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Exhibit
10.28
WAIVER AND CONSENT TO CREDIT
AGREEMENT
LASALLE RETAIL
FINANCE
Date: May
, 2008
THIS WAIVER AND CONSENT 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
BACKGROUND
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 A annexed hereto
(collectively, the “ Financial and Compliance Events of
Default ”).
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 Assets
”) of the Seller’s garment dying and finishing business
(the “ Acquisition ”) for the aggregate sum of
approximately $3,500,000.00 (the “ Purchase Price
”). 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
Default ”, and together with the Financial and Compliance
Events of Default, collectively, the “ Specified Events of
Default ”) 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 Default. The Agents and
the Required Lenders hereby waive the Specified Events of Default.
The Loan Parties acknowledge and agree that: |
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(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. |
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(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 (i) with respect
to the Specified Events of Default referred to in Items 1 and 2 of
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: |
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(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. |
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(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. |
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(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 Waiver ”),
duly executed by all parties thereto, pursuant to which SOF
Investments shall have waived the defaults arising from, among
other things, the
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2
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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).
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(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. |
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(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. |
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(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
, 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
, 2008 will be rendered and paid as set
forth in the Credit Agreement. |
| 3. |
Amendment; Joinder; Pledge. 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 B 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 Waiver. 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
Default ”) 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 others, the Agents,
the certain of the Lenders, and the Loan Parties,
(iii)&nb
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