule 16b-3 under the Exchange Act and "outside directors" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended. The Compensation Committee consists of three Board members, each of whom the Board has affirmatively determined satisfied these
independence requirements.
The
Compensation Committee Charter sets forth the purpose of and other matters pertaining to the Compensation Committee. The form of the current Compensation Committee Charter is
available on the Company's website at www.americanapparel.net/aboutus/investorrelations.
Pursuant
to its Charter, the Compensation Committee's responsibilities include the following::
-
- review and approve, either as a committee or together with the other independent directors, the corporate goals and objectives
relevant to the compensation of our CEO and other executive officers;
-
- evaluate, either as a committee or together with the other independent directors, our CFO's performance in light of such goals and
objectives;
-
- set, either as a committee or together with the other independent directors, our executive officers' compensation levels, including
base salary, annual incentive opportunities, long-term incentive opportunities and benefits;
-
- review and approve, either as a committee or together with the other independent directors, any employment contracts or related
agreements, such as severance or termination arrangements, to be made with any of our executive officers;
-
- review and recommend to the Board appropriate director compensation programs and, either as a committee or together with the other
independent directors, review and approve perquisites or other personal benefits to directors and recommend any changes to the Board;
-
- review its own performance and assess the adequacy of its Charter;
-
- review and approve the goals and objectives of and the plans underlying our general compensation and other employee benefit programs,
including incentive-compensation and equity-based programs;
-
- retain (after taking into consideration all factors relevant to that person's independence from management) and terminate any
compensation consultant used to assist in the evaluation of officer compensation, including to approve the consultant's fees and other retention terms;
-
- review and discuss with management our Compensation Discussion and Analysis to be included in our annual proxy statement;
-
- review and recommend for approval by the Board, or approve, the frequency with which we should submit to the stockholders an advisory
vote on the compensation of our named executive officers, taking into account any prior stockholder advisory vote on the frequency with which we shall hold a stockholder advisory vote on compensation
of our named executive officers;
27
Table of Contents
-
- review the results of any stockholder advisory vote on the compensation of our named executive officers and consider whether to make
any adjustments to our executive compensation policies and practices; and
-
- produce a report of the Compensation Committee to be included in our annual proxy statement.
28
Table of Contents
COMPENSATION OF DIRECTORS
Compensation for non-employee directors will consist of annual stock grants and Board and Committee meeting fees, as described below.
Employees who are also directors will receive no additional compensation for their Board service.
DIRECTOR COMPENSATIONFISCAL 2014
During 2014, our non-employee directors received a total of $1,026,312 in Board and Committee retainers and meeting fees, for their
participation in Board, Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee meetings held during 2014.
Pursuant
to the Amended and Restated 2011 Omnibus Stock Incentive Plan ("2011 Plan"), our non-employee directors each received the cash payments and fully vested stock grants as
described below for their Board service.
Each
non-employee director is eligible to receive compensation for their service totaling $80,000, to be paid in four equal installments quarterly in arrears, for service by such
director during such quarter, on each of March 31, June 30, September 30, and December 31 (or if such day is not a business day, on the next succeeding business day) (each,
a "Quarterly Award Date"), payable, at the option of each director individually, either (i) entirely in shares of our Common Stock or (ii) half in our Common Stock and half in cash at
the time of such grant. For fiscal 2014, any such grants of stock will be of that number of shares, rounded down to the nearest whole share, having an aggregate value equal to the value of the award
(either $10,000 or $20,000) based on a per-share price equal to the greater of (x) the average of the high and low sale prices of our Common Stock on the NYSE MKT on the Quarterly Award Date
(or the next business day if such date is not a business day) and (y) the last sale price of our Common Stock on the Quarterly Award Date (or the next business day if such date is not a
business day).
The
table below presents the compensation provided by us to all non-employee directors for the fiscal year ended December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
or Paid in
Cash ($) |
|
Stock
Awards
($)(1) |
|
Option
Awards
($) |
|
Change in
Pension Value
and
Nonqualified
Delivered
Compensation
Earnings
($) |
|
Non-Equity
Incentive
Plan
Compensation
($) |
|
All Other
Compensation
($) |
|
Total
($) |
|
Independent Non-Employee Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colleen B. Brown |
|
|
70,970 |
|
|
16,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,492 |
|
Alberto Chehebar |
|
|
25,333 |
|
|
23,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,666 |
|
David Danziger(2) |
|
|
196,739 |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236,739 |
|
David Glazek(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Greene |
|
|
81,208 |
|
|
23,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,541 |
|
Marvin Igelman |
|
|
46,333 |
|
|
23,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,666 |
|
Lyndon Lea(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laura A. Lee |
|
|
30,870 |
|
|
15,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,739 |
|
Joseph Magnacca |
|
|
31,521 |
|
|
16,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,043 |
|
William Mauer |
|
|
54,333 |
|
|
23,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,666 |
|
Allan Mayer(2) |
|
|
183,239 |
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
223,239 |
|
Robert Mintz(4) |
|
|
3,000 |
|
|
3,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,478 |
|
Thomas J. Sullivan |
|
|
44,000 |
|
|
33,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Non-Employee Directors |
|
|
767,546 |
|
|
258,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,026,312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
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|
|
|
|
|
|
|
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- (1)
- Represents
the aggregate grant date fair value.
29
Table of Contents
- (2)
- Fees
earned for Messrs. Danziger and Mayer include $50,000 each for their appointment as Co-Chairmen of the Board on June 18, 2014.
- (3)
- Mr. Glazek
declined compensation.
- (4)
- On
March 13, 2009, we entered into the Investment Agreement with Lion pursuant to which Mr. Lea and Mr. Mintz, designees of Lion, are
ineligible for compensation. We have requested the return of shares and cash compensation inadvertently issued and paid, respectively, to Mr. Mintz and as of June 15, 2015, we have not
yet received such shares or cash repayment.
Annual Stock Awards and Meeting Fees
The following table presents the schedule of annual stock grants and meeting fees for non-employee directors in effect during 2014:
|
|
|
|
|
Type of Fee
|
|
Dollar Amount |
|
Maximum Annual Value of Quarterly Stock Awards |
|
$ |
80,000 |
|
Minimum Annual Value of Quarterly Stock Awards |
|
$ |
40,000 |
|
Maximum Annual Cash Portion of Quarterly Awards |
|
$ |
40,000 |
|
Quarterly RetainerBoard Chairperson |
|
$ |
13,500 |
|
Quarterly RetainerChairman of Audit Committee |
|
$ |
2,500 |
|
Quarterly RetainerChairman of Compensation Committee |
|
$ |
1,875 |
|
Quarterly RetainerChairman of Nominating and Corporate Governance Committee |
|
$ |
1,625 |
|
Independent Director Meeting Fee |
|
$ |
1,000 |
|
Each
non-employee director is eligible to receive $80,000 total annual awards of cash and stock in respect of service on the Board and as Committee members and is also reimbursed for
out-of-pocket expenses, including travel expenses, incurred serving as a director. In addition, the Chairperson of the Board and the chairman of each committee receive retainers in the amounts
indicated in the table above, and each independent director receives a $1,000 per meeting fee.
30
Table of Contents
COMPENSATION DISCUSSION AND ANALYSIS
This section contains a discussion of the material elements of compensation awarded to, earned by or paid to our principal executive
officer and principal financial officer and our three other most highly compensated executive officers or individuals during fiscal 2014. The principal executive officers, principal financial officers
and our three other most highly compensated executive officers or individuals are referred to as the "Named Officers" herein.
Principal executive officerDuring 2014, Dov Charney served as our Chairman of the Board and CEO until his suspension on June 18, 2014. From
June 19, 2014 to September 29, 2014, John J. Luttrell served as our interim CEO and from September 29, 2014 to January 5, 2015, Scott Brubaker served as our interim CEO.
Principal financial officerDuring 2014, John J. Luttrell also served as our Executive Vice President and CFO until his resignation on
September 29, 2014 when Hassan N. Natha joined us as our Executive Vice President and CFO.
Other Named OfficersOur two other most highly compensated executive officers during 2014 who were serving as of December 31, 2014 were Martin
Bailey and Chelsea A. Grayson. Glenn A. Weinman, whose employment with us terminated on May 16, 2014, constituted our third most highly compensated executive officer during fiscal 2014 and is
included as a Named Officer under relevant SEC rules.
Our
current executive compensation programs are determined and approved by the Compensation Committee of the Board. None of the Named Officers are members of the Compensation Committee.
Our CEO, in consultation with the other Named Officers, recommends to the Compensation Committee salary, cash incentive awards, equity-based awards and long-term compensation levels for executive
officers, including the Named Officers. Our CFO provides the Compensation Committee with documents used by the committee in the determination of executive compensation.
Executive Compensation Program Objectives and Overview
It is the Company's intent that its executive compensation programs achieve three fundamental objectives:
-
- Competitive Compensation. We should provide competitive
compensation opportunities so that we can attract, motivate and retain qualified executive officers.
-
- Pay for Performance: Hold Executives
Accountable. A substantial portion of compensation should be tied to our company's performance (and/or relevant department or segment)
and individual performance.
-
- Alignment of Executive Incentives with Stockholder
Interests. A substantial portion of compensation should be contingent on our performance. As an executive officer's level of
responsibility increases, a greater portion of the officer's total compensation should be dependent on our performance.
