Exhibit 10.1

 

AMENDMENT NO. 5 TO CREDIT AGREEMENT AND LIMITED WAIVER

 

THIS AMENDMENT NO. 5 TO CREDIT AGREEMENT AND LIMITED WAIVER dated as of
March 25, 2014 (this “Amendment”), is among AMERICAN APPAREL (USA), LLC, a
California limited liability company (“AA USA”), AMERICAN APPAREL RETAIL, INC.,
a California corporation (“AA Retail”), AMERICAN APPAREL DYEING &
FINISHING, INC., a California corporation (“AA Dyeing & Finishing”), KCL
KNITTING, LLC, a California limited liability company (“KCL” and, together with
AA USA, AA Retail and AA Dyeing & Finishing, collectively, the “Borrowers” and
each, individually, a “Borrower”), AMERICAN APPAREL, INC., a Delaware
corporation (“Holdings”), FRESH AIR FREIGHT, INC., a California corporation
(“Fresh Air” and, together with Holdings, collectively, the “Guarantors” and
each, individually, a “Guarantor”), CAPITAL ONE BUSINESS CREDIT CORP. (f/k/a
Capital One Leverage Finance Corp.), as administrative agent (in such capacity,
the “Administrative Agent”), and each of the Lenders party hereto.

 

RECITALS:

 

A.            The Borrowers, the other borrowers from time to time party
thereto, the Guarantors, the other guarantors from time to time party thereto,
the lenders from time to time party thereto (collectively, “Lenders”) and the
Administrative Agent have entered into that certain Credit Agreement dated as of
April 4, 2013 (as amended by that certain Amendment No. 1 to Credit Agreement
dated as of May 22, 2013, that certain Amendment No. 2 to Credit Agreement dated
as of July 5, 2013, that certain Amendment No. 3 to Credit Agreement and Limited
Waiver dated as of November 14, 2013 and that certain Amendment No. 4 to Credit
Agreement and Limited Consent dated as of November 29, 2013, the “Credit
Agreement”).  Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Credit Agreement.

 

B.                                    The Guarantors have entered into that
certain Guaranty dated as of April 4, 2013, in favor of the Administrative
Agent.

 

C.                                    The Borrowers have requested that the
Administrative Agent and Lenders amend certain provisions of the Credit
Agreement and grant the waivers set forth below.

 

D.                                    Subject to the terms and conditions set
forth below, the Administrative Agent and Lenders party hereto are willing to so
amend the Credit Agreement and grant such waivers.

 

In furtherance of the foregoing, the parties agree as follows:

 

Section 1.                                          AMENDMENTS.  Subject to the
covenants, terms and conditions set forth herein and in reliance upon the
representations and warranties set forth herein, the Credit Agreement is amended
as follows:

 

(a)                                 The existing definition in Section 1.01 of
the Credit Agreement for the term “Adjusted Earnings” is deleted in its entirety
and the following new definition for such term is added in lieu thereof:

 

“Adjusted Earnings” means, for any period with respect to Holdings and its
Subsidiaries on a consolidated basis, net income (as that term is determined in
accordance with GAAP) for such period, plus, without duplication and to the
extent already deducted (and not added back) in arriving at such consolidated
net income, the sum of the following amounts for such period:

 

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(a)                                 the amount of depreciation and amortization
deducted in determining such net income for such period;

 

(b)                                 all interest expense and all fees for the
use of money or the availability of money, including commitment, facility,
letter of credit and like fees and charges upon indebtedness (including
indebtedness to the Administrative Agent and Lenders) paid or payable during
such period and amortization of discounts and financing fees, all amounts paid
in respect of Swap Contracts permitted hereunder, whether constituting periodic,
upfront or termination payments and all prepayment premiums and similar
redemption premiums relating to the repayment or redemption of indebtedness;

 

(c)                                  all tax liabilities paid or accrued during
such period;

 

(d)                                 all non-cash charges, including, without
limitation, non-cash charges resulting from losses on asset dispositions
incurred during such period, non-cash compensation charges or other non-cash
expenses or charges arising from the grant of or issuance or repricing of stock,
stock options or other equity-based awards incurred during such period and
non-cash charges relating to impairment of warrants or derivative instruments,
non-cash charges related to hedging agreements and any non-cash charges related
to impairment of assets;

 

(e)                                  transaction costs incurred and paid during
such period (including for the Revolving Credit Facility and the Senior Notes);

 

(f)                                   currency translation charges;

 

(g)                                  lease termination charges; and

 

(h)                                 extraordinary, unusual or non-recurring
losses, charges or expenses, including restructuring charges and severance costs
not to exceed $2,000,000 in any Reference Period or as otherwise approved by the
Administrative Agent.

