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Exhibit 10.1
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FIFTH AMENDMENT TO
CREDIT AGREEMENT
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BANK OF AMERICA,
N.A.
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Date: December 19,
2008
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this " Fifth
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 corporation
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 RETAIL FINANCE, LLC , with offices at One
Boston Place, 19 th 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
(g) the LENDERS party to the Credit Agreement; and
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(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. 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, and that certain Fourth
Amendment to Credit Agreement on June 20, 2008. The parties
hereto desire to further amend the Credit Agreement on the terms
and conditions set forth herein.
B. SOF Investments Loan . SOF Investments has requested
that the Loan Parties agree to certain modifications of the SOF
Investments Loan. Pursuant to the Credit Agreement and that certain
Intercreditor Agreement dated as of July 2, 2007 (as amended,
restated, supplemented or otherwise modified, the "
Intercreditor Agreement ") by and among the Agents (as
"First Lien Administrative Agent" thereunder) and SOF Investments
(as "Second Lien Administrative Agent" thereunder) and acknowledged
by the Lead Borrower, certain modifications of the SOF Investments
Loan are subject to the consent and approval of the Agents. The
Loan Parties have requested that the Agents consent to and approve
the modifications set forth in the amendment to the SOF Investments
Loan attached hereto in the form of Exhibit A . The Agents
are willing to consent to such amendment, subject to the terms and
conditions set forth herein.
Accordingly, it is hereby agreed, as follows:
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1.
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Amendment to Credit
Agreement. Subject to satisfaction of each and all of the
Preconditions to Effectiveness set forth in Section 3 hereof,
the Credit Agreement is amended as follows:
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a.
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By deleting Exhibit K (Form
of Compliance Certificate) to the Credit Agreement in its entirety
and substituting the attached Exhibit K in its
stead.
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b.
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By deleting Exhibit M
(Financial Performance Covenants) to the Credit Agreement in its
entirety and substituting the attached Exhibit M in its
stead.
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c.
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By adding to Section 1.01 the
following new definitions in appropriate alphabetical
order:
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" " Cash Flow Projections "
means the projections demonstrating the Lead Borrower’s and
its Subsidiaries’ weekly cash flows (including an
Availability model) for the thirteen-week period commencing on or
about the date of delivery to the Administrative Agent of the
initial Cash Flow Projections in accordance with SECTION 5.01(j)
hereof, together with a detailed description of any assumptions
made therein, in each case in form and substance satisfactory to
the Administrative Agent in the good faith exercise of its
reasonable business judgment, but in its sole discretion
nonetheless."
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" " Deteriorating Lender "
means any Delinquent Lender or any Lender as to which (a) the
Issuing Bank has a good faith belief that such Lender has defaulted
in fulfilling its obligations under one or more other syndicated
credit facilities as a result of such Lender’s financial
condition, or (b) a Person that Controls such Lender has been
deemed insolvent or become the subject of a bankruptcy, insolvency
or similar proceeding."
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" " Fifth Amendment Fee
Letter " means the Fee Letter dated as of December 18,
2008 by and among the Lead Borrower and the Agents."
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" " Intercreditor Agreement "
means that certain Intercreditor Agreement dated as of the Closing
Date by and among the Agents (as "First Lien Administrative Agent"
thereunder) and SOF Investments (as "Second Lien Administrative
Agent" thereunder) and acknowledged by the Lead Borrower, as
amended, restated, supplemented or otherwise modified from time to
time."
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" " Richter " means Richter
Consulting, Inc."
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" " Raw Materials Appraisal
Percentage " means 60%."
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" " Warrants " means those
certain Warrants to Purchase Shares of Common Stock of American
Apparel, Inc. issued to SOF Investments on December 18,
2008."
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" " Yearly Projections "
shall mean the balance sheet, income statement, and cash flow
projections (including an Availability model) of the Lead Borrower
and its Subsidiaries, prepared on a monthly basis for the balance
of the Fiscal Year ending December 31, 2008 and the Fiscal
Year ending December 31, 2009, together with a detailed
description of any assumptions made therein, in each case in form
and substance satisfactory to the Administrative Agent in the good
faith exercise of its reasonable business judgment, but in its sole
discretion nonetheless."