As
described in more detail below, the material elements of our executive compensation program will generally include, at the discretion of the Compensation Committee, some or a mix of
the following: a base salary, an annual cash incentive bonus opportunity, and a performance equity plan component. The base salary is the element of our current executive compensation program with
respect to which the value of the benefit in any given year is generally not variable. We believe that in order to attract, motivate and retain top-caliber executive officers, we need to provide
executive officers with predictable compensation amounts that reward the executive officer's continued service. The base salaries are paid out on a short-term or current basis. We anticipate that any
bonus awarded in any
31
Table of Contents
given
year will depend on the performance of the individual and our performance. Any bonuses would generally be paid out on a short-term basis, such as at year end or upon completion of significant
projects. Performance equity awards would generally be made on a longer-term basis. We believe that a mix of longer-term benefits, geared toward retention of executives, and short-term benefits,
focused on recruitment, will allow us to achieve our dual goals of attracting and retaining executive officers.
Our
cash incentive bonus opportunity is a compensation mechanism used to hold executive officers accountable by directly linking performance to compensation. We believe the ability to
reward excellence and pass along the consequences of poor performance aligns our executive officers' interests with those of our stockholders and helps us to attract, motivate and retain executive
officers. Our performance equity incentives also align our executive officers' interests with those of our stockholders, helping us to hold executive officers accountable for performance and to
motivate and retain high-performing executive officers.
These
compensation elements are intended to create a total compensation package for each executive officer that we believe will achieve our compensation objectives, providing competitive
compensation opportunities that reward performance and align executives' incentives with the interests of stockholders.
The
Compensation Committee also considers the results of competitive analyses such as the Pearl Meyer & Partners ("PM&P") analyses described below when evaluating and establishing
compensation opportunities for the Named Officers.
We
have employment agreements with Paula Schneider, our CEO, Hassan N. Natha, our Executive Vice President and CFO and Chelsea A. Grayson, our Executive Vice President, General Counsel
and Secretary. For a more complete description of current employment agreements with the Named Officers, see "Description of Employment Agreements" below.
Our
CEO recommends to the Compensation Committee salary, annual bonus, equity-based awards and long-term compensation levels for other executive officers, including the Named Officers.
While the Compensation Committee reviews and makes recommendations regarding compensation paid to the non-employee directors, the compensation for these directors is determined by the Board.
Equity
awards to all officers subject to Section 16 of the Exchange Act are made by the Compensation Committee. As indicated above, pursuant to its charter, the Compensation
Committee is authorized to retain and terminate any compensation consultant engaged to assist in the evaluation of the compensation of our officers (including all of the Named Officers).
In
2014, we engaged PM&P to review executive compensation for senior executive positions. While PM&P was engaged by and reports directly to the Compensation Committee, PM&P interacted
with our management when appropriate to gather perspectives and relevant company and compensation data. In addition, PM&P may seek feedback from the Compensation Committee Chairman, other members of
the Compensation Committee or the Board, or the CEO and Chairman of the Board regarding its work prior to presenting study results or recommendations to the Compensation Committee.
PM&P
has attended or participated in certain Compensation Committee meetings and provided third-party data, advice and expertise on proposed executive compensation levels, programs and
plan designs. The Compensation Committee may also ask PM&P to review and provide advice related to proposals prepared by management, including evaluating the consistency of such proposals with the
Compensation Committee's compensation philosophy and in comparison to programs at other companies.
For
the 2014 review, PM&P developed a list of Peer Group companies in the Retail/Apparel industry to establish a reference for executive compensation levels and program structure, total
32
Table of Contents
compensation,
beneficial ownership levels for Named Officers and long-term incentive plan features among the Peer Group companies. In determining the Peer Group, PM&P included Retail/Apparel
companies with revenues between one-quarter to four times our revenue. The Peer Group included:
-
- Aeropostale, Inc.
-
- Bebe Stores, Inc.
-
- The Cato Corporation
-
- Columbia Sportswear Company
-
- Delta Apparel Inc.
-
- Express Inc.
-
- Francesca's Holding Corporation
-
- Gildan Activewear, Inc.
-
- Guess? Inc.
-
- Joe's Jeans Inc.
-
- Kate Spade & Company
-
- Lululemon Athletica Inc.
-
- New York & Company Inc.
-
- Oxford Industries Inc.
-
- Pacific Sunwear of California Inc.
-
- Perry Ellis International Inc.
-
- Quicksilver Inc.
-
- Tilly's, Inc.
-
- Vince Holding Corp
-
- The West Seal, Inc.
-
- Zumiez, Inc.
The
Compensation Committee considered the results of the PM&M study and on March 30, 2015, approved the following: grants of restricted stock units ("RSUs") and stock options
("Options") to employees, including our executive officers, under the 2011 Plan; a one-time RSU grant for 50,000 shares of our Common Stock to each of Ms. Schneider, Mr. Natha and
Ms. Grayson, in recognition of such executive officer's service since her or his date of hire; and performance targets under the 2015 Executive Annual Incentive Plan ("2015 AIP") that will be
used to determine the amount of cash bonus awards that may be earned by the participants in the 2015 AIP, including the executive officers.
The
Compensation Committee has assessed the independence of PM&P pursuant to SEC rules and concluded that there are no conflict of interest issues.
Current Executive Compensation Program Elements
Base Salaries
The Compensation Committee reviews and approves base salaries for executive officers, including Named Officers, annually and in
connection with promotions or other changes in responsibilities. The
33
Table of Contents
Compensation
Committee generally reviews the base salaries for each executive officer in the first quarter of each year to set salaries, and considers market data, individual compensation history, pay
in relation to other executive officers at the Company, tax deductibility, individual job performance and future potential, as well as evaluations and recommendations by senior management in
determining base salary. The weight given to each of these factors may differ from individual to individual, as the Compensation Committee deems appropriate.
Annual Bonus Awards
The Compensation Committee has the authority to set annual bonus targets and performance criteria under our and believes that this
annual bonus program is an important part of creating an incentive for our executives to achieve specific goals across various measures of performance. For the 2014 performance period, Dov Charney,
Martin Bailey, John J. Luttrell and Glenn A. Weinman were eligible to achieve bonuses based on various weightings of sales, EBITDA, debt, inventory, as well as a discretionary portion and
Mr. Bailey achieved a bonus that is reflected in the Summary Compensation Table. Additionally, Mr. Natha was entitled to a bonus in accordance with his employment agreement and
Mr. Weinman was entitled to a bonus pursuant to the terms of his separation agreement.
Long-Term Equity Incentive Awards
The Compensation Committee has the authority to grant stock options, restricted stock and other awards to executive officers under our
2011 Plan.
On
March 12, 2014, the Compensation Committee approved grants to Messrs. Luttrell and Weinman of 120,000 and 45,000 shares of our Common Stock, respectively, with each
award vesting as to one-third of the shares on each of March 1, 2014, 2015 and 2016. The Compensation Committee believes that these grants will serve to further align the interests of our
executives and stockholders.
Severance and Other Benefits Upon Termination of Employment
In order to support our compensation objectives of attracting, retaining and motivating qualified executive officers, we believe that,
in certain cases, we may decide to provide executive officers with severance protections upon certain types of termination. These severance protections are negotiated on an individual basis. American
Apparel has not entered into any change in control agreements. We have or had (as the case may be) severance arrangements with Martin Bailey, Dov Charney, John J. Luttrell, Glenn A. Weinman, Hassan N.
Natha, and Chelsea A. Grayson.
For
a more complete description of current employment agreements with the Named Officers, see "Description of Employment Agreements" below.
Option Grant Practices and Policies
The Compensation Committee may, from time to time, grant stock options under our 2011 Plan, as determined by the Compensation
Committee.
Section 162(m) Policy
Section 162(m) of the Internal Revenue Code disallows a tax deduction to publicly-held companies for compensation paid to
certain executive officers, to the extent that compensation exceeds $1 million per officer in any year. The limitation applies only to compensation which is not considered to be
performance-based. The Compensation Committee intends to consider the anticipated tax treatment to us and our executive officers when reviewing executive compensation and our compensation programs.
While
the tax impact of any compensation arrangement is one factor to be considered, such impact is evaluated in light of the Compensation Committee's overall compensation philosophy.
The
34
Table of Contents
Compensation
Committee will consider ways to maximize the deductibility of executive compensation, while retaining the discretion it deems necessary to compensate officers in a manner commensurate
with performance and the competitive environment for executive talent. From time to time, the Compensation Committee may award compensation to our executive officers which is not fully deductible, if
it determines that such award is consistent with its philosophy and is in our and our stockholders' best interests.
The
Compensation Committee considers, in establishing and reviewing our executive compensation program, whether the program encourages unnecessary or excessive risk taking and has
concluded that it does not. Base salaries are fixed in amount and thus do not encourage risk taking. While our annual bonus plan focuses on achievement of short-term or annual goals, and short-term
goals may encourage the taking of short-term risks at the expense of long-term results, executives' annual bonuses are determined using multiple performance criteria and are subject to reduction by
the Compensation Committee based on the executive's individual performance. The Compensation Committee believes that the annual bonus plan appropriately balances risk and the desire to focus
executives on specific short-term goals important to our success, and that it does not encourage unnecessary or excessive risk taking. The Compensation Committee believes that our current executive
compensation program provides an appropriate balance between the goals of increasing the price of our Common Stock and avoiding risks that could threaten our growth and stability. In addition, it is
intended to be the practice of the Compensation Committee to grant executive officers a mixture of stock options and restricted stock as described above. The Compensation Committee believes that such
awards would not encourage unnecessary or excessive risk taking since the ultimate value of the awards would be tied to our stock price, and since grants are subject to long-term vesting schedules to
help ensure that executives always have significant value tied to long-term stock price performance.
