Exhibit 10.7
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SIXTH
AMENDMENT TO
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CREDIT AGREEMENT
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BANK OF AMERICA, N.A.
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Date: March 13,
2009
THIS SIXTH AMENDMENT TO CREDIT
AGREEMENT (this “
Sixth Amendment ”) is made to the Credit Agreement (as
amended, the “ Credit Agreement ”; capitalized
terms used herein but not defined have the meanings given to them
in the Credit Agreement, as amended by this Sixth Amendment) 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
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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. 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 and that certain Fifth Amendment to Credit
Agreement on December 19, 2008. The parties hereto desire to
further amend the Credit Agreement on the terms and conditions set
forth herein.
B. Second Lien Refinancing
Transaction . The Loan Parties have advised the Agents and the
Lenders that the Lead Borrower intends to refinance and replace the
SOF Investments Loan by (i) terminating all commitments and
repaying in full all obligations thereunder and (ii) entering
into a new Credit Agreement among Parent, as the borrower
thereunder, the other Loan Parties, as Guarantors thereunder
(Parent and the other Loan Parties, in such capacities, the “
Second Lien Loan Parties ”) and Lion Capital LLP, as
the collateral agent (together with its successors in such
capacity, the “ Second Lien Collateral Agent ”)
and as the administrative agent (together with its successors in
such capacity, the “ Second Lien Administrative Agent
” and, together with the Second Lien Collateral Agent, the
“ Second Lien Agents ”) and the lenders party
thereto (the “ Second Lien Lenders ”). In
connection with the entering into of the Second Lien Credit
Agreement, (i) the Second Lien Agents and the Loan Parties
will enter into a new Intercreditor Agreement with the Agents,
(ii) the Second Lien Loan Parties will also enter into the
Second Lien Loan Documents to, among other things, guaranty the
obligations of the Borrower (as defined in the Second Lien Credit
Agreement) under the Second Lien Credit Agreement and grant liens
on all of their assets to the Second Lien Collateral Agent, subject
in each case to the terms of the Intercreditor Agreement. The Loan
Parties have requested that the Agents and the Required Lenders
consent to (i) the prepayment of the SOF Investments Loan,
(ii) the entering into of the Intercreditor Agreement and the
other Second Lien Loan Documents and (iii) the incurrence of
the obligations, the granting of the guarantees, security interests
and other liens under the Second Lien Loan Documents and the
performance of the other transactions contemplated by the Second
Lien Loan Documents (collectively the “ Second Lien
Refinancing Transaction ”).
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The Agents and the Required Lenders have agreed
to consent to and approve the Second Lien Refinancing Transaction
and to the modifications to the Credit Agreement provided for
herein, 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 adding to
Section 1.01 the following new definitions in appropriate
alphabetical order:
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“ “ Dov Charney
Subordination Agreement ” means that certain Second
Amended and Restated Subordination Agreement dated as of
February 10, 2009 (as amended, restated, modified or otherwise
amended in accordance with the terms thereof), by and among the
Lead Borrower (as Borrower thereunder), Dov Charney, an individual
(as Subordinated Creditor thereunder), and the Administrative
Agent, pursuant to which, among other things, the Subordinated
Creditor has agreed to subordinate the Subordinated Debt
Obligations (as defined in the Dov Charney Subordination Agreement)
to the Obligations.”
“ “ Second Lien
Agents ” means the collateral agent for the Second Lien
Lenders under the Second Lien Credit Agreement, and the
administrative agent for the Second Lien Lenders under the Second
Lien Credit Agreement.”
“ “ Second Lien
Credit Agreement ” means the Credit Agreement, dated as
of March 13, 2009, among Parent, the Loan Parties which are
facility guarantors, Lion Capital LLP, as administrative agent and
collateral agent thereunder (together with their successors and
assigns), the lenders from time to time party thereto, as amended,
restated, supplemented or otherwise modified from time to time in
accordance with the terms of this Agreement and the Intercreditor
Agreement.”
“ “ Second Lien
Lenders ” means the lenders from time to time party to
the Second Lien Credit Agreement.”
“ “ Second Lien
Loan ” means the “Loans” as defined in the
Second Lien Credit Agreement, as such loans 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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“ “ Second Lien Loan
Documents ” means Second Lien Credit Agreement and the
other “Loan Documents” as defined
therein.”
“ “ Voting
Agreement ” means the Investment Voting Agreement dated
as of March 13, 2009 (as amended, supplemented or modified
from time to time), by and between Dov Charney and Lion Capital
(Guernsey) II Limited.”
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b.
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By amending the
definition of “Change in Control” by:
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i.
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inserting the
phrase “or approved in accordance with the Voting
Agreement” at the end of clause (b) thereof;
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ii.
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deleting the
phrase “twenty-five percent (25%)” set forth in clause
(c) thereof in its entirety and substituting the phrase
“thirty-five percent (35%)” in its stead;
and
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iii.
