ex10.htm


    Exhibit
10.1

     

    PROMISSORY
NOTE

     

    
    

     

    
      	$4,000,000	
               Maturity Date: January 2,
2013

            


    

     

     

    FOR
VALUE RECEIVED, American Apparel (USA), LLC, a California limited liability
company (the “Maker”), hereby
promises to pay to the order of Dov Charney (the “Payee”), his
successors and assigns, on or before the Maturity Date (as hereinafter defined),
the principal sum of FOUR MILLION DOLLARS ($4,000,000),
in lawful money of the United States of America, together with accrued and
unpaid interest hereon from the date hereof plus all other unpaid amounts to be
paid or reimbursed by the Maker pursuant to this Note, in accordance with the
terms hereinafter set forth.

     

    1.           Interest
Rate.  The outstanding principal amount of this Note, together
with all accrued and unpaid interest hereon, shall bear interest at 6.00% per
annum (the “Base
Rate”).  Interest shall be payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year, commencing on
March 31, 2009.  Following the occurrence and during the continuance
of an Event of Default, Maker further promises to pay interest on the
outstanding balance under this Note at a rate of interest (the “Default Rate”) equal
to the Base Rate plus two percent (2.0%) per annum, which amount shall accrue
from the date of such Event of Default until the earlier of the date on which
all amounts due under this Note shall have been paid in full or the date on
which such Event of Default is cured or waived, and shall be paid in kind in
accordance with the terms hereof (“Default
Interest”).  Except as otherwise provided herein, interest
shall be calculated on the basis of a 360-day year of twelve 30-day
months.

     

    All interest that accrues on this Note
shall be paid in kind and added to the outstanding principal amount of this
Note.  Interest that is paid in kind and added to the outstanding
principal amount of this Note, together with any Default Interest accruing
hereunder from time to time, is collectively referred to herein as “Additional PIK
Principal”.  Additional PIK Principal shall be added to the
principal amount of this Note, and shall be considered principal for all
purposes under this Note, and without limiting the foregoing, shall bear
interest at the Base Rate as provided herein, beginning on the date such
interest is paid in kind and the Additional PIK Principal it reflects is added
to the principal amount hereof.

     

    2.           Maturity
Date.  The principal amount of this Note (or, if less, the
unpaid principal balance of such amount) together with all accrued and unpaid
interest hereon plus all other unpaid amounts to be paid or reimbursed by the
Maker hereunder shall be due and payable by the Maker in full on January 2, 2013
(the “Maturity
Date”).

     

    3.           Application of Payments;
Overdue Payments.  Each payment on this Note shall be credited
first to the payment of all fees, costs and expenses for which the Payee is
entitled to reimbursement pursuant to Section 10 hereof, then to accrued but
unpaid interest, and then to the principal.  All payments of the
unpaid principal balance and interest will be made without withholding or
deduction for or on account of any present or future taxes, duties, assessments
or governmental charges of whatever nature, unless the withholding of such taxes
or duties is required by law.

     

    4.           Manner of
Payment.  All payments hereunder shall be made in immediately
available funds to the Payee or to such other payee or address as the Payee may
designate from time to time.  If any payment of principal or interest
on this Note is due on a day which is not a Business Day, as defined below, such
payment shall be due on the next succeeding Business Day, and such extension of


     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    time
shall not be taken into account in calculating the amount of interest payable
under this Note.  “Business Day” means
any day, other than a Saturday or Sunday, that is neither a legal holiday nor a
day on which banking institutions in New York are authorized or required by law,
regulation or executive order to close.

     

    5.           Prepayment.  Unless
such prepayment is then prohibited to be made pursuant to the terms of the
Second Amended and Restated Subordination Agreement, dated as of February 10,
2009 (as amended, restated, amended and restated, supplemented, modified or
replaced from time to time, the “BOA Subordination
Agreement”), among the Holder, Maker and Bank of America, N.A. (successor
by merger to LaSalle Business Credit, LLC, as Agent for LaSalle Bank Midwest
National Association, acting through its division, LaSalle Retail Finance), as
Administrative Agent or the Subordination Agreement, dated as of February 10,
2009, (as amended, restated, amended and restated, supplemented, modified or
replaced from time to time, the “SOF Subordination
Agreement” and, together with the BOA Subordination Agreement, the “Subordination
Agreements”), among the Holder, Maker and SOF Investments, L.P. – Private
IV, the Maker shall have the right to prepay the principal amount hereof in full
or in part, together with all accrued interest on the amount prepaid to the date
of such prepayment, at any time and from time to time (the “Prepayment
Right”).  Any prepayment amount received by the Payee in
connection with the Prepayment Right shall be applied first to the payment of
all fees, costs and expenses for which the Payee is entitled to reimbursement
pursuant to Section 10 hereof, then to accrued but unpaid interest on this Note
through the date of such prepayment, then to principal.  Any such
prepayment shall be payable without any premium or penalty of any
kind.

