10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

(Mark One)

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2007

or

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             

Commission File Number 001-32697

American Apparel, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-3200601
(State of Incorporation)	(I.R.S. Employer Identification No.)

747 Warehouse Street

Los Angeles, California 90021-1106

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (213) 488-0226

Securities registered pursuant to Section 12(b) of the Act:

Units consisting of one share of Common Stock, par value $.0001 per share, and one Warrant* Common Stock, par value $.0001 per share Warrants to purchase shares of Common Stock*	American Stock Exchange American Stock Exchange American Stock Exchange
(Title of Each Class)	(Name of Each Exchange on Which Registered)

* The Warrants were redeemed and, as a result, the Units and the Warrants ceased to be registered, pursuant to Section 12(b), on March 7, 2008.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨    Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2007 was approximately $190,696,791 based upon the last price reported for such date in the Amex-Composite transactions.

The number of shares of the registrant’s common stock outstanding as of March 25, 2008 was 71,116,652.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the registrant’s 2008 Annual Meeting of Stockholders (the “2008 Proxy Statement”), to be filed within 120 days of the end of the fiscal year ended December 31, 2007, are incorporated by reference into Part III herein. Except with respect to the information specifically incorporated by reference in Part III of this Form 10-K, the 2008 Proxy Statement is not deemed to be filed as part of this Form 10-K.

EXPLANATORY NOTE

American Apparel, Inc.’s Form 10-K for the year ended December 31, 2007 (the “Original Filing”) was filed with the Securities and Exchange Commission on March 17, 2008. This Amendment No. 1 is filed solely for the purposes of (i) revising the Exhibit Index and filing certain exhibits that were inadvertently omitted from the Original Filing and (ii) revising Exhibit 21.1. Except as expressly set forth in this Amendment No. 1, the Original Filing has not been amended, updated or otherwise modified.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

(a) The following documents are filed as part of this Report:

3. Exhibits

See Exhibit Index.

EXHIBIT INDEX

Exhibit No.	Description
2.1	Acquisition Agreement, dated as of December 18, 2006 and amended and restated on November 7, 2007, by and among the Registrant, AAI Acquisition LLC, American Apparel, Inc. (“AAI”), American Apparel, LLC, each of American Apparel Canada Wholesale Inc. and American Apparel Canada Retail Inc. (together the “CI companies”), Dov Charney, Sam Lim, and the stockholders of each of the CI companies (included as Annex A of the Definitive Proxy Statement (File No. 001-32697), filed November 28, 2007 and incorporated by reference herein)
3.1	Amended and Restated Certificate of Incorporation of the Registrant (included as Exhibit 3.1 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
3.2	Bylaws of the Registrant (included as Exhibit 3.1 of the Current Report on Form 8-K (File No. 001-32697) filed November 9, 2007 and incorporated by reference herein)
3.3	Certificate of Amendment to Certificate of Formation of American Apparel (USA), LLC (included as Exhibit 3.3 to Form 10-K (File No 001-32697) filed March 17, 2008 and incorporated by reference herein)
4.1	Specimen Unit Certificate (included as Exhibit 4.1 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
4.2	Specimen Common Stock Certificate (included as Exhibit 4.2 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
4.3	Specimen Warrant Certificate (included as Exhibit 4.3 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
4.4	Form of Unit Purchase Option (included as Exhibit 4.4 to the Registration Statement on Form S-1 (File No. 333-128440) filed September 20, 2005 and incorporated by reference herein)
4.5	Warrant Agreement (included as Exhibit 4.5 to the Registration Statement on Form S-1 (File No. 333-128440) filed September 20, 2005 and incorporated by reference herein)
4.6	Registration Rights Agreement, dated December 12, 2007, by and among the Registrant and the stockholders listed on the signature page therein (included as Annex H of the Definitive Proxy Statement (File No. 001-32697), filed November 28, 2007 and incorporated by reference herein)
4.7	Voting Agreement, dated December 12, 2007, between the Registrant and the Stockholders listed on the signature page therein (included as Annex E of the Definitive Proxy Statement (File No. 001-32697), filed November 28, 2007 and incorporated by reference herein)
4.8	Lock-Up Agreement, dated December 12, 2007, between the Registrant and Dov Charney (included as Annex D of the Definitive Proxy Statement (File No. 001-32697), filed November 28, 2007 and incorporated by reference herein)
10.1+	Employment Agreement, dated December 12, 2007, between the Registrant, AAI Acquisition LLC and Dov Charney (included as Annex J of the Definitive Proxy Statement (File No. 001-32697), filed November 28, 2007 and incorporated by reference herein)
10.2	Escrow Agreement, dated July 2, 2007, by and among the Registrant, Dov Charney and Continental Stock Transfer & Trust Company (included as Annex G of the Definitive Proxy Statement (File No. 001-32697), filed November 28, 2007 and incorporated by reference herein)
10.3+	Registrant’s 2007 Performance Incentive Equity Plan (included as Annex C of the Definitive Proxy Statement (File No. 001-32697), filed November 28, 2007 and incorporated by reference herein)

Exhibit No.	Description
10.4	Credit Agreement, dated as of July 2, 2007 (the “LaSalle Agreement”), among AAI, the Borrowers, the Facility Guarantors, LaSalle Business Credit, LLC, as agent for LaSalle Bank Midwest National Association, acting through its division, LaSalle Retail Finance (“LaSalle Business Credit”), the Lenders, and LaSalle Bank National Association (“LaSalle Bank”) (included as Exhibit 10.8 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.5	First Amendment to Credit Agreement LaSalle Retail Finance, dated October 11, 2007, amending the LaSalle Agreement, among AAI, the Borrowers, the Facility Guarantors, LaSalle Business Credit, Wells Fargo Retail Finance, LLC (“Wells Fargo”), the Lenders, and LaSalle Bank (included as Exhibit 10.9 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.6	Second Amendment and Waiver to Credit Agreement LaSalle Retail Finance, dated November 26, 2007, amending the LaSalle Agreement, among AAI, the Borrowers, the Facility Guarantors, LaSalle Business Credit, Wells Fargo, the Lenders, and LaSalle Bank (included as Exhibit 10.10 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.7*	Third Amendment to Credit Agreement LaSalle Retail Finance, dated December 12, 2007, amending the LaSalle Agreement, among AAI, the Borrowers, the Facility Guarantors, LaSalle Business Credit, Wells Fargo, the Lenders, and LaSalle Bank
10.8*	Waiver to Credit Agreement LaSalle Retail Finance, dated February 29, 2008, among American Apparel (USA), LLC (successor by merger to American Apparel, Inc.), the Borrowers, the Facility Guarantors, LaSalle Business Credit, Wells Fargo, the Lenders, and LaSalle Bank
10.9	Credit Agreement, dated as of January 18, 2007 (the “SOF Agreement”), among AAI, the Facility Guarantors, and SOF Investments, L.P. - Private IV (“SOF”) (included as Exhibit 10.11 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.10	Amendment No. 1 and Waiver to Credit Agreement of American Apparel, Inc., dated as of July 2, 2007, amending the SOF Agreement, among AAI, the Facility Guarantors, and SOF (included as Exhibit 10.12 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.11	Amendment No. 2 and Waiver to Credit Agreement of American Apparel, Inc., dated as of November 9, 2007, amending the SOF Agreement, among AAI, the Facility Guarantors, and SOF (included as Exhibit 10.13 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.12	Amendment No. 3 and Waiver to Credit Agreement of American Apparel, Inc., dated as of November     , 2007, amending the SOF Agreement, among AAI, the Facility Guarantors, and SOF (included as Exhibit 10.14 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.13*	Amendment No. 4 and Waiver to Credit Agreement of American Apparel, Inc., dated as of December 12, 2007, amending the SOF Agreement, among AAI, the Facility Guarantors, and SOF
10.14*	Amendment No. 5 and Waiver to Credit Agreement of American Apparel (USA), LLC (successor by merger to American Apparel, Inc.), dated as of February 29, 2008, amending the SOF Agreement, among American Apparel (USA), LLC, the Facility Guarantors, and SOF
10.15	Lease, dated June 9, 2004, by and between Titan Real Estate Investment Group, Inc., and Textile Unlimited Corp., E&J Textile Group, Inc., and Johnester Knitting, Inc. (jointly and severally) (included as Exhibit 10.15 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)

Exhibit No.	Description
10.16	Assignment of Lessee’s Interest in Lease and Assumption Agreement, dated as of June 2, 2005, by and between Textile Unlimited Corp., E&J Textile Group, Inc., and Johnester Knitting, Inc. (jointly and severally) and American Apparel Dyeing and Finishing, Inc. (included as Exhibit 10.16 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.17	Lease, dated December 13, 2005, by and between American Central Plaza and AAI (included as Exhibit 10.17 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.18	Lease Amendment, effective as of November 15, 2006, by and between American Central Plaza and AAI (included as Exhibit 10.18 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.19	Lease Amendment, effective as of March 22, 2007, by and between American Central Plaza and AAI (included as Exhibit 10.19 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.20*	Credit facilities agreement, dated December 3, 2007, among The Toronto-Dominion Bank and American Apparel Canada Wholesale Inc./American Apparel Canada Grossiste Inc. and Les Boutiques American Apparel Canada Inc./American Apparel Canada Retail Inc.
10.21	Lease, dated as of January 1, 2004, by and between Alameda Produce Market, Inc. and AAI (included as Exhibit 10.21 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.22	Lease, dated as of May 12, 2004, by and between Alameda Produce Market, Inc. and AAI (included as Exhibit 10.22 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein)
10.23*+	Employment Agreement, dated as of October 26, 2006, between the Registrant and Joyce E. Crucillo
10.24*	Asset Purchase Agreement, dated as of December 1, 2007, by and between PNS Apparel, Inc., Blue Man Group, Inc., Allen S. Yi and American Apparel, Inc.
10.25*	Promissory Note, dated December 11, 2007, between American Apparel Canada Wholesale Inc. and Dov Charney
10.26*	Promissory Note, dated December 11, 2007, between American Apparel Canada Wholesale Inc. and Dov Charney
14.1	Registrant’s Code of Ethics (included as Exhibit 14.1 of the Current Report for 8-K (File No 001-32697) filed December 18, 2007 and incorporated by reference herein)
21.1*	List of Subsidiaries
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith.

+ Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AMERICAN APPAREL, INC. (Registrant)
March 28, 2008	/s/ Ken Cieply
	Ken Cieply Chief Financial Officer (Principal Financial Officer)

EX-10.7

Exhibit 10.7

THIRD AMENDMENT TO

CREDIT AGREEMENT LASALLE RETAIL FINANCE

Date: December 12, 2007

THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this “Third Amendment”) is

made to the Credit Agreement (the “Credit Agreement”) dated as of July 2, 2007 by and among:

(a) American Apparel, Inc. (“AAI”), a corporation organized under the laws of the State of California, with its principal executive offices at 747 Warehouse Street, Los Angeles, California, 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) 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) 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, 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; and

(g) the LENDERS party to the Credit Agreement; and

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(h) 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, the parties hereto agree as follows:

Background:

A. Amendment. On October 11, 2007, the parties hereto entered into that certain First Amendment to Credit Agreement, and on November 26, 2007, the parties hereto entered into that certain Second Amendment and Wavier to Credit Agreement. The parties hereto desire to further amend the Credit Agreement on the terms and conditions set forth herein.

