Exhibit 10.9

 

FIRST AMENDMENT TO    CREDIT AGREEMENT    LASALLE RETAIL FINANCE

Date: October 11, 2007

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “First Amendment”) is made to the
Credit Agreement (the “Credit Agreement”) dated as of July 2, 2007 by and among:

(a) AMERICAN APPAREL, INC., a corporation organized under the laws of the State
of California, with its principal executive offices at 747 Warehouse Street, Los
Angeles, California, for itself and as agent (in such capacity, the “Lead
Borrower”) for the other Borrowers now or hereafter party to the Credit
Agreement; and

(c) the BORROWERS now or hereafter party to the Credit Agreement; and

(d) the FACILITY GUARANTORS now or hereafter party to the Credit Agreement; and

(e) LASALLE BUSINESS CREDIT, LLC, AS AGENT FOR LASALLE BANK MIDWEST NATIONAL
ASSOCIATION, ACTING THROUGH ITS DIVISION, LASALLE RETAIL FINANCE, with offices
at 135 South LaSalle Street, Suite 425, Chicago, Illinois 60603, as
administrative agent (in such capacity, the “Administrative Agent”) for its own
benefit and the benefit of the other Credit Parties; and

(f) LASALLE BUSINESS CREDIT, LLC, AS AGENT FOR LASALLE BANK MIDWEST NATIONAL
ASSOCIATION, ACTING THROUGH ITS DIVISION, LASALLE RETAIL FINANCE, with offices
at 135 South LaSalle Street, Suite 425, Chicago, Illinois 60603, as collateral
agent (in such capacity, the “Collateral Agent”) for its own benefit and the
benefit of the other Credit Parties; and

(g) WELLS FARGO RETAIL FINANCE, LLC, with offices at One Boston Place, 19th
Floor, Boston, Massachusetts 02108, as collateral monitoring agent (in such
capacity, the “Collateral Monitoring Agent”) for its own benefit and the benefit
of the other Credit Parties; and

(h) the LENDERS party to the Credit Agreement; and

 

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(i) LASALLE BANK NATIONAL ASSOCIATION, a national banking association with
offices at 135 South LaSalle Street, Chicago, Illinois 60603, as Issuing Bank;
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom, the parties hereto agree as follows:

Background:

The parties hereto desire to amend certain provisions of the Credit Agreement.
Accordingly, it is hereby agreed, as follows:

 

1. Amendment to Credit Agreement: Subject to satisfaction of each and all of the
Preconditions to Effectiveness set forth in Section 2, below, the Credit
Agreement is amended as follows:

 

  a. The definition of Bank Products is hereby deleted in its entirety and the
following is substituted in its place:

“Bank Products” means any services or facilities provided to any Loan Party by
the Administrative Agent, any Lender, or any of their respective Affiliates
(other than Cash Management Services), including, without limitation, on account
of (a) credit cards, (b) Hedge Agreements, (c) investments, and (d) equipment
leases.

 

  b. The definition of Cash Management Services is hereby deleted in its
entirety and the following is substituted in its place:

“Cash Management Services” means, without limitation, any one or more of the
following types or services or facilities provided to any Loan Party by the
Administrative Agent, any Lender, or any of their respective Affiliates: (a) ACH
transactions, (b) deposit and other accounts, and (c) cash management,
including, without limitation, controlled disbursement services.

 

  c. The definition of Consolidated EBITDA is hereby deleted in its entirety and
the following is substituted in its place:

“Consolidated EBITDA” means, with respect to any Person for any period, the sum
(without duplication) of (a) Consolidated Net Income for such period, plus
(b) depreciation, amortization, and all other non-cash charges that were
deducted in determining Consolidated Net Income for such period, plus
(c) provisions for Taxes based on income that were deducted in determining
Consolidated Net Income for such period, plus (d) Consolidated Interest Expense
that was deducted in determining Consolidated Net Income for such period, plus
(e) the increase in deferred rent for the period, if any, or minus (f) the
decrease in deferred rent for the period, if any, plus (g) litigation expenses
related to the existing sexual harassment suits, not to exceed $2,000,000 in the
aggregate, all as determined on a Consolidated basis

 