     

    6.           Covenant.  The
Maker agrees that, until this Note shall have been repaid in full, the Maker
shall pay the principal amount of and interest on this Note on the dates and in
the manner provided herein.

     

    7.           Further
Assurances.  At the Maker’s reasonable expense, the Maker shall
do all acts, furnish to the Payee all agreements, consents, instruments or other
documents, and do or cause to be done all such other things as the Payee may
reasonably request from time to time in order to give full effect to the purpose
and provisions of this Note.  If the Maker fails to perform any act
required by this Note, the Payee may perform, or cause performance of, such act,
and the expenses of the Payee therewith shall be reimbursed upon demand by the
Maker in accordance with Section 10 hereof.

     

     

    8.           Events of
Default.  Each of the following events shall constitute an
“Event of
Default” hereunder (whether it shall be voluntary or involuntary or occur
or be effected by operation of law or otherwise):

     

     

    (a)           a
failure on the part of the Maker to make any payment of principal when due under
this Note (except to the extent such payment is then prohibited to be made
pursuant to the terms of either Subordination Agreement);

     

     

    (b)           a
failure on the part of the Maker to make any payment of interest when due under
this Note and such failure shall continue for 30 days (except to the extent such
payment is then prohibited to be made pursuant to the terms of either
Subordination Agreement);

     

     

    (c)           the
Maker shall commence (or take any action for the purpose of commencing) any
proceeding under any bankruptcy, insolvency, readjustment of debt, moratorium or
similar law or statute or make (or take any action for the purpose of making) a
general assignment for the benefit of its creditors or shall admit in writing
its inability to pay its debts generally as they become due;

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    (d)           a
proceeding shall be commenced against the Maker under any bankruptcy,
insolvency, readjustment of debt, moratorium or similar law or statute and
relief is ordered against it, or the proceeding is controverted but is not
dismissed within thirty (30) days after the commencement thereof;

     

     

    (e)           the
Maker consents to or suffers the appointment of a receiver, trustee or custodian
to any substantial part of its assets that is not vacated within thirty (30)
days after such appointment; or

     

     

    (f)           any
event occurs in relation to the Maker which under the law of any relevant
jurisdiction has an analogous or equivalent effect to any of the events
mentioned in clause (c), (d) or (e) of this Section 8.

     

     

    The
Maker shall notify the Payee promptly (but in no event later than five (5)
Business Days following the occurrence of any Event of Default) in writing of
the occurrence of such Event of Default.

     

     

    9.           Remedies.

     

    (a)           If
an Event of Default shall occur and be continuing, then the Payee may, by notice
in writing to the Maker, (i) declare the then correct principal of and accrued
interest on this Note to be, and the same shall upon such notice forthwith
become, immediately due and payable and (ii) in addition to all rights and
remedies available to it at law, exercise any or all of its rights and remedies
under this Note; provided, however, that when
any Event of Default described in clause (c), (d), (e) or (f) of Section 8 has
occurred and is continuing, then all amounts in respect of principal and
interest under this Note shall immediately become due and payable, without
presentment, demand of payment, protest, notice of intent to accelerate, notice
of acceleration or notice of any kind, all of which are hereby expressly
waived.

     

    (b)           No
failure or delay by the Payee in exercising any remedy, right, power or
privilege under this Note shall operate as a waiver of such remedy, right, power
or privilege, nor shall any single or partial exercise of such remedy, right,
power or privilege preclude any other or further exercise of such remedy, right,
power or privilege.  No remedy, right, power or privilege conferred
upon or reserved to the Payee by this Note is intended to be exclusive of any
other remedy, right, power or privilege provided or permitted by law, but each
shall be cumulative and in addition to every other remedy, right, power or
privilege so provided or permitted and each may be exercised concurrently or
independently from time to time and as often as may be deemed expedient by the
Payee.

     

    10.           Expenses.  From
time to time, the Maker shall reimburse the Payee upon demand for all reasonable
fees, costs and expenses (including the fees, costs and expenses of counsel and
court costs) incurred after the date of this Note in connection with (a) the
collection of any outstanding principal and interest accrued hereunder (whether
or not suit is filed to enforce the terms hereof) and (b) the enforcement of any
rights or remedies provided for pursuant to this Note.  The provisions
of this Section 10 shall survive the termination of this Note.