 

(b)                                 The existing definition in Section 1.01 of
the Credit Agreement for the term “Applicable Rate” is deleted in its entirety
and the following new definition for such term is added in lieu thereof:

 

“Applicable Rate” means:

 

(a)                                 with respect to the Revolving Credit Loans,
4.00% per annum with respect to Base Rate Loans and 5.00% per annum with respect
to Eurodollar Rate Loans; and

 

(b)                                 with respect to Swing Line Loans, 4.00% per
annum.

 

(c)                                  The existing definition in Section 1.01 of
the Credit Agreement for the term “Early Termination Fee” is deleted in its
entirety and the following new definition for such term is added in lieu
thereof:

 

“Early Termination Fee” means an early termination fee that the Borrowers shall
pay to the Revolving Credit Lenders concurrently with the voluntary reduction or
termination of the Commitments by the Borrowers in an amount equal to (a) 3.00%
of the amount of the reduction or termination to the extent such reduction or
termination occurs on or before the first anniversary of the

 

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Closing Date, (b) 2.00% of the amount of the reduction or termination to the
extent such reduction or termination occurs after the first anniversary of the
Closing Date but on or before the second anniversary of the Closing Date,
(c) 1.00% to the extent such reduction or termination occurs after the second
anniversary of the Closing Date.

 

(d)                                 The existing definition in Section 1.01 of
the Credit Agreement for the term “Fixed Charge Coverage Ratio” is deleted in
its entirety and the following new definition for such term is added in lieu
thereof:

 

“Fixed Charge Coverage Ratio” means, as at any date of determination, the ratio
of (a) the result of (i) Adjusted Earnings for the Reference Period most
recently ended at such date of determination, minus (ii) the aggregate amount of
all Capital Expenditures (other than Capital Expenditures financed with Borrowed
Money other than Loans) during such period minus (iii) taxes deducted in
calculating net income for such period and paid in cash to (b) the sum of
(I) the aggregate amount of interest expense deducted in calculating net income
for such period, but excluding upfront fees, original issue discount, commitment
fees, underwriting fees, prepayment and redemption premiums and fees paid in
respect of Swap Contracts and net of all payments received under Swap Contracts
relating to interest rates, and (II) regularly scheduled principal payments made
on Borrowed Money (other than Loans) during such period (and excluding payments
made to a Credit Party or a Subsidiary of a Credit Party by a Credit Party or
Subsidiary of a Credit Party and payments made in connection with a
refinancing); provided that (x) the payments of accrued interest and principal
and premiums occurring on the Closing Date in connection with the termination of
the Indebtedness incurred and outstanding pursuant to the Prior Credit
Agreements shall not be included in the determination of the Fixed Charge
Coverage Ratio and, for any Reference Period that includes the Closing Date, the
Fixed Charge Coverage Ratio shall be determined on a pro forma basis as if the
Transactions had occurred on the first day of such Reference Period; and (y) for
purposes of Section 7.04(b) only, principal prepayments made on the Senior Notes
shall be included in the calculation of the Fixed Charge Coverage Ratio.

 

(e)                                  The existing Section 7.13 of the Credit
Agreement is deleted in its entirety and the following is inserted in lieu
thereof:

 

Fixed Charge Coverage Ratio.  The Credit Parties shall not permit the Fixed
Charge Coverage Ratio, determined as of the end of each Fiscal Quarter, during
any of the Reference Periods set forth below to be less than the amount set
forth below opposite such period:

 

Reference Period Ending

 

Minimum Fixed Charge Coverage Ratio

April 1, 2014 through June 30, 2014

 

0.85 to 1.00

April 1, 2014 through September 30, 2014

 

1.00 to 1.00

April 1, 2014 through December 31, 2014

 

1.00 to 1.00

April 1, 2014 through March 31, 2015

 

1.00 to 1.00

July 1, 2014 through June 30, 2015

 

1.00 to 1.00

October 1, 2014 through September 30, 2015

 

1.00 to 1.00

January 1, 2015 through December 31, 2015

 

1.05 to 1.00

April 1, 2015 through March 31, 2016

 

1.05 to 1.00

July 1, 2015 through June 30, 2016 and each period of twelve consecutive months
ended thereafter

 

1.10 to 1.00

 

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(f)                                   The existing Section 7.14 of the Credit
Agreement is amended by deleting the table set forth therein in its entirety and
inserting the following in lieu thereof:

 

Fiscal Year Ending

 

Maximum Capital Expenditures

 

December 31, 2014

 

$

8,000,000

 

December 31, 2015

 

$

15,000,000

 

December 31, 2016

 

$

15,000,000

 

December 31, 2017 and each Fiscal Year thereafter

 

$

15,000,000

 

 

(g)                                  The existing Section 7.15 of the Credit
Agreement is deleted in its entirety and the following is inserted in lieu
thereof:

 

Maximum Leverage Ratio.  The Credit Parties shall not permit the Leverage Ratio,
determined as of the end of each Fiscal Quarter, during any of the Reference
Periods set forth below to be greater than the amount set forth below opposite
such period:

 

Reference Period Ending

 

Maximum Leverage Ratio

January 1, 2014 through December 31, 2014

 

5.10 to 1.00

April 1, 2014 through March 31, 2015

 

4.75 to 1.00

July 1, 2014 through June 30, 2015

 

4.75 to 1.00

October 1, 2014 through September 30, 2015

 

4.75 to 1.00

January 1, 2015 through December 31, 2015

 

4.75 to 1.00

April 1, 2015 through March 31, 2016 and each period of twelve consecutive
months ended thereafter

 

4.50 to 1.00

 

(h)                                 The Credit Agreement is amended by inserting
immediately after Section 7.18 thereof the following as a new Section 7.19:

 

Adjusted Earnings.  The Credit Parties shall not permit the Adjusted Earnings at
any time during any of the Reference Periods set forth below to be less than the
amount set forth below opposite such period:

 

Reference Period Ending

 

Minimum Adjusted Earnings

 

April 1, 2014 through April 30, 2014

 

$

1,000,000

 

April 1, 2014 through May 31, 2014

 

$

5,000,000

 

April 1, 2014 through June 30, 2014

 

$

9,000,000

 

April 1, 2014 through July 31, 2014

 

$

15,565,000

 

April 1, 2014 through August 31, 2014

 

$

20,873,000

 

April 1, 2014 through September 30, 2014

 

$

23,406,000

 

April 1, 2014 through October 31, 2014

 

$

30,150,000

 

April 1, 2014 through November 30, 2014

 

$

32,827,000

 

April 1, 2014 through December 31, 2014

 

$

41,124,000

 

April 1, 2014 through January 31, 2015

 

$

40,730,000

 

April 1, 2014 through February 28, 2015

 

$

41,737,000

 

April 1, 2014 through March 31, 2015

 

$

45,735,000

 

May 1, 2014 through April 30, 2015

 

$

46,104,000

 

June 1, 2014 through May 31, 2015

 

$

45,701,000

 

July 1, 2014 through June 30, 2015

 

$

44,970,000

 

August 1, 2014 through July 31, 2015

 

$

44,114,000

 

September 1, 2014 through August 31, 2015

 

$

43,726,000

 

October 1, 2014 through September 30, 2015

 

$

43,118,000

 

November 1, 2014 through October 31, 2015

 

$

41,812,000

 

December 1, 2014 through November 30, 2015

 

$

41,377,000

 

January 1, 2015 through December 31, 2015

 

$

40,762,000

 

February 1, 2015 through January 31, 2016

 

$

43,000,000

 

March 1, 2015 through February 29, 2016

 

$

43,000,000

 

April 1, 2015 through March 31, 2016

 

$

43,000,000

 

May 1, 2015 through April 30, 2016

 

$

44,000,000

 

June 1, 2015 through May 31, 2016

 

$

44,000,000

 

July 1, 2015 through June 30, 2016

 

$

44,000,000

 

August 1, 2015 through July 31, 2016

 

$

44,000,000

 

September 1, 2015 through August 31, 2016

 

$

44,000,000

 

October 1, 2015 through September 30, 2016 and each period of twelve consecutive
months thereafter

 

$

45,000,000

 

 

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The amendments to the Credit Agreement are limited to the extent specifically
set forth above and no other terms, covenants or provisions of the Credit
Agreement are intended to be affected hereby.

 

Section 2.                                          LIMITED WAIVER.  Subject to
the covenants, terms and conditions set forth herein and in reliance upon the
representations and warranties set forth herein, the Administrative Agent and
the Lenders party hereto hereby waive any Default or Event of Default arising
from any failure of (i) the Credit Parties to comply with the financial
covenants set forth in Sections 7.13 and 7.15 of the Credit Agreement, in each
case, solely for the Reference Periods ended December 31, 2013 and March 31,
2014 and (ii) the report or opinion prepared by Marcum LLP or another
independent certified public accountant and delivered to the Administrative
Agent pursuant to Section 6.04(a)(i) of the Credit Agreement to be certified
without expression of uncertainty as to the ability of Holdings and its
Subsidiaries to continue as going concerns solely for the Fiscal Year ended
December 31, 2013.