Stockholder Advisory Vote on Executive Compensation
Our 2011 proxy statement included an advisory vote on executive compensation (Proposal 4) and an advisory vote on the frequency
of an advisory vote on executive compensation (Proposal 5). The results of these advisory votes were included in the results of voting at our 2011 Annual Meeting, as reported in our Form 8-K
filed with the SEC on June 27, 2011. Stockholders voted for the approval of our executive compensation by a vote of 46,305,428 for to 4,757,266 against with 38,780 abstaining and 13,124,449
broker non-votes. The votes cast with respect to the frequency of an advisory vote on executive compensation were 44,151,550 for a vote every three years, 1,966,307 for every two years, 4,899,164 for
a vote each year, 84,453 abstaining and 13,124,449 broker non-votes. Additionally, our 2014 proxy statement also included an advisory vote on executive compensation (Proposal 3). The results of this
advisory vote were included in the results of voting at our 2014 Annual Meeting, as reported in our Form 8-K filed with the SEC on June 23, 2014. Stockholders voted for the approval of
our executive compensation by a vote of 54,774,328 for to 13,458,923 against with 108,190 abstaining and 41,001,033 broker non-votes. The Compensation Committee considered the results of these
advisory votes in determining to recommend to the Board that a stockholder advisory vote on executive compensation be held every three years and in evaluating the extent to which our executive
compensation programs are effective at achieving the goals of the Compensation Committee and the Board. The next stockholder advisory votes on executive compensation and on the frequency of the
stockholder advisory votes on executive compensation will be included in our 2017 Proxy Statement.
35
Table of Contents
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has certain duties and powers as described in its Charter. The Compensation Committee is currently composed
of the three non-employee directors named at the end of this Compensation Committee Report, each of whom is independent as defined by NYSE MKT listing standards.
The
Compensation Committee of the Company has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K of
the Exchange Act of 1934, as amended, and, based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis section be
included in this Proxy Statement for the 2015 Annual Meeting, as filed with the SEC.
|
|
|
|
|
By the Compensation Committee,
Allan Mayer (Chairman)
David Glazek
Joseph Magnacca
|
36
Table of Contents
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 2014, Messrs. Greene, Glazek, Magnacca, Mauer and Mayer served as members of the
Compensation Committee, and except Mr. Glazek, during that period no current or former member of the Compensation Committee was our officer or employee, our former officer or had any
relationships requiring disclosure by us under the SEC's rules requiring disclosure of certain relationships and related-party transactions. Mr. Glazek is a partner of Standard General, which
is a party to the Standard General Credit Agreement, the Standstill Agreement and the Lion Loan Agreement assigned to Standard General, each as more fully described under "Certain Relationships and
Related Transactions, and Director Independence" contained herein. None of our executive officers served as a director or a member of a compensation committee (or
other committee serving an equivalent function) of any other entity whose executive officers served as a director or member of our Compensation Committee during the year ended December 31,
2014.
37
Table of Contents
SUMMARY COMPENSATION TABLE
The following table presents information regarding compensation of our Named Officers for services rendered during 2014, 2013 and 2012.
For 2014, Scott B. Brubaker, who served as our interim CEO from September 29, 2014 to January 5, 2015, has not been included in the compensation tables. The Company entered into a
consulting arrangement with Alvarez & Marsal North America, LLC ("A&M") on September 29, 2014, and Mr. Brubaker, a Managing Director of A&M, provided his services as
interim CEO under the terms of the arrangement. Mr. Brubaker was not our employee in 2014 and was not paid any compensation by us in 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal
Position
|
|
Year |
|
Salary |
|
Bonus
(1) |
|
Stock
Awards |
|
Option
Awards |
|
Non-
Equity
Incentive
Plan
Compensation
Earnings |
|
Change in
Pension
value
and Non-
Qualified
Deferred
Compensation
Earnings |
|
All Other
Compensation
(2) |
|
Total |
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Dov Charney(3) |
|
|
2014 |
|
$ |
400,000 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
463,276 |
|
$ |
863,276 |
|
Former Chairman of the Board |
|
|
2013 |
|
|
832,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
216,234 |
|
|
0 |
|
|
17,210 |
|
|
1,065,444 |
|
and CEO |
|
|
2012 |
|
|
800,000 |
|
|
0 |
|
|
12,479,003 |
(4) |
|
0 |
|
|
1,199,655 |
|
|
0 |
|
|
17,210 |
|
|
14,495,868 |
|
John J. Luttrell,(5) |
|
|
2014 |
|
|
429,560 |
|
|
0 |
|
|
335,750 |
(6) |
|
0 |
|
|
|
|
|
|
|
|
595,000 |
(7) |
|
1,360,310 |
|
Former Interim CEO and |
|
|
2013 |
|
|
432,640 |
|
|
0 |
|
|
480,600 |
|
|
0 |
|
|
47,546 |
|
|
0 |
|
|
0 |
|
|
960,786 |
|
Executive Vice President and |
|
|
2012 |
|
|
416,000 |
|
|
0 |
|
|
56,250 |
|
|
0 |
|
|
332,621 |
|
|
0 |
|
|
0 |
|
|
804,871 |
|
CFO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hassan N. Natha(8) |
|
|
2014 |
|
|
104,615 |
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
(9) |
|
169,615 |
|
Executive Vice President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn A. Weinman, |
|
|
2014 |
|
|
230,201 |
|
|
418,275 |
(10) |
|
33,750 |
(11) |
|
0 |
|
|
0 |
|
|
0 |
|
|
413,712 |
(12) |
|
1,095,938 |
|
Former Executive Vice President, |
|
|
2013 |
|
|
405,600 |
|
|
0 |
|
|
106,800 |
|
|
0 |
|
|
44,574 |
|
|
0 |
|
|
16,167 |
|
|
573,141 |
|
General Counsel and Secretary |
|
|
2012 |
|
|
390,000 |
|
|
0 |
|
|
295,000 |
|
|
0 |
|
|
311,832 |
|
|
0 |
|
|
0 |
|
|
996,832 |
|
Chelsea A. Grayson(13) |
|
|
2014 |
|
|
20,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
20,000 |
|
Executive Vice President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Counsel and Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin Bailey |
|
|
2014 |
|
|
339,780 |
|
|
90,989 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
95,695 |
(14) |
|
526,464 |
|
Chief Manufacturing Officer |
|
|
2013 |
|
|
324,380 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
40,000 |
|
|
0 |
|
|
40,167 |
|
|
404,547 |
|
|
|
|
2012 |
|
|
312,000 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
249,465 |
|
|
0 |
|
|
42,700 |
|
|
604,165 |
|
- (1)
- Includes
bonuses earned in the year indicated, regardless of when paid.
- (2)
- Except
as otherwise set forth below, amounts of perquisites and other personal benefits are less than $10,000 and accordingly are omitted.
- (3)
- 2014
salary represents compensation to Mr. Charney through his suspension on June 18, 2014. 2014 Other Compensation includes
(i) consulting fees of $422,400 from June 19, 2014, following Mr. Charney's suspension, and through his termination on December 15, 2014 (ii) $25,876 for
Mr. Charney's exclusive use of a company owned apartment in Montreal, Canada and (iii) $15,000 for life insurance premiums.
- (4)
- Includes
the right to be granted 7,500,000 shares upon the achievement of certain performance hurdles, as set forth in Mr. Charney's 2012 employment
agreement as well as additional expense associated with the October 2012 amendment to Mr. Charney's anti-dilution rights granted under a purchase agreement, dated April 27, 2011 (as
amended, the "Charney Purchase Agreement" and such rights, the "Charney Anti-Dilution Provision"). As of his termination, Mr. Charney no longer had the right to receive (i) 7,500,000
shares pursuant to his employment agreement and (ii) two-thirds of the shares that may be granted pursuant to the Charney Anti-Dilution Provision of the Charney Purchase Agreement, although
these shares are included in the chart above pursuant to SEC rules.
- (5)
- Commencing
as of June 18, 2014, John J. Luttrell served as interim CEO, Executive Vice President and CFO, following Dov Charney's suspension, through
his resignation on September 29, 2014.
- (6)
- Includes
(i) a vested grant of 350,000 shares of the our Common Stock that Mr. Luttrell received at the time of his appointment as interim CEO
and (ii) 120,000 restricted stock grant, approved by the Compensation Committee under our 2011 Plan, which became fully vested on September 29, 2014, pursuant to Mr. Luttrell's
employment agreement, following his resignation.
- (7)
- Represents
severance in accordance with Mr. Luttrell's Employment Agreement, as described in more detail in the section entitled "Potential Payments
on Termination or Change in Control".
- (8)
- On
September 29, 2014, Mr. Natha joined us as Executive Vice President and CFO.
- (9)
- Represents
relocation allowance for Mr. Natha based on his employment agreement.
- (10)
- In
accordance with Mr. Weinman's Separation Agreement effective May 16, 2014, the bonus amount represents targeted bonus for fiscal year 2014
and targeted bonus for January 1, 2015 through May 15, 2015.
38
Table of Contents
- (11)
- Includes
45,000 restricted stock grant to Mr. Weinman, approved by the Compensation Committee under our 2011 Plan, which became fully vested in
accordance with Mr. Weinman's separation agreement effective May 16, 2014.
- (12)
- In
accordance with Mr. Weinman's Separation Agreement effective May 16, 2014, other compensation included $413,712 severance corresponding to
one-year annual salary.
- (13)
- On
December 15, 2014, Ms. Chelsea A. Grayson joined us as Executive Vice President, General Counsel and Secretary.
- (14)
- For
2014, Mr. Bailey's other compensation includes: i) $16,492 for payments of health insurance premiums, ii) $11,303 car allowance
and iii) $67,900 for life insurance policy.
Compensation of Named Officers
The Summary Compensation Table above quantifies the value of the different forms of compensation earned by or awarded to our Named
Officers in 2014, 2013 and 2012. The primary elements of each Named Officer's total compensation reported in the table are base salary, bonuses, and the other benefits listed in Column (i) of
the Summary Compensation Table, as further described in the footnotes to the table identified therein.