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d.
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By deleting the definition of
"Applicable Margin" in its entirety and substituting the following
definition in its stead:
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" Applicable Margin " means
the following:
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Applicable Margin for LIBO
Loans
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Applicable Margin for Prime
Rate Loans
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4.50%
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2.50%
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a.
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By deleting clause (a) of the
definition of "Borrowing Base" in its entirety and substituting the
following clause (a) in its stead:
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"(a) (i) the Raw Materials Appraisal
Percentage of the Appraised Inventory Liquidation Value with
respect to Eligible Inventory consisting of raw materials, and
(ii) the Appraisal Percentage of the Appraised Inventory
Liquidation Value with respect to all other Eligible
Inventory;"
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b.
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By amending the definition of
"Equipment Reduction Amount" by deleting the phrase "one-sixtieth
(1/60 th )"
in the second line thereof in its entirety and substituting the
phrase "one-thirtieth (1/30 th )" in its stead.
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c.
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By amending the definition of
"Permitted Disposition" by deleting the word "and" at the end of
clause (f) thereof and adding the following new clause
(g) immediately after clause (f) thereof:
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"(g) as long as no Default or Event
of Default then exists or would arise therefrom, sales and
transfers of equipment now or hereafter owned by any Loan Party in
an amount not to exceed $15,000,000 in the aggregate for all such
sales, including sale-leaseback transactions involving such
equipment; provided that (i) the Net Proceeds received
by any Loan Party in connection therewith shall be deposited into
the Concentration Account for application to and reduction of the
Obligations in accordance with SECTION 2.16 hereof, and
(ii) in the case of any such sale-leaseback transactions, upon
the request of the Agents, the lessor(s) of any such equipment
shall have entered into an intercreditor agreement with the Agents,
in form and substance satisfactory to the Collateral Agent in the
good faith exercise of its reasonable business judgment, but in its
sole discretion nonetheless;"
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d.
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By amending the definition of
"Permitted Encumbrances" by deleting clause (h) thereof and
substituting the following new clause (h) in its
stead:
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"(h) (x) Liens on fixed or
capital assets acquired by any Loan Party or any Subsidiary (and
proceeds thereof and insurance proceeds relating thereto) which are
permitted under clause (e)(i) of the definition of Permitted
Indebtedness so long as (i) such Liens and the Indebtedness
secured thereby are incurred prior to or within ninety
(90) days after such acquisition or the completion of the
construction or improvement thereof (other than refinancings
thereof permitted hereunder), (ii) the Indebtedness secured
thereby does not exceed 100% of the cost of acquisition of such
fixed or capital assets, and (iii) such Liens shall not extend
to any other property or assets of the Loan Parties, and
(y) Liens on
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equipment securing Indebtedness
permitted under clause (e)(ii) of the definition of Permitted
Indebtedness or leases entered into pursuant to sale-leaseback
transactions permitted under clause (g) of the definition of
Permitted Disposition, so long as such Liens are limited to such
equipment, proceeds thereof and any insurance proceeds relating
thereto;"
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e.