B. Merger. Pursuant to the Merger Agreement (as such term is defined herein), (i) the SPAC Transaction shall be consummated, whereby AAI shall merge with and into AAI Acquisition LLC (“AAI LLC”), with AAI LLC as the surviving entity, and (ii) Endeavor Acquisition Corp. (“Endeavor”) shall hold all of the limited liability company membership interests or other equity interests of AAI LLC.

C. Assumption. Pursuant to that certain Assumption and Ratification Agreement dated as of even date herewith (as the same may be amended, modified, supplemented or restated, the “Assumption Agreement”) by and between, among others, AAI LLC and the Agents, AAI LLC shall, among other things, assume all of the Obligations of AAI as a Borrower and as Lead Borrower under the Loan Documents.

D. The parties hereto desire to amend certain provisions of the Credit Agreement in connection with the Merger. Accordingly, it is hereby agreed, as follows:

1. SPAC Transaction. The parties hereto acknowledge and agree that AAI and its Affiliates are hereby authorized to (i) consummate the SPAC Transaction in accordance with the terms of the Merger Document, and (ii) notwithstanding anything to the contrary in any Loan Document, take all such actions necessary therefor, including, without limitation, the following, in accordance with the funds flow set forth on Exhibit A annexed hereto:

a. make tax payments to Dov Chamey and Sang Ho Lim with respect to the applicable portions of the 2006 and 2007 taxable year, including such payments of notes payable upon transfer of funds from Endeavor;

b. purchase Capital Stock from Sang Ho Lim as provided under the Merger Agreement; and

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c. pay all Indebtedness set forth on Schedule 5.25(c) of the Merger Agreement.

2. Amendment to Credit Agreement: Subject to satisfaction of each and all of the Preconditions to Effectiveness set forth in Section 3 below, the Credit Agreement is amended, as follows:

a. By deleting the definition of “Consolidated” in its entirety and substituting the following in its place:

“Consolidated” means, when used to modify a financial term, test, statement, or report of a Person, the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of such Person and its Subsidiaries, provided with respect to the phrase “such Person and its Subsidiaries”, only the Persons which would have been included within the definition of “Consolidated” prior to the consummation of the SPAC Transaction shall be included within the definition of “Consolidated” following the consummation of the SPAC Transaction.

b. By deleting the definition of “Consolidated EBITDA” in its entirety and substituting the following in its place:

“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, amortization, and all other non-cash charges that were deducted in determining Consolidated Net Income for such period, plus (c) provisions for Taxes based on income that were 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 pursuant to Section 5.25(d) of the Merger Agreement, plus (f) any compensation expense incurred 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) the increase in deferred rent for the period, if any, minus the sum of (x) the decrease in deferred rent for the period, if any, plus (y) litigation expenses related to the existing sexual harassment suits, not to exceed $2,000,000 in the aggregate, all as determined on a Consolidated basis in accordance with GAAP, provided that for the purposes of calculating Consolidated EBITDA for any period prior to January 1, 2007, the amounts set forth below opposite each month shall be deemed to be the Consolidated EBITDA of each such month:

MONTH

CONSOLIDATED EBITDA

July 31,2006

$1,840,000

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August 31, 2006

$1,840,000

September 30, 2006

$1,840,000

October 31, 2006

$1,100,000

November 30, 2006

$1,100,000

December 31, 2006

$1,100,000

c. By deleting the definition of “Consolidated Fixed Charge Coverage Ratio” in its entirety and substituting the following in its place:

“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, provided that shareholder distributions made pursuant to Section 1.15 of the Merger Agreement shall be excluded from this calculation.

d. By deleting the definition of “Merger Agreement” in its entirety and substituting the following in its place:

“Merger Agreement” means that certain Amended and Restated Agreement and Plan of Reorganization dated as of November 7, 2007 by and among Endeavor, Merger Subsidiary, American Apparel, Inc., American Apparel, LLC, the Canadian Affiliates, Dov Charney, each of the stockholders of the Canadian Affiliates and Sang H. Lim.

e. By deleting the definition of “Merger Subsidiary” in its entirety and substituting the following in its place:

“Merger Subsidiary” means AAI Acquisition LLC.

f. By amending the provisions of Section 6.07(b) by deleting the word “and” at the end of Section 6.07(b)(iii), renumbering subsection (iv) as (v) and inserting the following new subsection (iv):

(iv) to the extent incidental to the SPAC Transaction, transactions resulting in the incurrence of Indebtedness to Endeavor, whether funded by Endeavor to a Loan Party on or about the date of the Merger or thereafter, provided that no Loan Party shall make any payments on account of such Indebtedness to Endeavor to the extent that such payments exceed the aggregate amount of $2,000,000.00; and

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g. By amending the provisions of Section 6.08 by deleting the word “and” at the end of clause (h) thereof, relettering clause (i) as (j) and inserting the following new clause (i):

(j) payments on account of Indebtedness to Endeavor to the extent permitted under Section 6.07(b)(iv); and

h. By deleting the provisions of Section 6.10 in their entirety and substituting the following in their place:

SECTION 6.10. Amendment of Material Documents.

No Loan Party will, or will permit any Subsidiary to, amend, modify or waive any of its rights under (a) its Charter Documents or (b) any Material Agreement, or (c) any Material Indebtedness, in each case to the extent that such amendment, modification or waiver would reasonably likely have a Material Adverse Effect, provided that notwithstanding anything to the contrary, the Lead Borrower may adopt as its Charter Documents those documents annexed to that certain Manager’s Certificate of AAI Acquisition LLC dated as of even date herewith (the “Manager’s Certificate”, which Manager’s Certificate has been delivered to the Agents as of the date hereof.

i. The provisions of Section 9.01 (b) are hereby deleted in their entirety and the following is inserted in their place:

(b) if to the Administrative Agent, the Collateral Agent or the Swingline Lender, to LaSalle Business Credit, LLC, 100 Federal Street, Boston, Massachusetts 02110, Attention: Stephen J. Garvin (Telecopy No. (617) 434-6685), (E-Mail stephen. garvin@bankofamerica.com), with a copy to Riemer & Braunstein, LLP, Three Center Plaza, Boston, Massachusetts 02108, Attention: Donald E. Rothman, Esquire (Telecopy No. (617) 880-3456), (E-Mail drothman@riemerlaw.com); and

The provisions of Section 9.04(c) are hereby amended by replacing the phrase “Chicago, Illinois” with the phrase “Boston, Massachusetts” in the second line of such Section 9.04(c).

3. Preconditions to Effectiveness. This Third Amendment shall not take effect unless and until each and all of the following items has been satisfied or delivered, as the case may be, and in all events, to the satisfaction of the Agents, in their sole and exclusive discretion. The willingness of the Agents and the Lenders to enter into this Third Amendment is expressly conditioned upon the receipt by the Administrative Agent of the following items:

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a. On or prior to the date hereof, the Lead Borrower, the Borrowers, and the Facility Guarantors shall have delivered to the Administrative Agent a duly executed copy of this Third Amendment.

b. The Lead Borrower, the Borrowers, and the Facility Guarantors shall have delivered to the Administrative Agent such other and further documents as the Administrative Agent reasonably may require and shall have identified prior to the execution of this Third Amendment, in order to confirm and implement the terms and conditions of this Third Amendment.

c. On or prior to the date hereof, the Borrowers shall have paid to the Administrative Agent for the ratable benefit of the Lenders an amendment and waiver fee in the amount of $25,000.00. In this regard, the waiver and amendment fee shall be fully earned as of the date of execution of this Third Amendment, and the Administrative Agent is hereby authorized to make a Revolving Credit Loan under the Credit Agreement to pay the waiver and amendment fee.

d. Within seven (7) days following the date hereof, the Agents shall have received a favorable written opinion (addressed to each Agent, the Collateral Monitoring Agent and the Lenders and dated as of the date hereof) of counsel for Endeavor and AAI LLC substantially in the form of Exhibit B annexed hereto.

4. Ratification of Loan Documents. No Claims against the Lender:

a. Except as provided herein, all terms and conditions of the Credit Agreement and of each of the other Loan Documents remain in full force and effect. Each Loan Party hereby ratifies, confirms, and re-affirms all terms and provisions of the Loan Documents.

b. Each Loan Party represents and warrants to the Lender that as of the date of this Third Amendment, no Event of Default exists, or solely with the passage of time or notice, would exist under the Loan Documents.

c. Each Loan Party acknowledges and agrees that to its actual knowledge (i) there is no basis nor set of facts on which any amount (or any portion thereof) owed by any of the Loan Parties under any Loan Document could be reduced, offset, waived, or forgiven, by rescission or otherwise; (ii) nor is there any claim, counterclaim, off set, or defense (or other right, remedy, or basis having a similar effect) available to any of the Loan Parties with regard thereto; (iii) 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.

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5. Miscellaneous:

a. Terms used in this Third Amendment which are defined in the Credit Agreement are used as so defined.

b. This Third Amendment may be executed in counterparts, each of which when so executed and delivered shall be an original, and all of which together shall constitute one agreement.

c. This Third Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.

d. Any determination that any provision of this Third Amendment or any application hereof is invalid, illegal, or unenforceable in any respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality, or enforceability of any other provisions of this Third Amendment.

e. The Borrowers shall pay on demand all reasonable costs and expenses of the Agents and the Lenders, including, without limitation, attorneys’ fees incurred by the Agents in connection with the preparation, negotiation, execution, and delivery of this Third Amendment. The Administrative Agent is hereby authorized by the Borrowers to make one or more Revolving Credit Loans to pay all such costs, expenses, and attorneys’ fees and expenses.

f. In connection with the interpretation of this Third Amendment and all other documents, instruments, and agreements incidental hereto:

i. All rights and obligations hereunder and thereunder, including matters of construction, validity, and performance, shall be governed by and construed in accordance with the law of The Commonwealth of Massachusetts and are intended to take effect as sealed instruments.

ii. The captions of this Third Amendment are for convenience purposes only, and shall not be used in construing the intent of the parties under this Third Amendment.

iii. In the event of any inconsistency between the provisions of this Third Amendment and any of the other Loan Documents, the provisions of this Third Amendment shall govern and control.

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g. The Agents, the Lenders, the Borrowers, and the Facility Guarantors have prepared this Third Amendment and all documents, instruments, and agreements incidental hereto with the aid and assistance of their respective counsel. Accordingly, all of them shall be deemed to have been drafted by the Agents, the Lenders, the Borrowers, and the Facility Guarantors and shall not be construed against any party.

[Signatures Follow]

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IN WITNESS WHEREOF, the undersigned have caused this Third Amendment to be duly executed as of the date first set forth above.

AMERICAN APPAREL, INC.,

as Lead Borrower and as a Borrower

By:

Name: Dov Charney

Title: CEO

AMERICAN APPAREL RETAIL, INC.

as a Borrower

By:

Name: Dov Charney

Title: CEO

AMERICAN APPAREL DYEING & FINISHING, INC.,

as a Borrower,.

By:

Name: Dov Charney

Title: CEO

KCL KNITTING, LLC,

as a Borrower

By:

American Apparel, Inc., its sole member

By:

Name: Dov Charney

Title: CEO

Signature Page to Third Amendment to Credit Agreement

AMERICAN APPAREL, LLC, as a Facility Guarantor

By:

Name: Dov Charney

Title: CEO

FRESH AIR FREIGHT, INC., as a Facility Guarantor

By:

Name: Dov Charney

Title: CEO

Signature Page to Third Amendment 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:

Name: Stephen J. Garvin Title: Vice President

Address: 100 Federal Street, 9th Floor Boston, Massachusetts 02110 Attn: Stephen J. Garvin

Telephone: (617) 434-9399 Telecopy: (617) 434-6685

LASALLE BANK NATIONAL ASSOCIATION,

As Issuing Bank

By:

Name: Stephen J. Garvin

Title: Vice President

Address: 135 South LaSalle Street

Chicago, Illinois 60603 Attention:

Telephone: (312) 904-2000 Telecopy:

Signature Page to Third Amendment to Credit Agreement

WELLS FARGO RETAIL FINANCE, LLC,

As Collateral Monitoring Agent and as a Lender

By:

Name: Emily Abrahamson

Title: Assistant Vice President/Account Executive

Address: One Boston Place, 19th Floor Boston, Massachusetts 02108 Attn: Emily Abrahamson

Telephone: (617) 854-7243

Telecopy:

Signature Page to Third Amendment to Credit Agreement

Exhibit A

Funds Flow

[please see attached]

Exhibit A to Third Amendment to Credit Agreement

ENDEAVOR ACQUISITION CORP. 590 Madison Avenue

21st Floor New York, New York 10022

As of December 12, 2007

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attention: Accounting Department

Dear Sirs:

Pursuant to the terms of the Investment Management Trust Agreement dated as of December 15, 2005, by and between Endeavor Acquisition Corp. and Continental Stock Transfer & Trust Company, you are hereby authorized to pay from Trust Account No. 530-060957 of Endeavor Acquisition Corp., to the designated persons on Schedule I hereto, the amounts set against their names.

Very truly yours,

ENDEAVOR ACQUISITION CORP.

By:

Name: Jonathan J. Ledecky Title: President

SCHEDULE 1 PAYMENTS FROM TRUST ACCOUNT

Gross Proceeds in Trust $ 129,188,279.45

Payments

Sang Ho Lim (for payment of Lim Buyout and tax distribution) $ 75,809,652.00

Payment of tax distribution to Dov Charney $ 7,857,318.00

Graubard Miller (for unpaid legal fees and disbursements) $ 1,100,000.00

Ladenburg Thalmann & Co. Inc. for deferred commissions and expenses $ 2,301,431.52

Repayment of interest-free loans made by Jonathan J. Ledecky to Endeavor $ 357,500.00

Repayment of interest-free loans made by Eric Watson to Endeavor. $ 357,500.00

RR Donnelly (for printing fees and expenses) $ 1,222,648.60

Total payments to above listed persons $ 89,006,050.12

Portion of trust account to be wired to Endeavor Acquisition Corp.

account, as parent of combined companies $ 24,530,796.33

Portion of trust account to be wired to American Apparel, Inc. account $ 13,694,252.00*

Portion of trust account to be wired to American Apparel (Canada). $ 1,957,181.00*

Total payments to Endeavor, American Apparel and affiliated companies. $ 40,182,229.33

*These amounts cover the following:

American Apparel directed payments for related party loan repayments: $16,955,733.00

American Apparel directed payments for cash bonuses: $ 2,500,000.00

2

Wire instructions for Sang Ho Lim

Wells Fargo Bank 12251 Ventura Blvd. Studio City, CA 91604 ABA # 121000248 Account # 1482775580

3

Wire instructions for Graubard Miller

Citibank N.A. 153 East 53rd Street New York, NY 10022 ABA 021000089

For further credit to: Graubard Miller Attorney Business Account

Account No. 59240615

4

Wire Instructions for Ladenburg Thalmann & Co. Inc.:

BANK: JP Morgan

ABA No.: 021000021 SWIFT: CHAS US 33

CREDIT TO: National Financial Services A/C #: 066-196-221

FURTHER CREDIT TO: Ladenburg Thalmann & Co. Inc.

A/C#: JLT899909

Wire instructions for Jonathan J. Ledecky

JPMorgan Private Bank–DE

500 Stanton Christiana Rd.

Newark, DE 19713

ABA# 021000021

SWIFT: CHASUS33

Private Bank Division

Credit Account T&I #0999-99-651

Account Name: Jonathan J. Ledecky

For Account of: Q74088008

2

Wire instructions for Eric Watson

Currency

USD

Intermediary Bank Details

TO BE SENT BY MT103

Bank Name/Location

CITIBANK

Bank Identifier e.g.; Swift Code Sort code ABA number

021000089

Beneficiary Bank Details (if applicable)

For Credit To;

Bank of New Zealand

Bank Name/Location

Bank of New Zealand , Wellington Head Office

Bank Identifier e.g.; Swift Code Account Number Sort code ABA number

BKNZNZ22 10933728

Account Number

For Further Credit To;

Account Name

Cullen Investments Limited

Account Number /IBAN

574658-0000

3

Wire instructions for RR Donnelly

Bank of America

ABA: 0260-0959-3

Account Number: 1233552859

Account Name: RR Donnelley Receivables, Inc.

CHIPS Address: 0959 SWIFT Address: BOFAUS3N

Physical Address for routing Identifiers: 100 West 33rd Street, NY 10001

In the OBI or Tag 6000 section please reference the invoice number: 1201412300

4

Wiring instructions for Dov Charney

Acct #: 0200572706 Routing #: 122041727 Swift Code: NARA US 6L Nara Bank Beneficiary: Dov Charney

5

Wire instructions for Endeavor Acquisition Corp.

CITIBANK NA

666 FIFTH AVE

NY, NY 10103

ABA 021000089

ACCT# 48685387

ACCOUNT NAME: Endeavor Acquisition Corp

Optional: Caterina F. Gage, Service Officer

If international: SWIFT CODE: CITIUS33

6

Wire instructions for American Apparel, Inc.

US Bank

Account Name: American Apparel, Inc.

Account #: 153492249385

Routing ABA#: 122235821

SWIFT: USBKUS 441MT

7

Wire instruction for American Apparel (Canada)

Beneficiary:

9001-9134 Quebec Inc. d/b/a American Apparel 350 Louvain Street West, Suite 203 Montreal, QC H2N 2E8

Corresponding Bank:

Bank of America National Trust and Savings Association New York, NY (BOFAUS3N) ABA #026-009-593

Account of TD Bank SWIFT: TDOMCATTTOR)

Beneficiary Bank:

TD Canada Trust 3590 St-Laurent Blvd. Montreal, QC Transit No.: 47201-004 Account No.: 7303560

8

Exhibit B

Opinion of Counsel [please see attached]

Exhibit B to Third Amendment to Credit Agreement

December [XX], 2007

LaSalle Business Credit, LLC,

as agent for

LaSalle Bank Midwest National Association,

acting through its division,

LaSalle Retail Finance, as

administrative and collateral agent, and as a Lender

25 Braintree Hill Office Park, Suite 205

Braintree, Massachusetts 02184

Wells Fargo Retail Finance, LLC,

as collateral monitoring agent and as a Lender

One Boston Place, 19th Floor

Boston, Massachusetts 02108

Re: Credit Agreement dated as of July 2, 2007 as currently amended, modified, supplemented or restated by and among (i) the Lenders from time to time party to the Credit Agreement, (ii) LaSalle Bank National Association, a national banking association, as Issuing Bank, (iii) LaSalle Business Credit, LLC, as Administrative and Collateral Agent, (iv) Wells Fargo Retail Finance, LLC as Collateral Monitoring Agent, (v) American Apparel, Inc., KCL Knitting, LLC, American Apparel Retail, Inc., and American Apparel Dyeing & Finishing, Inc. as Borrowers, and (vi) American Apparel, LLC, and Fresh Air Freight, Inc., as Facility Guarantors

Ladies and Gentlemen:

We have acted as counsel for American Apparel, Inc., a California corporation (“American Apparel”), in connection with the execution and delivery of the Credit Agreement dated as of July 2, 2007 (as amended, modified, supplemented or restated, the “Credit Agreement”), by and among the Borrowers, the Guarantors, the Lenders from time to time party to the Credit Agreement (the “Lenders”), LaSalle Business Credit, LLC, as agent for LaSalle Bank Midwest National Association, acting through its division, LaSalle Retail Finance, as Administrative Agent and Collateral Agent, LaSalle Bank National Association, as Issuing Bank, and, pursuant to that certain First Amendment to Credit Agreement dated October 11, 2007, Wells Fargo Retail Finance, LLC, as Collateral Monitoring Agent and Lender. This opinion is given to you pursuant to Section 3.d of that certain Third Amendment

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to Credit Agreement by and among the parties to the Credit Agreement (the “Third Amendment”). All capitalized terms used but not otherwise defined herein have the meanings given them in the Credit Agreement.

The Credit Agreement references the merger (the “Merger”) of American with and into AAI Acquisition LLC, a California limited liability company (“AAI”), with AAI being the surviving entity (the “Surviving Company”) pursuant to the Merger Agreement. Pursuant to Section 6.03 of the Credit Agreement, the Administrative Agent has requested that certain agreements be executed and delivered to the Lenders by the Surviving Company and the parent of the Surviving Company, Endeavor Acquisition Corp., a Delaware corporation (“Endeavor” and, together with the Surviving Company, the “Additional Parties”).

As to matters of fact, we are relying upon the representations and warranties of all parties contained in the Credit Agreement and the certificates of certain officers of Endeavor and the manager of the Surviving Company attached hereto as Exhibit A (“Opinion Certificate”). In rendering the opinion expressed below, we have examined executed originals or copies of the following documents:

(a) the Guaranty executed by Endeavor:

(b) the Ownership Interest Pledge and Security Agreement executed by Endeavor (the “Pledge Agreement”);

(c) the Assumption and Ratification Agreement executed by the Surviving Company (the “Assumption Agreement”);

(d) the First Amendment to Ownership Interest and Security Agreement;

(e) the copy of the UCC-1 financing statement attached hereto as Exhibit B (the “Endeavor Financing Statement”);

(f) the copy of the UCC-1 financing statement attached hereto as Exhibit C (the “AAI Financing Statement”); and

(g) the Merger Agreement.

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Hereinafter, the documents referred to in items (a) and (b) are referred to as the “Endeavor Documents”, the documents referred to in items (c) and (d) are referred to as the “Surviving Company Documents” and, collectively, the Endeavor Documents and the Surviving Company Documents shall together be referred to as the “Assumption Documents”. Together, the documents referred to in items (a) through (g) shall be referred to as the “Reviewed Documents”.

In rendering our opinion regarding the valid existence and good standing of Endeavor and the Surviving Company and qualification of the Surviving Company to conduct business in foreign jurisdictions, we have relied entirely on the certificates and advices attached hereto as Exhibit D and representations made to us in the Opinion Certificate without independent verification. We did not obtain tax good standing certificates from any jurisdiction and no opinion is provided with respect to tax good standing of either Endeavor or the Surviving Company in any jurisdiction.

In addition, in rendering the opinions given below, we have examined originals or copies of documents, corporate records and other writings that we consider relevant for the purposes of this opinion. In our examination of documents in connection with rendering our opinions, we have assumed with your permission that the signatures, original or copied, on all documents and instruments examined by us are genuine and authentic, that each is complete and what it purports to be, that all documents and instruments submitted to us as copies or facsimiles or electronically conform with the originals, and that the documents and instruments submitted to us have not been amended or modified since the date submitted.

In our examination of documents, we further assumed (i) the genuineness of all certificates and the authenticity of all documents submitted to us as original counterparts or as certified or photostatic copies, (ii) the genuineness of the signatures of all parties to the Assumption Documents other than those of officers of Endeavor and the Loan Parties and the manager of the Surviving Company, and (iii) that each person or entity entering into such documents (other than the Additional Parties and the Loan Parties in connection with the Assumption Documents) had the power, legal competence and capacity to enter into and perform all of such party’s obligations thereunder, (iv) the due authorization, execution and delivery by each party (other than the due authorization, execution and delivery of the Additional Parties), (v) the enforceability and binding nature of the obligations of the parties to such documents (other than as to the enforceability against, and the binding nature upon, the Additional Parties), (vi) that there is no fact or circumstance relating to any party that might prevent the Lenders from enforcing any of the rights provided for in the Assumption

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Documents, (vii) performance on or before the closing of the Merger (the “Closing”) by all parties of their obligations under the Merger Agreement to be performed on or before the Closing and (viii) that no action has been taken or event occurred which amends, revokes, terminates or renders invalid any of the documents, records, consents or resolutions which we have reviewed since the date of the certificates we relied upon in rendering this opinion. We also assumed that there are no extrinsic agreements or understandings among the parties to the Assumption Documents that would modify or interpret the terms of the Assumption Documents or the respective rights or obligations of the parties thereunder.

In rendering the opinions set forth below which are stated to be to our knowledge, we have, with your consent, advised you only concerning information actually and currently known to Grant Hallstrom and Richard Christesen, the attorneys within the firm with primary responsibility for the transactions covered by this opinion. Except to the extent expressly set forth herein we have not undertaken any independent investigation to determine the accuracy or completeness of any such statement, and no inference as to the accuracy or completeness of such statement should be drawn from our representation of any of the Loan Parties or our rendering the opinion set forth below.

For purposes of these opinions, we have, with your approval, made no independent review of the operations, transactions, or contractual arrangements of Endeavor, the Surviving Company, Borrowers or Guarantors, or made any search of court records or inquiry of any governmental agency.

We are licensed to practice law in the State of California and are not experts on and do not express any opinion concerning any laws of any jurisdiction other than the laws of the State of California and the federal laws of the United States, as such are in effect on the date hereof, and we have made no inquiry into, and we express no opinion as to, the statutes, regulations, treaties, common laws or other laws of any other nation, state or jurisdiction.

Based upon and subject to the foregoing and the qualifications and limitations set forth below, and except as set forth in the Credit Agreement, the Merger Agreement, the Assumption Documents, or the schedules attached to the foregoing, it is our opinion that:

1. Endeavor is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, has all requisite corporate power and authority to own and operate its properties, to carry on its business as, to our knowledge, it is now conducted and as it is contemplated to be conducted following the consummation of the Merger, to execute, deliver and perform its obligations under the Endeavor Documents. The

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Surviving Company is a limited liability company, duly formed, validly existing and in good standing under the laws of the State of California and has all requisite limited liability company power and authority to own and operate its properties, to carry on its business as, to our knowledge, it is now conducted and as it is contemplated to be conducted following the consummation of the Merger, to execute, deliver and perform its obligations under the Surviving Company Documents. Endeavor and the Surviving Company are each qualified to conduct business as a foreign entity in the jurisdictions set forth opposite their respective names on Exhibit D attached hereto.

2. The execution, delivery and performance by each of the Additional Parties of each of the Assumption Documents to which such Additional Party is a party has been duly authorized by all necessary corporate or limited liability company action, as applicable. Each of the Additional Parties has executed and delivered each of the Assumption Documents to which it is a party, and subject to the exceptions and qualifications set forth below, such Additional Documents constitute the valid and binding obligations of such Additional Party in accordance with their respective terms.

3. To the extent a security interest in such collateral may be created therein under Division 9 of the Commercial Code, the Endeavor Financing Statement is sufficient in form to perfect the security interest in the collateral described in the Endeavor Financing Statement, to the extent that security interests in such collateral can be perfected by the filing of the UCC-1 Financing Statement with the Secretary of State of the State of California.

4. To the extent a security interest in the collateral may be created therein under Division 9 of the Commercial Code, the AAI Financing Statement is sufficient in form to perfect the security interest in the collateral described in the AAI Financing Statement and in the Assumption and Ratification Agreement, to the extent that security interests in such collateral can be perfected by the filing of the UCC-1 Financing Statement with the Secretary of State of the State of California.

5. Based upon the permitted assumptions of due execution and delivery of the Merger Agreement, and valid implementation of the Merger in accordance with applicable laws and the terms of the Merger Agreement, the consummation of the Merger has no adverse effect on the security interest in the Borrowers’ assets, or the priority of that security interest established in the Credit Agreement and the Security Agreement.

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With regard to the opinion set forth in paragraph 2 above regarding enforceability, we note that whenever an opinion herein states that an agreement is a “valid and binding obligation” of a party “enforceable in accordance with its terms,” or use words of similar import, such opinions are to be understood to mean that, subject to the qualifications and limitations set forth herein, (i) an effective contract has been formed under California law, (ii) the entire agreement is not invalid by reason of a specific statutory prohibition or the public policy of the State of California, (iii) contractual defenses to the entire agreement are not available and (iv) some remedy is available if a party to the agreement does not materially comply with its terms. This does not imply that any particular type of remedy is available.

We have further assumed that the governing law (exclusive of California laws relating to conflicts of laws) of each such Reviewed Document is California. We have not, however, reviewed the covenants in the Reviewed Documents that contain financial ratios and any other financial restrictions, and no opinion is provided with respect thereto. We also do not express any opinion on parol evidence bearing on interpretation or construction of any such Reviewed Documents or on any oral modifications to such contractual obligations made by the parties thereto. .

We have assumed that no party to any of the Loan Documents or Reviewed Documents will in the future take any discretionary action (including a decision not to act permitted by any of the Loan Documents) that would cause the performance of any of the Loan Documents to violate any California or federal statute, rule or regulation; constitute a violation or breach of or default under any of the Reviewed Documents; or require an order, consent, permit or approval to be obtained from a California or federal government authority.

Each of our opinions set forth above is further subject to the following exceptions, qualifications, limitations, comments and additional assumptions:

A. The enforceability of the Assumption Documents is subject to and we express no opinion on the effect of usury, bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting the relief of debtors or the rights and remedies of creditors generally, including without limitation the effect of statutory or other law regarding fraudulent transfers or conveyance, preferential transfers and distributions and equitable subordination.

B. We express no opinion regarding (i) the effect of any limitations or exceptions imposed by principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, or upon the availability of equitable

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remedies for the enforcement of provisions of the Loan Documents, whether considered in a proceeding at law or in equity, or (ii) the effect of an exercise of judicial discretion whether in a proceeding in equity or at law.

C. We express no opinion regarding (i) any of the rights or remedies available to any party for violations or breaches of any provisions which are immaterial or the enforcement of which would be unreasonable under the then existing circumstances, (ii) any of the rights or remedies available to any party for material violations or breaches which are the proximate result of actions taken by any party to the Loan Documents other than the party against whom enforcement is sought, which actions such other party is not entitled to take pursuant to the Assumption Documents or which otherwise violate applicable laws, (iii) any of the rights or remedies available to any party which takes discretionary action which is arbitrary, unreasonable or capricious, or is not taken in good faith or in a commercially reasonable manner, whether or not the Loan Documents permit such action, (iv) the enforceability of any provision deemed to be “unconscionable” within the meaning of Section 1670.5 of the California Civil Code or any other California law or United States federal law or equitable principle which provides that a court may refuse to enforce, or may limit the application of, a contract or any clause thereof which the court finds to have been unconscionable at the time it was made or contrary to public policy, (v) the enforceability of any provision authorizing the exercise of any remedy without reasonable notice and opportunity to cure, or (vi) the effect of any provision of any of the Loan Documents purporting to give a lender the right to make any conclusive determination in its sole discretion.

D. We express no opinion as to the legality, validity, binding nature or enforceability of (i) any provisions in the Assumption Documents providing for the payment or reimbursement of costs or expenses or indemnifying a party, or referring to a right of contribution, to the extent such provisions may be held unenforceable as contrary to public policy, (ii) any provision of any of the Loan Documents insofar as it provides for the payment or reimbursement of costs and expenses or indemnification for claims, losses or liabilities in excess of a reasonable amount determined by any court or other tribunal, (iii) any provisions regarding any party’s ability to collect attorneys’ fees and costs in an action involving the Loan Documents, including, but not limited to, when a party is not the prevailing party in an action (we call your attention to the effect of Section 1717 of the California Civil Code, which provides that where a contract permits one party thereto to recover attorneys’ fees, the prevailing party in any action to enforce any provision of the contract shall be entitled to recover its reasonable attorneys’ fees), (iv) any provisions of any of the Loan Documents

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imposing penalties or forfeitures, late payment charges or any increase in interest rate, upon delinquency in payment or the occurrence of a default to the extent they constitute a penalty or forfeiture or are otherwise contrary to public policy, (v) any rights of set-off, (vi) any provision of the Loan Documents to the effect that a statement, certificate, determination or record shall be deemed conclusive absent manifest error (or similar effect), including, without limitation, that any such statement, certificate, determination or record shall be prima facie evidence of a fact, (vii) any provision of the Loan Documents which provides that notice not actually received may be binding on any party, or (viii) any severability provision.

E. We express no opinion with respect to the legality, validity, binding nature or enforceability of provisions of the Loan Documents expressly, or by implication, waiving or relinquishing broadly or vaguely stated rights or unknown future rights or defenses, or waiving defenses to obligations or rights granted by law (whether substantive or procedural) or waiving rights to damages, or the benefits of statutory, regulatory or constitutional rights.

F. We express no opinion with respect to the legality, validity, binding nature or enforceability of any provision of the Loan Documents purporting to (a) waive rights to trial by jury, service of process or objections to venue or jurisdiction in connection with any litigation arising out of or pertaining to the Loan Documents, (b) exclude conflict of law principles under California law, (c) establish particular courts as the forum for the adjudication of any controversy relating to the Loan Documents, (d) establish the laws of any particular state or jurisdiction for the adjudication of any controversy relating to the Loan Documents, (e) establish evidentiary standards or make determinations conclusive, or (f) provide for arbitration of disputes.

G. We express no opinion regarding the effect of judicial decisions which may permit the introduction of extrinsic evidence to modify the terms or the interpretation of the Loan Documents.

H. We express no opinion with respect to the legality, validity, binding nature or enforceability of any provision of the Loan Documents providing that (a) rights or remedies are or are not exclusive, (b) rights or remedies may be exercised without notice, (c) every right or remedy is cumulative and may be exercised in addition to or with any other right or remedy, (d) the election of a particular remedy or remedies does not preclude recourse to one or more other remedies, (e) liquidated damages are to be paid upon the breach of any of the Loan Documents, or (f) the failure to exercise, or any delay in exercising, rights or

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remedies available under any of the Loan Documents will not operate as a waiver of any such right or remedy.

I. We express no opinion with respect to the legality, validity, binding nature or enforceability of any provision of the Loan Documents requiring written amendments or waivers insofar as it suggests that oral or other modifications, amendments or waivers could not be effectively agreed upon by the parties or that the doctrine of promissory estoppel might not apply. We note that a requirement that provisions of the Loan Documents may only be amended or waived in writing may not be binding or enforceable if an oral agreement has been created modifying such provision or an implied agreement by trade practice or course of conduct has given rise to an amendment or waiver.

J. We express no opinion with respect to the legality, validity, binding nature or enforceability of any provision of the Loan Documents to the extent that an arbitrator’s decision may be contrary to the law or the facts and not subject to reversal.

K. We express no opinion as to the applicability or effect of compliance or non-compliance by any lender (or its agent) with any state, federal or other laws applicable to such lender (or its agent) or to the transactions contemplated by the Loan Documents because of the nature of its business, including its legal or regulatory status.

L. Except as expressly set forth above, we express no opinion as to the creation, attachment, validity, perfection or priority of a security interest in any item of collateral or the necessity of making any filings or taking any other action in connection therewith.

M. We express no opinion as to the effect on a secured creditor’s ability to realize on collateral, of marshaling, substitution of collateral, or similar doctrines or laws.

N. We express no opinion as to the perfection of any security interest in collateral consisting of after-acquired property, except to the extent such property is properly classified in a category specifically referred to in the grant clause of the applicable security agreement and on the relevant financing statements.

O. We express no opinion as to any matter concerning perfection or continuation of a security interest in, or the ability of any of the Agents or any Lender to realize upon, (i) collateral located, or deemed located, in any jurisdiction other than the State of California and (ii) collateral moved outside the State of California at any time. Our

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opinion is based on California law, which generally provides for the local law of the jurisdiction of where the debtor is located to govern the perfection, the effect of perfection, and the priority of a security interest in collateral of a debtor. However, California law recognizes that “while collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a possessory security interest in that collateral.” Cal. Comm. Code §9301(2). Under California law, perfection by possession has priority over perfection by filing for certain collateral, such as, but not limited to, instruments, negotiable documents of title, certificated and uncertificated securities, and investment property, but does not have priority in the case of goods. We call your attention to the other provisions of §9301 of the California Commercial Code which discuss the law governing perfection, effect of perfection or nonperfection, and priority. The Lender and Agents may be able to realize upon collateral located in other jurisdictions besides California if they follow California law, but priority rules are so extensive and diverse among the various states that we are unable to express any opinion regarding collateral located outside of the State of California. The above narrative regarding priority between perfection by filing verses possession was for explanatory purposes only and does not constitute a priority opinion.

P. We express no opinion on the effect of provisions permitting any of the Agents or Lenders to exercise, or the exercise of any of the Agents or Lenders of self-help and non-judicial remedies, such as a right, without judicial process, to enter upon, to take possession of, to collect, retain, use and enjoy rents, issues and profits from the Collateral, or to manage the Collateral or of provisions respecting sales or disposal of collateral or property other than in compliance with applicable law.

Q. We express no opinion as to the sufficiency of any description of the Collateral in the Security Agreement or the UCC-1 Financing Statements. We have assumed that such descriptions are sufficient and reasonably identifies what is described under Division 9 of the Commercial Code (within the meaning of Section 9108(a) of the California Uniform Commercial Code (hereinafter the “Commercial Code”)). We call your attention to Section 9108 of the Commercial Code.

R. We express no opinion as to the existence of, or the state of any rights or interest of the Surviving Company or Endeavor in or title to, any item of collateral or the priority of any security interest in any item of collateral over any other interest in the collateral. In this regard, we have assumed that the Surviving Company and Endeavor have

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“rights” (within the meaning of Section 9203(b)(2) of the Commercial Code) in the collateral in which it purports to grant a security interest for the security interests to attach.

S. We have assumed that “value has been given” (within the meaning of Section 9203(b)(l) of the Commercial Code).

T. We express no opinion as to the effect of any provision of any of the Loan Documents purporting to give any of the Agents or any Lender the right to take control of any of the operations without formal acceleration, appropriate notice and compliance with the procedural limitations of Division 9 of the Commercial Code.

U. We call your attention to the fact that the security interest of the Collateral Agent in collateral consisting of proceeds is limited to the extent set forth in Section 9315 of the Commercial Code.

V. We express no opinion as to the effect of any provision of any of the Loan Documents purporting to relieve a secured party of any duty it may have to preserve the value of collateral in its possession (see Commercial Code Section 9207; see, also, Citibank, N.A. v. Data Lease Financial Corporation, 828 F.2d 686 (11th Cir. 1987)).

W. We advise you that if the difference between the name of the original debtor and a new debtor causes a financing statement to become seriously misleading under Section 9506 of the Commercial Code, an additional filing must be made. We direct your attention to Section 9508 of the Commercial Code.

X. We advise you that under certain circumstances, a surety agreement executed by an equity holder of a borrower may not be enforced as an obligation separate from the obligation guaranteed if it is determined that the borrower is merely an alter ego or nominee of the surety and that the “true” borrower is the surety. If the surety is deemed to be liable as a principal, it is likely that the surety will also be entitled to the rights and defenses otherwise available to a principal. For purposes of this opinion, we have assumed, with your consent and without independent investigation, that the Surviving Company is adequately capitalized for the purpose of conducting its business, that the Surviving Company was not formed for the purpose of acting as agent for or as an instrumentality of Endeavor, and that the Surviving Company maintains and will continue to maintain an identity independent of and separate from Endeavor.

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to the Credit Agreement

Page 12

Y. We advise you of statutory provisions and case law to the effect that a surety may be exonerated if the creditor alters the original obligation of the principal without the consent of the surety, elects remedies for default that may impair the subrogation rights of the surety against the principal, or otherwise takes any action without notifying the surety which materially prejudices the surety, unless the surety validly waives such rights. We express no opinion as to the effect of (i) any modification or amendment of the obligations of the Borrowers which materially increases such obligations, (ii) any election of remedies by any of the Lenders or Agents following the occurrence of an event of default under the obligation subject to the Guaranty, or (iii) any other action by any of the Agents or Lenders which materially prejudices the surety if, in each instance, such modification, election or action occurs without notice to Endeavor and without granting to Endeavor an opportunity to cure any default by the Borrowers.

Z. We express no opinion concerning the enforceability of assignment, transfer or other conveyance of any permit, license or approval to the extent any governmental agencies or authorities or other third parties may refuse or be unable to approve, acquiesce in, or consent to any such assignment, transfer or other conveyance.

AA. We express no opinion as to the legal effect of any provision of any of the Loan Documents purporting to reinstate, as against any obligor or guarantor, obligations or liabilities of such obligor which have been avoided or which have arisen from transactions which have been rescinded or the payment of which has been required to be returned by any court of competent jurisdiction.

BB. We call to your attention the fact that the perfection of a security interest will be terminated under Section 9507(c) of the Commercial Code as to any collateral acquired more than four months after a borrower changes its name so as to make any UCC-1 financing statement seriously misleading, unless an amendment to the financing statement which renders the financing statement not seriously misleading is properly filed before the expiration of such four-month period.

CC. In the case of all collateral, Division 9 of the Commercial Code requires the filing of continuation statements within six months prior to the expiration of each five-year period following the original filing of the UCC-1 financing statements describing such collateral in order to continue the perfection of lenders’ security interest therein.

DD. We have assumed the validity of any wire transfers, drafts or checks tendered by any of the Lenders or Issuing Bank.

LaSalle Business Credit, LLC

The Lenders From Time to Time Party

to the Credit Agreement

Page 13

EE. We express no opinion as to whether the members of the board of directors of Endeavor or the manager of the Surviving Company have complied with their fiduciary duties in connection with the authorization and performance of the Assumption Documents and we have assumed such compliance.

FF. We have assumed that the actions of Endeavor and its officers, directors and shareholders comply with the provisions of Section 310 of the California General Corporation Law.

GG. We express no opinion as to matters governed by any laws other than the laws of the State of California or the federal law of the United States of America. We express no opinion as to the laws of any other jurisdiction nor as to the statutes, administrative decisions, rales, regulations or requirements of any county, municipality, subdivision or local authority of any jurisdiction. We express no opinion as to whether the laws of any jurisdiction are applicable to the Loan Documents or the transactions contemplated thereby.

HH. We express no opinion as to matters governed by federal and state laws and regulations governing: usury; securities; broker-dealers, investment advisers; insurance; labor, employment (including, but not limited to, the Americans with Disabilities Act) and pension and employee benefits; antitrust and unfair competition, including covenants not to compete; escheat; health and safety, environmental protection and hazardous substances; taxation; or patents, copyrights, trademarks, trade names and other intellectual property rights.

H. We advise you that, pursuant to Section 17375 of the California Corporations Code, a limited liability company is generally not permitted to render professional services as defined in California Corporations Code section 13401 (a). In rendering the opinion set forth in paragraph (a), we have, with your permission, relied exclusively upon the Opinion Certificate in determining the principal business activities of the Surviving Company and have concluded that such activities do not constitute the rendering of professional services. We have not, however, engaged in any independent investigation of the scope of the business activities of the Surviving Company and render no opinion relating to any business activities of the Surviving Company that are not described in the Opinion Certificate.

JJ. We express no opinion regarding any entity organized outside of the State of California, except for Endeavor, and our opinion is qualified to the extent that any foreign entity impacts the opinions rendered.

LaSalle Business Credit, LLC

The Lenders From Time to Time Party

to the Credit Agreement

Page 14

KK. We note that the parties to the Loan Documents have designated the laws of the Commonwealth of Massachusetts as the laws governing the Loan Documents. Our opinion is premised upon the result that would be obtained if a California court were to apply the internal laws of the State of California to the interpretation and enforcement of the Loan Documents (notwithstanding the designation therein of the laws of the Commonwealth of Massachusetts).