     

    11.           Waivers.  The
Maker hereby waives diligence, presentment, demand of payment, protest, notice
of intent to accelerate, notice of acceleration and all other notices and
demands whatsoever with respect to such liabilities and obligations or to any
action under this Note, except as specifically provided for in this
Note.  The Maker further agrees that it shall remain liable for all
amounts due hereunder notwithstanding any extension of time or any change in the
terms of payment of this Note granted by the Payee or any delay or failure by
the Payee to exercise any rights hereunder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    12.           Governing Law;
Severability.  This Note shall be governed by and construed in
accordance with the internal laws of the State of New York, including, without
limitation, Section 5-1401 of the New York General Obligations
Law.  All claims and proceedings arising from or related to this Note,
shall be adjudicated solely by the federal or state courts of New York, and the
parties hereby attorn to the jurisdiction thereof.  Whenever possible,
each provision of this Note shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision hereof is in
conflict with any applicable law or is otherwise unenforceable for any reason
whatsoever, then such invalidity, illegality or unenforceability shall not
affect any other provision hereof, and this Note shall be construed as if such
invalid, illegal or unenforceable provision had never been contained
herein.

     

    13.           Amendment;
Waiver.  No amendment to this Note shall be effective unless in
writing signed by the Maker and the Payee.  No waiver of any provision
of this Note and no consent to any departure by the Maker hereunder shall be
effective unless in writing signed by the Payee.

     

    14.           Registration.  The
Maker will maintain, at its principle place of business, a register of the
Payee(s) of this Note (the “Register”), and will
update the Register to reflect any permitted assignments or transfers subsequent
to the date hereof.  The Maker will make payments of principal and
interest as specified hereunder to the Payee(s) named as such in the
Register.  The Payee shall notify the Maker in writing prior to any
assignment, transfer or other disposition of this Note (or any portion hereof)
or such Payee’s rights or interests hereunder, with such written notice to be
delivered to the Maker not later than one (1) Business Day prior to any such
assignment, transfer or disposition and which notice shall specify the principal
amount hereunder that is the subject of such assignment, transfer or
disposition.  Notwithstanding anything to the contrary herein, (i) the
registered owner of this Note (or any portion hereof) as indicated on the
Register shall be the party with the exclusive right to receive payment of any
principal amount and accrued and unpaid interest on this Note and (ii) payments
required to be made hereunder shall not be subject to counter-claim or offset of
any nature whatsoever.

     

    15.           Loss, Mutilation,
Etc.  Upon notice from the Payee to the Maker of the loss,
theft, destruction or mutilation of this Note, and upon receipt of an indemnity
reasonably satisfactory to the Maker from the Payee or, in the case of
mutilation hereof, upon surrender of the mutilated Note, the Maker will make and
deliver a new note of like tenor in lieu of this Note.

     

    16.           Notices.  All
notices, consents, waivers or other communications required or permitted
hereunder to be delivered to the Maker shall be in writing and shall be mailed
by registered or certified mail, return receipt requested, postage prepaid or
otherwise delivered by hand, by messenger or an internationally recognized
courier (charges prepaid) or facsimile transmission, addressed to the Maker at
747 Warehouse St., Los Angeles, CA 90021.  Each such notice, consent,
waiver or other communication shall for all purposes hereunder be treated as
effective or as having been given when delivered, if delivered by hand or by
messenger (or internationally recognized courier), 24 hours after confirmed
receipt if sent by facsimile transmission or at the earlier of its receipt or on
the second (2nd)
Business Day after mailing, if mailed, as aforesaid.

     

    17.           Subordination
Agreements.  Each of the Maker and the Holder (by the Holder’s
acceptance hereof) expressly acknowledges and agrees that the rights and
obligations of the Maker and the Holder hereunder are subject to the terms and
conditions of the Subordination Agreements.  Notwithstanding the
foregoing, in the event of any conflict between the terms of this Note and any
Subordination Agreement, the terms of such Subordination Agreement shall govern,
and in the event of any conflict between the terms of the BOA Subordination
Agreement and the SOF Subordination Agreement, the terms of the BOA
Subordination Agreement shall govern.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN WITNESS WHEREOF, this Note
has been executed and delivered by the undersigned on the 10th day of February,
2009.

     

    


    
      
        
          	 
      	 
      	 
      	
                  AMERICAN
      APPAREL (USA), LLC

                
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                  By:

                	
                  /s/
      Dov Charney

                	 
      
	 
      	 
      	 
      	
                   

                	
                        
                    Name: 
      Dov Charney

                  

                
	 
      	 
      	 
      	
                   

                	
                        
                    Title:    
      Chief Executive
Officer