Document:

Exhibit 10.8

 Exhibit 10.8 
 

 
  
 WAIVER TO CREDIT
AGREEMENT 
 LASALLE RETAIL FINANCE 
 Date: February 29, 2008 
 THIS WAIVER TO CREDIT AGREEMENT (this
“Waiver”) is made to the Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) dated as of July 2, 2007 by and among: 
 AMERICAN APPAREL (USA), LLC (f/k/a AAI Acquisition LLC (successor by merger to American Apparel, Inc.)), a California limited liability
company, as agent for itself and the other Borrowers party thereto (in such capacity, the “Lead Borrower”); 
 THE
BORROWERS now or hereafter party to the Credit Agreement; 
 THE FACILITY GUARANTORS now or hereafter party to the Credit
Agreement; 
 LASALLE BUSINESS CREDIT, LLC, AS AGENT FOR LASALLE BANK 
 MIDWEST NATIONAL ASSOCIATION, ACTING THROUGH ITS DIVISION, 
 LASALLE RETAIL FINANCE, with offices at 100 Federal Street, 9th Floor, Boston, 
 Massachusetts 02110, as administrative agent (in such capacity, the “Administrative 
 Agent”) for
its own benefit and the benefit of the other Credit Parties; 
 LASALLE BUSINESS CREDIT, LLC, AS AGENT FOR LASALLE BANK
MIDWEST NATIONAL ASSOCIATION, ACTING THROUGH ITS DIVISION, LASALLE RETAIL FINANCE, with offices at 100 Federal Street, 9th Floor, Boston, Massachusetts 02110, as collateral agent (in such capacity, the “Collateral Agent”, and together with
the Administrative Agent, individually an “Agent” and collectively, the “Agents”) for its own benefit and the benefit of the other Credit Parties; 
 WELLS FARGO RETAIL FINANCE, LLC, with offices at One Boston Place, 19th 
 Floor, Boston, Massachusetts 02108, as collateral monitoring agent (in such capacity, the 
 “Collateral
Monitoring Agent”) for its own benefit and the benefit of the other Credit 
 Parties; 
 the LENDERS party to the Credit Agreement; and 
 LASALLE BANK NATIONAL ASSOCIATION, a national banking association with offices at 135 South LaSalle Street, Chicago, Illinois 60603, as Issuing Bank; 
 in consideration of the mutual covenants herein contained and benefits to be derived herefrom. 1 

 

 
  
 The Lead Borrower
has advised the Administrative Agent that certain Events of Default have occurred as a result of the Loan Parties’ failure to comply with certain financial performance covenants and other covenants with respect to delivery of financial
statements and other information, as more particularly set forth on Exhibit A annexed hereto (collectively, the “Specified Events of Default”). The Lead Borrower has requested that the Administrative Agent and the Lenders waive the
Specified Events of Default, and the Administrative Agent and the Lenders are willing to waive the Specified Events of Default, on the terms and conditions set forth herein. 
 Accordingly, it is hereby agreed as follows: 
 1. Waiver of Specified Events of Default. The Agents and the Required Lenders hereby waive the Specified Events of Default. The Loan Parties acknowledge and agree that: 
 (a) The foregoing waiver is a one-time waiver and shall not be deemed to constitute a waiver of any other Event of Default or a waiver of
any other requirement of the Credit Agreement with respect to any other circumstance, including without limitation, any failure by the Loan Parties to comply with the financial performance covenants relating to Minimum Consolidated EBITDA and
Capital Expenditures for any other period, or any other financial performance covenant. 
 (b) The consent and waiver provided
above shall not take effect upon the execution of this Agreement, and shall only take effect upon satisfaction of each and all of the requirements of Section 2, below. 
 2. Conditions to Effectiveness. The Waiver provided in Section 1, above, shall be effective as of December 31, 2007 upon the
fulfillment of the following conditions precedent: 
 (a) All action on the part of the Loan Parties necessary for the valid
execution, delivery, and performance by the Loan Parties of this Waiver shall have been duly and effectively taken. 
 (b) The
Administrative Agent shall have received an original copy of this Waiver duly executed and delivered by the Loan Parties, the Agents, and the Required Lenders. 
 (c) The Administrative Agent shall have received a copy of that certain Amendment No. 5 and Waiver with respect to the SOF Investments Loan (the “SOF Fifth Amendment”), duly executed by
all parties thereto, pursuant to which SOF Investments shall have waived the defaults arising from the breaches by the Lead Borrower (as Borrower with respect to the SOF Investments Loan) of Section 6.11(a) and Section 6.12(a) of the
“Credit Agreement” (as such term is defined in the SOF Fifth Amendment). 
 (d) The Administrative Agent shall have
received, for the ratable benefit of the Lenders, a waiver fee in the amount of $25,000.00, which shall be fully earned on 2 

 

 
  
 the date hereof
and shall not be subject to refund or rebate in whole or in part under any circumstance. The Administrative Agent is hereby authorized to make a Credit Extension to pay the waiver fee. 
 (e) The Administrative Agent shall have received reimbursement from the Loan Parties for all reasonable costs, expenses, and legal fees
incurred by the Administrative Agent through February 29, 2008 in connection with the negotiation, preparation, and execution of this Waiver. Provided that the Administrative Agent shall have notified the Lead Borrower of the amount of such
costs, expenses, and legal fees incurred through such date, the Administrative Agent is hereby authorized to make a Credit Extension to reimburse the Administrative Agent for such costs, expenses, and legal fees. Each of the Loan Parties
acknowledges and agrees that additional statements for all reasonable costs, expenses, and legal fees incurred by the Administrative Agent in connection with the negotiation, preparation, and execution of this Waiver for periods after
February 29, 2008 will be rendered and paid as set forth in the Credit Agreement. 
 3. Joinder to Loan Documents. Each
Loan Party hereby agrees to work in good faith and use its best efforts to enter into an amendment to the Credit Agreement, which amendment may, among other things, effect a joinder by American Apparel, Inc. (f/k/a Endeavor Acquisition Corp.) to the
Loan Documents, whereby American Apparel, Inc. (f/k/a Endeavor Acquisition Corp.) shall become a Facility Guarantor thereunder. 
 4. Representations and Warranties; Ratification of Loan Documents. In order to induce the Agents and the Lenders to enter into this Waiver, each Loan Party hereby represents and warrants that except for the Specified Events of
Default, no Default or Event of Default by any Loan Party exists under the Credit Agreement or under any other Loan Document. Except as expressly provided in this Waiver, all terms and conditions of the Credit Agreement and the other Loan Documents
shall remain in full force and effect. The Loan Parties hereby ratify, confirm, and re-affirm all terms and provisions of the Loan Documents, except that any representation or warranty made as of a specific date shall be true and correct only as of
the date so specified. 
 5. Acknowledgement of Obligations. Each of the Loan Parties hereby acknowledges and agrees that
there is no basis nor set of facts on which any amount (or any portion thereof) owed by the Loan Parties under the Credit Agreement and the Loan Documents could be reduced, offset, waived, or forgiven, by rescission or otherwise; nor is there any
claim, counterclaim, offset, or defense (or other right, remedy, or basis having a similar effect) available to any of the Loan Parties with regard thereto; nor is there any basis on which the terms and conditions of any of the Obligations could be
claimed to be other than as stated on the written instruments which evidence such Obligations. 
 6. Waiver of Claims and
Release. Each of the Loan Parties hereby acknowledges and agrees that it has no offsets, defenses, claims, or counterclaims against the Agents, the Lenders, or their respective parents, affiliates, predecessors, successors, or assigns, or their
officers, directors, employees, attorneys, or representatives, with respect to the 3 

 

 
  
 Obligations, or
otherwise, and that if any of the Loan Parties now has, or ever did have, any offsets, defenses, claims, or counterclaims against such Persons, whether known or unknown, at law or in equity, from the beginning of the world through this date and
through the time of execution of this Waiver, all of them are hereby expressly WAIVED, and each of the Loan Parties hereby RELEASES such Persons from any liability therefor. 
 7. Binding Effect. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their
representatives, successors and assigns. 
 8. Multiple Counterparts. This Waiver may be executed in multiple counterparts,
each of which shall constitute an original and together which shall constitute but one and the same instrument. 
 9.
Governing Law. This Waiver shall be construed, governed, and enforced pursuant to the laws of the Commonwealth of Massachusetts, without giving effect to principles of conflicts of laws. 
 10. Loan Document. This Waiver shall constitute a Loan Document for all purposes. Capitalized terms used herein but not otherwise defined
herein shall have the meanings assigned to them in the Credit Agreement. 
 [signature pages follow] 4 

 

 
  
 IN WITNESS
WHEREOF, the parties hereto have duly executed this Waiver as of the date above first written. This Waiver is intended to take effect as a sealed instrument. 
 AMERICAN APPAREL (USA), LLC, 
 as Lead Borrower and as a Borrower 

By: /s/ Ken Cieply 
 Name: Ken Cieply 
 Title: CEO 
 AMERICAN APPAREL RETAIL, INC., 
 as a Borrower 
 By: /s/ Ken Cieply 
 Name: Ken Cieply 
 Title: CEO 
 AMERICAN APPAREL DYEING & 
 FINISHING, INC., as a Borrower

 By: /s/ Ken Cieply 
 Name: Ken Cieply 
 Title: CEO 
 KCL KNITTING, LLC, as a Borrower 
 By: American Apparel (USA), LLC, its sole member 
 By: /s/ Ken Cieply 
 Name: Ken Cieply 
 Title: CEO 
 Signature Page to Waiver to Credit Agreement 

 

 
  
 AMERICAN APPAREL,
LLC, as a Facility Guarantor 
 By: American Apparel (USA), LLC, its sole member 
 By: /s/ Ken Cieply 
 Name: Ken Cieply 
 Title: CEO 
 FRESH 
 AIR FREIGHT, INC., as a 
 Facility Guarantor 
 By: /s/ Ken Cieply 
 Name: Ken Cieply 
 Title: CEO 
 Signature Page to Waiver to Credit Agreement 

 

 
  
 LASALLE BUSINESS
CREDIT, LLC, 
 As Agent for LaSalle Bank Midwest National 
 Association, acting through its division, 
 LaSalle Retail Finance, as Administrative 
 Agent, as Collateral Agent, as
Swingline 
 Lender and as Lender 
 By: /s/ Stephen J. Garvin 
 Name: Stephen J. Garvin 
 Title: Vice President 
 LASALLE BANK NATIONAL ASSOCIATION, 
 as Issuing Bank 
 By: /s/ Stephen J. Garvin 
 Name: Stephen J. Garvin 
 Title: Vice President 
 Signature Page to Waiver to Credit Agreement 

 

 
  
 WELLS FARGO
RETAIL FINANCE, LLC, 
 as Collateral Monitoring Agent and as a Lender 
 By: /s/ Emily Abrahamson 
 Name: Emily Abrahamson 
 Title: Assistant Vice President/Account Executive 
 Signature Page to Waiver to Credit Agreement 

 

 
  
 NATIONAL CITY
BUSINESS CREDIT, INC., 
 as a Lender 
 By: /s/ Kathryn C. Ellero 
 Name: Kathryn C. Ellero 
 Title: Vice President 
 Signature Page to Waiver to Credit Agreement 

 

 
  
 Exhibit A

 Specified Events of Default 
 1. The Loan Parties have failed to comply with Section 2 of Exhibit M to the Credit 
 Agreement: Capital Expenditures for the Fiscal Year ending December 31, 2007: 
 Covenant 
 Actual 
 Not
more than $25,000,000.00 
 $27,281,724.00 
 Such failure constitutes an Event of Default under Section 7.01(d) of the Credit Agreement. 
 2. The Loan Parties have failed to comply with Section 4 of Exhibit M to the Credit 
 Agreement: Consolidated Fixed Charge Coverage Ratio for the Fiscal Quarter ending December 
 31, 2007:

 Covenant 
 Actual 
 Not less than 1.00 to 1.00 
 0.74 to 1.00 
 Such failure constitutes an Event of Default under Section 7.01(d) of the Credit Agreement. 
 3. The
Loan Parties have failed to deliver the financial statements for the Fiscal Month 
 ending December 31, 2007, which are
required to be delivered pursuant to Section 5.01(b) of the 
 Credit Agreement. Such failure constitutes an Event of
Default under Section 7.01(e) of the 
 Credit Agreement. 
 4. The Loan Parties have failed to deliver the budget by month for the Fiscal Year commencing January 1, 2008, which is required to
be delivered pursuant to Section 5.01(d) of the Credit Agreement. Such failure constitutes an Event of Default under Section 7.01(e) of the Credit Agreement. 
 1061748.10 
 Exhibit A to Waiver to Credit AgreementExhibit 10.13

 Exhibit 10.13 
 AMENDMENT NO. 4 AND WAIVER 
 TO 
 CREDIT AGREEMENT OF AMERICAN APPAREL, INC. 
 AMENDMENT NO. 4 AND WAIVER (this
“Amendment”), dated as of December 12, 2007, to the Credit Agreement dated as of January 18, 2007 (as amended by that certain Amendment No. 1 and Waiver to Credit Agreement of American Apparel, Inc. dated as of
July 2, 2007, that certain Amendment No. 2 and Waiver to Credit Agreement of American Apparel, Inc. dated as of November 9, 2007 and that certain Amendment No. 3 and Waiver to Credit Agreement of American Apparel, Inc. dated as
of November 28, 2007, the “Credit Agreement”), among American Apparel, Inc., a California corporation (the “Borrower”), the Facility Guarantors thereto (the “Guarantors”) and SOF Investments,
L.P. - Private IV, as lender (the “Lender”). Capitalized terms used herein but not defined herein are used as defined in the Credit Agreement. 
 WITNESSETH: 
 WHEREAS, the Borrower, the Guarantors and the Lender are party to the Credit Agreement;

 WHEREAS, Borrower has notified Lender that the Borrower breached Section 6.04 (Investments, Loans, Advances, Guarantees and
Acquisitions) of the Credit Agreement by consummating an Acquisition which is not a Permitted Acquisition pursuant to the terms of the Credit Agreement by failure to meet the conditions set forth in clauses (c) and (d) of such
definition (the “Specified Event of Default”); 
 WHEREAS, the Borrower has requested that the Lender waive the Specified
Event of Default and further amend the Credit Agreement as set forth herein; and 
 WHEREAS, the Lender agrees, subject to the limitations
and conditions set forth herein, to waive the Specified Event of Default and to further amend the Credit Agreement as set forth herein. 
 NOW, THEREFORE, in consideration of the premises and the covenants and obligations contained herein the parties hereto agree as follows: 
 Section 1. Waiver 
 Effective as of the Amendment Effective Date and subject to the satisfaction (or due
waiver) of the conditions set forth in Section 4 (Conditions Precedent to the Effectiveness of this Amendment) hereof, the Lender waives the Specified Event of Default as of the date hereof; provided, however, that the
waiver set forth in this paragraph shall not constitute a consent or waiver with respect to any failure to comply after the Amendment Effective Date with the Credit Agreement as amended hereby. 

 AMENDMENT NO. 4 AND WAIVER TO
CREDIT AGREEMENT 
 OF AMERICAN APPAREL, INC.

 Section 2. Amendments to the Credit Agreement 
 Effective as of the Amendment Effective Date and subject to the satisfaction (or due waiver) of the conditions set forth in Section 4 (Conditions
Precedent to the Effectiveness of this Amendment) hereof, the Credit Agreement is hereby amended as follows: 
 (a) Amendments to
Article I (Definitions) 
 (i) The following definitions are hereby amended and restated in their entirety to read as follows:

 “Consolidated EBITDA” means, with respect to any Person for any period, the sum (without duplication) of
(a) Consolidated Net Income for such period, plus (b) depreciation and amortization, plus (c) provisions for Taxes based on income that was deducted in determining Consolidated Net Income for such period, plus
(d) Consolidated Interest Expense that was deducted in determining Consolidated Net Income for such period, plus (e) cash bonuses paid during such period pursuant to Section 5.25(d) of the Merger Agreement, plus
(f) any compensation expense incurred during such period with respect to the issuance of up to 2,710,000 shares of common stock pursuant to Section 5.31 of the Merger Agreement, plus (g) any non-cash amortization of stock-based
compensation expense. 
 “Consolidated Fixed Charge Coverage Ratio” means, with respect to any Person for any period, the
ratio of (a) (i) Consolidated EBITDA for such period, minus (ii) Capital Expenditures, net of Capital Lease Obligations, made during such period, minus (iii) shareholder distributions made during such period, to
(b) Debt Service Charges during such period, all as determined on a Consolidated basis in accordance with GAAP. Shareholder distributions made pursuant to Section 1.15 of the Merger Agreement shall be excluded from this calculation.

 “Endeavor” means Endeavor Acquisition Corp., a Delaware corporation. 
 “Permitted Dividends” means: 
 (a) dividends with respect to Capital Stock payable solely in additional shares of or warrants to purchase common stock; 
 (b)
stock splits or reclassifications of stock into additional or other shares of common stock; 
 (c) the declaration and payment of a dividend
by (i) any Subsidiary of a Loan Party to a Loan Party and (ii) any Subsidiary of a Loan Party to a Subsidiary of a Loan Party that is not a Loan Party; 
 (d) the declaration and payment of cash dividends to the Loan Parties’ shareholders in an aggregate amount equal to such shareholder’s actual federal and state income tax liability for any applicable taxable
year (or applicable portion thereof) attributable to such Loan Parties’ taxable income, for each taxable year (or portion thereof) that such Loan Parties have an effective election for federal income tax purposes to be treated as an
“S” corporation; provided that (y) as a condition precedent to any such payment, (I) such Loan Parties shall deliver to the Administrative Agent a letter, in form and substance satisfactory to the 
  

 2 

 AMENDMENT NO. 4 AND WAIVER TO
CREDIT AGREEMENT 
 OF AMERICAN APPAREL, INC.

 Administrative Agent, from their independent public accountants detailing the amount necessary to be applied to such shareholder’s tax liability,
which letter can relate to the estimated tax payments for the next succeeding four quarters, (II) such payment or distribution shall be limited to the amount(s) specified in said letter, (III) immediately prior to the making of the applicable
payment, and after giving effect to any such payment, no Event of Default is then occurring; and (IV) the aggregate of all such payments or distributions made to all shareholders as of December 12, 2007 in connection with the 2005 K-1 and the
2006 K-1 is $8,341,219, and the aggregate of all such additional payments or distributions to all shareholders shall not exceed $5,928,421 in connection with the 2006 schedule K-1, $10,235,438 in connection with the 2007 schedule K-I, and $900,000
per month from January, 2008 through August, 2008, with limits thereafter to be established in the reasonable discretion of the Administrative Agent; and (z) after any re-determination of such Loan Parties’ taxable income for such period,
each of the Loan Parties’ shareholders effected thereby shall be obligated to repay to such Loan Parties the aggregate amount (if any) by which any such distribution exceeded the allocable amount of such shareholder’s actual tax liability;

 (e) the payment of salary and the declaration and payment of a cash dividend by the Borrower to Dov Charney or Sang H. Lim, which is in an
amount not to exceed when taken together with all other such payments made during the Fiscal Year, $500,000 for each such Person in any Fiscal Year; provided that immediately prior to the making of the applicable payment, and after giving
effect to any such payment, no Event of Default is then occurring. Distributions made pursuant to subsection (d), above, shall not be included in the calculation of Distributions under this subsection (e); 
 (f) a distribution to Sang H. Lim by the Loan Parties in an amount not to exceed $67,800,000 on or prior to December 15, 2007 in respect of his
Capital Stock in the Borrower pursuant to the Lim Option Agreement; and 
 (g) any dividends in respect of Capital Stock expressly required
to be made pursuant to the terms of the Merger Agreement in an amount not to exceed $500,000. 
 (ii) Clauses (k) and (1) of the
definition of “Permitted Indebtedness” are hereby amended and restated in their entirety to read as follows: 
 “(k)
Subordinated Indebtedness not existing on the Closing Date in an aggregate principal amount not exceeding $100,000,000; provided such Indebtedness (i) has a maturity which extends beyond the Maturity Date, (ii) does not require the
payment of principal in cash prior to the Maturity Date, (iii) is subordinated to the Obligations on terms reasonably acceptable to the Agents, and (iv) such Loan Party shall be in pro forma compliance with SECTION 6.11(a) after the
incurrence of such Subordinated Indebtedness; 
 (1) other unsecured Indebtedness in an aggregate principal amount not exceeding $12,000,000
at any time outstanding; provided such Indebtedness (i) has a maturity which extends beyond the Maturity Date, (ii) does not require the payment of principal in cash prior to the Maturity Date, and (iii) is subordinated to the
Obligations on terms reasonably acceptable to the Agents; and provided further that such Indebtedness shall not be payable to Endeavor;” 
  

 3 

 AMENDMENT NO. 4 AND WAIVER TO
CREDIT AGREEMENT 
 OF AMERICAN APPAREL, INC.

 (b) Amendments to Article VI (Negative Covenants) 
 (i) Section 6.07 (Restricted Payments; Certain Payments of Indebtedness) of the Credit Agreement is hereby amended and restated in its entirety to
read as follows: 
 “(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 and Permitted Dispositions, without the prior consent of the Administrative Agent and the Required Lenders; provided that the Borrower shall be permitted to pay up to an
aggregate amount of $2,000,000 for general corporate purposes on behalf of Endeavor. 
 (b) No Loan Party will, or will permit any Subsidiary
to make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment or other distribution
(whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Indebtedness, except: 
 (i) mandatory payments and prepayments of interest and principal as and when due in respect of any Permitted Indebtedness; 
 (ii) payments on account of Indebtedness outstanding as of the Closing Date and as set forth on Schedule 6.01; 
 (iii) payments on account of Subordinated Indebtedness to the extent permitted under any subordination agreement or provisions governing
such Indebtedness and including any payments to be made pursuant to the Merger Agreement (as set forth on Schedule 5.25(c) thereof) in an amount not to exceed $5,000,000; and 
 (iv) refinancings of Indebtedness to the extent permitted under this Agreement.” 
 (ii) Section 6.08 (Transactions with Affiliates) of the Credit Agreement is hereby amended and restated in its entirety to
read as follows: 
 “No Loan Party will, or will permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to,
or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) (i) transactions in the ordinary course of business that are at prices and on terms
and conditions not less favorable to such Loan Party than could be obtained on an arm’s-length basis from unrelated third parties and (ii) contributions of capital by an Affiliate to a Loan Party, (b) transactions between or among the
Loan Parties not involving any other Affiliate, (c) sales of inventory by the Loan Parties to any Subsidiaries at the cost of such property plus an agreed upon markup and extensions of credit in connection with such transfers, (d) any Loan
Party’s transfer of inventory to The American Apparel Group of Canada, a company which owns stores in Canada and that is 
  

 4 

 AMENDMENT NO. 4 AND WAIVER TO
CREDIT AGREEMENT 
 OF AMERICAN APPAREL, INC.

 owned by Endeavor (or prior to the consummation of the SPAC Transactions, family members of Dov Charney), for a sales price not less than the Loan
Party’s cost of such property; provided that such transactions provided for under this clause (d) are in the ordinary course of business and consistent with past practice and that such transactions do not include inventory having a
selling price in excess of $15,000,000 per Fiscal Year, (e) Permitted Dividends, (f) Permitted Investments (provided that such Permitted Investments described in clauses (a) through (e) and in clause (g) of the
definition of Permitted Investments shall be made on an arm’s-length basis), (g) Permitted Dispositions, (h) transactions in respect of the 59th Street Facility, (i) the transfers and transactions expressly set forth in the Lim
Option Agreement or the Merger Agreement and (j) any payments made on behalf of Endeavor permitted pursuant to Section 6.07(a).” 
 (c) Amendment to Lender’s Signature Page. 
 (i) The attention line on the Lender’s signature page to the
Credit Agreement shall be replaced in its entirety as follows: 
 “Attn: General Counsel” 
 Section 3. Amendment to Other Loan Documents 
 (a) Upon consummation of the SPAC Transactions, all references to “American Apparel, Inc.” in the Pledge Agreement and the Security Agreement shall be replaced by “American Apparel (USA), LLC (f/k/a AAI
Acquisition LLC (successor by merger to American Apparel, Inc.))”. 
 Section 4. Conditions Precedent to the Effectiveness of
this Amendment 
 This Amendment shall become effective as of the date first written above when, and only when, each of the following
conditions precedent shall have been satisfied (the “Amendment Effective Date”) or duly waived by the Lender: 
 (a)
Certain Documents. The Administrative Agent shall have received the following documents, each in form and substance satisfactory to the Lender and dated the Amendment Effective Date (when applicable): 
 (i) this Amendment, duly executed by the Borrower, each Guarantor and the Lender; and 
 (ii) an executed copy of the amendment to the Credit Agreement among Borrower, KCL Knitting, LLC, American Apparel Retail, Inc., American Apparel
Dyeing & Finishing, Inc., American Apparel, LLC, Fresh Air Freight, Inc., each of the lenders party thereto and LaSalle Business Credit, LLC, as agent. 
  

 5 

 AMENDMENT NO. 4 AND WAIVER TO
CREDIT AGREEMENT 
 OF AMERICAN APPAREL, INC.

 (b) Corporate and Other Proceedings. All corporate and other proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Amendment shall be satisfactory in all respects to the Lender. 
 (c)
Representations and Warranties. Each of the representations and warranties contained in Section 5 (Representations and Warranties) below are true and correct. 
 (d) No Default or Event of Default. After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing,
either on the date hereof or on the Amendment Effective Date. 
 (e) No Litigation. No litigation shall have been commenced against
any Loan Party or any of its Subsidiaries, either on the date hereof or the Amendment 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 or any Loan Document, in either case as amended hereby. 
 (f) Fees and Expenses
Paid. The Borrower shall have paid all Obligations due, after giving effect to this Amendment, on or before the later of the date hereof and the Amendment Effective Date including, without limitation, the fees set forth in
Section 6 (Fees and Expenses) hereof and all costs and expenses of the Lender in connection with the preparation, reproduction, execution and delivery of this Amendment and all other Loan Documents entered into in connection herewith
(including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Lender with respect thereto and all other Loan Documents) and all other costs, expenses and fees due under any Loan Document. 
 (g) No Default or Event of Default Under Existing First Lien Credit Agreement. No default or event of default shall have occurred and be
continuing with respect to the Existing First Lien Credit Agreement on the date hereof. 
 Section 5. Representations and
Warranties 
 On and as of the date hereof and as of the Amendment Effective Date, after giving effect to this Amendment, the Borrower
hereby represents and warrants to each Lender as follows: 
 (a) this Amendment has been duly authorized, executed and delivered by the
Borrower and each Guarantor and constitutes a legal, valid and binding obligation of the Borrower and each Guarantor, enforceable against the Borrower and each Guarantor in accordance with its terms and the Credit Agreement as amended by this
Amendment and constitutes the legal, valid and binding obligation of the Borrower and each Guarantor, enforceable against the Borrower and each Guarantor in accordance with its terms; 
 (b) 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 Amendment Effective Date, in each case as if made on and as 
  

 6 

 AMENDMENT NO. 4 AND WAIVER TO
CREDIT AGREEMENT 
 OF AMERICAN APPAREL, INC.

 of such date except (i) 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 (ii) to the extent that such statement was subsequently corrected and such correction was presented to the Lender; provided,
however, that references therein to the “Credit Agreement” shall be deemed to refer to the Credit Agreement as amended hereby and after giving effect to the consents and waivers set forth herein; 
 (c) no Default or Event of Default has occurred and is continuing; and 
 (d) 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 or any Loan Document, in each case as amended hereby (if applicable). 
 Section 6. Fees and Expenses 
 (a) The Borrower and each other Loan Party agrees to pay on demand in accordance
with the terms of Section 9.03(a) (Expenses; Indemnity; Damage Waiver) of the Credit Agreement all costs and expenses of the Lender in connection with the preparation, reproduction, execution and delivery of this Amendment and all other
Loan Documents entered into in connection herewith (including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Lender with respect thereto and all other Loan Documents). 
 Section 7. Covenants 
 (a) The Borrower hereby covenants that it shall deliver to the Administrative Agent, on or before December 28, 2007, the following documents, each in form and substance satisfactory to the Lender: 
 (i) a favorable opinion of Hallstrom, Klein & Ward LLP, counsel to the Loan Parties, addressed to the Lender and addressing such matters as the
Lender may reasonably request; 
 (ii) a Subordination Agreement, duly executed by American Apparel, Inc. (f/k/a Endeavor Acquisition Corp.)
and the Lender, and acknowledged by American Apparel (USA), LLC (f/k/a AAI Acquisition LLC (successor by merger to American Apparel, Inc.)) and the Guarantors; 
 (iii) a Guaranty, duly executed by American Apparel, Inc. (flkla Endeavor Acquisition Corp.) for the benefit of the Lender; 
 (iv) a Pledge Agreement, duly executed by American Apparel, Inc. (f/k/a Endeavor Acquisition Corp.) for the benefit of the Lender; 
 (v) a UCC-1 financing statement, naming Endeavor Acquisition Corp. as debtor and Lender as secured party and a UCC-3 financing statement amending the name of the debtor to American Apparel, Inc.; 
  

 7 

 AMENDMENT NO. 4 AND WAIVER TO
CREDIT AGREEMENT 
 OF AMERICAN APPAREL, INC.

 (vi) a copy of the promissory note made by American Apparel (USA), LLC (flk/a AAI Acquisition LLC (successor by merger to American
Apparel, Inc.)) to American Apparel, Inc. (f/k/a Endeavor Acquisition Corp.) (duly endorsed in blank) delivered to LaSalle Business Credit, LLC; 
 (vii) a Confirmation and Ratification Agreement, duly executed by the Guarantors; and 
 (viii) an Assumption and Ratification
Agreement, duly executed by American Apparel (USA), LLC (f/k/a AAI Acquisition LLC (successor by merger to American Apparel, Inc.)). 
 Section 8. Reference to the Effect on the Loan Documents 
 (a) As of the Amendment 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 Amendment Effective Date. 

(b) Except as expressly amended hereby or specifically waived above, all of the terms and provisions of the Credit Agreement and all other Loan
Documents are and shall remain in full force and effect and are hereby ratified and confirmed. 
 (c) The execution, delivery and
effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lender under any of the Loan Documents, nor constitute a waiver or amendment of any other provision of any of
the Loan Documents or for any purpose except as expressly set forth herein. 
 (d) This Amendment is a Loan Document. 
 Section 9. Consent of Guarantors 
 Each 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). 
 Section 10. Execution in Counterparts 
 This Amendment may be executed in any number of
counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature 
  

 8 

 AMENDMENT NO. 4 AND WAIVER TO
CREDIT AGREEMENT 
 OF AMERICAN APPAREL, INC.

 pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are attached to the same
document. Delivery of an executed counterpart by telecopy shall be effective as delivery of a manually executed counterpart of this Amendment. 
 Section 11. Governing Law 
 This Amendment shall be governed by and construed in accordance with the law of the
State of New York. 
 Section 12. Section; Titles 
 The section titles contained in this Amendment are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the
agreement between the parties hereto, except when used to reference a section. Any reference to the number of a clause, sub-clause or subsection of any Loan Document immediately followed by a reference in parenthesis to the title of the section of
such Loan Document containing such clause, subclause or subsection is a reference to such clause, sub-clause or subsection and not to the entire section; provided, however, that, in case of direct conflict between the reference to the title
and the reference to the number of such section, the reference to the title shall govern absent manifest error. If any reference to the number of a section (but not to any clause, sub-clause or subsection thereof) of any Loan Document is followed
immediately by a reference in parenthesis to the title of a section of any Loan Document, the title reference shall govern in case of direct conflict absent manifest error. 
 Section 13. Notices 
 All
communications and notices hereunder shall be given as provided in the Credit Agreement or, as the case may be, the Guaranty. 
 Section 14. 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 
 Section 15. 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.

  

 9 

 AMENDMENT NO. 4 AND WAIVER TO
CREDIT AGREEMENT 
 OF AMERICAN APPAREL, INC.

 Section 16. 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. 
  

 10 

 IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be executed by their respective officers and general partners thereunto duly authorized, as of the date first written above. 
  

			
	AMERICAN APPAREL, INC.,
	    as Borrower
		
	By:	 	 /s/ Ken Cieply

	Name:	 	Ken Cieply
	Title:	 	CFO

 [SIGNATURE PAGE TO AMENDMENT
NO.4 AND WAIVER TO CREDIT AGREEMENT] 

			
	SOFINVESTMENTS, L.P. - PRIVATE IV,
	    as Lender
		
	By:	 	 /s/ Marc R. Lisker

	Name:	 	Marc R. Lisker
	Title:	 	General Counsel

 SIGNATURE PAGE TO AMENDMENT
NO. 4 AND WAIVER 

			
	GUARANTORS:
	
	AMERICAN APPAREL, LLC, 
	as Facility Guarantor
		
	By:	 	 /s/ Ken Cieply

	Name:	 	Ken Cieply
	Title:	 	CFO

 [SIGNATURE PAGE TO AMENDMENT
NO.4 AND WAIVER TO CREDIT AGREEMENT] 

			
	FRESH AIR FREIGHT, INC.,
	as Facility Guarantor
		
	By:	 	 /s/ Ken Cieply

	Name:	 	Ken Cieply
	Title:	 	CFO

 [SIGNATURE PAGE TO AMENDMENT
NO.4 AND WAIVER TO CREDIT AGREEMENT] 

			
	KCL Knitting, LLC, as Facility Guarantor
		
	By:	 	 /s/ Ken Cieply

	Name:	 	Ken Cieply
	Title:	 	CFO

 [SIGNATURE PAGE TO AMENDMENT
NO.4 AND WAIVER TO CREDIT AGREEMENT] 

			
	AMERICAN APPAREL RETAIL, INC.,
	as Facility Guarantor
		
	By:	 	 /s/ Ken Cieply

	Name:	 	Ken Cieply
	Title:	 	CFO

 [SIGNATURE PAGE TO AMENDMENT
NO.4 AND WAIVER TO CREDIT AGREEMENT] 

			
	AMERICAN APPAREL DYEING & FINISHING, INC., as Facility Guarantor
		
	By:	 	 /s/ Ken Cieply

	Name:	 	Ken Cieply
	Title:	 	CFO

 [SIGNATURE PAGE TO AMENDMENT
NO.4 AND WAIVER TO CREDIT AGREEMENT]

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