The
Summary Compensation Table should be read in conjunction with the narrative descriptions that follow. A description of the material terms of the employment agreements currently in
force with respect to Named Officers is provided immediately following this paragraph.
Description of Employment Agreements
The following are descriptions of the terms of the employment agreements with Paula Schneider, Hassan N. Natha and Chelsea A. Grayson.
Paula Schneider, Chief Executive Officer
In connection with Ms. Schneider's appointment as CEO, the Company and Ms. Schneider entered into an employment agreement
pursuant to which Ms. Schneider will serve as our CEO for a term commencing on January 5, 2015 and continuing until her employment is terminated in accordance with the terms of the
employment agreement. The employment agreement provides that Ms. Schneider will receive a base salary of $600,000 per year, subject to increase based on the annual review of the Compensation
Committee. Ms. Schneider will be eligible to receive an annual incentive compensation award, with a target payment based on a bonus matrix providing for a range of 50% to 75% of her salary
during each such fiscal year, subject to the terms and conditions of our annual bonus plan and further subject to certain targets or criteria reasonably determined by the Board or the Compensation
Committee. Ms. Schneider will also participate in the benefit plans that we maintain for our executives and receive certain other standard benefits (including, without limitation, vacation
benefits and reimbursement of travel and business-related expenses), and we will provide medical and dental coverage consistent with that offered to our other executives. Ms. Schneider will be
entitled to attend all meetings of the Board in a nonvoting observer capacity, to the extent the Board determines
that such attendance is not inconsistent with its fiduciary obligations. Ms. Schneider is required to provide the Board with an assessment of our operational plan for fiscal year 2015, no later
than April 5, 2015, and she will be entitled to receive a bonus payment of $100,000 no later than 30 days following the delivery and presentation of such plan. The Compensation Committee
has approved Ms. Schneider's bonus in 2015 based on her fulfillment of the stated requirements.
If
Ms. Schneider is terminated without "cause" or if she resigns for "good reason" (as these terms are defined in the Employment Agreement), we will pay Ms. Schneider the
following: (a) her base salary accrued through the date of such resignation or termination and, subject to entering into a release, continued payment of Ms. Schneider's then-current base
salary for 18 months; (b) at the time of, on the terms of, and otherwise consistent with payments to similarly situated executives, (i) any bonus earned but not yet paid in
respect of any calendar year preceding the year in which such termination or resignation occurs and (ii) for terminations after the first three months of the fiscal
39
Table of Contents
year,
a pro rata target bonus for the year of termination; and (c) any unreimbursed expenses. In addition, in such case, Ms. Schneider and her eligible dependents will be entitled to
receive, until the earlier of 18 months following termination and the date Ms. Schneider is entitled to comparable benefits by a subsequent employer, continued participation in our
medical, dental and insurance plans and arrangements.
If
Ms. Schneider's employment terminates by reason of her death or disability, or if she is terminated for "cause" or if she resigns without "good reason" (as these terms are
defined in the employment agreement), we will pay her (a) base salary accrued through the date of such resignation or termination; (b) any unreimbursed expenses; and (c) only in
the case of a termination because of her death or disability, (x) any bonus earned but not yet paid in respect of any calendar year preceding the year in which such termination of employment
occurs and (y) a pro rated amount of her target annual performance bonus, if any, for the calendar year in which such termination of employment occurs.
The
Employment Agreement also provides that upon termination of Ms. Schneider's employment for any reason, she agrees to resign, as of the date of such termination and to the
extent applicable, from the Board (and any committees) of, and as an officer of, us and any of our affiliates and subsidiaries.
Hassan N. Natha, Executive Vice President and Chief Financial Officer
The Company and Mr. Natha are parties to an employment agreement effective as of September 29, 2014, pursuant to which
Mr. Hatha will serve as our Executive Vice President and CFO for a term ending on September 28, 2015. This term will automatically extend for successive one-year periods unless either
party provides written notice of non-renewal.
The
employment agreement provides that Mr. Natha will receive a base salary of $400,000 per year, subject to increase based on the annual review of the Compensation Committee. For
a period of one year, Mr. Natha will also be paid a relocation stipend of $5,000 per month. Mr. Natha will be eligible to receive an annual incentive compensation award, with a target
payment equal to 50% of his salary during each such fiscal year, subject to the terms and conditions of our annual bonus plan and further subject to certain targets or criteria reasonably determined
by the Board or the Compensation Committee. The Employment Agreement provides that Mr. Natha entitled to a bonus of at least $50,000 for the fiscal year ended December 31, 2014.
Mr. Natha will also participate in the benefit plans that we maintains for our executives and receive certain other standard benefits (including, without limitation, vacation benefits,
relocation expenses and reimbursement of travel and business-related expenses).
If
Mr. Natha is terminated without "cause" or if he resigns for "good reason" (as these terms are defined in the employment agreement), we will pay Mr. Natha the following:
(a) his base salary and relocation stipend accrued through the date of such resignation or termination and, subject to entering into a release, continued payment of Mr. Natha's
then-current base salary and relocation stipend (if applicable) for a period of six months (the "Continuation Period"); (b) at the time of, on the terms of, and otherwise consistent with
payments to similarly situated executives, (i) any bonus earned but not yet paid in respect of any calendar year preceding the year in which such termination or resignation occurs and
(ii) for terminations after the first three months of the fiscal year, a pro rata target bonus for the year of termination; and (c) any unreimbursed expenses. In addition, in such case,
Mr. Natha and his eligible dependents will be entitled to receive, until the earlier of the last day of the Continuation Period and the date Mr. Natha is entitled to comparable benefits
by a subsequent employer, continued participation in the our medical, dental and insurance plans and arrangements. If we elect not to extend Mr. Natha's term of employment, then unless
Mr. Natha's employment has been earlier terminated, Mr. Natha's employment will be deemed to terminate at the end of the applicable
40
Table of Contents
term
and we will pay Mr. Natha the amounts set forth in clauses (a) through (c) above in this paragraph.
If
Mr. Natha's employment terminates by reason of his death or disability, or if he is terminated for "cause" or if he resigns without "good reason" (as these terms are defined in
the employment agreement), we will pay him (a) his base salary accrued through the date of such resignation or termination; (b) any unreimbursed expenses; and (c) only in the case
of a termination because of his death or disability, (x) any bonus earned but not yet paid in respect of any calendar year preceding the year in which such termination of employment occurs and
(y) a pro rated amount of his target annual performance bonus, if any, for the calendar year in which such termination of employment occurs.
The
employment agreement also provides that upon termination of Mr. Natha's employment for any reason, he agrees to resign, as of the date of such termination and to the extent
applicable, from the Board (and any committees) of, and as an officer of, us and any of our affiliates and subsidiaries.
Chelsea A. Grayson, Executive Vice President, General Counsel and Secretary
The Company and Ms. Grayson are parties to an employment agreement effective as of December 15, 2014 pursuant to which
Ms. Grayson will serve as our Executive Vice President, General Counsel, and Secretary for an initial term of one year, which term will automatically extend for successive one-year periods as
of each December 15 (beginning December 15, 2015) unless terminated by us on at least 90 days written notice prior to the expiration of the then-current term. The employment
agreement provides that Ms. Grayson will receive a base salary of $400,000 per year, subject to increase based on the annual review of the Compensation Committee. Ms. Grayson will be
eligible to receive an annual incentive compensation award, with a target payment equal to 50% of her salary during each such fiscal year, subject to the terms and conditions of our annual bonus plan
and further subject to certain targets or criteria reasonably determined by the Board or the Compensation Committee. Ms. Grayson will also participate in the benefit plans that we maintain for
our executives and receive certain other standard benefits (including, without limitation, vacation benefits, relocation expenses and reimbursement of travel and business-related expenses).
If
Ms. Grayson is terminated without "cause" or if she resigns for "good reason" (as these terms are defined in the employment agreement), we will pay Ms. Grayson the
following: (a) her base salary accrued through the date of such resignation or termination and, subject to entering into a release, continued payment of Ms. Grayson's then-current base
salary; (b) at the time of, on the terms of, and otherwise consistent with payments to similarly situated executives, (i) any bonus earned but not yet paid in respect of any calendar
year preceding the year in which such termination or resignation occurs and (ii) for terminations after the first three months of the fiscal year, a pro rata target bonus for the year of
termination; and (c) any unreimbursed expenses. In addition, in such case, Ms. Grayson and her eligible dependents will be entitled to receive, until the earlier of the last day of the
Continuation Period and the date Ms. Grayson is entitled to comparable benefits by a subsequent employer, continued participation in the Company's medical, dental and insurance plans and
arrangements. If we elect not to extend Ms. Grayson's term of employment, then unless Ms. Grayson's employment has been earlier terminated, Ms. Grayson's employment will be deemed
to terminate at the end of the applicable
term and we will pay Ms. Grayson the amounts set forth in clauses (a) through (c) above in this paragraph.
If
Ms. Grayson's employment terminates by reason of her death or disability, or if she is terminated for "cause" or if she resigns without "good reason" (as these terms are
defined in the employment agreement), we will pay her (a) her base salary accrued through the date of such resignation or termination; (b) any unreimbursed expenses; and (c) only
in the case of a termination because of her death or disability, (x) any bonus earned but not yet paid in respect of any calendar year preceding the year in which such termination of employment
occurs and (y) a prorated amount of
41
Table of Contents
her
target annual performance bonus, if any, for the calendar year in which such termination of employment occurs.
The
employment agreement also provides that upon termination of Ms. Grayson's employment for any reason, she agrees to resign, as of the date of such termination and to the extent
applicable, from the Board (and any committees) of, and as an officer of, us and any of our affiliates and subsidiaries.
