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Waiver And Consent To Credit Agreement

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Exhibit 10.10



WAIVER AND CONSENT TO CREDIT AGREEMENT



LASALLE RETAIL FINANCE







Date: May 16, 2008



THIS WAIVER AND CONSENT TO CREDIT AGREEMENT (this " Waivernone" ) is made to the Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time, the " Credit Agreementnone" ) 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 Borrowernone" );

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 Agentnone" ) 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 Agentnone" , and together with the Administrative Agent, individually an " Agentnone" and collectively, the " Agentsnone" ) 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 Agentnone" ) 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.







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BACKGROUND none



A. The Lead Borrower has advised the Agents that certain Events of Default have occurred as a result of the Loan Parties' failure to comply with, among other things, certain financial performance covenants and other covenants, as more particularly set forth on Exhibit Anone annexed hereto (collectively, the " Financial and Compliance Events of Defaultnone" ).

B. The Lead Borrower has further advised the Agents that the Lead Borrower has entered into that certain Asset Purchase Agreement dated as of April 8, 2008 (" the " APA" ) by and between USDF, a California corporation (the " Seller" ), and the Lead Borrower, pursuant to which the Lead Borrower has agreed to purchase certain assets (the " Purchased Assetsnone" ) of the Seller' s garment dying and finishing business (the " Acquisition" ) for the aggregate sum of approximately $3,500,000.00 (the " Purchase Pricenone" ). The Lead Borrower has further advised the Agents that the Lead Borrower has commenced making payments of the Purchase Price to Seller in respect of such Acquisition. Absent the consent of the Agents and the Required Lenders, the Acquisition would constitute an Event of Default (the " Acquisition Event of Defaultnone" , and together with the Financial and Compliance Events of Default, collectively, the " Specified Events of Defaultnone" ) under Section 7.01(d) of the Credit Agreement as a result of the failure of the Loan Parties to comply with Section 6.04 of the Credit Agreement. Furthermore, the commencement of the payment of the Purchase Price constitutes a Default under Section 7.01(d) as a result of the failure of the Loan Parties to comply with Section 6.04 of the Credit Agreement (relating to investments and acquisitions).

C. In light of the foregoing, the Lead Borrower has requested that the Agents and the Required Lenders consent to the Acquisition and waive the Specified Events of Default. The Agents and the Required 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 Defaultnone . 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 or other covenants set forth in Sections 5.01, 6.01, 6.04 or 6.08.



(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 Effectivenessnone . The Waiver provided in Section 1 above shall be effective as of (i) with respect to the Specified Events of Default referred to in Items 1 and 2 of





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Exhibit A, February 29, 2008, (ii) with respect to the Specified Events of Default referred to in Items 3 through 11 of Exhibit A, March 31, 2008, and (iii) with respect to the Acquisition Event of Default and the Specified Events of Default referred to in Items 12 through 16 of Exhibit A, the date hereof, in each case upon the fulfillment of the following conditions precedent:



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



(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. 6, Consent and Waiver to Credit Agreement of American Apparel (USA), LLC, dated as of the date hereof, with respect to the SOF Investments Loan (the " SOF Waivernone" ), duly executed by all parties thereto, pursuant to which SOF Investments shall have waived the defaults arising from, among other things, the breaches by the Lead Borrower (as Borrower with respect to the SOF Investments Loan) of Section 5.01, Section 6.04, Section 6.11 or Section 6.12 of the " Credit Agreement" (as such term is defined in the SOF Waiver).



(d) The Administrative Agent shall have received, for the ratable benefit of the Lenders executing this Waiver, a waiver fee in the amount of $93,750.00, which shall be fully earned on the date hereof and shall not be subject to refund or rebate in whole or in part under any circumstance. The Administrative Agent is hereby authorized to make a Credit Extension to pay the waiver fee.



(e) The Administrative Agent shall have instituted an Availability Reserve under the Borrowing Base (which Availability Reserve shall be in addition to all other Reserves under the Borrowing Base) in the amount of $4,500,000, which Availability Reserve shall remain in place until satisfaction of the obligations of the Loan Parties set forth in Section 3 hereof.



(f) 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 May 16, 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 May 16, 2008 will be rendered and paid as set forth in the Credit Agreement.





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3. Amendment; Joinder; Pledgenone . Each Loan Party hereby agrees to enter into, by May 31, 2008, each in form and substance satisfactory to the Agents and each Lender in their discretion, (i) an amendment to the Credit Agreement and related documents, which amendment and related documents may, among other things, (a) effect a joinder by American Apparel, Inc. (f/k/a Endeavor Acquisition Corp.) to the Loan Documents, whereby American Apparel, Inc. (f/k/a Endeavor Acquisition Corp.) shall become a Facility Guarantor thereunder, and (b) delete certain financial performance covenants, including, without limitation, the financial performance covenant relating to Capital Expenditures, in each case in accordance with the Summary of Terms and Conditions set forth as Exhibit Bnone hereto, and (ii) an amendment to the Pledge Agreement, pursuant to which, among other things, the parties thereto shall amend Schedule I thereto to include all Subsidiaries in existence as of the date of such amendment. The failure of the Loan Parties to enter into the foregoing amendments and related documents by May 31, 2008 shall constitute an Event of Default under the Credit Agreement for all purposes but shall not invalidate the waiver provided in Section 1 above.



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



5. Financial Statements for Fiscal Month Ending April 30, 2008none . The parties hereto acknowledge and agree that notwithstanding anything in the Credit Agreement to the contrary, the date by which the Lead Borrower shall have furnished to the Administrative Agent the financial statements and Compliance Certificate referred to in Section 5.01(b) and Section 5.01(c) of the Credit Agreement for the Fiscal Month ended April 30, 2008, is hereby extended by ten (10) days to June 9, 2008.





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6. Representations and Warranties; Ratification of Loan Documentsnone . In order to induce the Agents and the Lenders to enter into th
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