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in accordance with GAAP, provided that for the purposes of calculating
Consolidated EBITDA for any period prior to January 1, 2007, the amounts set
forth below opposite each month shall be deemed to be the Consolidated EBITDA of
such month:

 

MONTH

   CONSOLIDATED
EBITDA

July 31, 2006

   $ 1,840,000

August 31, 2006

   $ 1,840,000

September 30, 2006

   $ 1,840,000

October 31, 2006

   $ 1,100,000

November 30, 2006

   $ 1,100,000

December 31, 2006

   $ 1,100,000

 

  d. The definition of Required Revolving Credit Lenders is hereby deleted in
its entirety and the following is substituted in its place:

“Required Revolving Credit Lenders” means, (i) if there are two or fewer
Revolving Credit Lenders who are not Delinquent Lenders, all Revolving Credit
Lenders who are not Delinquent Lenders; or (ii) if there are three or more
Revolving Credit Lenders who are not Delinquent Lenders, at any time, the
Administrative Agent (in its capacity as a Lender) and such other Revolving
Credit Lenders (other than Delinquent Lenders, but including at least one
(1) other Lender in addition to the Administrative Agent, in its capacity as a
Lender) having Revolving Credit Commitments aggregating more than 50% of the
Total Revolving Credit Commitments, or if the Revolving Credit Commitments have
been terminated, Revolving Credit Lenders (other than Delinquent Lenders, but
including at least one (1) other Lender in addition to the Administrative Agent,
in its capacity as a Lender) whose percentage of the outstanding Revolving Loan
Credit Extensions (calculated assuming settlement and repayment of all Swingline
Loans by the Revolving Credit Lenders) aggregate more than 50% of all such
Revolving Loan Credit Extensions.

 

  e. The provisions of Section 7.01(d) are hereby deleted in their entirety and
the following is inserted in their place:

(d) Any Loan Party shall fail to observe or perform when due any covenant,
condition or agreement contained in (i) ARTICLE VI (other than SECTIONS 6.01 and
6.02), or (ii) SECTION 5.01(e) (after a one (1) Business Day grace period), or
(iii) in any of SECTION 2.16, SECTION 5.02(a), SECTION 5.07, SECTION 5.08 or
SECTION 6.01 (provided that, if (A) any such Default described in this clause
(iii) is of a type that can be cured within

 

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5 Business Days, and (B) such Default could not materially adversely impact the
Lenders’ Liens on the Collateral, such default shall not constitute an Event of
Default for 5 Business Days after the occurrence of such Default so long as the
Loan Parties are diligently pursuing the cure of such Default; and provided
further, there shall be no Default if the subject default in question relates to
the provision of Bank Products, unless the default in question exceeds
$100,000.00 in any instance, and if so, (A) it is of a type that can be cured
within 10 Business Days and (B) such Default could not materially adversely
impact the Lenders’ Liens on the Collateral, such default shall not constitute
an Event of Default for 10 Business Days after the occurrence of such Default so
long as the Loan Parties are diligently pursuing the cure of such Default);

 

  f. The provisions of Section 7.01(n) are hereby deleted in their entirety and
the following is inserted in their place:

(n) Any challenge by or on behalf of any Loan Party to the validity of any Loan
Document or the applicability or enforceability of any Loan Document strictly in
accordance with the subject Loan Document’s terms or which seeks to void, avoid,
limit, or otherwise adversely affect any security interest created by or in any
Loan Document or any payment made pursuant thereto; provided that, it shall not
be an Event of Default under this subparagraph (n) for any Loan Party to
dispute, in good faith based upon reasonable grounds, the assessment or amount
of any charges, fees, or expenses incidental to the provision of Bank Products
by any Credit Party;

 

  g. The provisions of Section 7.03 are hereby deleted in their entirety and the
following is inserted in their place:

SECTION 7.03 Application of Proceeds.