LL. This opinion is qualified to the extent, and is rendered and delivered on the express condition and assumption that no counsel for any addressee has expressed or reached opinions which are contrary to the opinions set forth herein.

This opinion is rendered as of the date first written above solely for your benefit in connection with the Assumption Documents and may not be relied on by, nor may copies be delivered to, any other person other than your counsel, Riemer & Braunstein LLP, without our prior written consent. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Additional Parties, the Loan Parties or the Loan Documents. We assume no obligation to inform you of any facts, circumstances, events or changes in the law that may hereafter be brought to our attention that may alter, affect or modify the opinions expressed herein.

Respectfully submitted,

Grant J. Hallstrom

Hallstrom, Klein & Ward, LLP

EXHIBIT A

Opinion Certificates

EXHIBIT B

Endeavor Financing Statement

EXHIBIT C

AAI Financing Statement

EXHIBIT D

Good Standing and Qualifications to Conduct Business

EX-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 Agreement

EX-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]

EX-10.14

Exhibit 10.14

AMENDMENT NO. 5 AND WAIVER

TO

CREDIT AGREEMENT OF AMERICAN APPAREL (USA), LLC

AMENDMENT NO. 5 AND WAIVER (this “Amendment”), dated as of February 29, 2008, 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, that certain Amendment No. 3 and Waiver to Credit Agreement of American Apparel, Inc. dated as of November 28, 2007 and that certain Amendment No. 4 and Waiver to Credit Agreement of American Apparel, Inc., dated as of December 12, 2007, the “Credit Agreement”), among American Apparel (USA), LLC (f/k/a AAI Acquisition LLC (successor by merger to American Apparel, Inc.)), a California limited liability company (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 (a) the Borrower breached paragraph (a) of Section 6.11 (Financial Covenants) of the Credit Agreement (the “Fixed Charge Coverage Ratio Covenant”) by failing to maintain a Consolidated Fixed Charge Coverage Ratio of 1.00 to 1.00 for the four Fiscal Quarter period ended on December 31, 2007 (the “Fixed Charge Coverage Ratio Default”), (b) the Borrower breached paragraph (a) of Section 6.12 (Capital Expenditures) of the Credit Agreement (the “Capital Expenditures Covenant” and, together with the Fixed Charge Coverage Ratio Covenant, the “Financial Covenants”) by incurring Capital Expenditures in excess of $25,000,000 in the aggregate for the Fiscal Year ending December 31, 2007 (the “Capital Expenditures Default”, and together with the Fixed Charge Coverage Ratio Default, the “Financial Covenants Defaults”) and (c) the Borrower breached paragraph (e) of Section 5.01 (Financial Statements and Other Information) by failing to deliver, before the commencement of the Fiscal Year ending December 31, 2008, a detailed Consolidated budget by month for such Fiscal Year (the “Budget Default” and, together with the Financial Covenants Defaults, the “Specified Events of Defaults”);

WHEREAS, the Borrower has requested that the Lender waive the Specified Events of Defaults and compliance with the Financial Covenants for the Fiscal Year ending December 31, 2007 (the “Specified Period”);

WHEREAS, the Lender agrees, subject to the limitations and conditions set forth herein, to waive the Specified Events of Defaults and compliance with the Financial Covenants for the Specified Period; and

WHEREAS, the Lender and the Borrower wish to amend the Pledge Agreement to update Schedule I thereto.

AMENDMENT NO. 5 AND WAIVER TO CREDIT AGREEMENT

OF AMERICAN APPAREL (USA), LLC

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 3 (Conditions Precedent to the Effectiveness of this Amendment) hereof, the Lender waives the following, each as of December 31, 2007: (a) the Specified Events of Defaults and (b) compliance for the Specified Period with the Financial Covenants; 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.

Section 2. Amendment to the Pledge Agreement

Effective as of the Amendment Effective Date and subject to the satisfaction (or due waiver) of the conditions set forth in Section 3 (Conditions Precedent to the Effectiveness of this Amendment) hereof, the Pledge Agreement is hereby amended by replacing Schedule I to the Pledge Agreement in its entirety with Schedule I attached as Exhibit A hereto.

Section 3. 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, which satisfaction shall be evidenced by the execution and delivery by the Lender of this Amendment, 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 Waiver to Credit Agreement with respect to the Existing First Lien Credit Agreement.

(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, which satisfaction shall be evidenced by the execution and delivery by the Lender of this Amendment.

(c) Representations and Warranties. Each of the representations and warranties contained in Section 4 (Representations and Warranties) below are true and correct.

2

AMENDMENT NO. 5 AND WAIVER TO CREDIT AGREEMENT

OF AMERICAN APPAREL (USA), LLC

(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 5 (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 4. 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 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;

3

AMENDMENT NO. 5 AND WAIVER TO CREDIT AGREEMENT

OF AMERICAN APPAREL (USA), LLC

(c) no Default or Event of Default has occurred and is continuing;

(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); and

(e) each of the Consolidated Fixed Charge Coverage Ratio for the four Fiscal Quarter period ended on December 31, 2007 and the amount of Capital Expenditures in the aggregate for the Fiscal Year ending December 31, 2007 is as set forth on Schedule A hereto.

Section 5. 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 6. 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 7. 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).

4

AMENDMENT NO. 5 AND WAIVER TO CREDIT AGREEMENT

OF AMERICAN APPAREL (USA), LLC

Section 8. 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 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 9. Governing Law

This Amendment shall be governed by and construed in accordance with the law of the State of New York.

Section 10. 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 IL Notices

All communications and notices hereunder shall be given as provided in the Credit Agreement or, as the case may be, the Guaranty.

Section 12. 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 13. 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.

5

AMENDMENT NO. 5 AND WAIVER TO CREDIT AGREEMENT

OF AMERICAN APPAREL (USA), LLC

Section 14. 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.

Section 15. Joinder to Loan Documents

The Borrower 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.

[Signature Page to Follow]

6

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

AMERICAN APPAREL (USA), LLC (f/k/a AAI
Acquisition LLC (successor by merger to
American Apparel, Inc.)),
as Borrower
By:	/s/ Ken Cieply
Name:	Ken Cieply
Title:	CFO

SOF INVESTMENTS, L.P. - PRIVATE IV,

    as Lender

By:

Name:

Title:

[SIGNATURE PAGE TO AMENDMENT NO. 5]

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 (USA), LLC (f/k/a AAI

Acquisition LLC (successor by merger to

American Apparel, Inc.)),

    as Borrower

By:

Name:

Title:

SOF INVESTMENTS, L.P. - PRIVATE IV,
as Lender
By:	/s/ Marc R. Lisker
Name:	Marc R. Lisker
Title:	General Counsel

[SIGNATURE PAGE TO AMENDMENT NO. 5]

GUARANTORS:
AMERICAN APPAREL, LLC, as Facility
Guarantor
By: AMERICAN APPAREL (USA), LLC (f/k/a
AAI Acquisition LLC (successor by merger to
American Apparel, Inc.))
By:	/s/ Ken Cieply
Name:	Ken Cieply
Title:	CFO

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

KCL KNITTING, LLC, as Facility Guarantor
By: AMERICAN APPAREL (USA), LLC (f/k/a
AAI Acquisition LLC (successor by merger to
American Apparel, Inc.))
By:	/s/ Ken Cieply
Name:	Ken Cieply
Title:	CFO

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

[SIGNATURE PAGE TO AMENDMENT NO. 5]

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

[SIGNATURE PAGE TO AMENDMENT NO. 5]

Exhibit A

Schedule I to Pledge Agreement

See attached.

SCHEDULE I

to

OWNERSHIP INTEREST PLEDGE AND SECURITY

AGREEMENT

(Pledged Securities)

As of January II, 2008

Issuer	No. Authorized Shares	No. Issued Shared		Percentage Being Pledged		Pledgor	Certificated
American Apparel Retail, Inc.	1,000,000	100,000		100	%	American Apparel (USA), LLC	Yes
American Apparel Dyeing & Finishing, Inc.	100,000	10,000		100	%	American Apparel (USA), LLC	Yes
American Apparel, LLC	Membership Interest	100	%	100	%	American Apparel (USA), LLC	No.
Fresh Air Freight, Inc.	100,000	10,000		100	%	American Apparel (USA), LLC	Yes.
KCL Knitting, LLC	Membership Interest	100	%	100	%	American Apparel (USA), LLC	No.
American Apparel (UK) LTD	1,000,000	10,000		65	%	American Apparel (USA), LLC	Yes
American Apparel (Carnaby) Limited	100,000	10,000		65	%	American Apparel (USA), LLC	Yes.
American Apparel Deutschland GMBH		100	%	65	%	American Apparel (USA), LLC	No.
American Apparel		1 Unit valued at		65	%	American Apparel	Yes.

Issuer	No. Authorized Shares	No. Issued Shared	Percentage Being Pledged		Pledgor	Certificated
MEXICO, SdeRLde CV		1.00 peso			(USA), LLC
American Apparel MEXICO SdeRLde CV American Apparel		1 Unit valued at 2,999.00 pesos	65	%	American Apparel Retail, Inc.	Yes
American Apparel LABOR, SdeRLdeCV		1 Unite valued at 1.00 peso	65	%	American Apparel (USA), LLC	Yes
American Apparel LABOR, SdeRLdeCV		1 Unit valued at 2,999.00 pesos	65	%	American Apparel Retail, Inc.	Yes
American Apparel Japan Yugen Kaisha		60 Units of 50,000 Yen	65	%	American Apparel (USA), LLC	No.
American Apparel Retail (ISRAEL) Ltd.	1,000 Ordinary Shares, Nominal Value NIS 1 per share	1,000 Ordinary Shares	65	%	American Apparel Retail, Inc.	Yes
American Apparel Korea	160,000 Common Shares Par Value 5,000 Korean Won	40,000 Common Shares	65	%	American Apparel Retail, Inc.	Yes
American Apparel Australia Pty Limited		12 Ordinary Shares	65	%	American Apparel (USA), LLC	Yes
American Apparel – China (Hong Kong)	Pending	Unk	Unk		Unk	Unk

Issuer	No. Authorized Shares	No. Issued Shared	Percentage Being Pledged	Pledgor	Certificated
American Apparel, New Zealand Limited		100%	65%	American Apparel Retail, Inc.	No.
American Apparel – Taiwan	Pending	Unk	Unk	Unk	Unk
American Apparel – Africa	Pending	Unk	Unk	Unk	Unk
American Apparel – Singapore	Pending	Unk	Unk	Unk	Unk
American Apparel – Sweden	Pending	Unk	Unk	Unk	Unk
American Apparel – Norway	Pending	Unk	Unk	Unk	Unk
American Apparel – Denmark	Pending	Unk	Unk	Unk	Unk
American Apparel – United Arab Emirates	Pending	Unk	Unk	Unk	Unk
American Apparel – Ireland	Pending	Unk	Unk	Unk	Unk
American Apparel – Indonesia	Pending	Unk	Unk	Unk	Unk

Issuer	No. Authorized Shares	No. Issued Shared	Percentage Being Pledged	Pledgor	Certificated
American Apparel – Glasgow Scotland	Pending
American Apparel – Brazil	Pending	Unk	Unk	Unk	Unk

Schedule A

Financial Covenants

(a) The Consolidated Fixed Charge Coverage Ratio for the four Fiscal Quarter period ended on December 31, 2007 is 0.74.

