American Apparel Inc.

American Apparel Inc.

American Apparel Inc. Securities Settlement

The lawsuit was settled for $4.8 million in cash on January 17, 2014. The following is a summary of the proceedings in this lawsuit: ‘The case concerns claims brought by investors alleging that the price of American Apparel common stock was artificially inflated during the Class Period as a result of alleged false and misleading statements and omissions by the American Apparel Defendants during the Class Period concerning, inter alia, the Company compliance with immigration laws and certain financials in the Company 2009 Annual Statement. Beginning on August 25, 2010, the following putative class action complaints were filed in the Court against American Apparel and certain of the other Defendants: Anthony Andrade v. American Apparel, Inc., et al., No. 2:10-cv-06352-MMM-JCG; Douglas Ormsby v. American Apparel, Inc., et al., No. 2:10-cv- 06513-MMM; James Costa v. American Apparel, Inc., et al., No. 2:10-cv-06516-MMM; and Wesley Childs v. American Apparel, Inc., et al., No. 2:10-cv-06680-GW-JCG. On December 3, 2010, the Court consolidated the foregoing cases under the caption In re American Apparel, Inc. Shareholder Litigation, Case No. CV-10- 6352 MMM (RCx). On March 15, 2011, the Court issued an order appointing Charles Rendelman as Lead Plaintiff and approving his selection of Kessler Topaz Meltzer & Check, LLP as Lead Counsel. On April 29, 2011, Lead Plaintiff filed his Consolidated Class Action Complaint for Violation of Federal Securities Laws (Consolidated Complaint). Lead Plaintiff asserted claims against the Defendants pursuant to §§10(b) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act), and Rule 10b-5 promulgated thereunder. On May 31, 2011, Defendants moved to dismiss the Consolidated Complaint. On September 12, 2011, the Court held a hearing on Defendants motions to dismiss and issued a tentative order granting Defendants motions. On January 13, 2012, the Court issued its final order largely adopting its tentative ruling, but granting Lead Plaintiff leave to amend. On February 27, 2012, Lead Plaintiff filed his First Amended Complaint for Violation of Federal Securities Laws (FAC). On March 30, 2012, Defendants moved to dismiss the FAC. On May 21, 2012, the Court issued its tentative opinion and heard oral argument on Defendants motions. On January 16, 2013, the Court issued a final order granting in part and denying in part Defendants motions to dismiss. By its order, the Court (i) upheld Lead Plaintiff allegations regarding American Apparel Defendants immigration compliance statements as to the Company only; (ii) dismissed Lead Plaintiff allegations regarding the effects of the terminations and the Company 2009 Annual Report; and (iii) granted Lead Plaintiff one final opportunity to amend. On February 15, 2013, Lead Plaintiff filed his Second Amended Class Action Complaint for Violation of Federal Securities Laws (SAC or Complaint). On March 15, 2013, Defendants moved to dismiss the SAC. On June 3, 2013, the Court issued a tentative order and held oral argument on Defendants motions. On August 8, 2013, the Court issued its final order on Defendants motions to dismiss. By its order, the Court (i) upheld the SAC allegations regarding immigration compliance statements as to the Company and the Individual Defendants and the SAC allegations regarding the 2009 Annual Report statements as to the Company only; (ii) upheld control person allegations against Lion Capital (for the 2009 Annual Report statements only) and the Individual Defendants (for both sets of statements); and (iii) dismissed with prejudice the SAC allegations regarding the effects of the terminations and the Company compliance with its debt covenants. The Parties thereafter engaged in mediation efforts with the assistance of an experienced mediator, including a formal mediation session and the submission of detailed mediation briefs. The Parties reached a tentative agreement to settle the Action on October 24, 2013.’

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