After the occurrence of an Event of Default and acceleration of the Obligations,
all proceeds realized from any Loan Party or on account of any Collateral or,
without limiting the foregoing, on account of any Prepayment Event, shall be
applied in the following order:

(a) FIRST, ratably to pay Credit Party Expenses, indemnities and other similar
amounts then due in connection with Credit Extensions to the Borrowers until
paid in full;

(b) SECOND, ratably to pay interest accrued in respect of the Obligations until
paid in full;

 

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(d) THIRD, to pay principal due in respect of the Swingline Loans to the
Borrowers until paid in full;

(e) FOURTH, ratably to pay principal due in respect of the other Loans to the
Borrowers until paid in full;

(f) FIFTH, to the Administrative Agent, to be held by the Administrative Agent,
for the ratable benefit of the Issuing Bank and the Revolving Credit Lenders as
cash collateral in an amount up to 105% of the then extant Stated Amount of
Letters of Credit until paid in full;

(g) SIXTH, to pay outstanding Obligations with respect to Cash Management
Services furnished to any Loan Party;

(n) SEVENTH, ratably to pay any other Obligations and Other Liabilities of the
Borrowers; and

(o) EIGHTH, to the Lead Borrower or such other Person entitled thereto under
Applicable Law.

 

  h. The provisions of Section 9.01(b) are hereby deleted in their entirety and
the following is inserted in their place:

(b) if to the Administrative Agent, the Collateral Agent or the Swingline
Lender, to LaSalle Business Credit, LLC, 135 South LaSalle Street, Suite 425,
Chicago, Illinois 60603, Attention: Steven Chalmers (Telecopy No.
(312) 992-1501), (E-Mail steven.chalmers@abnamro.com), with a copy to Riemer &
Braunstein, LLP, Three Center Plaza, Boston, Massachusetts 02108, Attention:
Robert E. Paul, Esquire (Telecopy No. (617) 880-3456), (E-Mail
rpaul@riemerlaw.com); and

 

  i. The provisions of Section 9.04(c) are hereby amended by replacing the
phrase “Braintree, Massachusetts” with the phrase “Chicago, Illinois” in the
second line of such Section 9.04(c).

 

2. Preconditions to Effectiveness. This First Amendment shall not take effect
unless and until each and all of the following items has been satisfied or
delivered, as the case may be, and in all events, to the satisfaction of the
Agents, in their sole and exclusive discretion. The willingness of the Agents
and the Lenders to enter into this First Amendment is expressly conditioned upon
the prior receipt by the Administrative Agent of the following items:

 

  a. The Lead Borrower and the Borrowers shall have delivered to the
Administrative Agent a duly executed copy of this First Amendment.

 

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  b. The Lead Borrower and the Borrowers shall have delivered to the
Administrative Agent such other and further documents as the Administrative
Agent reasonably may require and shall have identified prior to the execution of
this First Amendment, in order to confirm and implement the terms and conditions
of this First Amendment.

 

3. Ratification of Loan Documents. No Claims against the Lender:

 

  a. Except as provided herein, all terms and conditions of the Credit Agreement
and of each of the other Loan Documents remain in full force and effect. Each
Borrower hereby ratifies, confirms, and re-affirms all terms and provisions of
the Loan Documents.

 

  b. Each Borrower represents and warrants to the Lender that as of the date of
this First Amendment, other than with respect to items which remain outstanding
under the Post Closing Letter dated July 2, 2007, no Event of Default exists, or
solely with the passage of time or notice, would exist under the Loan Documents.

 

  c. Each Borrower acknowledges and agrees that to its actual knowledge
(i) there is no basis nor set of facts on which any amount (or any portion
thereof) owed by any of the Borrowers under any Loan Document could be reduced,
offset, waived, or forgiven, by rescission or otherwise; (ii) nor is there any
claim, counterclaim, off set, or defense (or other right, remedy, or basis
having a similar effect) available to any of the Borrowers with regard thereto;
(iii) nor is there any basis on which the terms and conditions of any of the
Obligations could be claimed to be other than as stated on the written
instruments which evidence such Obligations.

 

4. Miscellaneous:

 

  a. Terms used in this First Amendment which are defined in the Credit
Agreement are used as so defined.

 

  b. This First Amendment may be executed in counterparts, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one agreement.

 

  c. This First Amendment expresses the entire understanding of the parties with
respect to the transactions contemplated hereby. No prior negotiations or
discussions shall limit, modify, or otherwise affect the provisions hereof.