 

The waivers set forth in this Section 2 are limited to the extent and time
period specifically set forth above and no other terms, covenants or provisions
of the Credit Agreement (nor compliance for any other applicable time period)
are intended to be waived or affected hereby.

 

Section 3.                                          CONDITIONS PRECEDENT.  The
parties hereto agree that this Amendment and the amendments set forth in
Section 1 above and the waivers set forth in Section 2 above shall not be
effective until the satisfaction of each of the following conditions precedent
(the date on which such conditions precedent are satisfied or waived, the
“Amendment Effective Date”):

 

(a)                                 Documentation.  The Administrative Agent
shall have received (i) a counterpart of this Amendment, duly executed and
delivered by each Borrower, each Guarantor and each Lender, and (ii) such other
documents and certificates as the Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good standing of
each Credit Party, the authorization of

 

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this Amendment and any other legal matters relating to the Credit Parties or the
transactions contemplated hereby.

 

(b)                                 Equity Offering. Borrowers shall have
received cash proceeds from the sale or issuance of Capital Stock of Holdings in
a public offering in an amount, net of expenses and fees, of not less than $25
million on or before April 15, 2014.  Notwithstanding anything herein or in the
Credit Agreement, a portion of the net proceeds of such offering sufficient to
pay the interest obligations due under the Senior Notes on the Interest Payment
Date (as defined in the Senior Notes Indenture) scheduled for April 15, 2014
(the “Specified Payment”) may be delivered to the Senior Notes Trustee or,
pending such delivery, held by the Borrowers in the Borrowers’ operating
account, and any proceeds not so delivered or held (and any such funds not used
to make the Specified Payment on or before the expiration of the grace period
for such payment on May 15, 2014) shall have been delivered to the
Administrative Agent for application to the Obligations.

 

(c)                                  Amendment and Waiver Fee.  The Borrowers
shall have paid to the Administrative Agent, for the account of each Lender in
accordance with its Applicable Percentage, a fee in an amount equal to $250,000,
which fee shall be deemed fully earned and due on the Amendment Effective Date
and shall be nonrefundable.

 

(d)                                 Fees and Expenses.  All fees and expenses of
counsel to the Administrative Agent estimated to date shall have been paid in
full (without prejudice to final settling of accounts for such fees and
expenses), in each case to the extent invoiced.

 

Section 4.                                          REPRESENTATIONS AND
WARRANTIES.

 

(a)                                 In order to induce the Administrative Agent
and Lenders to enter into this Amendment, each Credit Party represents and
warrants to the Administrative Agent and Lenders as follows:

 

(i)                                     The representations and warranties made
by such Credit Party contained in Article V of the Credit Agreement (other than
Section 5.04 thereof) shall be true and correct in all material respects (but
without any duplication of any materiality qualifications) on and as of the
Amendment Effective Date, except to the extent that such representations and
warranties expressly relate to an earlier date, in which case on the Amendment
Effective Date such representations and warranties shall be true and correct in
all material respects (but without any duplication of any materiality
qualifications) on and as of such earlier date.

 

(ii)                                  Since the Balance Sheet Date, no act,
event, condition or circumstance (except for any act, event, condition or
circumstance publicly disclosed by Holdings prior to the date hereof in a filing
with the SEC or as otherwise disclosed to the Administrative Agent) has occurred
or arisen which, individually or in the aggregate, has had or could reasonably
be expected to have a Material Adverse Effect.

 

(iii)                               No Default or Event of Default (other than
the Default(s) or Event(s) of Default waived in Section 2 above) has occurred
and is continuing or will exist after giving effect to this Amendment.

 

(b)                                 In order to induce the Administrative Agent
and Lenders to enter into this Amendment, each Credit Party represents and
warrants to the Administrative Agent and Lenders that this Amendment has been
duly authorized, executed and delivered by such Credit Party and constitutes its
legal, valid and binding obligation.

 

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Section 5.              MISCELLANEOUS

 

(a)           Ratification and Confirmation of Loan Documents.  Each Credit
Party hereby consents, acknowledges and agrees to the amendments and waivers set
forth herein and hereby confirms and ratifies in all respects the Loan Documents
to which such Person is a party (including, without limitation, with respect to
each Guarantor, the continuation of its payment and performance obligations
under the Guaranty upon and after the effectiveness of the amendments and
waivers contemplated hereby and, with respect to each Credit Party, the
continuation and existence of the liens granted under the Security Documents to
secure the Obligations).

 

(b)           Fees and Expenses.  The Borrowers, jointly and severally, shall
promptly pay on demand (and, in any event, within 10 Business Days after demand
therefor) all reasonable costs and expenses of the Administrative Agent in
connection with the preparation, reproduction, execution, and delivery of this
Amendment and any other documents prepared in connection herewith, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Administrative Agent.

 

(c)           Headings.  Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.

 

(d)           Governing Law; Waiver of Jury Trial.  This Amendment shall be
governed by and construed in accordance with the laws of the State of New York,
and shall be further subject to the provisions of Section 10.14 of the Credit
Agreement.

 

(e)           Counterparts.  This Amendment may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
agreement.  Delivery of an executed counterpart of a signature page of this
Amendment by facsimile or electronic transmission (including .pdf file) shall be
effective as delivery of a manually executed counterpart hereof.

 

(f)            Entire Agreement.  This Amendment, together with all the Loan
Documents (collectively, the “Relevant Documents”), sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relating to such subject matter.  No promise, condition, representation
or warranty, express or implied, not set forth in the Relevant Documents shall
bind any party hereto, and no such party has relied on any such promise,
condition, representation or warranty.  Each of the parties hereto acknowledges
that, except as otherwise expressly stated in the Relevant Documents, no
representations, warranties or commitments, express or implied, have been made
by any party to the other.  None of the terms or conditions of this Amendment
may be changed, modified, waived or canceled orally or otherwise except in a
writing signed by the parties hereto for such purpose.

 

(g)           Enforceability.  Should any one or more of the provisions of this
Amendment be determined to be illegal or unenforceable as to one or more of the
parties hereto, all other provisions nevertheless shall remain effective and
binding on the parties hereto.

 

(h)           Successors and Assigns.  This Amendment shall be binding upon and
inure to the benefit of each Borrower, each Guarantor, the Administrative Agent,
each Lender and their respective successors and assigns (subject to
Section 10.06 of the Credit Agreement).

 

[Remainder of page intentionally left blank; signatures begin on following page]

 

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The following parties have caused this Amendment No. 5 to Credit Agreement and
Limited Waiver to be executed as of the date first written above.

 

 

BORROWERS:

 

 

 

AMERICAN APPAREL (USA), LLC

 

 

 

 

:

By:

/s/ John Luttrell

 

Name:

John Luttrell

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

AMERICAN APPAREL RETAIL, INC.

 

 

 

 

 

By:

/s/ John Luttrell

 

Name:

John Luttrell

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

AMERICAN APPAREL DYEING & FINISHING, INC.

 

 

 

 

 

By:

/s/ John Luttrell

 

Name:

John Luttrell

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

KCL KNITTING, LLC

 

 

 

 

 

By:

/s/ John Luttrell

 

Name:

John Luttrell

 

Title:

Chief Financial Officer

 

AMENDMENT NO. 5 TO CREDIT AGREEMENT AND LIMITED WAIVER

Signature Page

 

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GUARANTORS:

 

 

 

 

AMERICAN APPAREL, INC.

 

 

 

 

 

 

 

By:

/s/ John Luttrell

 

Name:

John Luttrell

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

FRESH AIR FREIGHT, INC.

 

 

 

 

 

 

 

By:

/s/ John Luttrell

 

Name:

John Luttrell

 

Title:

Chief Financial Officer

 

AMENDMENT NO. 5 TO CREDIT AGREEMENT AND LIMITED WAIVER

Signature Page

 

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ADMINISTRATIVE AGENT AND LENDERS:

 

 

 

 

CAPITAL ONE BUSINESS CREDIT CORP.,

 

as Administrative Agent and Lender

 

 

 

 

 

 

 

By:

/s/ Julianne Low

 

Name:

Julianne Low

 

Title:

Senior Vice President

 

AMENDMENT NO. 5 TO CREDIT AGREEMENT AND LIMITED WAIVER

Signature Page

 

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BANK OF MONTREAL, CHICAGO BRANCH,

 

as Lender

 

 

 

 

 

 

 

By:

/s/ L. M. Junior Del Brocco

 

Name:

L. M. Junior Del Brocco

 

Title:

Senior Manager

 

AMENDMENT NO. 5 TO CREDIT AGREEMENT AND LIMITED WAIVER

Signature Page

 

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