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By amending the definition of
"Permitted Indebtedness" by deleting clauses (e), (k), (l) and
(q) thereof in their entirety and substituting the following
new clauses (e), (k), (l) and (q) in their
stead:
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"(e) (i) purchase money
Indebtedness of any Loan Party or their Subsidiaries to finance the
acquisition of any fixed or capital assets, including Capital Lease
Obligations, and any Indebtedness assumed in connection with the
acquisition of any such assets or secured by a Lien on any such
assets prior to the acquisition thereof (and not incurred in
contemplation of such acquisition) and extensions, renewals and
replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof or result in an earlier
maturity date or decreased weighted average life thereof, and
(ii) Indebtedness incurred with respect to any financing of or
secured by equipment now or hereafter owned by any Loan Party
(including without limitation any sale-leaseback transaction with
respect to such equipment) and extensions, renewals and
replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof or result in an earlier
maturity date or decreased weighted average life thereof;
provided that (x) with respect to extensions, renewals,
or replacements of such Indebtedness, the holders of such
Indebtedness are not afforded covenants, defaults, rights or
remedies more burdensome in any material respect to the obligor or
obligors than those contained in the Indebtedness being extended,
renewed or replaced, (y) in the case of any Indebtedness
incurred with respect to any financing of or secured by equipment
in connection with a sale-leaseback transaction permitted
hereunder, upon request of the Agents, the lessor(s) of any such
equipment shall have entered into an intercreditor agreement with
the Agents, in form and substance satisfactory to the Collateral
Agent in the good faith exercise of its reasonable business
judgment, but in its sole discretion nonetheless, and (z) that
the aggregate principal amount of Indebtedness permitted by this
clause (e) and clause (i) below shall not exceed
$20,000,000 at any time outstanding;"
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"(k) [Intentionally
Deleted.];"
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"(l) Subordinated Indebtedness not
existing on the Closing Date, provided that 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;"
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"(q) other unsecured Indebtedness in
an aggregate principal amount not exceeding $25,000,000 at any time
outstanding, provided that the terms of such Indebtedness are
reasonably acceptable to the Agents;"
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f.
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By amending the definition of
"Prepayment Event" by deleting clause (d) thereof in its
entirety and substituting the following new clause (d) in its
stead:
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"(d) The incurrence by a Loan Party of any
Indebtedness other than Permitted Indebtedness (other than
Permitted Indebtedness of the types described in clauses
(l) or (q) of the definition thereof)."
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g.
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By deleting the definition of "Prime
Rate" in its entirety and substituting the following definition in
its stead:
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" Prime Rate " means, for any day, the
highest of: (a) the variable annual rate of interest then most
recently announced by the Administrative Agent as its "Prime Rate";
(c) the one-month LIBO Rate plus two and one-half percent
(2.50%) per annum, which rate shall be determined on a daily
basis; and (c) the Federal Funds Effective Rate in effect on
such day plus 1
/ 2 of
1% (0.50%) per annum. The Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate being charged to
any customer. If for any reason the Administrative Agent shall have
determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective
Rate for any reason, including the inability or failure of the
Administrative Agent to obtain sufficient quotations thereof in
accordance with the terms hereof, the Prime Rate shall be
determined without regard to clause (b) of the first sentence
of this definition, until the circumstances giving rise to such
inability no longer exist. Any change in the Prime Rate due to a
change in the Administrative Agent’s Prime Rate or the
Federal Funds Effective Rate shall be effective on the effective
date of such change in the Administrative Agent’s Prime Rate
or the Federal Funds Effective Rate, respectively."
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h.
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By deleting the definition of "SOF
Investments" in its entirety and substituting the following new
definition in its stead:
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" SOF Investments " means SOF Investments,
L.P. – Private IV, or another lender party to the Material
Agreements in respect of the SOF Investments Loan."
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i.
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By deleting the definition of "SOF
Investments Loan" in its entirety and substituting the following
new definition in its stead:
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" SOF Investments Loan " means the term
loan in the aggregate principal amount of $51,000,000 made by SOF
Investments to the Borrowers, the terms of which are satisfactory
to the Administrative Agent, as such loan may be refinanced in
accordance with the terms of this Agreement and the Intercreditor
Agreement or otherwise on terms satisfactory to the Administrative
Agent in the good faith exercise of its reasonable business
judgment, but in its sole discretion nonetheless."
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j.
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By amending Section 2.05
(Swingline Loans) thereto as follows:
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i.
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By amending clause (a) thereof
by adding the phrase "in its sole discretion" immediately after the
phrase "at any time" in the second line thereof;
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ii.
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By amending clause (b) thereof
by adding the phrase "in its sole discretion" (i) immediately
after the phrase "Swingline Loans may be made by Swingline Lender"
in the first line thereof, and (ii) immediately after the
phrase "continue to make Swingline Loans" in the third sentence
thereof.
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k.