42
Table of Contents
EQUITY COMPENSATION PLAN INFORMATION
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of
Shares of
Common
Stock
to be issued
upon exercise
of outstanding
options,
warrants
and rights |
|
Weighted-
average
exercise price
of outstanding
options,
warrants and
rights |
|
Number of
Shares of
Common Stock
remaining
available for
future
issuance
under equity
compensation
plans (excluding
shares
reflected
in the
first column) |
|
Equity compensation plans approved by stockholders |
|
|
|
|
$ |
|
|
|
12,700,000 |
|
Equity compensation plans not approved by stockholders |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
$ |
|
|
|
12,700,000 |
|
GRANTS OF PLAN-BASED AWARDS
The following table presents information regarding grants of plan-based awards for our Named Officers during the fiscal year ended
December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future
Payments Under
Non-Equity
Incentive Plan Awards |
|
|
|
|
|
|
|
All Other
Stock
Awards:
Number
of Shares
of Stocks
or Units |
|
All Other
Option
Awards:
Number
of Securities
Underlying
Options |
|
|
|
Grant
Date Fair
Value of
Stock and
Option
Awards |
|
|
|
|
|
|
|
Estimated Future
Payouts Under
Equity Incentive Plan Awards |
|
Exercise
Or Base
Price of
Option
Awards |
|
|
|
Grant
Date |
|
Approval
Date |
|
Name
|
|
Threshold |
|
Target |
|
Maximum |
|
Threshold |
|
Target |
|
Maximum |
|
(a)
|
|
(b)
|
|
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
(k)
|
|
(l)
|
|
John J. Luttrell |
|
03/12/14 |
|
03/12/14 |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
(1) |
|
|
|
$ |
|
|
$ |
90,000 |
|
|
|
06/18/14 |
|
06/18/14 |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
350,000 |
(2) |
|
|
|
$ |
|
|
$ |
234,500 |
|
Glen A. Weinman |
|
03/12/14 |
|
03/12/14 |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
(3) |
|
|
|
$ |
|
|
$ |
33,750 |
|
- (1)
- Includes
restricted stock award to Mr. Luttrell, approved by the Compensation Committee under our 2011 Plan, which became fully vested in accordance
with Mr. Luttrell's employment agreement upon his resignation on September 29, 2014.
- (2)
- Includes
a vested grant of 350,000 shares of the our Common Stock that Mr. Luttrell received at the time of his appointment as interim CEO.
- (3)
- Includes
restricted stock grant to Mr. Weinman, approved by the Compensation Committee under our 2011 Plan, which became fully vested in accordance
with Mr. Weinman's separation agreement effective May 16, 2014.
Stock Options and Other Equity Awards
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
There were no outstanding equity awards during 2014.
OPTIONS EXERCISED AND STOCK VESTED
The table below provides certain information with respect to the options exercised and stock vested for each of our Named Officers
during the fiscal year ended December 31, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Number of
Shares
Acquired on
Exercise
(#) |
|
Value Related
on Exercise
($) |
|
Number of
Shares
Acquired on
Vesting
(#) |
|
Value Realized
on Vesting
($) |
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
John J. Luttrell |
|
|
700,000 |
|
|
574,000 |
|
|
877,500 |
|
|
911,725 |
|
Martin Bailey |
|
|
|
|
|
|
|
|
333,333 |
|
|
509,999 |
|
Glenn A. Weinman |
|
|
|
|
|
|
|
|
328,000 |
|
|
362,206 |
|
43
Table of Contents
Pension Benefits and Nonqualified Defined Contribution Plans
Our Named Officers did not participate in, or otherwise receive any benefits under, any pension or non-qualified defined contribution
plans sponsored by us during 2014 or any other prior years.
Potential Payments Upon Termination or Change of Control
In 2014, we terminated employment contracts and incurred expenses related to such terminations of the certain Named Officer as
described below.
Glenn A. Weinman, Former Executive Vice President, General Counsel and Secretary
On May 16, 2014 we entered into Separation Agreement and General Release of All Claims (the "Separation Agreement") with
Mr. Weinman, pursuant to which Mr. Weinman resigned from his positions effective May 16, 2014 (the "Separation Date"). The Separation Agreement provides that Mr. Weinman
will receive (i) continued payment of his annual base salary at the rate of $413,712 per annum, minus applicable payroll taxes and withholdings, payable over the course of the twelve-month
period immediately following the Separation Date in accordance with the our usual payroll practices, (ii) a targeted bonus for fiscal 2014 of $310,284 minus applicable payroll taxes and
withholdings, payable at the same time and in the same manner as bonuses are paid to participants in the applicable bonus plan, but in no event later than March 31, 2015, (iii) a
targeted bonus for the period of January 1, 2015 through May 15, 2015 of $114,763 payable at the same time and in the same manner as bonuses are paid to participants in the applicable
bonus plan, but in no event later than March 31, 2016, and (iv) continued participation in our medical, dental and insurance plans and arrangements, on the same terms and conditions as
are in effect immediately prior to the Separation Date, for up to twelve months following the Separation Date. In addition, all equity awards previously granted to Mr. Weinman by us will be
exercisable as provided in the applicable award agreement for a termination without Cause (as defined in his employment agreement).
In
March 2015, we entered into an agreement with Mr. Weinman to spread out his bonus payment over the following 52 weeks and extend the continuation of his medical and
dental benefits through November 2015.
Upon
Mr. Weinman's separation, we incurred (i) $832,000 for severance and bonus, (ii) $228,272 in stock compensation expense related to accelerated vesting of equity
awards and (iii) $1,680 per month for continuation of medical, dental and insurance arrangements.
John J. Luttrell, Former Interim Chief Executive Officer
Effective July 14, 2014, the company appointed John Luttrell as interim CEO and entered into an employment agreement with
Mr. Luttrell. Pursuant to the employment agreement, if Mr. Luttrell is terminated without "cause" or if he resigns for "good reason" (as these terms are defined in the employment
agreement), Mr. Luttrell shall be entitled to receive the following: (a) his base salary accrued through the date of such resignation or termination and, subject to entering into a
release, payments equal to his base salary at a rate of $595,500; (b) any bonus earned but not yet paid in respect of any calendar year preceding the year in which such termination or
resignation occurs; and (c) any unreimbursed expenses. In addition, in such case, subject to entering into a release, Mr. Luttrell's equity awards will vest and become exercisable, and
Mr. Luttrell and his eligible dependents will be entitled to receive, until the earlier of the first anniversary of the termination date and the date Mr. Luttrell is entitled to
comparable benefits by a subsequent employer, continued participation in the our medical, dental and insurance plans and arrangements.
In
March 2015, we entered into an agreement with Mr. Luttrell to spread out his severance payment over the following six months.
44
Table of Contents
Upon
Mr. Luttrell's resignation on September 29, 2014, we incurred (i) $595,000 for severance, (ii) $429,150 in stock compensation expense related to
accelerated vesting of equity awards and (iii) $545 per month for continuation of medical, dental and insurance arrangements.
Dov Charney, Former Chairmen of the Board and Chief Executive Officer
On December 15, 2014, the Board terminated Dov Charney, former Chairman of the Board and CEO, for cause in accordance with the
terms of his employment agreement. Upon his termination, Mr. Charney was entitled to any unreimbursed expenses then owed and all accrued but unpaid wages. Mr. Charney was not entitled to
any other consideration or compensation.
In
the discussion that follows, payments and other benefits payable upon early termination are set out as if the terminations took place on December 31, 2014. In setting out such
payments and benefits, amounts that had already been earned as of the termination date are not shown. In addition, benefits that are available to all full-time regular employees when their employment
terminates are not shown. The amounts set forth below are estimates of the amounts which could be paid out to our Named Officers upon their termination. The actual amounts to be paid out can only be
determined at the time of such Named Officer's separation from us.
The
following are descriptions of potential payments upon termination or change of control with respect to the employment agreements of our Named Officers.
Hassan N. Natha, Executive Vice President and Chief Financial Officer
Mr. Natha's employment agreement provides that if Mr. Natha is terminated without "cause" or resignation for "good
reason" (as these terms are defined in the Employment Agreement), we will pay Mr. Natha the following: (a) his base salary and relocation stipend accrued through the date of such
resignation or termination and, subject to entering into a release, continued payment of Mr. Natha's then-current base salary and relocation stipend (if applicable) for the Continuation Period;
(b) at the time of, on the terms of, and otherwise consistent with payments to similarly situated executives, (i) any bonus earned but not yet paid in respect of any calendar year
preceding the year in which such termination or resignation occurs and (ii) for terminations after the first three months of the fiscal year, a pro rata target bonus for the year of
termination; and (c) any unreimbursed expenses. In addition, in such case, Mr. Natha and his eligible dependents will be entitled to receive, until the earlier of the last day of the
Continuation Period and the date Mr. Natha is entitled to comparable benefits by a subsequent employer, continued participation in our medical, dental and insurance plans and arrangements.
Had
Mr. Natha separated from us as of December 31, 2014, as a result of termination without "cause" or resignation for "good reason," he would have been entitled to
$230,000 plus medical, dental and insurance benefits of $442 per month for a period of six months or until comparable benefits are obtain from a new employer.
Chelsea A. Grayson, Executive Vice President, General Counsel and Secretary
Ms. Grayson's employment agreement provides that if Ms. Grayson is terminated without "cause" or resignation for "good
reason" (as these terms are defined in the Employment Agreement), we will pay Ms. Grayson the following: (a) her base salary accrued through the date of such resignation or termination
and, subject to entering into a release within sixty calendar days following termination of employment, continued payment of Ms. Grayson's then-current base salary for the Continuation Period;
(b) at the time of, on the terms of, and otherwise consistent with payments to similarly situated executives, (i) any bonus earned but not yet paid in respect of any calendar year
preceding the year in which such termination or resignation occurs and (ii) for terminations after the first three months of the fiscal year, a pro rata target bonus for the year of
termination; and (c) any unreimbursed expenses.