 

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  d. Any determination that any provision of this First Amendment or any
application hereof is invalid, illegal, or unenforceable in any respect and in
any instance shall not affect the validity, legality, or enforceability of such
provision in any other instance, or the validity, legality, or enforceability of
any other provisions of this First Amendment.

 

  e. The Borrowers shall pay on demand all reasonable costs and expenses of the
Agents and the Lenders, including, without limitation, attorneys’ fees incurred
by the Agents in connection with the preparation, negotiation, execution, and
delivery of this First Amendment. The Administrative Agent is hereby authorized
by the Borrowers to make a Credit Extension to pay all such costs, expenses, and
attorneys’ fees and expenses.

 

  f. In connection with the interpretation of this First Amendment and all other
documents, instruments, and agreements incidental hereto:

 

  i. All rights and obligations hereunder and thereunder, including matters of
construction, validity, and performance, shall be governed by and construed in
accordance with the law of The Commonwealth of Massachusetts and are intended to
take effect as sealed instruments.

 

  ii. The captions of this First Amendment are for convenience purposes only,
and shall not be used in construing the intent of the parties under this First
Amendment.

 

  iii. In the event of any inconsistency between the provisions of this First
Amendment and any of the other Loan Documents, the provisions of this First
Amendment shall govern and control.

 

  g. The Agents, the Lenders and the Borrowers have prepared this First
Amendment and all documents, instruments, and agreements incidental hereto with
the aid and assistance of their respective counsel. Accordingly, all of them
shall be deemed to have been drafted by the Agents, the Lenders, and the
Borrowers and shall not be construed against any party.

[Signatures Follow]

 

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IN WITNESS WHEREOF, the undersigned have caused this First Amendment to be duly
executed as of the date first set forth above.

 

AMERICAN APPAREL, INC., as Lead Borrower and as a Borrower By:   /s/ Sang Ho Lim
Name:   Sang Ho Lim Title:   Secretary

 

AMERICAN APPAREL RETAIL, INC., as a Borrower By:   /s/ Sang Ho Lim Name:   Sang
Ho Lim Title:   Secretary

 

AMERICAN APPAREL DYEING & FINISHING, INC., as a Borrower By:   /s/ Sang Ho Lim
Name:   Sang Ho Lim Title:   President

 

KCL KNITTING, LLC, as a Borrower By:   American Apparel, Inc., its sole   member
  By:   /s/ Sang Ho Lim   Name:   Sang Ho Lim   Title:   Secretary

Signature Page to First Amendment to Credit Agreement

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AMERICAN APPAREL, LLC, as a Facility Guarantor By:   /s/ Sang Ho Lim Name:  
Sang Ho Lim Title:   Secretary

 

FRESH AIR FREIGHT, INC., as a Facility Guarantor By:   /s/ Sang Ho Lim Name:  
Sang Ho Lim Title:   Secretary

Signature Page to First Amendment to Credit Agreement

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LASALLE BUSINESS CREDIT, LLC, As Agent for LaSalle Bank Midwest National
Association, acting through its division, LaSalle Retail Finance As
Administrative Agent, as Collateral Agent, as Swingline Lender and as Lender By:
  /s/ Steven Chalmers Name:   Steven Chalmers Title:   V. P. Address:   135
South LaSalle Street, Suite 425   Chicago, Illinois 60603 Attn:   Steven
Chalmers Telephone:   (312) 904-8468 Telecopy:   (312) 992-1501 LASALLE BANK
NATIONAL ASSOCIATION, As Issuing Bank By:   /s/ Steve Friedlander Name:   Steve
Friedlander Title:   S. V. P. Address:   135 South LaSalle Street   Chicago,
Illinois 60603 Attention:   Telephone:   (312) 904-2000 Telecopy:  

Signature Page to First Amendment to Credit Agreement

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WELLS FARGO RETAIL FINANCE, LLC, As Collateral Monitoring Agent and as a Lender
By:   /s/ Cory Loftig Name:   Cory Loftig Title:   Vice President Address:   One
Boston Place, 19th Floor   Boston, Massachusetts 02108 Attn:   Telephone:   617
854 7259 Telecopy: