ex10-1.htm


    
      
        WAIVER
TO CREDIT AGREEMENT

      

      
        LASALLE
RETAIL FINANCE

      

      


       

      Date:  June
5, 2008

       

      


       

      THIS WAIVER TO CREDIT
AGREEMENT (this “Waiver”) is made to
the Credit Agreement (as amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”)
dated as of July 2, 2007 by and among:

       

      AMERICAN APPAREL (USA), LLC
(f/k/a AAI Acquisition LLC (successor by merger to American Apparel,
Inc.)), a California limited liability company, as agent for itself and the
other Borrowers party thereto (in such capacity, the “Lead
Borrower”);

       

      THE BORROWERS now or hereafter
party to the Credit Agreement;

       

      THE FACILITY GUARANTORS now or
hereafter party to the Credit Agreement;

       

      LASALLE BUSINESS CREDIT, LLC,
AS AGENT FOR LASALLE BANK MIDWEST NATIONAL ASSOCIATION, ACTING THROUGH ITS
DIVISION, LASALLE RETAIL FINANCE, with offices at 100 Federal Street, 9th Floor,
Boston, Massachusetts 02110, as administrative agent (in such capacity, the
“Administrative
Agent”) for its own benefit and the benefit of the other Credit
Parties;

       

      LASALLE BUSINESS CREDIT, LLC,
AS AGENT FOR LASALLE BANK MIDWEST NATIONAL ASSOCIATION, ACTING THROUGH ITS
DIVISION, LASALLE RETAIL FINANCE, with offices at 100 Federal Street, 9th Floor,
Boston, Massachusetts 02110, as collateral agent (in such capacity, the “Collateral Agent”,
and together with the Administrative Agent, individually an “Agent” and
collectively, the “Agents”) for its own
benefit and the benefit of the other Credit Parties;

       

      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;

       

      the LENDERS party to the Credit
Agreement; and

       

      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.

      


      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      


      BACKGROUND

      


      A.           Reference
is made to that certain Waiver and Consent to Credit Agreement dated as of May
16, 2008 (the “May
2008 Waiver”) entered into by and among the parties hereto, pursuant to
which, among other things, the Loan Parties agreed to enter into, by May 31,
2008, each in form and substance satisfactory to the Agents and each Lender in
their discretion, (i) an amendment to the Credit Agreement and related documents
(collectively, the “Fourth Amendment
Documents”), which Fourth Amendment Documents may, among other things,
(a) effect a joinder by American Apparel, Inc. (f/k/a Endeavor Acquisition
Corp.) to the Loan Documents, whereby American Apparel, Inc. (f/k/a Endeavor
Acquisition Corp.) shall become a Facility Guarantor thereunder, and (b) delete
certain financial performance covenants, including, without limitation, the
financial performance covenant relating to Capital Expenditures, in each case in
accordance with the Summary of Terms and Conditions set forth as Exhibit B to the May
2008 Waiver, and (ii) an amendment to the Pledge Agreement, pursuant to which,
among other things, the parties thereto shall amend Schedule I thereto to
include all Subsidiaries in existence as of the date of such
amendment.  Pursuant to the May 2008 Waiver, the failure of the Loan
Parties to enter into the Fourth Amendment Documents by May 31, 2008 constitutes
an Event of Default under the Credit Agreement.

      


      B.           The
Loan Parties have failed to enter into the Fourth Amendment Documents by May 31,
2008 (such failure, the “Specified Event of
Default”).

      


      C.           In
light of the foregoing, the Lead Borrower has requested that the Agents and the
Required Lenders waive the Specified Event of Default.  The Agents and
the Required Lenders are willing to waive the Specified Event of Default, on the
terms and conditions set forth herein

      


      Accordingly,
it is hereby agreed as follows:

      


      
        	
                1.

              	
                Waiver of Specified
      Event of Default.  The Agents and the Required Lenders
      hereby waive the Specified Event of Default.  The Loan Parties
      acknowledge and agree that:

              


      

       

      
        	
                 
      

              	
                (a)

              	
                The
      foregoing waiver is a one-time waiver and shall not be deemed to
      constitute a waiver of any other Event of Default or a waiver of any other
      requirement of the Credit Agreement or any other Loan Document (including,
      without limitation, the May 2008 Waiver) with respect to any other
      circumstance.

              


      

       

      
        	
                 
      

              	
                (b)

              	
                The
      consent and waiver provided above shall not take effect upon the execution
      of this Agreement, and shall only take effect upon satisfaction of each
      and all of the requirements of Section 2,
below.

              


      

       

      
        	
                2.

              	
                Conditions to
      Effectiveness.  The Waiver provided in Section 1 above
      shall be effective as of the date hereof upon the fulfillment of the
      following conditions precedent:

              


      

       

      
        	
                 
      

              	
                (a)

              	
                All
      actions on the part of the Loan Parties necessary for the valid execution,
      delivery, and performance by the Loan Parties of this Waiver shall have
      been duly and effectively taken.

              


      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      
        	
                 
      

              	
                (b)

              	
                The
      Administrative Agent shall have received an original copy of this Waiver
      duly executed and delivered by the Loan Parties, the Agents, and the
      Required Lenders.

              


      

       

      
        	
                 
      

              	
                (c)

              	
                The
      Administrative Agent shall have received, for the ratable benefit of the
      Lenders executing this Waiver, a waiver fee in the amount of $75,000.00,
      which shall be fully earned on the date hereof and shall not be subject to
      refund or rebate in whole or in part under any
      circumstance.  The Administrative Agent is hereby authorized to
      make a Credit Extension to pay the waiver
fee.

              


      

       

      
        	
                 
      

              	
                (d)

              	
                The
      Administrative Agent shall have received reimbursement from the Loan
      Parties for all reasonable costs, expenses, and legal fees incurred by the
      Administrative Agent through June 5, 2008 in connection with the
      negotiation, preparation, and execution of this
      Waiver.  Provided that the Administrative Agent shall have
      notified the Lead Borrower of the amount of such costs, expenses, and
      legal fees incurred through such date, the Administrative Agent is hereby
      authorized to make a Credit Extension to reimburse the Administrative
      Agent for such costs, expenses, and legal fees.  Each of the
      Loan Parties acknowledges and agrees that additional statements for all
      reasonable costs, expenses, and legal fees incurred by the Administrative
      Agent in connection with the negotiation, preparation, and execution of
      this Waiver for periods after June 5, 2008 will be rendered and paid as
      set forth in the Credit Agreement.

              


      

       

      
        	
                3.

              	
                Amendment; Joinder;
      Pledge; Alternate Sources of
Funding.

              


      

       

      
        	
                 
      

              	
                (a)

              	
                Each
      Loan Party hereby agrees to take all commercially reasonable actions that
      are necessary or advisable to enable such Loan Party to enter into, by
      June 20, 2008, an amendment to the Credit Agreement (the “Fourth
      Amendment”) and related documents (together with the Fourth
      Amendment, collectively, the “New Fourth Amendment
      Documents”).  Such Fourth Amendment shall be
      substantially in the form of Exhibit A
      annexed hereto (or with such other changes as are mutually agreed upon by
      the Lead Borrower, the Agents and the Lenders in their
      discretion).  Such other Fourth Amendment Documents shall, among
      other things, amend and restate each of the Pledge Agreement, the pledge
      agreement entered into on December 28, 2007 by the Parent and the
      Collateral Agent, the Facility Guaranty, and the Guarantee entered into on
      December 28, 2007 by the Parent for the benefit of, among others, the
      Agents.  Each of the New Fourth Amendment Documents shall be in
      form and substance satisfactory to the Agents and each Lender in their
      reasonable discretion.  The failure of the Loan Parties to enter
      into the New Fourth Amendment Documents by June 20, 2008 shall constitute
      an Event of Default under the Credit Agreement (such Event of Default, the
      “Amendment Event
      of Default”) for all purposes without further action or notice
      required by any Person but shall not invalidate the waiver provided in
      Section 1 above.

              


      

       

      
        	
                 
      

              	
                (b)

              	
                If
      an Event of Default occurs as a result of the failure of the Loan Parties
      to enter into the New Fourth Amendment Documents by June 20, 2008, without
      limiting

              


      

      
         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

         

        
          	
                   
      

                	
                   

                	
                  any
      Agent’s or Lender’s rights and remedies arising as a result of the
      occurrence of such Amendment Event of Default or any other Event of
      Default, the Agents may (and at the direction of the Required Lenders,
      shall) elect to (i) terminate negotiations, (ii) terminate the commitments
      of the Lenders to make loans and advances and to grant financial
      accommodations to or for the benefit of the Loan Parties, and (iii)
      accelerate the maturity of the Obligations.  The Agents and the
      Lenders expressly reserve all rights and remedies arising as a result of
      the occurrence of the Amendment Event of Default or any other Event of
      Default, including, without limitation, the right to charge the Default
      Rate of interest.  Any loans, advances, and financial
      accommodations made from and after the occurrence and during the
      continuation of the Amendment Event of Default or any other Event of
      Default shall be made in the sole and exclusive discretion of the
      Lenders.  Further, if any such loans, advances, and financial
      accommodations are made, the Lenders expressly reserve the right to
      suspend making additional loans and advances and granting financial
      accommodations at any time from and after the occurrence and during the
      continuation of the Amendment Event of Default or any other Event of
      Default, without further notice to the Loan
  Parties.

                


        

      

       

      
        	
                4.

              	
                No Continuing
      Waiver.  The Loan Parties acknowledge and agree that
      since the Closing Date, in addition to the Specified Event of Default,
      certain Events of Default (together with the Specified Event of Default,
      collectively, the “Past Events of
      Default”) have occurred as a result of the Loan Parties’ actions in
      violation of the Credit Agreement and failure to obtain prior consent from
      the Agents and the Lenders for such actions, as such Past Events of
      Default are more specifically described herein and in (i) that certain
      Default Waiver dated as of November 23, 2007, by and among the
      Administrative Agent, certain of the Lenders, and the Lead Borrower, (ii)
      that certain Second Amendment and Waiver dated as of November 26, 2007, by
      and between, among others, the Agents, the certain of the Lenders, and the
      Loan Parties, (iii) that certain Waiver and Consent dated as of December
      28, 2007, by and among the Agents, certain of the Lenders, and the Lead
      Borrower, (iv) that certain Waiver to Credit Agreement dated as of
      February 29, 2008, by and among the Agents, the Lenders and the Loan
      Parties, and (v) the May 2008 Waiver.  The Agents and the
      Lenders have consented to waive such Past Events of Default based on their
      consideration of certain facts and circumstances presented at the time of
      each request from the Loan Parties for such waiver.  The Loan
      Parties further acknowledge and agree that the Agents and the Lenders are
      under no obligation to waive any future Event of Default arising after the
      date hereof and that the Agents and the Lenders shall determine whether to
      waive any such Event of Default based on facts and circumstances in
      existence when such Event of Default arises.  Nothing herein or
      in any other communication with any Agent or any Lender shall be deemed an
      agreement by any Agent or any Lender to forbear from exercising any and
      all of their rights, remedies, powers, and privileges with respect to any
      other Events of Default.

              


      

       

      
        	
                5.

              	
                Representations and
      Warranties; Ratification of Loan Documents.  In order to
      induce the Agents and the Lenders to enter into this Waiver, each Loan
      Party hereby represents and warrants that except for the Specified Event
      of Default, no Default or Event of Default by any Loan Party exists under
      the Credit

              


      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      
        
          	
                   

                	
                  Agreement
      or under any other Loan Document.  Except as expressly provided
      in this Waiver, all terms and conditions of the Credit Agreement and the
      other Loan Documents shall remain in full force and effect.  The
      Loan Parties hereby ratify, confirm, and re-affirm all terms and
      provisions of the Loan Documents, except that any representation or
      warranty made as of a specific date shall be true and correct only as of
      the date so specified.

                


        

         

        
          
            	
                    6.

                  	
                    Acknowledgement of
      Obligations.  Each of the Loan Parties hereby
      acknowledges and agrees that there is no basis nor set of facts on which
      any amount (or any portion thereof) owed by the Loan Parties under the
      Credit Agreement and the Loan Documents could be reduced, offset, waived,
      or forgiven, by rescission or otherwise;  nor is there any
      claim, counterclaim, offset, or defense (or other right, remedy, or basis
      having a similar effect) available to any of the Loan Parties with regard
      thereto;  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.

                  


          

           

          
            	
                    7.

                  	
                    Waiver of Claims and
      Release.  Each of the Loan Parties hereby acknowledges
      and agrees that it has no offsets, defenses, claims, or counterclaims
      against the Agents, the Lenders, or their respective parents, affiliates,
      predecessors, successors, or assigns, or their officers, directors,
      employees, attorneys, or representatives, with respect to the Obligations,
      or otherwise, and that if any of the Loan Parties now has, or ever did
      have, any offsets, defenses, claims, or counterclaims against such
      Persons, whether known or unknown, at law or in equity, from the beginning
      of the world through this date and through the time of execution of this
      Waiver, all of them are hereby expressly WAIVED, and each of the Loan
      Parties hereby RELEASES such Persons from any liability
      therefor.

                  


          

           

        

      

      
        	
                8.

              	
                Binding
      Effect.  The terms and provisions hereof shall be binding
      upon and inure to the benefit of the parties hereto and their
      representatives, successors and
assigns.

              


      

       

      
        	
                9.

              	
                Multiple
      Counterparts.   This Waiver may be executed in
      multiple counterparts, each of which shall constitute an original and
      together which shall constitute but one and the same
      instrument.

              


      

       

      
        	
                10.

              	
                Governing
      Law.  This Waiver shall be construed, governed, and
      enforced pursuant to the laws of the Commonwealth of Massachusetts,
      without giving effect to principles of conflicts of
  laws.