(b) The amount of Capital Expenditures in the aggregate for the Fiscal Year ending December 31, 2007 is $27,281,724.

EX-10.20

Exhibit 10.20

Exhibit 10.20

td Commercial Banking

8801 Trans Canada Highway Ste 600 St Laurent, Quebec H4S 1Z6

Telephone No.: 514-335-2648 Fax No.: 514-335-7808

December 3, 2007

American Apparel Canada Wholesale Inc./ American Apparel Canada Grossiste Inc.

350 Rue De Louvain O Suite 203 Montreal, QC H2N 2E8

Attn: Dov Charney Dear Sir,

We are pleased to offer the Borrower the following credit facilities (the “Facilities”), subject to the following terms and conditions.

BORROWER American Apparel Canada Wholesale Inc./ American Apparel Canada

Grossiste Inc. Borrower “A”

Les Boutiques American Apparel Canada Inc./ American Apparel Canada Retail Inc. Borrower “B”

(collectively know as “the Borrower”)

LENDER The Toronto-Dominion Bank (the “Bank”), through its 3590 Boul. St-Laurent

branch, in Montreal, Quebec.

CREDIT LIMIT 1) The lesser of:

i) CDN$5,500,000 [or its US$ Equivalent], AND

ii) the TOTAL of (A) assigned credit balances (US & CDN$), (B) 80% of Canadian based accounts receivable from Borrower A net of over 90 day accounts, related accounts and accounts not valued at Bank discretion

and (C) 50% of the Inventory Value from Borrower A and B at cost less 30 day goods, but limited to a maximum of CDN$4,000,000.

The total of direct loans, L/Cs acceptances and 20% of L/Cs available is not to exceed ii) above.

2) CDN $1,000,000

TYPE OF CREDIT AND BORROWING

OPTIONS

1) Operating Loan available at the Borrower’s option by way of:

Prime Rate Based Loans in CDN$ (“Prime Based Loans”) United States Base Rate Loans in US$ (“USBR Loans”)

Letters of Credit in CDN$ or US$ (“L/Cs”)

2) Committed Reducing Term Facility (Single Draw) available at the

Borrower’s option by way of:

• Floating Rate Term Loan available by way of:

• Prime Rate Based Loans in CDN$ (“Prime Based Loans”)

PURPOSE

1) To finance working capital.

2) To finance capital expenditures

TENOR

1) Uncommitted 2) Committed

CONTRACTUAL TERM

1) No term

2) 2 years from the date of drawdown

AMORTIZATION

2) 2 years

INTEREST RATES AND FEES

Advances shall bear interest and fees as follows:

1) Operating Loan:

Prime Based Loans: Prime Rate + 1.00% per annum

USBR Loans: USBR + 1,00% per annum

L/Cs: As set out in the Letter of Credit Indemnity Agreement applicable to the issued L/C

Inventory financing: 0.50% per annum (minimum premium to be charged $100)

2) Committed Reducing Term Facility:

• Floating Rate Term Loans available by way of:

• Prime Based Loans: Prime Rate + 2.00% per annum

For all Facilities, interest payments will be made in accordance with Schedule “A” attached hereto unless otherwise stated in this Letter or in the Rate and Payment

Terms Notice applicable for a particular drawdown. Information on interest rate and fee definitions, interest rate calculations and payment is set out in the Schedule “A” attached hereto.

ADMINISTRATION FEE

RENEWAL FEE $250 per month. $10,000.

2

DRAWDOWN

1) On a revolving basis.

2) One time drawdown, after which time, any amount not drawn is cancelled. Amounts repaid may not be redrawn.

BUSINESS CREDIT SERVICE

The Borrower will have access to the Operating Loan (Facility 1) via Loan Account Number 4720-9333078 (the “Loan Account”) up to the Credit Limit of the Operating Loan by withdrawing funds from the Borrower’s Current Account Number 4720-0333078 (the “Current Account”). The Borrower agrees that each advance from the Loan Account will be in an amount equal to $25,000 (the “Transfer Amount”) or a multiple thereof. If the Transfer Amount is NIL, the Borrower agrees that an advance from the Borrower’s Loan Account may be in an amount sufficient to cover the debits made to the Current Account.

The Borrower agrees that:

a) all other overdraft privileges which have governed the Borrower’s Current Account are hereby cancelled.

b) all outstanding overdraft amounts under any such other agreements are now included in indebtedness under this Agreement.

The Bank may, but is not required to, automatically advance the Transfer Amount or a multiple thereof or any other amount from the Loan Account to the Current Account in order to cover the debits made to the Current Account if the amount in the Current Account is insufficient to cover the debits. The Bank may, but is not required to, automatically and without notice apply the funds in the Current Account in amounts equal to the Transfer Amount or any multiple thereof or any other amount to repay the outstanding amount in the Loan Account.

OVERDRAFTS

The Borrower will have access to USBR Loans under the Operating Loan via overdraft from Current Account Number 4720-7303560 at Branch (Branch Number for Current Account) (the “US Current Account”). The total of CDN$ loans and CDN equivalent of USBR Loans under the Operating Loan via overdrafts can not exceed the limits defined under “Credit Limit” above.

REPAYMENT AND REDUCTION OF AMOUNT OF CREDIT FACILITY

1) On demand. If the Bank demands repayment, the Borrower will pay to the Bank all amounts outstanding under the Operating Loan, including without limitation, the amount of all unmatured B/As and LIBOR Loans and the amount of all drawn and undrawn L/Gs and L/Cs. All costs to the Bank and all loss suffered by the Bank in re-employing the amounts so repaid will be paid by the Borrower.

2) All amounts outstanding will be repaid on or before the Contractual Term Maturity Date. The drawdown will be repaid in equal monthly payments. The details of repayment and interest rate applicable to such drawdown

will be set out in the “Rate and Payment Terms Notice” applicable to that drawdown. Any amounts repaid may not be reborrowed.

PREPAYMENT

2) Floating rate: permitted without penalty. 3

SECURITY The following security shall be provided, shall, unless otherwise indicated,

support all present and future indebtedness and liability of the Borrower and the grantor of the security to the Bank including without limitation indebtedness and liability under guarantees, foreign exchange contracts, cash management products, and derivative contracts, shall be registered in first position, and shall be on the Bank’s standard form, supported by resolutions and solicitor’s opinion, all acceptable to the Bank:

a) Movable Hypothec on the following universality of property from American Apparel Canada Grossiste Inc. / American Apparel Canada Wholesale Inc. in the amount of $7,500,000:

Property in stock:

Claims, receivables, book debts and other movable property:

Securities:

Equipment and road vehicles:

Trade marks and intellectual property rights:

Universality of all movable property corporeal or incorporeal:

Leasehold improvements:

Fluctuating credit balances:

b) Section 427 Bank Act Security from American Apparel Canada Grossiste Inc. / American Apparel Canada Wholesale Inc. representing a first charge on:

• inventory

c) Suretyship and Subordination in the amount of $500,000 executed by Morris Charney in favor of American Apparel Canada Grossiste Inc. / American Apparel Canada Wholesale Inc.

d) Suretyship and Subordination in the amount of $500,000 executed by Morris Charney in favor of Les Boutiques American Apparel Canada inc. / American Apparel Canada Retail Inc.

e) Postponement and Assignment of Creditor’s Claim executed by Morris Charney (assignor) in the amount of $300,000.

f) Postponement and Assignment of Creditor’s Claim executed by Dov Charney (assignor) in the amount of USD$2,393,800.

g) Fire insurance with TD Bank as loss payee from American Apparel Canada Grossiste Inc. /American Apparel Canada Wholesale Inc.

h) Fire insurance with TD Bank as loss payee from Les Boutiques American

Apparel Canada Inc. / American Apparel Canada Retail Inc.

i) Suretyship and Subordination unlimited amount executed by Dov

Charney in favor of American Apparel Canada Grossiste Inc. / American Apparel Canada Wholesale Inc.

j) Suretyship and Subordination unlimited amount executed by Dov

Charney in favor of Les Boutiques American Apparel Canada Inc. / American Apparel Canada Retail Inc.

k) Eufer ACI accounts receivable insurance from American Apparel Canada

Grossiste Inc. / American Apparel Canada Wholesale Inc. 4

l) Movable Hypothec on the following universality of property from Les

Boutiques American Apparel Canada Inc. / American Apparel Canada Retail Inc. in the amount of $7,500,000:

Property in stock:

Claims, receivables, book debts and other movable property:

Securities:

Equipment and road vehicles:

Trade marks and intellectual property rights:

Universality of all movable property corporeal or incorporeal:

Leasehold improvements:

Fluctuating credit balances:

m) Section 427 Bank Act Security from Les Boutiques American Apparel Canada Inc. / American Apparel Canada Retail Inc. representing a first charge on:

• inventory

n) General Security Agreement (“GSA”) representing a first charge from Les

Boutiques American Apparel Canada Inc. / American Apparel Canada Retail Inc. on all the Borrower’s assets and undertakings in Ontario, British Columbia, Alberta, and Nova Scotia.

o) Suretyship and Subordination unlimited amount executed by American

Apparel Canada Grossiste Inc. / American Apparel Canada Wholesale

Inc. in favor of Les Boutiques American Apparel Canada Inc. / American Apparel Canada Retail Inc.

p) Suretyship and Subordination unlimited amount executed by Les

Boutiques American Apparel Canada Inc. / American Apparel Canada Retail Inc. in favor of American Apparel Canada Grossiste Inc. / American Apparel Canada Wholesale Inc.

All persons and entities required to provide a guarantee shall be referred to herein individually as a “Surety” and/or “Guarantor” and collectively as the

“Guarantors”.

All of the above security and guarantees shall be referred to collectively in this

Agreement as “Bank Security”.

DISBURSEMENT

CONDITIONS The obligation of the Bank to permit any drawdown hereunder is subject to the

Standard Disbursement Conditions contained in Schedule “A” and the following

additional drawdown conditions:

Delivery to the Bank of the following, all of which must be satisfactory to the Bank:

a) all security is to be obtained and in good order.

b) post transaction day 1 opening balance sheets for American Apparel, Inc. as well as American Apparel Canada Grossiste Inc. / American Apparel Canada Wholesale Inc. and Les Boutiques American Apparel Canada Inc. / American Apparel Canada Retail Inc.

c) final Endeavor / Lasalle agreements to be reviewed by outside legal councel. 5

REPRESENTATIONS AND WARRANTIES

All representations and warranties shall be deemed to be continually repeated so long as any amounts remain outstanding and unpaid under this Agreement or so long as any commitment under this Agreement remains in effect. The Borrower makes the Standard Representations and Warranties set out in Schedule “A”, and

in addition, represents and warrants that:

a) confirmation that no guarantee in favor of American Apparel, Inc. exists.