45
Table of Contents
In
addition, in such case, Ms. Grayson and her eligible dependents will be entitled to receive, until the earlier of the last day of the Continuation Period and the date Ms. Grayson is
entitled to comparable benefits by a subsequent employer, continued participation in the our medical, dental and insurance plans and arrangements.
Had
Ms. Grayson separated from us as of December 31, 2014, as a result of termination without "cause" or resignation for "good reason," she would have been entitled to
$200,000 plus medical, dental and insurance benefits $1,020 per month for a period of six months or until comparable benefits are obtain from a new employer.
Martin Bailey, Chief Manufacturing Officer
On July 21, 2014, the Compensation Committee adopted the American Apparel, Inc. Severance Plan for the benefit of certain
of our employees, including Martin Bailey, who is a Named Officer. The effective date of the plan is July 21, 2014 and it will terminate on the first anniversary of such date.
The
severance plan provides that if Mr. Bailey's employment is terminated without "cause" or if he resigns for "good reason," each as defined in the severance plan, he will be
entitled to receive: (a) earned but unpaid base salary and any unreimbursed expenses, which shall be paid promptly upon such termination of employment in accordance with applicable law; and
(b) subject to the Mr. Baileys execution and delivery of a general release of all claims against the Company and its affiliates in a form satisfactory to the Compensation Committee
within sixty days following termination of employment, (i) continued payment of the his then-current salary for twelve months, as is stipulated by the Compensation Committee and
(ii) reimbursement of COBRA premiums for twelve months. In addition, subject to the Mr. Bailey's execution and delivery of the Release as described in clause (b), he will
(x) fully vest in and have the right to exercise all of his or her outstanding stock options, including shares as to which such stock options would not otherwise be vested or exercisable, and
(y) fully vest in all of his or her outstanding restricted stock awards.
Had
Mr. Bailey separated from us as of December 31, 2014, as a result of termination without "cause" or resignation for "good reason," he would have been entitled to
$331,000 plus COBRA reimbursement of $1,250 per month, for a period of twelve months after his separation. Mr. Bailey had no unvested equity awards at December 31, 2014.
46
Table of Contents
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth certain information available to the Company as of June 15, 2015, with respect to shares of
Common Stock held by (i) our Named Officers (as defined under "Compensation Discussion and Analysis" above), (ii) each director, including the Class B Nominees, (iii) each
stockholder who is known to the Company to be the beneficial owner of more than 5% of our issued and outstanding Common Stock based on statements filed with the SEC pursuant to Section 13(d) or
13(g) of the Exchange Act, and (iv) all of our current directors and executive officers as a group.
|
|
|
|
|
|
|
|
Name and Address of Beneficial Owner
|
|
Amount and Nature of
Beneficial
Ownership(1) |
|
Percent of
Class |
|
Dov Charney |
|
|
74,560,813 |
(2) |
|
41.4 |
% |
Lion/Hollywood L.L.C.
c/o Lion Capital (Americas) Inc.
100 Wilshire Blvd, Suite 1400
Santa Monica, CA 90401 |
|
|
24,511,023 |
(3) |
|
12.0 |
% |
Standard General L.P.
767 Fifth Avenue, 12th Floor
New York, NY 10153 |
|
|
1,540,000 |
(4) |
|
* |
|
Martin Bailey |
|
|
1,556,960 |
(5) |
|
* |
|
Paula Schneider |
|
|
650,000 |
(6) |
|
* |
|
Hassan N. Natha |
|
|
326,000 |
(7) |
|
* |
|
Chelsea A. Grayson |
|
|
350,000 |
(8) |
|
* |
|
Allan Mayer |
|
|
195,605 |
(9) |
|
* |
|
Thomas J. Sullivan |
|
|
49,744 |
|
|
* |
|
Colleen B. Brown |
|
|
46,612 |
|
|
* |
|
Joseph Magnacca |
|
|
46,612 |
|
|
* |
|
Laura A. Lee |
|
|
31,308 |
|
|
* |
|
David Glazek |
|
|
0 |
(10) |
|
|
|
Lyndon Lea |
|
|
0 |
|
|
|
|
Jeff Chang |
|
|
0 |
|
|
|
|
Current executive officers and directors as a group (13 persons) |
|
|
3,432,700 |
|
|
1.9 |
% |
John J. Luttrell |
|
|
1,290,178 |
(11) |
|
* |
|
Glenn A. Weinman |
|
|
383,157 |
(12) |
|
* |
|
Scott B. Brubaker |
|
|
0 |
(13) |
|
* |
|
- *
- Less
than one percent of outstanding Common Stock.
- (1)
- This
table is based upon 179,982,122 shares of Common Stock outstanding as of June 15, 2015 and upon information supplied by officers, directors and
principal stockholders and contained in schedules filed with the SEC pursuant to Section 13(d) or 13(g) of the Exchange Act. Except as
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described
in the footnotes herein and subject to applicable community property laws and similar laws, we believe that each person listed above has sole voting and investment power with respect to such
shares.
If a person has the right to acquire shares of our Common Stock subject to options and other convertible or exercisable securities, such as warrants, within 60 days of the date as of which the
information is provided, then such shares are deemed outstanding for purposes of computing the percentage ownership of that person, but are not deemed outstanding for purposes of computing the
percentage ownership of any other person. For stock awards granted to our executive officers, the total number of shares of our Common Stock granted have been included in the table above even though
those stock awards may be subject to vesting.
- (2)
- According
to the Schedule 13D/A filed on July 11, 2014. The reported shares include 27,351,407 shares of our Common Stock which
Mr. Charney purchased on June 27, 2014, pursuant to a letter agreement with Standard General dated as of June 25, 2014.
On
July 9, 2014, Mr. Charney and Standard General entered into a cooperation agreement, which provides, among other things, that neither Mr. Charney nor Standard General will vote
the Common Stock owned by Mr. Charney except in a manner approved by the parties in writing, except that, notwithstanding the terms of the Standstill Agreement, Mr. Charney may vote
certain of his shares in favor of his own election to the Board and may vote all of such shares pursuant to the Investment Voting Agreement dated March 13, 2009 between Mr. Charney and
Lion.
- (3)
- According
to the Schedule 13D filed on July 21, 2014. This amount represents shares of our Common Stock underlying warrants held by Lion. Lion
holds warrants exercisable to purchase a total of up to 24,511,022.66 shares of our Common Stock. The warrants held by Lion, however, contain certain anti-dilution protections in favor of Lion
providing for proportional adjustment of the warrant price and, under certain circumstances, the number of shares of our Common Stock issuable upon exercise of the warrants held by Lion, in connection
with, among other things, stock dividends, subdivisions and combinations and the issuance of additional equity securities at less than fair market value, as well as providing for the issuance of
additional warrants to Lion in the event of certain equity sales or debt for equity exchanges. Upon exercise, the actual number of warrants issued would be rounded to the nearest whole numbers. See
"Certain Relationships and Related Transactions-Relationship with Lion" below for further description of the warrants held by Lion.
- (4)
- According
to the Schedule 13D filed on July 18, 2014. This amount excludes 74,560,813 shares of our Common Stock beneficially owned by
Mr. Charney and subject to the Cooperation Agreement described in footnote 2 herein. As a result of a letter agreement dated June 25, 2014 and the transactions effected thereunder,
Standard General L.P., Standard General Master Fund L.P., P Standard General Ltd., Soohyung Kim and Mr. Charney have formed a "group" within the meaning of
Rule 13d-5(b)(1) of the Exchange Act. Each of Standard General L.P., Standard General Master Fund L.P., P Standard General Ltd. and Soohyung Kim disclaims beneficial
ownership of our securities beneficially owned by the other persons and Mr. Charney, except to the extent of any pecuniary interest that he or it may have with respect thereto. If Standard
General L.P. and its affiliates were deemed to beneficially own the 74,560,813 shares owned directly by Mr. Charney as a result of such arrangements, then the total number of shares of
our Common Stock beneficially owned would be 76,100,813, representing 43.1% of the shares of Common Stock outstanding as of April 16, 2015.
- (5)
- Includes
82,750 unvested RSU and 82,750 unvested Options.
- (6)
- Includes
300,000 unvested RSU and 300,000 unvested Options.
- (7)
- Includes
150,000 unvested RSU and 150,000 unvested Options.
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- (8)
- Includes
150,000 unvested RSU and 150,000 unvested Options.
- (9)
- Includes
194,605 shares held by a trust established for the benefit of Mr. Mayer and his family, of which Mr. Mayer is Trustee.
- (10)
- Mr. Glazek
is a partner of Standard General L.P. which owns 1,540,000 shares.
- (11)
- Mr. Luttrell
was terminated from the the Company on September 29, 2014. The amount and nature of Common Stock beneficially owned by
Mr. Luttrell is based on information as of that time and includes 700,000 options exercised on December 14, 2014.
- (12)
- Mr. Weinman
was terminated from the the Company on May 16, 2014. The amount and nature of Common Stock beneficially owned by
Mr. Weinman is based on information as of that time.