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deleting the
phrase “set forth in clause (n) of the definition of
Permitted Encumbrances” set forth in clause (d) thereof
in its entirety and substituting the phrase “set forth in
clause (o) of the definition of Permitted Encumbrances”
in its stead.
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c.
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By deleting the
definition of “Consolidated Fixed Charge Coverage
Ratio” in its entirety and substituting the following new
definition in its stead:
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“ “ 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) the aggregate amount of federal,
state, local and foreign income taxes paid in cash during such
period, to (b) Debt Service Charges during such period, all as
determined on a Consolidated basis in accordance with
GAAP.”
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d.
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By deleting the
definition of “Debt Service Charges” in its entirety
and substituting the following new definition in its
stead:
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“ “ Debt Service
Charges ” means for any period, the sum of
(i) Consolidated Interest Expense, plus
(ii) principal payments made or required to be made on account
of Indebtedness (including, without limitation, on account of
Capital Lease Obligations) for such period, in each case determined
in accordance with GAAP.”
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e.
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By deleting the
definition of “Equipment Reduction Amount” in its
entirety and substituting the following new definition in its
stead:
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“ Equipment Reduction
Amount ” means an amount equal to the sum of (A)(i)
eighty percent (80%) multiplied by (ii) one-thirtieth
(1/30th) of the Appraised Fixed Assets
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Liquidation Value of any Eligible
Fixed Assets, calculated for each Eligible Fixed Asset as of the
date that any such Equipment was first included as Eligible Fixed
Assets, plus (B) from and after April 1, 2009, $165,000.
The Equipment Reduction Amount may be adjusted from time to time by
the Administrative Agent to reflect any changes in the Appraised
Fixed Assets Liquidation Value previously included as Eligible
Fixed Assets.
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f.
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By deleting the
definition of “Intercreditor Agreement” in its entirety
and substituting the following definition in its stead:
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“ “ Intercreditor
Agreement ” means that certain Intercreditor Agreement,
dated as of March 13, 2009, by and among the Agents and the
Second Lien Agents and acknowledged by the Lead Borrower and the
other Loan Parties, as amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms
thereof.”
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g.
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By deleting the
phrase “SOF Investments Loan” set forth in the
definition of “Material Agreements” and inserting in
lieu thereof the phrase “Second Lien Loan (including, without
limitation, the Second Lien Loan Documents)”.
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h.
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By deleting the
definition of “Maturity Date” in its entirety and
substituting the following new definition in its stead:
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“ “ Maturity Date
” means July 2, 2012.”
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i.
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By amending the
definition of “Permitted Dividends” by:
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i.
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deleting the
word “and” set forth immediately after the semicolon
contained in clause (c) thereof;
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ii.
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deleting the
period at the end of clause (d) set forth therein and
substituting the phrase “; and” in its stead;
and
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iii.
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inserting a new
clause (e) immediately after clause (d) as
follows:
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“(e) non-cash repurchases or
termination of Capital Stock upon the exercise of stock options or
warrants.”.
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j.
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By deleting
clause (o) of the definition of “Permitted
Encumbrances” in its entirety and substituting the following
clause (o) in its stead:
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“(o) Liens in favor of the
Second Lien Agent securing the obligations of Parent and the other
Loan Parties under Second Lien Loan Documents, provided that
such Liens are subject at all times to the terms of the
Intercreditor Agreement.”
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k.
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By amending the
definition of “Permitted Indebtedness” by:
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i.
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amending clause
(d) thereof as follows:
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a)
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by inserting
the word “and” immediately before clause
(ii) contained therein; and
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b)
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by deleting the
phrase “and (iii) Guarantees by any Loan Party of
Indebtedness in respect of Leases of any Foreign Subsidiary
existing as of the Fourth Amendment Effective Date and described on
Schedule 1.03 annexed hereto” in its entirety
therefrom.
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ii.
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deleting clause
(h) thereof in its entirety and substituting the following new
clause (h) in its stead:
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“(h) Indebtedness under the
Second Lien Loan Documents;”
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l.
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By amending the
definition of “Permitted Investments” by deleting the
word “and” set forth immediately after the semicolon
contained in clause (l) thereof, re-lettering clause
(m) thereof as clause (n), and inserting the following new
clause (m) in its stead:
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“(m) Guarantees by any Loan
Party of obligations in respect of Leases of any Foreign Subsidiary
existing as of the Fourth Amendment Effective Date and described on
Schedule 1.03 annexed hereto; and”
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m.
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By deleting the
definition of “Warrants” in its entirety and
substituting the following definition in its stead:
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“ “ Warrants
” means (i) those certain Warrants to Purchase Shares of
Common Stock of American Apparel, Inc. issued to SOF Investments on
December 19, 2008 and (ii) that certain Warrant to
purchase an aggregate of 16,000,000 shares of common stock of
Parent dated March 13, 2009, issued to Lion Capital (Guernsey)
II Limited.”
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n.
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By amending
Section 5.01 ( Financial Statements and Other
Inform
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