Document:

Exhibit 10.4

 Exhibit 10.4 

 

			
	WAIVER, CONSENT, AND EIGHTH	 	
	AMENDMENT TO CREDIT AGREEMENT	 	BANK OF AMERICA, N.A.    

 
 Date: April 26, 2011

 THIS WAIVER, CONSENT, AND EIGHTH AMENDMENT TO CREDIT AGREEMENT (this “Eighth Amendment”) is made to the Credit
Agreement (as amended, the “Credit Agreement”) dated as of July 2, 2007 by and among: 
 (a) AMERICAN
APPAREL (USA), LLC (f/k/a AAI Acquisition LLC (successor-by-merger to American Apparel, Inc.)), a limited liability company organized under the laws of the State of California, with its principal executive offices at 747 Warehouse Street, Los
Angeles, California 90021, for itself and as agent (in such capacity, the “Lead Borrower”) for the other Borrowers now or hereafter party to the Credit Agreement; and 

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

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

(d) 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), 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; and 
 (e) 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), 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; and

 (f) WELLS FARGO BANK, NATIONAL ASSOCIATION (successor by merger to 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 

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

(h) BANK OF AMERICA, N.A. (successor by merger to LaSalle Bank National Association), a national banking association with offices
at 100 Federal Street, 9th Floor, Boston, Massachusetts 02110, as Issuing Bank; 
 in consideration of the mutual covenants herein contained and
benefits to be derived herefrom, the parties hereto agree as follows: 
 Background: 

A. Waiver. On April 1, 2011, the Administrative Agent and the Collateral Agent notified the Loan Parties that they were in
Default under the Credit Agreement as a result of the Loan Parties’ failure to comply with Section 5.01(a) of the Credit Agreement in that the year-end Consolidated balance sheet and related statements of operations, and Consolidated
statements of stockholders’ equity and cash flows as of the end of and for 2010 for the Lead Borrower and its Subsidiaries contained a “going concern” or like qualification or exception (the “Specified Default”). On
April 16, 2011, the Specified Default became an Event of Default (the “Specified Event of Default”). The Administrative Agent and the Collateral Agent expressly reserved all of the Agents’ and the Lenders’ rights and
remedies under the Credit Agreement and the other Loan Documents as a consequence of the Specified Default and the Specified Event of Default. The Loan Parties have requested that the Agents and the Lenders waive the Specified Default and the
Specified Event of Default, and the Agents and the Lenders are willing to do so, but only upon the terms and conditions set forth in this Eighth Amendment. 
 B. Consent. The Loan Parties have requested that the Agents and the Lenders consent to the execution by the Lead Borrower and the Loan Parties of, and their entry into, that certain Waiver and
Sixth Amendment to Credit Agreement with Wilmington Trust FSB, as Administrative Agent, to be effective simultaneously with the execution and effectiveness of this Eighth Amendment, and the Agents and the Lenders are willing to do so, but only upon
the terms and conditions set forth in this Eighth Amendment. 
 C. Amendment. The parties hereto entered into that
certain First Amendment to Credit Agreement on October 11, 2007, that certain Second Amendment and Waiver to Credit Agreement on November 26, 2007, that certain Third Amendment to Credit Agreement on December 12, 2007, that certain
Fourth Amendment to Credit Agreement on June 20, 2008, that certain Fifth Amendment to Credit Agreement on December 19, 2008, that certain Sixth Amendment to Credit Agreement on March 13, 2009, and that certain Seventh Amendment to
Credit Agreement on December 30, 2009. The parties hereto desire to further amend the Credit Agreement on the terms and conditions set forth herein. 

  
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 Accordingly, it is hereby agreed, as follows: 

 

	1.	Waiver of Specified Default and Specified Event of Default. The Agents and the Lenders, with the Consent of the Required Lenders, hereby waive the Specified
Default and the Specified Event of Default. The foregoing waiver shall not take effect upon the execution of this Eighth Amendment by the Agents and the Lenders, and only shall become effective upon satisfaction in full of each of the Preconditions
to Effectiveness set forth in Section 6 below. Further, the foregoing waiver relates only to the Specified Default and the Specified Event of Default, is a one-time waiver, shall not be deemed to constitute a waiver with respect to any other
non-compliance with the terms and conditions of the Credit Agreement, any of the other Loan Documents, or this Eighth Amendment, whether now existing or hereafter arising, and is granted in express reliance upon the terms and conditions of this
Eighth Amendment, including all representations, warranties, and covenants of the Loan Parties set forth herein. 

  

	2.	Provisions Relating to Financial Performance and Controls. 

  

	 	a.	Retention of FTI Consulting, Inc. On or before the effectiveness of this Eighth Amendment, the Parent shall formally retain FTI Consulting, Inc. and Mark
Weinsten (or any successor or replacement reasonably acceptable to the Administrative Agent) (“FTI/Weinsten”) as Chairman of the Parent’s Office of Special Programs (“OSP”), as described below. Unless and until
terminated in accordance with Section 4 below, FTI/Weinsten shall continue to be retained by the Parent and serve as Chairman of the OSP at all times, and FTI/Weinsten shall maintain and exercise all of the power, authority, and responsibility
as set forth in the Amendment to Engagement Letter between the OSP and FTI/Weinsten dated April 17, 2011. 

  

	 	b.	Creation of the Office of Special Programs. On or before the effectiveness of this Eighth Amendment, the Parent shall establish the OSP, initially comprised of
FTI/Weinsten, as Chairman, Thomas Casey, and John Luttrell. The OSP shall report directly to the Parent’s Audit Committee of its Board of Directors. Unless and until terminated in accordance with Section 4 below, the OSP shall continue to
be maintained by the Parent at all times and the OSP shall maintain and exercise all of the power, authority, and responsibility that is usual and customary for such offices. 

  
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	 	i.	On or before May 31, 2011, the OSP shall develop a business and operating plan for the remainder of the fiscal year ending December 31, 2011 (the
“Operating Plan”) for the Loan Parties (x) as approved by the Audit Committee, and (y) acceptable to the Agents, with the Consent of the Required Lenders. Thereafter, the OSP shall have power and authority to implement and
execute the Operating Plan, and the Loan Parties shall use their good faith efforts to operate their businesses in accordance with the Operating Plan. 

  

	 	ii.	Any amendment of the Operating Plan shall be made solely by OSP, subject to the approval of the Agents, with the Consent of the Required Lenders.

  

	 	iii.	Not later than December 31, 2011, the OSP shall present to the Agents an updated and extended Operating Plan for the Loan Parties reasonably acceptable to the
Agents, with the Consent of the Required Lenders (not to be unreasonably withheld), covering the period commencing upon the expiry of the initial Operating Plan and ending on the Maturity Date. 

 

	 	c.	Cash Flow Budget. On or before April 26, 2011, the OSP shall prepare and deliver a 13 week cash flow budget (the “CF Budget”) with respect
to the Loan Parties’ operations, and the CF Budget shall be updated and extended no later than every 10 week period thereafter for the 13 week period commencing immediately after the expiry of the then extant CF Budget, such that a 13 week CF
Budget is in place and effective at all times. Each CF Budget shall include, among other things, receipts from Affiliates and require collections on accounts due from Affiliates on a current basis (to the extent that funds are available to make the
required payments on a current basis, provided that to the extent that the Loan Parties represent that funds are not so available to the Affiliates, FTI/Weinsten shall have confirmed and then certified to the Agents and the Lenders that
(i) sufficient funds are not available for such payments, and (ii) the absence of sufficient funds has not been caused by the Affiliates’ direct expenditure of funds in connection with items described in the then current CF Budget in
lieu of the Loan Parties’ expenditure of funds therefor). The initial CF Budget, each extension thereof, and any amendments to any CF Budget shall be in form and substance reasonably acceptable to the Agents, with the Consent of the Required
Lenders (not to be unreasonably withheld). The Loan Parties shall use their commercially reasonable, good faith efforts to conduct their operations in accordance with the then effective CF Budget. 

  
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	 	i.	The Loan Parties acknowledge and agree that no disbursements by the Loan Parties shall be made without the prior written approval of FTI/Weinsten. The Loan Parties
shall perform in accordance with the then effective CF Budget (i) within ninety percent (90%) of aggregate projected cumulative receipts as shown in the then effective CF Budget, tested on a rolling three-week basis as of the close of
business on Saturday of each week with respect to the most recently ended three-week period, with the first such test to be performed as of May 14, 2011, and (ii) within one hundred ten percent (110%) of aggregate projected cumulative
disbursements as shown in the then effective CF Budget, tested weekly as of the close of business on Saturday of each week, with the first such test to be performed as of April 30, 2011. 

	 	ii.	Weekly, on or before 5:00 pm prevailing Eastern time on Tuesday of each week, the OSP shall submit to the Agents a report (the “Variance Report”),
which reflects on a line-item basis the Loan Parties’ actual cash flow performance compared to the CF Budget for the immediately preceding week and on a cumulative basis for the period from the date of the then effective CF Budget through the
close of business for the immediately preceding week, and the percentage variance of the Loan Parties’ actual cash flow results from those reflected in the then extant CF Budget, along with an explanation of such variance(s). Each Variance
Report shall be certified by FTI/Weinsten that it is true, accurate, and complete in all material respects, and that the Loan Parties have operated in compliance with the then extant CF Budget and the terms and conditions of this Eighth Amendment.

  

	 	d.	Borrowing Base Certificates. Each Borrowing Base Certificate submitted pursuant to Section 5.01(e) of the Credit Agreement shall be certified by
FTI/Weinsten to be true, accurate, and complete in all material respects, and contain their representation and warranty to the Agents and the Lenders that all requests for Borrowings are in compliance with the then effective CF Budget, subject to
variances permitted by this Eighth Amendment. 

  
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	3.	Amendments to Credit Agreement. Subject to satisfaction of each and all of the Preconditions to Effectiveness set forth in Section 6 below, the Credit
Agreement is amended as of the Eighth Amendment Effective Date (as defined below) as follows: 

  

	 	a.	By deleting Exhibit “M” to the Credit Agreement, “Financial Performance Covenants”, and substituting a new Exhibit “M”, in the form of
Exhibit “M” annexed hereto, in its place. 

  

	 	b.	Notwithstanding the provisions of Section 5.08 of the Credit Agreement relating to the frequency with which appraisals, examinations, and audits may be conducted,
the Agents may employ (A) an independent appraiser to conduct (i) a so-called “desktop appraisal” of the Loan Parties inventory each month, and (ii) comprehensive appraisals of the Loan Parties’ inventory each calendar
quarter, and (B) an independent consultant to conduct a field examination and audit each calendar quarter. Each of the foregoing appraisals, examinations, and audits shall be conducted in accordance with the terms and conditions of the Credit
Agreement, and each shall be conducted at the Loan Parties’ cost and expense. The Administrative Agent is hereby authorized to make a Revolving Credit Loan under the Credit Agreement to pay all fees, costs, and expenses incurred in connection
with each appraisal, examination, and audit. 

  

	 	c.	By adding the following new definitions to Section 1.01 thereof in their respective appropriate alphabetical order: 

“ “Eighth Amendment” means that certain Waiver, Consent, and Eighth Amendment to Credit Agreement dated as of
April 26, 2011, by and between, among others, the Loan Parties, the Agents, the Collateral Monitoring Agent, and the Lenders party thereto.” 
 “ “Eighth Amendment Effective Date” means April 26, 2011.” 
  

	 	d.	By amending the definition of “Disclosed Matters” by adding the following language at the end thereof: 

“and all matters disclosed in filings with the SEC made by the Parent prior to the Eighth Amendment Effective Date.” 

 

	 	e.	By amending Section 3.04 by adding the following language at the end of the last sentence thereof: 

“(other than Disclosed Matters).” 
  

	 	f.	By amending Section 3.17 by adding the following language at the end of the first sentence thereof: 

“(other than as a result of any Disclosed Matters).” 

  
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	 	g.	By deleting subsection 6.07(a) in its entirety and substituting the following in its place: 

“(a) No Loan Party will, or will permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any
Restricted Payment other than Permitted Dividends.” 
  

	 	h.	By adding a new subsection 7.01(x) in its appropriate alphabetical place, as follows: 

“(x) The failure of the Loan Parties to promptly, punctually, and faithfully perform all and singular the terms and conditions of the
Eighth Amendment in accordance with its terms.” 
  

	4.	Termination of FTI/Weinsten and Dissolution of the OSP. The Lead Borrower may request the termination of the effectiveness of the provisions of Section 2
above, including the termination of FTI/Weinsten and the dissolution of the OSP, at any time after August 31, 2011, if: 

  

	 	a.	The Loan Parties have complied with each and all of the terms and conditions of this Eighth Amendment; 

 

	 	b.	No Default or Event of Default then exists; and 

  

	 	c.	The Loan Parties (i) have demonstrated Excess Availability of at least $25,000,000.00, and (ii) satisfy a trailing twelve month minimum Consolidated Fixed
Charge Coverage Ratio of not less than 1.10:1.0. 

 Any such request for termination may be granted or withheld by
the Agents, in their sole and exclusive discretion, and may be conditioned upon such other and further terms and conditions as the Agents, in their sole and exclusive discretion, may require. No such termination shall take effect unless and until
confirmed in writing by the Agents, with the Consent of the Required Lenders. 
  

	5.	 Waiver and Amendment Fee. In consideration of the Agents and the Lenders entering into this Eighth Amendment, the Loan Parties shall pay to the
Administrative Agent, for the ratable benefit of each Lender executing this Eighth Amendment, a waiver and amendment fee (the “Waiver and Amendment Fee”) in the amount of $375,000.00. The Waiver and Amendment Fee shall be fully
earned as of the Eighth Amendment Effective Date, shall not be subject to refund or rebate under any circumstance, and shall not be subject to reduction by way of 

  
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setoff or counterclaim. The Waiver and Amendment Fee shall be payable in five (5) consecutive monthly installments, each in the amount of $75,000.00, with the first such monthly installment
due on April 30, 2011, and each subsequent installment due on the last day of each succeeding calendar month. The Administrative Agent is hereby authorized to make a Revolving Credit Loan under the Credit Agreement to pay each installment of
the Waiver and Amendment Fee. Any unpaid installment of the Waiver and Amendment Fee shall be accelerated and be immediately due and payable in full upon the occurrence of any Default or Event of Default after the Eighth Amendment Effective Date.

  

	6.	Preconditions to Effectiveness. This Eighth Amendment shall not become effective unless and until, on or before April 26, 2011, each and all of the
following conditions have been satisfied, in each case to the satisfaction of the Agents, in their sole and exclusive discretion exercised in good faith: 

  

	 	a.	The Lead Borrower, the other Borrowers, and the Facility Guarantors shall have delivered to the Administrative Agent duly executed copies of this Eighth Amendment.

  

	 	b.	The Agents shall have received whatever documents and certificates as the Agents or their counsel may reasonably request relating to the authorization of the
transactions contemplated by this Eighth Amendment, all in form and substance reasonably satisfactory to the Agents and their counsel. 

  

	 	c.	The Lead Borrower, the Borrowers, and the Facility Guarantors 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 Eighth Amendment, in order to confirm and implement the terms and conditions of this Eighth Amendment, including without limitation, such corporate governance
documentation for the Loan Parties confirming the retention of FTI/Weinsten as the Chairman of the OSP and the creation of the OSP. 

  

	 	d.	The Agents shall have confirmed receipt by the Lead Borrower of not less than $10,500,000 in new equity from Michael Serruya, among others, on terms and conditions
acceptable to the Agents, with the consent of the Required Lenders, as provided in that certain Purchase and Investment Agreement dated as of April 21, 2011, a fully executed copy of which shall have been delivered to the Administrative Agent.

  
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	 	e.	The Agents shall have received a fully executed copy of the Waiver and Sixth Amendment to Credit Agreement entered into by the Lead Borrower, the Loan Parties, and
Wilmington Trust FSB, as Administrative Agent, dated April 26, 2011, and that Waiver and Sixth Amendment shall be fully effective with all conditions precedent contained therein having been satisfied or waived simultaneously with the
effectiveness of this Eighth Amendment. 

  

	 	f.	The Borrowers shall have reimbursed the Agents for all Credit Party Expenses incurred by the Agents incidental to the Specified Default and the negotiation and
preparation of this Eighth Amendment and all documents, instruments, and agreements incidental hereto or thereto. The Administrative Agent is hereby authorized to make a Revolving Credit Loan under the Credit Agreement to pay such Credit Party
Expenses, and the Administrative Agent agrees to do so upon satisfaction of the condition precedent set forth in Section 6(a) above, the foregoing being deemed satisfaction of the condition precedent set forth in this Section 6(e).

  

	 	g.	No Default (other than the Specified Default) or Event of Default shall exist. 

 

	 	h.	Except as set forth on Schedule 3.06 to the Credit Agreement and other than as disclosed in filings with the SEC made by the Parent prior to the Eighth Amendment
Effective Date, there shall not be pending any litigation or other proceeding, the result of which could reasonably be expected to have a Material Adverse Effect. 

 

	7.	Ratification of Loan Documents. No Claims against any Credit Party. 

 

	 	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 Loan Party
hereby ratifies, confirms, and re-affirms all terms and provisions of the Loan Documents. 

  

	 	b.	Each Loan Party hereby makes all representations, warranties, and covenants set forth in the Loan Documents as of the date hereof (other than representations,
warranties and covenants that relate solely to an earlier date). To the extent that any changes in any representations, warranties, and covenants require any amendments to the schedules or exhibits to the Loan Documents, such schedules and exhibits
are hereby updated, as evidenced by any supplemental schedules and exhibits (if any) annexed to this Eighth Amendment. 

  
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	 	c.	Each Loan Party represents and warrants to the Administrative Agent and each Lender that as of the date of this Eighth Amendment after giving effect to this Eighth
Amendment, no Default (other than the Specified Default) or Event of Default exists. 

  

	 	d.	Each Loan Party 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 Loan Parties 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 Loan Parties 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. 

  

	 	e.	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, 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 Eighth Amendment, all of them are hereby expressly
WAIVED, and each of the Loan Parties hereby RELEASES such Persons from any liability therefor. 

  

	8.	Acknowledgment of Obligations. The Loan Parties hereby acknowledge and agree that the Loan Parties are unconditionally liable to the Credit Parties for
the following amounts which constitute a portion of the Obligations in accordance with the terms of the Credit Agreement, as of the date hereof: 

  

	 	a.	For outstanding Credit
Extensions:                                       
                      $58,701,907.99 

  

	 	b.	For all amounts now due, or hereafter coming due, to any Agent, any Lender or any of their respective Affiliates with respect to cash management, ACH, depository,
investment, banker’s acceptance, letter of credit, Hedge Agreement, or other banking or financial services provided by any Agent, any Lender or any such Affiliate to any Loan Party. 

 

	 	c.	 For all interest heretofore or hereafter accruing under the Loan Documents, for all fees heretofore or hereafter accruing under the Loan

  
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Documents, and for all Credit Party Expenses and other fees, costs, expenses, and costs of collection heretofore or hereafter incurred by the Lenders, and any other amounts due under, the Loan
Documents, including, without limitation, all interest, fees and expenses that accrue after the commencement of any case or proceeding by or against any Loan Party under the Bankruptcy Code or any state, federal or provincial bankruptcy, insolvency,
receivership, or similar law, whether or not allowed in such case or proceeding. 

  

	9.	Miscellaneous. 

  

	 	a.	Capitalized terms used herein but not otherwise defined shall have the meanings given to them in the Credit Agreement, as amended by this Eighth Amendment.

  

	 	b.	This Eighth 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. This Eighth Amendment constitutes a Loan Document for all purposes. 

  

	 	c.	This Eighth 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. 

  

	 	d.	Any determination that any provision of this Eighth 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 Eighth Amendment. 

 

	 	e.	In connection with the interpretation of this Eighth 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. 

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

  

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

  

	 	f.	Each Loan Party agrees that any suit for the enforcement of this Eighth Amendment or any other Loan Document may be brought in the courts of the Commonwealth of
Massachusetts sitting in Boston, Massachusetts or any federal court sitting therein as the Administrative Agent may elect in its sole discretion and consents to the non-exclusive jurisdiction of such courts. Each party to this Eighth Amendment
hereby waives any objection which it may now or hereafter have to the venue of any such suit or any such court or that such suit is brought in an inconvenient forum and agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Eighth Amendment shall affect any right that any Credit Party may otherwise have to bring any action or proceeding
relating to this Eighth Amendment against a Loan Party or its properties in the courts of any jurisdiction. 

  

	 	g.	Each Loan Party agrees that any action commenced by any Loan Party asserting any claim or counterclaim arising under or in connection with this Eighth Amendment or any
other Loan Document shall be brought solely in a court of the Commonwealth of Massachusetts sitting in Boston, Massachusetts or any federal court sitting therein as the Administrative Agent may elect in its sole discretion and consents to the
exclusive jurisdiction of such courts with respect to any such action. 

  

	 	h.	The Agents, the Lenders, the Borrowers, and the Facility Guarantors have prepared this Eighth 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, the Borrowers, and the Facility Guarantors and shall not be construed against any party.

 [Signatures Follow] 

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

					
	AMERICAN APPAREL (USA), LLC (f/k/a AAI Acquisition LLC (successor-by-merger to American Apparel, Inc.), 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, Consent, and Eighth Amendment to Credit Agreement 

 
			
	FRESH AIR FREIGHT, INC., as a Facility Guarantor
		
	By:	 	 /s/ Dov Charney

	Name:	 	 Dov Charney

	Title:	 	 CEO

	
	AMERICAN APPAREL, INC. (f/k/a Endeavor Acquisition Corp.), as a Facility Guarantor
		
	By:	 	 /s/ Thomas M. Casey

	Name:	 	 Thomas M. Casey

	Title:	 	 Acting President

  
 Signature
Page to Waiver, Consent, and Eighth Amendment to Credit Agreement 

 
			
	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, as Collateral Agent, as Swingline Lender and as Lender
		
	By:	 	 /s/ David Vega

	Name:	 	 David Vega

	Title:	 	 Managing Director

	
	BANK OF AMERICA, N.A. (successor by merger to LaSalle Bank National Association), as Issuing Bank
		
	By:	 	 /s/ David Vega

	Name:	 	 David Vega

	Title:	 	 Managing Director

  
 Signature
Page to Waiver, Consent, and Eighth Amendment to Credit Agreement 

 
			
	WELLS FARGO BANK, NATIONAL ASSOCIATION (successor by merger to Wells Fargo Retail Finance, LLC), as Collateral Monitoring Agent and as a Lender
		
	By:	 	 /s/ Emily Abrahamson

	Name:	 	 Emily Abrahamson

	Title:	 	 Vice President

  
 Signature
Page to Waiver, Consent, and Eighth Amendment to Credit Agreement 

 
			
	PNC BANK, as successor to NATIONAL CITY BANK, as further successor to NATIONAL CITY BUSINESS CREDIT, INC., as a Lender
		
	By:	 	 /s/ Tom Buda

	Name:	 	 Tom Buda

	Title:	 	 Vice President

  
 Signature
Page to Waiver, Consent, and Eighth Amendment to Credit Agreement 

 Exhibit M 
 FINANCIAL PERFORMANCE COVENANTS 
 1. Minimum Excess Availability. From and after the Eighth
Amendment Effective Date, the Loan Parties shall at all times maintain Excess Availability in an amount not less than the greater of (a) fifteen percent (15%) of the lesser of (i) the Borrowing Base and (ii) the Revolving Credit
Ceiling, or (b) $12,500,000.00.Exhibit 10.5

 Exhibit 10.5 
 WAIVER AND SIXTH AMENDMENT TO CREDIT AGREEMENT 
 WAIVER AND SIXTH AMENDMENT, dated
as of April 26, 2011 (this “Amendment”), under and to the Credit Agreement dated as of March 13, 2009 (as heretofore amended, supplemented or otherwise modified, the “Credit Agreement”), among American
Apparel, Inc., a corporation organized under the laws of the State of Delaware (the “Borrower”), the Facility Guarantors from time to time party thereto, Wilmington Trust FSB, in its capacity as Administrative Agent thereunder and
in its capacity as Collateral Agent thereunder, and the Lenders from time to time party thereto. 
 W I T N E S S E T H:

 WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, certain loans and other
extensions of credit to the Borrower; 
 WHEREAS, the Borrower and the Required Lenders have agreed to waive and to amend
certain provisions of the Credit Agreement on the terms and subject to the conditions set forth in this Amendment; and 
 NOW
THEREFORE, in consideration of the premises and mutual covenants contained in this Amendment, the undersigned hereby agree as follows: 
 I. Defined Terms; Interpretation; Etc. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Credit Agreement (as amended hereby). 

II. Amendments to Credit Agreement. 
 (a) Amendments to Section 1.01 – Definitions. 
 (i) The definition
of “Loans” contained in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows: 
 ““Loans” means all loans made pursuant to this Agreement pursuant to Section 2.01, all PIK Interest, if any, that has been added to the principal balance of the Loans on any
Interest Payment Date pursuant to Section 2.04, the Closing Date PIK Fee that has been added to the principal balance of the Loans on the Closing Date pursuant to Section 2.01(c), the Fifth Amendment PIK Fee that has been added to the
principal balance of the Loans on the Fifth Amendment Effective Date pursuant to Section 2.01(c) and any Warrant PIK Fee that has been added to the principal balance of the Loans on any Warrant PIK Fee Date pursuant to
Section 2.01(c).” 
 (ii) Section 1.01 of the Credit Agreement is hereby amended by adding the following new
definitions in proper alphabetical order: 
 “Adjustment PIK Payment” has the meaning provided in
Section 5.16(c). 
 “Closing Price” means on any particular date (a) the last sale price per share of
the Borrower common stock on such date on the NYSE Amex or another registered national stock exchange on which the Borrower common stock is then listed, or if there is no such price on such date, then the closing bid price or last sale price, as
applicable, on such exchange or quotation system on the date nearest preceding such date, or (b) if the Borrower common stock is not listed then on the NYSE Amex or any registered national stock exchange, the closing bid price or last sale
price, as applicable, for a share of Borrower common stock in the 

 
over-the-counter market, as reported by the OTC Bulletin Board or by the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices)
at the close of business on such date, or (c) if the Borrower common stock is not then reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting
prices), then the average of the “Pink Sheet” quotes for the five trading days preceding such date of determination, or (d) if the Borrower common stock is not then publicly traded the fair market value of a share of Borrower common
stock (as determined by the Board of Directors of the Borrower or any authorized committee thereof acting in good faith, assuming a willing buyer and a willing seller, provided that no minority or illiquidity discount shall be taken into account and
no consideration shall be given to any restrictions on transfer, or to the existence or absence of, or any limitations on, voting rights); provided, that all determinations of the Closing Price shall be appropriately adjusted for any stock
dividends, stock splits or other similar transactions during such period. 
 “Existing Warrants” has the meaning
provided in Section 5.16(a). 
 “FTI/Weinsten” means FTI Consulting Inc. and Mark Weinsten, or any
successor or replacement approved by the Audit Committee of the Board of Directors of the Borrower. 
 “Initial Equity
Sale” has the meaning provided in Section 5.16(a). 
 “Office of Special Programs” means the
Borrower’s Office of Special Programs, comprised initially of FTI/Weinsten, as Chairman, Thomas Casey, and John Luttrell (or such other Persons approved by the Audit Committee of the Board of Directors of the Borrower), which reports directly
to the Borrower’s Audit Committee of its Board of Directors. 
 “Operating Plan” has the meaning provided
in Section 6.16(c). 
 “Purchaser” has the meaning provided in Section 5.16(a). 

“Realization Date” means the earliest to occur of (a) June 30, 2011, (b) any filing for bankruptcy by any
Loan Party, (c) the execution of any definitive agreement for or public announcement of (i) any sale of all or substantially all assets of the Borrower and its Subsidiaries on a consolidated basis or (ii) any acquisition of the
Borrower or of all or substantially all of the Borrower’s assets by a third party or any acquisition by the Borrower of a significant amount of equity or assets, other than in the ordinary course of business (in each case, whether by way of
merger, consolidation or other similar transaction, but excluding transactions solely among the Borrower and any of its subsidiaries), (d) any announcement or commencement of any tender or exchange offer for Borrower common stock (other than by
or on behalf of any of the Lenders or their Affiliates or any “group” (within the meaning of the Securities and Exchange Act of 1934, as amended) that includes the Lenders or any of their Affiliates), (e) any solicitation of proxies
for any director candidate not proposed or approved by the Borrower or a majority of its Board of Directors (excluding any solicitation by or on behalf of any of the Lenders or their Affiliates or any “group” (within the meaning of the
Securities and Exchange Act of 1934, as amended) that includes the Lenders or any of their Affiliates) or (f) the occurrence of, or any event that would result in, a Change of Control. 

“Sixth Amendment” means the Waiver and Sixth Amendment to the Credit Agreement, dated as of April 26, 2011, among
the Borrower, the Facility Guarantors party thereto, Wilmington Trust FSB, in its capacity as Administrative Agent thereunder and in its capacity as Collateral Agent thereunder, and the Lenders from time to time party thereto. 

  
 2 

 “Sixth Amendment Effective Date” means the effective date under, and as
defined in, Section IV(a) of the Sixth Amendment. 
 “trading day” means (a) a day on which the Borrower
common stock is traded on the NYSE Amex, or (b) if the Borrower common stock is not traded on the NYSE Amex, a day on which the Borrower common stock is quoted in the over-the-counter market as reported by the OTC Bulletin Board or by the
National Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Borrower common stock is not listed or quoted as set forth in (a) or
(b) hereof, then trading day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to
close. 
 “Warrant PIK Payment” has the meaning provided in Section 5.16(c). 

“Warrant PIK Fee” has the meanings provided in Sections 5.16(c) and 5.16(e). 

“Warrant PIK Fee Date” has the meanings provided in Sections 5.16(c) and 5.16(e). 

(b) Amendment to Section 2.01(c) – Loans. The first paragraph of Section 2.01(c) of the Credit Agreement is hereby
amended and restated in its entirety as follows: 
 “The Borrower agrees to pay to (x) Lion Capital LLP, on the Closing
Date a fee in amount equal to $5,000,000 (the “Closing Date PIK Fee”), (y) those Persons who are Lenders on the Fifth Amendment Effective Date, on a pro rata basis, a fee equal to $994,367.30 (the “Fifth Amendment PIK
Fee”) and (z) Lion/Hollywood L.L.C., on any Warrant PIK Fee Date, any Warrant PIK Fee (all Warrant PIK Fees, together with the Closing Date PIK Fee, the “PIK Fees”). The Closing Date PIK Fee shall be paid in full on
the Closing Date by increasing the outstanding principal amount of Loans by the amount of the Closing Date PIK Fee on the Closing Date. The Closing Date PIK Fee so added to the principal amount of the Loans shall bear interest as provided in
Section 2.04 beginning on the Closing Date. The Fifth Amendment PIK Fee shall be paid in full on the Fifth Amendment Effective Date by increasing the outstanding principal amount of Loans by the amount of the Fifth Amendment PIK Fee on the
Fifth Amendment Effective Date. The Fifth Amendment PIK Fee so added to the principal amount of the Loans shall bear interest as provided in Section 2.04 beginning on the Fifth Amendment Effective Date. Any Warrant PIK Fee shall be paid in full
on any Warrant PIK Fee Date by increasing the outstanding principal amount of Loans by the amount of such Warrant PIK Fee on such Warrant PIK Fee Date. Any Warrant PIK Fee so added to the principal amount of the Loans shall bear interest as provided
in Section 2.04 beginning on the corresponding Warrant PIK Fee Date. The obligation of the Borrower to pay the PIK Fees shall be automatically evidenced by this Agreement or, if applicable, any Notes issued pursuant to this Agreement.”

  
 3 

 (c) Amendment to Section 5.02(k) – Notices of Material Events.
Section 5.02 of the Credit Agreement is hereby amended by (i) deleting the word “and” and the end of clause (j), (ii) deleting the period at the end of clause (k) and replacing it with “; and”, and
(iii) adding a new clause (l) as follows: 
 “(l) Promptly, but in any event no later than five
days after the same are sent, copies of all notices of default, notices of acceleration, budgets, Operating Plans, financial projections, other strategic plans and all material modifications thereof delivered pursuant to any First Lien Loan
Document.” 
 (d) Amendment to Section 5.14(a) – Reset of Warrants; Additional Liquidity. 

(i) The second paragraph of Section 5.14(a) is amended by replacing the reference therein to “April 30,
2011” with “May 20, 2011”. 
 (ii) The third paragraph of Section 5.14(a) is amended and
restated in its entirety as follows: 
 If the Borrower determines, in consultation with the Required Lenders,
that the Requisite Stockholder Approval is required, the Borrower shall, as soon as practicable following the date that the Proxy Statement is cleared by the SEC for mailing to the Borrower’s stockholders, but no later than May 20, 2011,
mail the Proxy Statement to the Borrower’s stockholders and establish a record date for, duly call and give notice of, the Borrower Stockholders Meeting (as defined below), and the Borrower shall no later than June 30, 2011 (or, in the
event the Borrower Stockholders Meeting (as defined below) may not be held by such date due to injunction or court order, or regulatory action that makes holding the Borrower Stockholders Meeting illegal, such later date no later than sixty
(60) days following the lifting of such injunction or court order, or regulatory action that makes holding the Borrower Stockholders Meeting illegal), convene and hold an annual meeting of its stockholders (including any adjournment or
postponement thereof, the “Borrower Stockholders Meeting”) for purposes which shall include obtaining the affirmative vote of the holders of Borrower’s common stock representing a majority of the votes cast at the Borrower
Stockholders Meeting on the proposal to approve the Exercise Price Reset, if the Borrower determines, in consultation with the Required Lenders, that such approval is necessary, for purposes of Section 713 of the NYSE Amex Company Guide (the
“Requisite Stockholder Approval”). The Borrower shall, through its board of directors or any committee thereof, recommend to its stockholders that the Requisite Stockholder Approval be given (the “Borrower Board
Recommendation”) and shall include the Borrower Board Recommendation in the Proxy Statement and use reasonable best efforts to solicit from its stockholders proxies in favor of the approval of this Agreement and the transactions
contemplated by this Agreement. The “Exercise Price Reset” means the adjustments to the “Warrant Price” (as defined in the Warrants) contemplated by this Section 5.14 and by Section 5.16, as such Warrant Price
may be further adjusted pursuant to the Warrants, this Section 5.14 and by Section 5.16, and the issuance of shares of Borrower’s common stock upon exercise of the Warrants at such Warrant Price. 

(e) Amendment to Section 5.14(b) – Reset of Warrants; Additional Liquidity. Section 5.14(b) is amended and restated
in its entirety as follows: 
 “(b) Simultaneously with any issuance and sale of common stock (excluding
(i) common stock or options granted or issued under a board-approved equity incentive plan or other stock option plan for management and other employees of the Borrower or its subsidiaries, (ii) common stock issued pursuant to a security
convertible, exercisable or exchangeable for common stock if such security was issued or outstanding on or prior to the Fifth Amendment Effective Date, and (iii) common stock issued pursuant to the Warrants (such excluded securities,
“Excluded Securities”)) or preferred stock of the Borrower (each, an “Equity Sale”), and/or any issuance and sale of any security convertible, exercisable or exchangeable for common stock or preferred stock, other than New
Warrants or Excluded Securities (each, a “Convertible Sale”) (provided 

  
 4 

 
that solely in the case of a Convertible Sale, New Warrants will be issued pursuant to this Section 5.14(b) at the time and to the extent that such convertible, exercisable or exchangeable
security is in fact converted, exercised or exchanged rather than upon definitive agreement or consummation of the Convertible Sale), and/or any debt-for-equity exchange or conversion completed by the Borrower in respect of the Borrower’s
existing indebtedness (each, a “Debt Exchange”): 
 (i) in each case, either definitively agreed
or consummated after the Fifth Amendment Effective Date and prior to the earlier of (x) 365 days after the Sixth Amendment Effective Date and (y) the repayment of all Obligations, the Borrower shall issue and grant to Lion/Hollywood L.L.C.
a warrant to purchase at an initial exercise price of $0.90 (or such lower price to which the Warrant Price for Warrants shall have been adjusted) that number of shares of Borrower’s common stock as are sufficient such that Lion/Hollywood
L.L.C.’s percentage beneficial ownership of the Borrower’s common stock as represented by the Warrants immediately after an Equity Sale, Convertible Sale or Debt Exchange, including such new warrants, calculated on a fully-diluted basis
assuming the exercise, exchange and conversion of all securities exercisable, exchangeable or convertible for Borrower common stock, is at least equal to such percentage as calculated immediately prior to an Equity Sale, Convertible Sale or Debt
Exchange, subject, however, to Section 5.16(a) with respect to Equity Sales and Convertible Sales pursuant to the Purchase Agreement; or 

(ii) in each case, either definitively agreed or consummated on or after the 365th day after the Sixth Amendment Effective Date and prior to the
repayment of all Obligations, and the Issued Price (defined below) of such Equity Sale, Convertible Sale or Debt Exchange is lower than the Warrant Price of the Warrants, the Borrower shall issue and grant to Lion/Hollywood L.L.C. a warrant to
purchase at an initial exercise price of the lowest Issued Price that number of shares of Borrower’s common stock as are sufficient such that Lion/Hollywood L.L.C.’s percentage beneficial ownership of the Borrower’s common stock as
represented by the Warrants immediately after an Equity Sale, Convertible Sale or Debt Exchange, including such new warrants, calculated on a fully-diluted basis assuming the exercise, exchange and conversion of all securities exercisable,
exchangeable or convertible for Borrower common stock, is at least equal to such percentage as calculated immediately prior to an Equity Sale, Convertible Sale or Debt Exchange, subject, however, to Section 5.16(a) with respect to Equity Sales
or Convertible Sales pursuant to the Purchase Agreement. 
 The warrants in subclause (b)(i) or (b)(ii) above shall be referred
to as the “New Warrants”. 
 If, in connection with an Equity Sale, Convertible Sale or Debt
Exchange under subclause (b)(i) above the per common stock share sales price implied by the proceeds to the Borrower in such Equity Sale or Convertible Sale net of any costs, fees or expenses paid to or on behalf of the investors in such Equity Sale
or Convertible Sale, or the per common stock share price implied by such Debt Exchange (the “Issued Price”), is less than the Warrant Price of the New Warrants or the Warrants, in each case taking into account any adjustments
pursuant to Section 5.14(b) or Section 5.16(a), then the Borrower agrees contemporaneously therewith to amend (A) the New Warrants to reduce the Warrant Price to the lowest Issued Price and (B) conditioned only on receipt of the
Requisite Stockholder Approval, the Warrants (other than the New Warrants) to reduce the Warrant Price to the lowest Issued Price (in each case, subject to Section 5.16(a)). 

  
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 If, in connection with an Equity Sale, Convertible Sale or Debt Exchange
under subclause (b)(ii) above the Issued Price is less than the Warrant Price of the New Warrants or the Warrants, in each case taking into account any adjustments pursuant to Section 5.14(b) or Section 5.16(a), and the Net Cash Proceeds
(or the fair market value of any other consideration received) from such Equity Sale, Convertible Sale or Debt Exchange (together with any Equity Sale, Convertible Sale and/or Debt Exchange within three months thereof) is equal to or greater than $5
million, then the Borrower agrees contemporaneously therewith to amend (A) the New Warrants to reduce the Warrant Price to the lowest Issued Price and (B) conditioned only on receipt of the Requisite Stockholder Approval, the Warrants
(other than the New Warrants) to reduce the Warrant Price to the lowest Issued Price (in each case, subject to Section 5.16(a)). 
 Subject to Section 5.16(c), any New Warrants issued pursuant to Section 5.14(b) of this Agreement shall be substantially in the form of the Existing Warrants and shall be deemed to be
“Warrants” for all purposes under the Loan Documents and each document governing or relating to the Warrants, including the Investment Agreement. Subject to Section 5.16(b), the Warrants and New Warrants shall be subject to
adjustments pursuant to Section 4 of such Warrant or New Warrant, as applicable, and this Agreement from and including the date on which the Borrower became obligated to issue such Warrant or New Warrant pursuant to this Agreement, as if such
Warrant or New Warrant had been issued on such date; provided, however, that in the event of an Equity Sale, Convertible Sale or Debt Exchange, the provisions in this Section 5.14(b) and in Section 5.16 shall control, and
there shall be no additional adjustment pursuant to Section 4 of such Warrant or New Warrant for such Equity Sale, Convertible Sale or Debt Exchange.” 
 (f) Addition of Section 5.16 – Repricing of Warrants and New Warrants; Additional Terms for New Warrants. A new Section 5.16 of the Credit Agreement is hereby added as follows:

 “SECTION 5.16 Repricing of Existing Warrants and New Warrants; Additional Terms for New Warrants.

 (a) In connection with (i) the initial purchase by certain investors (collectively, the
“Purchasers”) of up to $15.0 million of shares of Borrower common stock, as further described in the Purchase Agreement (the “Investor Purchase Agreement”), dated as of April 21, 2011, among the Borrower and
the Purchasers and (ii) the initial purchase by Dov Charney of up to $700,000 of shares of Borrower common stock, as further described in the Purchase Agreement, dated on or about April 26, 2011, between the Borrower and Dov Charney (the
“Charney Purchase Agreement” and, together with the Investor Purchase Agreement, the “Purchase Agreements”) ((i) and (ii), together, the “Initial Equity Sale”), Lion/Hollywood L.L.C. agrees that,
notwithstanding the requirements of the second and third paragraphs of Section 5.14(b) of this Agreement which would require that the Warrant Price for the Warrants and the New Warrants issued to Lion/Hollywood L.L.C. on March 24, 2011
(collectively, the “Existing Warrants”), and the New Warrants issued in connection with the Initial Equity Sale and any New Warrants required to be issued in connection with any subsequent Equity Sale pursuant to the Purchase
Agreements at a price of not less than $0.90 per share, be adjusted to $0.90, in lieu thereof the Warrant Price of the Existing Warrants and such New Warrants shall be adjusted to $1.00; provided that such exception to the requirements of the
second and third paragraphs of Section 5.14(b) of this Agreement shall apply only to the Initial Equity Sale and any subsequent Equity Sale pursuant to the Purchase Agreements at a price of not less than $0.90 per share, and not to any other
subsequent Equity Sale. 
 (b) For clarity, the Borrower acknowledges that the provisions of Section 5.14(b)
of this Agreement shall apply to each of the following Equity Sales under the Purchase Agreements: (i)

  
 6 

 
the issuance of shares of Borrower common stock in connection with the Initial Equity Sale, (ii) any additional issuance of shares of Borrower common stock pursuant to the Purchasers’
and Dov Charney’s respective rights to receive additional shares in the case of certain additional equity issuances by the Borrower or pursuant to the Purchasers’ or Dov Charney’s respective rights to purchase additional shares under
the applicable Purchase Agreement and (iii) any issuance of shares of Borrower common stock to Dov Charney pursuant to the anti-dilution protection provision as contemplated by the Purchase Agreements or any agreements or instruments entered
into in connection with the Purchase Agreements. For avoidance of doubt, as of the date of the Sixth Amendment, the number of New Warrant shares to which Lion/Hollywood L.L.C. is entitled to be issued with respect to the issuance in clause
(i) above is 3,063,101, with respect to the issuance in clause (ii) above (assuming full exercise by the Purchasers and Dov Charney of their respective purchase rights under the Purchase Agreement) is 5,630,273, and with respect to the
issuance in clause (iii) above (assuming Dov Charney receives all of the shares issuable under such anti-dilution protection provision) is 7,374,035. For the avoidance of doubt, the provisions in Section 5.14 and this Section 5.16
shall control and supersede any provisions set forth in Section 4 of the Warrants with respect to the transactions under the Purchase Agreement. 
 (c) Any New Warrants issued pursuant to Section 5.14(b) of this Agreement in respect of the issuances described in Section 5.16(b) of this Agreement shall be substantially in the form of the
Existing Warrants (as provided in this Agreement); provided that such New Warrants shall provide, in form and substance reasonably acceptable to the Required Lenders, that, upon exercise of such Warrant, to the extent the Borrower does not
have sufficient authorized and unissued shares of Borrower common stock (after taking into account then currently reserved shares) to legally issue the shares of Borrower common stock to which the holder is entitled upon such exercise, then
(i) there shall be no requirement for Borrower to reserve for issuance the shares issuable upon exercise of such New Warrants to the extent that Borrower does not have such sufficient authorized and unissued shares (and, at such time and to the
extent that Borrower does have such sufficient authorized and unissued shares, Borrower shall promptly reserve for issuance the shares issuable upon exercise of such New Warrants), and (ii) upon such exercise of such New Warrants, after the
Realization Date, in lieu of issuing shares of Borrower common stock upon exercise that are not then currently reserved, the Borrower shall pay on the date of exercise of such New Warrants to Lion/Hollywood L.L.C. (which date shall constitute a
“Warrant PIK Fee Date”) an amount in the form of a “Warrant PIK Fee” in accordance with Section 2.01(c) of this Agreement (the “Warrant PIK Payment”) equal to (x) the number of shares of Borrower
common stock issuable upon such exercise that are not authorized to be legally issued, multiplied by (y) at the Borrower’s option, either (A) the Closing Price on the last trading day immediately preceding the applicable
exercise date or (B) the difference between the Closing Price on the last trading day immediately preceding the applicable exercise date and the then applicable Warrant Price; provided that, in the case of this clause (B), Lion/Hollywood
L.L.C. shall not be required to pay the Warrant Price upon such exercise (and any such payment already made shall be returned to Lion/Hollywood L.L.C.); provided, further, that the Borrower may elect, at its option, to instead pay such
Warrant PIK Payment to Lion/Hollywood L.L.C on such Warrant PIK Fee Date in immediately available funds in cash. 

(d) To the extent the Borrower has failed to issue any New Warrants that the Borrower is obligated to issue pursuant to
Section 5.14(b) or Section 5.16(a) of this Agreement (including any such obligation that remains subject to a condition), then in addition to any other remedies available to the Lenders, at any point after the Realization Date the party
entitled to receive such unissued New Warrants may exercise such New Warrants as if they had been issued in accordance with Section 5.16(c) of this Agreement, to the extent any shares of Borrower common stock issuable in respect thereof are not
then authorized for issuance shall be able to exercise the rights of a holder of such New Warrants with respect to the Warrant PIK Payment as provided in Section 5.16(c) of this Agreement. 

  
 7 

 (e) To the extent the Borrower has failed to adjust the Warrant Price of any
Existing Warrants or New Warrants that the Borrower is obligated to adjust pursuant to Section 5.14(b) or Section 5.16(a) of this Agreement (including any such obligation that remains subject to a condition), then in addition to any other
remedies available to the Lenders, at any point after the Realization Date upon the holder exercising such Existing Warrants or New Warrants, the Borrower shall pay on the date of exercise of such Existing Warrants or New Warrants (which date shall
constitute a “Warrant PIK Fee Date”) an amount in the form of a “Warrant PIK Fee” in accordance with Section 2.01(c) (the “Adjustment PIK Payment”) equal to (x) the number of shares of Borrower
common stock issuable upon such exercise, multiplied by (y) (i) the existing Warrant Price minus (ii) the Warrant Price that would have been in effect if such Warrant Price had been adjusted pursuant to
Section 5.14(b) or Section 5.16(a) of this Agreement; provided that the Borrower may elect , at its option, to instead pay such Adjustment PIK Payment to Lion/Hollywood L.L.C. on such Warrant PIK Fee Date immediately available funds
in cash. 
 (g) Addition of Section 6.16 – Additional Covenants. A new Section 6.16 of the Credit Agreement is
hereby added as follows: 
 “SECTION 6.16 Additional Covenants. 

(a) On or before May 31, 2011, the Office of Special Programs shall develop a business and operating plan for the
remainder of the fiscal year ending December 31, 2011 (the “Operating Plan”) for the Loan Parties which shall be (x) approved by the Audit Committee and (y) reasonably acceptable to the Required Lenders. 

(b) After delivery of the Operating Plan pursuant to the foregoing paragraph (a), the Office of Special Programs (for so
long as it is in effect) shall have the authority to implement and execute the Operating Plan, and the Loan Parties shall use their good faith efforts to operate their businesses in accordance with the Operating Plan, as modified from time to time.

 (c) Any amendment to the Operating Plan shall be made solely by the Office of Special Programs (for so long as
it is in effect) and otherwise by the Borrower, with the approval of the Audit Committee, and, in the case of any material amendment thereto, shall also be reasonably acceptable to the Required Lenders. 

(d) On or prior to December 31, 2011, the Office of Special Programs (so long as it is in effect) shall present to
the Lenders an updated and extended Operating Plan for the Loan Parties reasonably acceptable to the Required Lenders, covering the immediately succeeding twelve- month period commencing upon the expiry of the initial Operating Plan delivered
pursuant to the preceding paragraph (c). 
 (e) Concurrently with the delivery of cash flow budgets for the Loan
Parties under the First Lien Credit Agreement, delivery thereof to the Administrative Agent and the Lenders.” 
 (f) (i) On the last Business Day of each calendar month commencing with May 2011, the Borrower shall reimburse the Administrative Agent, Collateral Agent, the Lenders and Lion Capital LLP and its
affiliates (the “Lion Parties”) for an aggregate amount of at least $200,000 or such lesser amount then owing ($100,000, solely in the case of the calendar month of May 2011) of their respective outstanding reasonable out-of-pocket
expenses invoiced to the Borrower on or 

  
 8 

 
prior to such Business Day incurred in connection with the Credit Agreement, the other Loan Documents and the monitoring and oversight of the Lion Parties’ investment prior to such Business
Day (including without limitation, the reasonable fees, disbursements and other charges of Simpson Thacher & Bartlett LLP and Miller Buckfire & Co., LLC), and (ii) within three (3) Business Days of the Sixth Amendment
Effective Date, the Borrower shall pay to the Lion Parties $400,000 with respect to such expenses; provided that notwithstanding anything in Section 7.01 to the contrary, any Default under clause (i) of this Section 6.16(f)
shall not constitute a Default for ten (10) days after the occurrence of such Default so long as the parties are diligently pursuing the cure of such Default. Notwithstanding the foregoing, nothing in this Section 6.16(f) shall be
construed to limit the provisions of Section 9.03. 
 (h) Amendment to Section 7.01(d) – Events of Default.
Section 7.01(d) of the Credit Agreement is hereby amended and restated in its entirety as follows: 
 “any Loan Party
or any Subsidiary thereof shall fail to observe or perform when due any covenant, condition or agreement contained in (i) Article VI (provided that any Default under Section 6.01 or Section 6.02 shall not constitute a Default or Event
of Default for five (5) Business Days after the occurrence of such Default so long as the parties are diligently pursuing the cure of such Default and the amount involved is less than $1,000,000), (ii) Section 5.14 or
Section 5.16, or (iii) in any of Section 5.02, Section 5.07 or Section 5.08 (provided that, if (A) any such Default described in this clause (d)(iii) is of a type that can be cured within five (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 five (5) Business Days after the occurrence of such Default so long as the
Loan Parties are diligently pursuing the cure of such Default);” 
 (i) Addition of Section 7.01(t) – Events of
Default. A new Section 7.01(t) of the Credit Agreement is hereby added as follows: 
 “at the Borrower Stockholders
Meeting, the requisite stockholders of the Borrower shall fail to approve amendments to the Borrower’s certificate of incorporation authorizing the issuance of a number of shares of Borrower common stock sufficient for Borrower to meet its
obligations to issue the maximum number of shares of Borrower common stock issuable under the transactions referenced in clauses (ii) and (iii) of Section 5.16(b) of this Agreement, under the Purchase Agreements and pursuant to
Sections 5.14(b) and Section 5.16(a) of this Agreement, as calculated on the Sixth Amendment Effective Date;” 
 III.
Waiver. The Required Lenders hereby agree to waive the provisions of (x) Section 2.08(a) of the Credit Agreement requiring the Borrower to prepay the Loans with proceeds of the Equity Sales pursuant to the Purchase Agreements and
(y) Section 5.01(a) of the Credit Agreement requiring that the year-end audit be provided without a “going concern” or like qualification or exception with respect to the Consolidated financial statements covering the Fiscal Year
ended December 31, 2010. 
 IV. Conditions Precedent to the Effectiveness of this Amendment. 

(a) This Amendment shall become effective as of, and with effect from, the date (the “Effective Date”) on which the
Borrower, the Facility Guarantors and the Required Lenders shall have duly executed and delivered to the Administrative Agent this Amendment. 
 (b) All corporate and other proceedings required in connection with this Amendment, and all documents, instruments and other legal matters in connection with the transactions contemplated

  
 9 

 
by this Amendment, shall be satisfactory in all respects to the Required Lenders, and the Lenders shall have received such documents and certificates as the Lenders or their counsel may
reasonably request relating to the authorization of the transactions contemplated by this Amendment, all in form and substance satisfactory to the Required Lenders and their counsel. 

(c) Each of the representations and warranties contained in Section V (Representations and Warranties) of this Amendment shall be
true and correct. 
 (d) After giving effect to this Amendment, no Default or Event of Default shall have occurred and be
continuing as of the date hereof. 
 (e) No litigation shall have been commenced against any Loan Party or any of its
Subsidiaries, either on the date hereof or the Effective Date, seeking to restrain or enjoin (whether temporarily, preliminarily or permanently) the performance of any action by any Loan Party required or contemplated by this Amendment or the Credit
Agreement as amended by this Amendment or any Loan Document. 
 (f) The Borrower shall have retained FTI/Weinsten as Chairman of
the Borrower’s Office of Special Programs and the Lenders shall have received evidence thereof reasonably requested by them. 
 (g) The Borrower shall have established the Office of Special Programs and the Lenders shall have received evidence thereof reasonably requested by them. 

(h) Effectiveness of the Waiver and Eighth Amendment to the Existing First Lien Credit Agreement, in form and substance satisfactory to
the Required Lenders. 
 (i) Receipt by the Borrower of proceeds from the Initial Equity Sale in an amount of not less than
$10,500,000. 
 V. Representations and Warranties. On and as of the date hereof and as of the Effective Date, the
Borrower hereby represents and warrants to the Administrative Agent, the Collateral Agent and the Lenders as follows: 
 (a) this
Amendment has been duly authorized, executed and delivered by the Borrower and each Facility Guarantor and constitutes a legal, valid and binding obligation of the Borrower and each Facility Guarantor, enforceable against the Borrower and each
Facility Guarantor in accordance with its terms and the Credit Agreement as amended by this Amendment and the other Loan Documents and constitutes the legal, valid and binding obligation of the Borrower and each Facility Guarantor, enforceable
against the Borrower and each Facility Guarantor in accordance with its terms; 
 (b) the transactions to be entered into and
contemplated by this Amendment (i) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except for such as have been obtained or made and are in full force and effect,
(ii) will not violate any material Applicable Law or the Charter Documents of any Loan Party, (iii) will not violate or result in a default under any indenture or any other agreement, instrument or other evidence of Material Indebtedness,
or any other Material Agreement or other material instrument binding upon any Loan Party or its assets, or give rise to a right thereunder to require any payment to be made by any Loan Party, and (iv) will not result in the creation or
imposition of any Lien on any asset of any Loan Party, except Liens created under the Loan Documents; 

  
 10 

 (c) each of the representations and warranties contained in Article III (Representations and
Warranties) of the Credit Agreement, the other Loan Documents or otherwise made in writing in connection therewith are true and correct in all material respects on and as of the date hereof and the Effective Date, in each case as if made on and as
of such date, except (x) to the extent that such representations and warranties specifically relate to a specific date, in which case such representations and warranties shall be true and correct in all material respects as of such specific
date and (y) with respect to the representations contained in Sections 3.04(b), 3.06 and 3.17 of the Credit Agreement, as disclosed in filings by the Borrower with the SEC prior to the date hereof with respect to the Borrower and its
consolidated Subsidiaries; 
 (d) after giving effect to this Amendment, no Default or Event of Default has occurred and is
continuing; and 
 (e) no litigation has been commenced against any Loan Party or any of its Subsidiaries seeking to restrain or
enjoin (whether temporarily, preliminarily or permanently) the performance of any action by any Loan Party required or contemplated by this Amendment, the Credit Agreement as amended hereby or any Loan Document. 

VI. Amount of Obligations. Each Loan Party acknowledges and agrees that (a) as of the close of business on March 31,
2011, the Obligations include, without limitation, the amounts set forth on Schedule 1 attached hereto on account of the outstanding unpaid amount of principal of, accrued and unpaid interest on, the Loans and (b) such Loan Party is truly and
justly indebted to the Lenders and the Administrative Agent for the Obligations without defense, counterclaim or offset of any kind, and such Loan Party ratifies and reaffirms the validity, enforceability and binding nature of such Obligations.

 VII. Collateral. Each Loan Party ratifies and reaffirms the validity and enforceability (without defense, counterclaim
or offset of any kind) of the liens and security interests granted to secure any of the Obligations by such Loan Party to the Administrative Agent, for the benefit of the Lenders, pursuant to the Security Documents to which such Loan Party is a
party. Each Loan Party acknowledges and agrees that all such liens and security interests granted by such Loan Party shall continue to secure the Obligations from and after the Effective Date. Each Loan Party hereby represents and warrants to the
Administrative Agent and the Lenders that, pursuant to the Security Documents to which such Loan Party is a party, the Obligations are secured by liens on and security interests in all of such Loan Party’s assets to the extent required by the
Security Documents. 
 VIII. Loan Party Release. Although each Lender, the Administrative Agent and the Collateral Agent
regards its conduct as proper and does not believe that any Loan Party has any claim, right, cause of action, offset or defense against any Lender, the Administrative Agent, the Collateral Agent or any of such Lender’s, the Administrative
Agent’s or the Collateral Agent’s present or former subsidiaries, Affiliates, officers, directors, employees, attorneys or other representatives or agents (collectively with their respective successors and assigns, the “Lender
Parties”) in connection with the execution, delivery, performance and administration of, or the transactions contemplated by this Amendment, the Credit Agreement and the other Loan Documents, each Lender, the Administrative Agent, the
Collateral Agent and each Loan Party agree to eliminate any possibility that any past conduct, conditions, acts, omissions, events, circumstances or matters of any kind whatsoever could impair or otherwise affect any rights, interests, contracts or
remedies of the Lenders, the Administrative Agent or the Collateral Agent. Therefore, each Loan Party unconditionally, freely, voluntarily and, after consultation with counsel and becoming fully and adequately informed as to the relevant facts,
circumstances and consequences, releases, waives and forever discharges (and further agrees not to allege, claim or pursue) (a) any and all liabilities, indebtedness and obligations, whether known or unknown, of any kind whatsoever of any
Lender Party to any Loan Party, (b) any legal, equitable or other 

  
 11 

 
obligations of any kind whatsoever, whether known or unknown, of any Lender Party to any Loan Party (and any rights of any Loan Party against any Lender Party), (c) any and all claims,
whether known or unknown, under any oral or implied agreement with (or obligation or undertaking of any kind whatsoever of) any Lender Party which is different from or in addition to the express terms of this Agreement, the Credit Agreement and the
other Loan Documents and (d) all other claims, rights, causes of action, counterclaims or defenses of any kind whatsoever, in contract or in tort, in law or in equity, whether known or unknown, direct or derivative, which such Loan Party or any
predecessor, successor or assign might otherwise have or may have against any Lender Party on account of any conduct, condition, act, omission, event, contract, liability, obligation, demand, covenant, promise, indebtedness, claim, right, cause of
action, suit, damage, defense, circumstance or matter of any kind whatsoever which, in the case of each of the foregoing clauses (a), (b), (c) and (d), existed, arose or occurred at any time prior to the Effective Date and in connection with
the execution, delivery, performance and administration of, or the transactions contemplated by, this Amendment, the Credit Agreement and the other Loan Documents. 
 IX. No Other Amendments or Waivers; Confirmation. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise
affect the rights and remedies of the Lenders, the Agents, the Borrower or any other Loan Party under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations,
covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrower to any
future consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. This
Amendment shall apply and be effective only with respect to the provisions of the Credit Agreement specifically referred to herein. After the Effective Date, any reference in any Loan Document to the Credit Agreement shall mean the Credit Agreement
as modified hereby. As of the Effective Date, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of like import, and each reference in the other Loan
Documents to the Credit Agreement (including, without limitation, by means of words like “thereunder”, “thereof” and words of like import), shall mean and be a reference to the Credit Agreement as amended hereby, and this
Amendment and the Credit Agreement shall be read together and construed as a single instrument. Each of the table of contents and lists of Exhibits and Schedules of the Credit Agreement shall be amended to reflect the changes made in this Amendment
as of the Effective Date. This Amendment is a Loan Document. 
 X. Consent of Facility Guarantors. Each Facility
Guarantor hereby consents to this Amendment and agrees that the terms hereof shall not affect in any way its obligations and liabilities under the Loan Documents (as amended and otherwise expressly modified hereby), all of which obligations and
liabilities shall remain in full force and effect and each of which is hereby reaffirmed (as amended and otherwise expressly modified hereby). 
 XI. Expenses. The Borrower agrees to reimburse the Administrative Agent and the Lenders for their respective reasonable out-of-pocket expenses incurred in connection with this Amendment and the
transactions and documentation contemplated herein (including the reasonable fees, disbursements and other charges of Simpson Thacher & Bartlett LLP). 
 XII. Governing Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

  
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 XIII. Counterparts. This Amendment may be executed by one or more of the parties
hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Amendment may be delivered by facsimile or other electronic transmission of the relevant
signature pages hereof. 
 XIV. Headings. The Section headings used herein are for convenience of reference only, are not
part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Amendment. 
 XV. Notices. All communications and notices hereunder shall be given as provided in the Credit Agreement or, as the case may be, the Facility Guaranty. 

XVI. Severability. The fact that any term or provision of this Amendment is held invalid, illegal or unenforceable as to any
person in any situation in any jurisdiction shall not affect the validity, enforceability or legality of the remaining terms or provisions hereof or the validity, enforceability or legality of such offending term or provision in any other situation,
or jurisdiction or as applied to any person. 
 XVII. Successors. The terms of this Amendment shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective successors and assigns. 
 XVIII. Waiver of Jury
Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT. 
 XIX. Submission to Jurisdiction. Each Loan Party agrees that any suit for the enforcement of this Amendment may be brought in the federal or state courts of the State of New York as the Lenders may
elect in their sole discretion and consents to the non-exclusive jurisdiction of such courts. Each party to this Amendment hereby waives any objection which it may now or hereafter have to the venue of any such suit or any such court or that such
suit is brought in an inconvenient forum and agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this
Amendment shall affect any right that any Credit Party may otherwise have to bring any action or proceeding relating to this Amendment against a Loan Party or its properties in the courts of any jurisdiction. 

[Remainder of Page Intentionally Left Blank] 

  
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 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and
delivered by their respective proper and duly authorized officers as of the day and year first above written. 
  

			
	AMERICAN APPAREL, INC., as Borrower
		
	By:	 	 /s/ Thomas M. Casey

	Name:	 	Thomas M. Casey
	Title:	 	Acting President

  
 [Signature
Page to Sixth Amendment] 

 
			
	AMERICAN APPAREL (USA), LLC, as Facility Guarantor
		
	By:	 	 /s/ Dov Charney

	Name:	 	Dov Charney
	Title:	 	Chief Executive Officer
	
	FRESH AIR FREIGHT, INC., as Facility Guarantor
		
	By:	 	 /s/ Dov Charney

	Name:	 	Dov Charney
	Title:	 	Chief Executive Officer
	
	KCL KNITTING, LLC, as Facility Guarantor
	
	By: American Apparel (USA), LLC, its sole member
		
	By:	 	 /s/ Dov Charney

	Name:	 	Dov Charney
	Title:	 	Chief Executive Officer
	
	AMERICAN APPAREL RETAIL, INC., as Facility Guarantor
		
	By:	 	 /s/ Dov Charney

	Name:	 	Dov Charney
	Title:	 	Chief Executive Officer
	
	AMERICAN APPAREL DYEING & FINISHING, INC., as Facility Guarantor
		
	By:	 	 /s/ Dov Charney

	Name:	 	Dov Charney
	Title:	 	Chief Executive Officer

  
 [Signature
Page to Sixth Amendment] 

 
			
	WILMINGTON TRUST FSB, as Administrative Agent and Collateral Agent
		
	By:	 	 /s/ Boris Treyger

	Name:	 	Boris Treyger
	Title:	 	Vice President

  
 [Signature
Page to Sixth Amendment] 

 
			
	LION CAPITAL (AMERICAS) INC., as Lender
		
	By:	 	 /s/ Jacob Capps

	Name:	 	Jacob Capps
	Title:	 	President

  
 [Signature
Page to Sixth Amendment] 

 
			
	LION/HOLLYWOOD L.L.C., as Lender
		
	By:	 	 /s/ Jacob Capps

	Name:	 	Jacob Capps
	Title:	 	President

  
 [Signature
Page to Sixth Amendment] 

 Schedule I 
 Amount of Obligations as of March 31, 2011 
  

					
	 Outstanding Loans1
	  	$	102,416,871.55	  
	 Accrued and Unpaid Interest
	  	$	0	  
	 Accrued and Unpaid Fees2
	  	$	0	  

  

	1 	 Including PIK Interest and PIK Fees that has been added to the principal amount of the Loans 

	2 	 Exclusive of amounts due under Sections 6.16(f) and 9.03 of the Credit Agreement.

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