- (13)
- Mr. Brubaker's
consulting arrangement with the Company ended on January 5, 2015. The amount and nature of Common Stock beneficially owned by
Mr. Brubaker is based on information as of that time.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under its charter, the Audit Committee is charged with reviewing our policies relating to the avoidance of conflicts of interest and
reviewing all related party transactions that are required to be disclosed pursuant to SEC Regulation S-K, Item 404, or any successor provision. Additionally, the Audit Committee is
responsible for reviewing our program to monitor compliance with our Code of Business Conduct and Ethics. Our Code of Business Conduct and Ethics is applicable to all directors, officers and employees
and provides examples of conflict of interest situations as including, but not limited to, the following: any significant ownership interest in any supplier or customer; any consulting or employment
relationship with any customer, supplier or competitor; any outside business activity that detracts from an individual's ability to devote appropriate time and attention to his or her responsibilities
with us; the receipt of money, non-nominal gifts or excessive entertainment from any company with which we have current or prospective business dealings; being in the position of supervising,
reviewing or having any influence on the job evaluation, pay or benefit of any close relative; selling anything to us or buying anything from us, except on the same terms and conditions as comparable
officers or directors are permitted to so purchase or sell; and any other circumstance, event, relationship or situation in which the personal interest of a person subject to the Code of Business
Conduct and Ethics interferes, or even appears to interfere, with the interests of our company as a whole. In determining whether to approve or ratify a transaction, the Audit Committee will take into
account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar
circumstances and the extent of the related person's interest in the transaction.
The
following are the material transactions or agreements between us and related persons. The Audit Committee has approved or ratified all of these transactions. All dollar amounts in
this section are in United States dollars unless stated otherwise. The following descriptions of the agreements among us
and related persons are qualified in their respective entireties by reference to the respective agreements, as filed with the SEC, and the descriptions thereof included in our Current Reports on
Form 8-K.
Personal Guarantees by Mr. Charney
As of December 31, 2014, Mr. Charney personally guaranteed our obligations under two property leases aggregating
approximately $9,210,000 in obligations.
Lease Agreement between the Company and a Related Party
We have an operating lease expiring in November 2016 for our knitting facility with American Central Plaza LLC, which is
partially owned by Mr. Charney and Mr. Bailey. Mr. Charney holds an 18.75% ownership interest in American Central Plaza LLC, while Mr. Bailey holds a 6.25% interest.
The remaining members of American Central Plaza LLC are not affiliated with us. Rent expense (including property taxes and insurance payments) related to this lease was approximately $717,000
for the year ended December 31, 2014.
Payments to Morris Charney
Morris Charney ("Mr. M. Charney") is Mr. Charney's father and served as a director of American Apparel Canada
Wholesale Inc. and a director of American Apparel Canada Retail Inc. until June 28, 2014. Day to day operations of these two Canadian subsidiaries are handled by their management
and employees, none of whom performs any policy making functions for us. Our management sets the policies for American Apparel, Inc. and its subsidiaries as a whole. Mr. M. Charney did
not perform any policy making functions for us or any of our subsidiaries. Mr. M. Charney only provided architectural consulting services primarily for stores located in Canada and, in limited
cases, in the U.S.
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Mr. M.
Charney was paid architectural consulting and director fees amounting to approximately $70,000 for the year ended December 31, 2014.
Agreements between Mr. Charney and Standard General
As of December 31, 2014, Mr. Charney owned 42.3% of our outstanding Common Stock. Mr. Charney and Standard General
collectively controlled the right to vote such Common Stock.
On
June 25, 2014, Mr. Charney entered into a letter agreement with Standard General in which, if Standard General was able to acquire at least 10% of our outstanding
shares, Standard General would loan Mr. Charney the funds needed for him to purchase those acquired shares from Standard General (the "SG-Charney Loan"). Between June 26, 2014 and
June 27, 2014, Standard General acquired 27,351,000 of our outstanding shares, and Mr. Charney purchased those shares at a price of $0.715 per share using the proceeds from the
SG-Charney Loan. According to Mr. Charney's Schedule 13D/A, dated June 25, 2014, the loan bears interest at 10% per annum, payable in-kind and matures on July 15, 2019,
with no prepayment penalty. The loan is collateralized by the newly acquired shares as well as by Mr. Charney's original shares of our outstanding Common Stock.
On
July 9, 2014, Mr. Charney and Standard General entered into a cooperation agreement, which provides, among other things, that neither Mr. Charney nor Standard
General will vote the Common Stock owned by Mr. Charney except in a manner approved by the parties in writing, except that, notwithstanding the terms of the Standstill Agreement,
Mr. Charney may vote certain of his shares in favor of his own election to the Board and may vote all of such shares pursuant to the Investment Voting Agreement dated March 13, 2009
between Mr. Charney and Lion. In the Standstill Agreement, however, Mr. Charney agreed not to serve as a director of the Company. In addition, Mr. Charney agreed to enter into
warrant agreements with Standard General that would give Standard General the right exercisable, on or prior to July 15, 2017, to purchase from Mr. Charney 32,072,000 shares (consisting
of the 27,351,000 shares purchased by using the proceeds from the SG-Charney Loan and 10% of Mr. Charney's 47,209,000 original shares).
Under
the terms of the Standstill Agreement, until completion of the 2015 Annual Meeting, (i) each member of the Standard General Group (as defined below) and its affiliates (in
respect of Dov Charney) and its controlled affiliates (in respect of Standard General) shall cause all shares of Common Stock beneficially owned by them as of the record date for any annual or special
meeting of stockholders to be present at such meeting for quorum purposes, and (ii) to the extent that such
aggregate holdings on the record date exceeds 331/3 percent of the outstanding Common Stock at any annual or special meeting of stockholders or any adjournments or postponements
thereof, the Standard General Group (including Dov Charney) shall cause any excess stock over 331/3 percent of the outstanding Common Stock to be voted for any proposals or other
business that comes before any such meeting in proportion to the votes for such proposals or other business cast by the other stockholders of the Company voting at such meeting.
Loans held by Standard General
On July 16, 2014, Lion assigned its rights and obligations as a lender under the Lion Loan Agreement to Standard General.
Standard General has waived any default under the Standard General Loan Agreement that may have resulted or which might result from Mr. Charney not being our CEO.
On
March 25, 2015, one of our subsidiaries borrowed $15,000,000 under the Standard General Credit Agreement. The Standard General Credit Agreement is guaranteed by us, bears
interest at 14% per annum, and will mature on October 15, 2020. The Standard General Credit Agreement contains customary defaults, including cross event of default to the senior secured notes
and the Standard General Loan Agreement and cross acceleration to other indebtedness above a threshold amount. If we experience certain change of control events, we are required to offer to prepay the
Standard General
51
Table of Contents
Credit
Agreement at 101% of the outstanding principal amount plus accrued and unpaid interest on the date of the prepayment. We will be required to prepay loans under the Standard General Credit
Agreement to the extent necessary to avoid the loan being characterized as an "applicable high yield discount obligation" within the meaning of the Internal Revenue Code, by the first interest payment
date following the fifth anniversary of closing.
Standard
General informed the Company that it entered into an agreement with Capital One Business Credit Corp. ("Capital One") that could result in it purchasing all of the loans and
commitments outstanding under the $50 million, asset-backed revolving credit facility between Capital One and the Company by September 30, 2015 or earlier under certain other
circumstances.
Standstill Agreement with Mr. Charney and Standard General
On July 9, 2014, the Company entered into the Standstill Agreement with Standard General, Standard General Master
Fund L.P., P Standard General Ltd. and Dov Charney (collectively, the "Standard General Group"). The Standstill Agreement relates to, among other things, the composition of the Board,
the provision by Standard General of financial support to the Company in an aggregate amount up to $25 million, and the creation of a special committee of the Board to oversee the now-concluded
investigation into alleged misconduct by Dov Charney (which investigation led to Mr. Charney's termination for cause). The Standard General Group also agreed to certain standstill and voting
limitations, and Standard General affirmed its commitment to the Company's core values, including the Company's sweatshop-free, "Made in the USA" manufacturing philosophy and maintaining the Company's
manufacturing headquarters in Los Angeles, California. In addition, the terms of the Standstill Agreement require that the Company separate the positions of Chairman and CEO for so long as any of the
Standard General Designees is a member of the Board.
The
Standstill Agreement includes provisions related to Dov Charney, including the resignation by Mr. Charney from the Board, and the creation of a special committee of the Board
to oversee the now-concluded investigation into alleged misconduct by Dov Charney (which investigation led to Mr. Charney's termination for cause). The Standstill Agreement also provides that
Mr. Charney will not make any statements that disparage or otherwise negatively reflect upon the Company, serve as a member of the Board or be nominated by the Company or Standard General for
election to the Board. In addition, the Standstill Agreement provides that, through the completion of the 2015 Annual Meeting, Mr. Charney will not seek, directly or indirectly, the removal of
any member of the Board or propose any nominee for election to the Board or seek representation on the Board, or directly or indirectly instigate, encourage, join, act in concert with or assist any
third party to, among other things, seek the removal of any member of the Board.
On
June 1, 2015, the Delaware Court of Chancery granted the motion of the Company for a temporary restraining order against Mr. Charney, temporarily restraining
Mr. Charney from breaching the terms of the Standstill Agreement. Mr. Charney subsequently agreed that the restraints placed on him by such temporary restraining order are extended until
the conclusion of the 2015 Annual Meeting.
Lion and Warrants held by Lion
See above for a description of the loan made by Lion and assigned to Standard General on July 16, 2014.
Mr. Charney
and Lion are parties to the Investment Voting Agreement, and we have entered into the Investment Agreement with Lion. Pursuant to the Investment Agreement, Lion
currently has the right to designate two directors to the Board (or, if we increase our board size to 12, up to three directors and no board observers). Lion's right to designate two directors is
subject to maintaining certain minimum ownership thresholds of shares issuable under the Lion Warrants. As of the date of this Amendment, positions for Lion's two directors have been filled by Jeff
Chang and Lyndon Lea.