              


      

       

      
        	
                11.

              	
                Loan
      Document.  This Waiver shall constitute a Loan Document
      for all purposes.  Capitalized terms used herein but not
      otherwise defined herein shall have the meanings assigned to them in the
      Credit Agreement.

              


      

       

      [signature
pages follow]

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      IN
WITNESS WHEREOF, the parties hereto have duly executed this Waiver as of the
date above first written.  This Waiver is intended to take effect as a
sealed instrument.

      


      


      
        	 
      	
                AMERICAN
      APPAREL (USA), LLC,

              
	 
      	
                as
      Lead Borrower and as a Borrower

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      Dov Charney

              
	 
      	
                Name:

              	
                Dov
      Charney

              
	 
      	
                Title:

              	
                Chief
      Executive Officer

              


      

      


      


      
        	 
      	
                AMERICAN APPAREL RETAIL,
      INC.,

              
	 
      	
                as
      a Borrower

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      Dov Charney

              
	 
      	
                Name:

              	
                Dov
      Charney

              
	 
      	
                Title:

              	
                Chief
      Executive Officer

              


      

      


      


      
        	 
      	
                AMERICAN
      APPAREL DYEING &

              
	 
      	
                FINISHING, INC., as a
      Borrower

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      Dov Charney

              
	 
      	
                Name:

              	
                Dov
      Charney

              
	 
      	
                Title:

              	
                Chief
      Executive Officer

              


      

      
 

      
        	 
      	
                KCL KNITTING, LLC, as a
      Borrower

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                American
      Apparel (USA), LLC, its

              
	 	 	sole
      member
	 
      	 
      	 
      
	 
      	 
      	
                By:

              	
                /s/
      Dov Charney

              
	 
      	 
      	
                Name:

              	
                Dov
      Charney

              
	 
      	 
      	
                Title:

              	
                Chief
      Executive Officer

              


      

       

       

      
        
          
          

        

        
          Signature
Page to Waiver to Credit Agreement

          
            

          

        

        
          
          

        

      

      


      
        	 
      	
                AMERICAN APPAREL, LLC,
      as a

              
	 
      	
                Facility
      Guarantor

              
	 
      	 
      
	 
      	
                By:

              	
                American
      Apparel (USA), LLC, its 

              
	 	 	sole
      member
	 
      	 
      	 
      
	 
      	 
      	
                By:

              	
                /s/
      Dov Charney

              
	 
      	 
      	
                Name:

              	
                Dov
      Charney

              
	 
      	 
      	
                Title:

              	
                Chief
      Executive Officer

              


      

      


      


      
        	 
      	
                FRESH AIR FREIGHT, INC.,
      as a

              
	 
      	
                Facility
      Guarantor

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      Dov Charney

              
	 
      	
                Name:

              	
                Dov
      Charney

              
	 
      	
                Title:

              	
                Chief
      Executive Officer

              


      

       

       

       

       

      
        
          
          

        

        
          Signature
Page to Waiver to Credit Agreement

          
            

          

        

        
          
          

        

      

       

      
        	 
      	
                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/
      Stephen J. Garvin

              
	 
      	
                Name:

              	
                Stephen
      J. Garvin

              
	 
      	
                Title:

              	
                Vice
      President

              


      

      


      


      
        	 
      	
                LASALLE
      BANK NATIONAL ASSOCIATION,

              
	 
      	
                as
      Issuing Bank

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      Stephen J. Garvin

              
	 
      	
                Name:

              	
                Stephen
      J. Garvin

              
	 
      	
                Title:

              	
                Vice
      President

              


      

       

       

       

      
 

      
        
          
          

        

        
          Signature
Page to Waiver to Credit Agreement

          
            

          

        

        
          
          

        

      

       

      
        	 
      	
                WELLS FARGO RETAIL FINANCE,
      LLC,

              
	 
      	
                as
      Collateral Monitoring Agent and as a Lender

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      Emily Abrahamson

              
	 
      	
                Name:

              	
                Emily
      Abrahamson

              
	 
      	
                Title:

              	
                Assistant
      Vice President/Account Executive

              


      

       

       

       

       

      
        
          
          

        

        
          Signature
Page to Waiver to Credit Agreement

          
            

          

        

        
          
          

        

      

      
 

      


      
        	 
      	
                NATIONAL CITY BUSINESS CREDIT,
      INC.,

              
	 
      	
                as
      a Lender

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/
      Kathryn C. Ellero

              
	 
      	
                Name:

              	
                Kathryn
      C. Ellero

              
	 
      	
                Title:

              	
                Vice
      President

              


      

      
 

       

      Signature Page to Waiver
to Credit Agreement