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By deleting Section 2.12(a)
(Letters of Credit) thereto in its entirety and substituting
the following new Section 2.12(a) in its stead:
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"(a) Upon the terms and subject to the conditions
herein set forth, at any time and from time to time after the date
hereof and prior to the Termination Date, the Lead Borrower, on
behalf of the Borrowers, may request the Issuing Bank to issue, and
subject to the terms and conditions contained herein, the Issuing
Bank shall issue, for the account of the relevant Borrower, one or
more Letters of Credit; provided , however , that no
Letter of Credit shall be issued (x) if after giving effect to
such issuance (i) the aggregate Letter of Credit Outstandings
shall exceed $10,000,000, or (ii) the aggregate Revolving Loan
Credit Extensions (including Swingline Loans) would exceed the
limitation set forth in SECTION 2.01(a)(i), and (y) without
the prior consent of the Administrative Agent if a default of any
Revolving Credit Lender’s obligations to fund under this
SECTION 2.03 exists or any Revolving Credit Lender is at such time
a Delinquent Lender or Deteriorating Lender hereunder, unless the
Issuing Bank has entered into arrangements satisfactory to the
Issuing Bank with the Borrowers or such Revolving Credit Lender to
eliminate the Issuing Bank’s risk with respect to such
Revolving Credit Lender."
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l.
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By amending Section 2.17(b)
(Fees) thereto by deleting the phrase "0.375% per annum"
therefrom in its entirety and substituting the phrase "0.50% per
annum" in its stead.
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m.
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By amending Section 5.01
(Financial Statements and Other Information) thereof by
deleting the word "and" at the end of clause (i) thereof,
re-lettering clause (j) thereof as clause (k), and inserting
the following new clause (j) therein:
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"(j) in addition to the other documents and other
information required to be delivered pursuant to this SECTION 5.01,
(i) from and after December 31, 2009, on or before
Wednesday of each calendar week, a comparison of projected to
actual performance for such period and a detailed explanation of
any variances, which comparison and explanation shall be certified
by the chief financial officer of the Lead Borrower; and
(ii) upon request from the Administrative Agent, updated Cash
Flow Projections, in each case in form, scope and substance
satisfactory to the Agents in the good faith exercise of their
reasonable business judgment, but in their sole discretion
nonetheless."
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n.
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By amending Section 5.08(b)
(Books and Records; Inspection and Audit Rights; Appraisals;
Accountants) thereto as follows:
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i.
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By deleting the proviso in the
second sentence in its entirety and substituting the following new
proviso in its stead:
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" provided , that the Loan Parties
shall be responsible only for the costs and expenses of three
(3) appraisals of Inventory, three (3) appraisals of
Equipment, and three (3) commercial finance examinations in
any twelve month period following the Closing Date, unless
(x) an Event of Default shall have occurred and be continuing,
or (y) the Agents are required to obtain such appraisals
and/or commercial finance examinations pursuant to Applicable Law,
in either of which cases the Agents may undertake such additional
appraisals and commercial finance examinations as they deem
appropriate, at the Loan Parties’ sole cost and
expense."
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ii.
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By adding the following new
sentences at the end thereof.
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"Each appraisal, commercial finance examination
and other evaluation conducted in accordance with this SECTION
5.08(b) shall be in form, scope and substance satisfactory to the
Agents in the good faith exercise of their reasonable business
judgment, but in their sole discretion nonetheless. Without
limiting their other obligations under this SECTION 5.08(b), the
Loan Parties shall cooperate with Richter in conducting an updated
commercial finance examination, which cooperation shall include
(subject to customary confidentiality undertakings by Richter),
without limitation, (i) providing all financial information
and inventory data of the Loan Parties reasonably requested by
Richter, (ii) providing access to the books and records of the
Loan Parties and such other information as Richter may reasonably
request, and (iii) making officers of the Loan Parties
available to discuss the affairs, finances and accounts of the Loan
Parties with Richter."
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o.
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By amending Section 5.08(c)
(Books and Records; Inspection and Audit Rights; Appraisals;
Accountants) thereof by adding the following new sentences at
the end thereof:
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"Without limiting the generality of the
foregoing, the Agents and the Lenders shall retain Richter or
ano
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