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Table of Contents
Pursuant
to the Investment Voting Agreement, for so long as Lion has the right to designate any person or persons to the Board, Mr. Charney has agreed to vote his shares of our
Common Stock in favor of Lion's designees, provided that Mr. Charney's obligation to so vote terminates if he owns less than 6,000,000 shares of our Common Stock (which number will be adjusted
appropriately to take into account any stock split, reverse stock split or similar transaction). In addition, pursuant to the Investment Voting Agreement, for so long as Lion has the right to
designate any person or persons to the Board, Lion has agreed to vote its shares of our Common Stock in favor of Mr. Charney each time Mr. Charney is nominated for election to the Board,
provided that Lion's obligation to so vote terminates if Mr. Charney beneficially owns less than 27,900,000 shares of our Common Stock (which number will be adjusted appropriately to take into
account any stock split, reverse stock split or similar transaction).
As
a result of the public offering in March 2014, Lion received the right to purchase an additional 2,905,000 shares of our Common Stock, and the exercise price of all of Lion held
warrants (the "Lion Warrants") was adjusted from $0.75 per share to $0.66 per share. Such adjustments were required by the terms of the existing Lion Warrants. As of December 31, 2014, Lion
held warrants to purchase 24,511,000 shares of our Common Stock. These warrants will expire on February 18, 2022.
The
Lion Warrants, as amended, contain certain anti-dilution protections in favor of Lion providing for proportional adjustment of the warrant price and, under certain circumstances, the
number of shares of our Common Stock issuable upon exercise of the Lion Warrants, in connection with, among other things, stock dividends, subdivisions and combinations and the issuance of additional
equity securities at less than fair market value, as well as providing for the issuance of additional warrants to Lion in the event of certain equity sales or debt for equity exchanges. Such
anti-dilution protections are expected to be triggered in connection with the Company's "at-the-market" offering (described in Proposal 3).
53
Table of Contents
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and any beneficial owner of more than ten
percent of a registered class of our equity securities, to file reports (Forms 3, 4 and 5) of stock ownership and changes in ownership with the SEC and the NYSE MKT. Officers, directors
and beneficial owners of more than ten percent of our Common Stock are required by SEC regulations to furnish us with copies of all such forms that they file.
Based
solely on our review of the copies of Forms 3, 4 and 5 and the amendments thereto received by us for the year ended December 31, 2014, or written representations from
certain reporting persons that no Forms 5 were required to be filed by those persons, we believe that during the year ended December 31, 2014, all filing requirements were complied with
by our executive officers, directors and beneficial owners of more than ten percent of our Common Stock.
Cost of Solicitation
We will bear the cost of the solicitation of proxies. In addition to mail and e-mail, proxies may be solicited personally, via the
Internet or by telephone or facsimile, by a few of our regular employees without additional compensation. We will reimburse brokers and other persons holding stock in their names, or in the names of
nominees, for their expenses for forwarding proxy materials to principals and beneficial owners and obtaining their proxies. We have hired Innisfree M&A
Incorporated to assist us in the solicitation of proxies for a fee of up to $15,000 plus out-of-pocket expenses.
OTHER BUSINESS
The Board of Directors knows of no other matters to be brought before the stockholders at the Annual Meeting. If other matters are
properly presented for a vote at the Annual Meeting, the proxy holders will vote shares represented by properly executed proxies as recommended by the Board of Directors or, if no recommendation is
given, in their discretion in accordance with their judgment on such matters.
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INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at our 2016 Annual Meeting of Stockholders must be received by us no later
than February 18, 2016 in order to be included in the proxy statement and form of proxy relating to that annual meeting. A stockholder must have continuously held at least $2,000 in market
value, or 1%, of the Company's outstanding Common Stock for at least one year by the date of submission of the proposal, and the stockholder must continue to own such stock through the date of the
meeting.
In
addition, for a stockholder proposal that is not intended to be included in the Company's proxy statement for the 2016 Annual Meeting of Stockholders under the Exchange Act, written
notice of the proposal, which notice must include the information required by the Bylaws, must be received by the Company's Secretary not earlier than the close of business on the
90th day prior to the 2016 Annual Meeting of Stockholders and not later than the close of business on the 60th day prior to the 2016 Annual Meeting of
Stockholders. If less than 70 days' notice or prior public disclosure of the date of next year's annual meeting is given or made to stockholders, then notice of a stockholder proposal that is
not intended to be included in the Company's proxy statement under Rule 14a-8 under the Exchange Act must be received no later than the close of business on the tenth day following the date on
which notice of the date of such annual meeting is mailed to the stockholders or the date on which public disclosure of the date of such annual meeting is made, whichever is first. Furthermore,
receipt by the
Company of any such proposal from a qualified stockholder in a timely manner will not guarantee its inclusion in the proxy materials or its presentation at the 2016 Annual Meeting of Stockholders,
because there are other relevant requirements in the SEC's proxy rules.
For
proposals that are timely filed, the Company retains discretion to vote proxies it receives provided that (1) the Company includes in its proxy statement advice on the nature
of the proposal and how it intends to exercise its voting discretion and (2) the proponent does not issue a proxy statement.
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Annex A
The Amended and Restated Certificate of Incorporation of American Apparel, Inc. is hereby amended by deleting Article FOURTH
thereof in its entirety and substituting therefor the following:
FOURTH: The
total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 461,000,000 of which 460,000,000 shares shall be Common Stock of
the par value of $.0001 per share and 1,000,000 shares shall be Preferred Stock of the par value of $.0001 per share.
A-1
|
YOUR VOTE IS IMPORTANT Please take a moment now to vote your shares of American Apparel, Inc. common stock for the upcoming Annual Meeting of Stockholders. PLEASE REVIEW THE PROXY STATEMENT AND VOTE TODAY IN ONE OF THREE WAYS: 1. Vote by TelephonePlease call toll-free in the U.S. or Canada at 1-866-874-4878, on a touch-tone phone. If outside the U.S. or Canada, call 215-521-1340. Please follow the simple instructions. You will be required to provide the unique control number printed below. OR 2. Vote by InternetPlease access https://www.proxyvotenow.com/app, and follow the simple instructions. Please note you must type an s after http. You will be required to provide the unique control number printed below. OR 3. Vote by MailIf you do not wish to vote by telephone or over the Internet, please complete, sign, date and return the proxy card in the envelope provided, or mail to: American Apparel, Inc., c/o Innisfree M&A Incorporated, FDR Station, P.O. Box 5154, New York, NY 10150-5154. 6TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE AND SIGN, DATE AND RETURN IN THE POSTAGE-PAID ENVELOPE PROVIDED 6 To vote, mark blocks below in blue or black ink as follows THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH NOMINEE FOR THE BOARD OF DIRECTORS AND FOR ITEMS 2 AND 3. FOR AGAINST ABSTAIN 1. To elect Laura A. Lee, Thomas J. Sullivan and Lyndon Lea to the Board of Directors, each to serve for a term of three years and until his or her successor is duly elected and qualified, or such directors earlier death, resignation or removal. Nominees: 01. Laura A. Lee 02. Thomas J. Sullivan 03. Lyndon Lea 2. To ratify the appointment of Marcum LLP as the Company's independent auditors for the fiscal year ending December 31, 2015. 3. To approve an amendment to our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of our common stock that we may issue. FOR AGAINST ABSTAIN 4. To consider and transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. FOR ALL WITHHOLD ALL FOR ALL EXCEPT Address Change: To change the address on your account, please check the box to the right and provide the new address on the reverse side. Please note that changes to the registered name(s) on the account may not be submitted via this method. To withhold authority to vote for any individual nominee(s), mark For All Except and write the number(s) of the nominee(s) on the line below. Date: , 2015 Signature Signature Note: Please sign exactly as your name(s) appear(s) on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. X You may vote by telephone or Internet 24 hours a day, 7 days a week. Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned a proxy card. |
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PLEASE VOTE TODAY! SEE REVERSE SIDE FOR THREE EASY WAYS TO VOTE. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on July 16, 2015 American Apparels proxy statement and 2014 Annual Report on Form 10-K are available at https://www.eproxyaccess.com/app 6TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE, AND SIGN, DATE AND RETURN IN THE ENVELOPE PROVIDED6 747 Warehouse Street Los Angeles, California 90021 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 16, 2015 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned stockholder(s) of American Apparel, Inc., a Delaware corporation (the Company), hereby appoint(s) Paula Schneider and Chelsea A. Grayson as proxies for the undersigned, each with full power of substitution, to attend the Annual Meeting of Stockholders of the Company to be held at the Chicago office of Skadden, Arps, Slate, Meagher & Flom LLP, 155 N. Wacker Dr., Chicago, IL 60606 on Thursday, July 16, 2015 at 9:00 a.m., Central Time, or any adjournments or postponements thereof, to cast on behalf of the undersigned all votes that the undersigned is entitled to cast at such meeting and otherwise to represent the undersigned at the meeting with all powers possessed by the undersigned if personally present at the Annual Meeting. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders, the Proxy Statement with respect thereto and the Companys Annual Report for the year ended December 31, 2014 and revoke(s) any proxy heretofore given with respect to such meeting. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED ON THE REVERSE SIDE AND, IN THE DISCRETION OF THE PROXY HOLDERS, ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL FOR PROPOSAL 1 AND FOR PROPOSALS 2 AND 3. This proxy is revocable and the undersigned may revoke it at any time prior to its exercise. Attendance of the undersigned at the above meeting or any adjourned or postponed session thereof will not be deemed to revoke this proxy unless the undersigned votes said shares in person. If your address has changed, please indicate the new address below and mark the Address Change box on the reverse side. Address Change P R O X Y (Continued, and to be marked, dated and signed, on the other side) |