POSITIVE COVENANTS

So long as any amounts remain outstanding and unpaid under this Agreement or so long as any commitment under this Agreement remains in effect, the Borrower will and will ensure that its subsidiaries and each of the Guarantors will observe the Standard Positive Covenants set out in Schedule “A” and in addition will provide:

a) audited financial statements for American Apparel Canada Grossiste Inc. / American Apparel Canada Wholesale Inc. within 90 days of fiscal year end.

b) audited financial statements for Les Boutiques American Apparel Canada Inc. / American Apparel Canada Retail Inc. within 90 days of fiscal year end.

c) audited combined financial statements for The American Apparel Group of Canada within 90 days of fiscal year end and quarterly reviewed financial statements within 45 days of each quarter end, excluding 4th quarter financial statements. A compliance certificate is to be provided for both year end financial statements and quarterly financial statements from a senior officer confirming that the company has complied with all the terms and conditions of its banking agreement.

d) an account receivable listings, account payable listings and inventory declaration within 20 days of month end for American Apparel Canada Grossiste Inc. /American Apparel Canada Wholesale Inc. and Les Boutiques American Apparel Canada Inc. / American Apparel Canada Retail Inc.

e) personal financial statement of guarantors to be provided to the Bank upon request.

f) annual compliance certificates for American Apparel, Inc.

g) quarterly and annual financial statements for the publicly traded US parent within 45 days and 90 days of respective periods ends.

h) Borrowers to advise the Bank of any default under the parentco banking

agreement within 5 business days of such a default. i) Borrowers to advise the Bank of any material change in the transfer

pricing or trade terms policy between American Apparel, Inc. and the

Canadian entities.

Independent Auditor:

So long as the Borrower is indebted to the Bank, the Borrower acknowledges and agrees that the Bank may, from time to time, engage, at the Borrower’s expense, an independent auditor to examine the Borrower’s books, records and physical assets and perform such tests and analysis and other verifications as the Bank may, in its sole discretion, determine necessary to assess its loan risk and realizable value of the Bank Security. The Borrower agrees that it shall provide the Bank’s representative(s), including such independent auditor, with its full and complete cooperation and assistance. 6

NEGATIVE COVENANTS

So long as any amounts remain outstanding and unpaid under this Agreement or so long as any commitment under this Agreement remains in effect, the Borrower will and will ensure that its subsidiaries and each of the Guarantors will observe the Standard Negative Covenants set out in Schedule “A”. In addition the Borrower will not and will ensure that its subsidiaries and each of the Guarantors will not:

(a) prohibition of the granting of any guarantee & or security interest without the

Bank’s prior consent.

(b) no payment of bonuses unless covenants are on-side on a pre &

post-payment basis.

(c) on a combined basis, capital expenditures not to exceed $2,200,000 in fiscal

2007 and 2008.

(d) postponed loans are not to be repaid unless they are replaced by either

subrogated loans from American Apparel, Inc. and or an addition to share capital for a minimum amount of $4,400,000.

REPORTING

The Borrower acknowledges that the financial reporting obligations contained herein, including the submission of the financial statements to the Bank on a timely basis, constitute a material condition precedent to the Bank providing the credit facilities contemplated herein. Should the Borrower fail to fulfill such obligations within the delays set forth herein and such default is not remedied within 10 days from the date of the Bank’s written notice to the Borrower setting forth the nature of the default, then the Borrower shall be deemed to have committed an “Event of Default” as hereinafter defined.

Notwithstanding the foregoing, and without prejudice to and under strict reserve thereof, of any rights and recourses the Bank may have in the circumstances, the Bank shall nevertheless have the right to engage, at the Borrower’s expense, an independent auditor to examine the Borrower’s books, records and physical assets, and perform such tests and analysis and such other verifications as the Bank may, in its sole discretion, determine necessary to assess its loan risk and realizable value of the Security.

PERMITTED LIENS Permitted Liens as referred to in Schedule “A” are:

a) Purchase Money Security Interests in equipment which Purchase Money Security Interest exists on the date of this Agreement (“Existing PMSIs”) which are known to the Bank and all future Purchase Money Security Interests on equipment acquired to replace the equipment under Existing PMSIs, provided that the cost of such replacement equipment may not exceed the cost of the equipment subject to the Existing Lien by more than 10%.

FINANCIAL COVENANTS

The Borrower agrees at all times to:

a) maintain a combined minimum Current Ratio of not less than 1:1, tested

quarterly. 7

Current Ratio is defined as current assets less loans to shareholders, employees and any other related parties divided by current liabilities.

b) maintain a combined minimum Tangible Net Worth of $6,000,000, tested quarterly.

Tangible Net Worth is defined as shareholder’s equity plus loans made by the shareholders to the Borrower and postponed in favour of the Bank, less loans to its shareholders, employees and other related parties and less intangible assets including without limitation, goodwill, research and development, franchises, patents and trademarks.

c) maintain a combined Debt to Tangible Net Worth ratio of not exceeding 2.00X by December31, 2007 and stepping down to 1.75X by December 31, 2008, tested quarterly.

Debt is defined as the Borrower’s total indebtedness less loans made by the shareholders to the Borrower and postponed in favour of the Bank.

Tangible Net Worth is defined as above.

d) maintain a Debt Service Coverage ratio, of not less than 1.20:1., tested annually

The Debt Service Coverage ratio to be calculated as follows:

EBITDA - Capital Expenditures - Cash Taxes - capital distributions -

dividends - shareholder loan repayment

Principal + Interest + Capital Leases

EBITDA is defined as Earnings Before Interest, Income Taxes, Depreciation, and Amortization.

EVENTS OF

DEFAULT The Bank may accelerate the payment of principal and interest under any

committed credit facility hereunder and cancel any undrawn portion of any committed credit facility hereunder, at any time after the occurrence of any one of the Standard Events of Default contained in Schedule “A” attached hereto.

ANCILLARY

FACILITIES As at the date of this Agreement, the following uncommitted ancillary products

are made available. These products may be subject to other agreements.

1) TD Visa Business card (or cards) for an aggregate amount of $180,000.

2) Spot Foreign Exchange Facility which allows the Borrower to enter into US$500,000 for settlement on a spot basis.

3) Certain treasury products, such as forward foreign exchange transactions

The Borrower agrees that treasury products will be used to hedge its risk and will not be used for speculative purposes.

The paragraph headed “FX CLOSE OUT” as set out in Schedule “A” shall apply to FX Transactions. 8

For the Borrower’s information only, the Bank advises the Borrower that, as at the day of this Agreement only, the Bank would, if requested by the Borrower, make available to the Borrower forward foreign exchange contracts in an aggregate amount of up to US$3,500,000 for periods of up to 24 months. This limit and term is subject to change at any time at the discretion of the Bank and without prior notice to the Borrower. The Borrower must contact the Bank from time to time, to obtain information about the Borrower’s then current forward foreign exchange limit.

AVAILABILITY OF OPERATING LOAN

The Operating Loan is uncommitted, made available at the Bank’s discretion, and is not automatically available upon satisfaction of the terms and conditions, conditions precedent, or financial tests set out herein.

The occurrence of an Event of Default is not a precondition to the Bank’s right to accelerate repayment and cancel the availability of the Operating Loan.

LANGUAGE PREFERENCE

This Agreement has been drawn up in the English language at the request of all parties. (Cet acte a été rédigé en langue anglaise a la demande de toutes les parties.)

SCHEDULE “A” - STANDARD TERMS AND CONDITIONS

Schedule “A” sets out the Standard Terms and Conditions (“Standard Terms and Conditions”) which apply to these credit facilities. The Standard Terms and Conditions, including the defined terms set out therein, form part of this Agreement, unless this letter states specifically that one or more of the Standard Terms and Conditions do not apply or are modified.

We trust you will find these facilities helpful in meeting your ongoing financing requirements. We ask that if you wish to accept this offer of financing (which includes the Standard Terms and Conditions), please do so by signing and returning the attached duplicate copy of this letter to the undersigned. This offer will expire if not accepted in writing and received by the Bank on or before December 21, 2007.

Yours truly,

/s/ Robert Szokpp

Robert Szokopp

Manager Commercial credit

THE TORONTO-DOMINION BANK

/s/ Caroline Podsiadlo

Caroline Podsiadlo Relationship Manager 9

TO THE TORONTO-DOMINION BANK:

American Apparel Canada Wholesale Inc./ American Apparel Canada Grossiste Inc. hereby accepts the

foregoing offer this day of, 200 . The Borrower confirms that, except as

may be set out above, the credit facility(ies) detailed herein shall not be used by or on behalf of any third party.

Signature Signature

Print Name & Position Print Name & Position

Les Boutiques American Apparel Canada Inc./American Apparel Canada Retail Inc.hereby accepts the

foregoing offer this day of, 200 . The Borrower confirms that, except as

may be set out above, the credit facility(ies) detailed herein shall not be used by or on behalf of any third party.

Signature Signature

Print Name & Position Print Name & Position 10

cc. Guarantor(s)

The Bank is providing the guarantor(s) with a copy of this letter as a courtesy only. The delivery of a copy of this letter does not create any obligation of the Bank to provide the guarantor(s) with notice of any changes to the credit facilities, including without limitation, changes to the terms and conditions, increases or decreases in the amount of the credit facilities, the establishment of new credit facilities or otherwise. The Bank may, or may not, at its option, provide the guarantor(s) with such information, provided that the Bank will provide such information upon the written request of the guarantor.

SCHEDULE A

STANDARD TERMS AND CONDITIONS

1. INTEREST RATE DEFINITIONS

Prime Rate means the rate of interest per annum (based on a 365/366 day year) established and reported by the Bank to the Bank of Canada from time to time as the reference rate of interest for determination of interest rates that the Bank charges to customers of varying degrees of creditworthiness in Canada for Canadian dollar loans made by it in Canada.

The Stamping Fee rate per annum for CDN$ B/As is based on a 365/366 day year and the Stamping Fee is calculated on the Face Amount of each B/A presented to the Bank for acceptance. The Stamping Fee rate per annum for US$ B/As is based on a 360 day year and the Stamping Fee is calculated on the Face Amount of each B/A presented to the Bank for acceptance.

LIBOR means the rate of interest per annum (based on a 360 day year) as determined by the Bank (rounded upwards, if necessary to the nearest whole multiple of 1/16th of 1%) at which the Bank may make available United States dollars which are obtained by the Bank in the Interbank Euro Currency Market, London, England at approximately 11:00 a.m. (Toronto time) on the second Business Day before the first day of, and in an amount similar to, and for the period similar to the interest period of, such advance.

USBR means the rate of interest per annum (based on a 365/366 day year) established by the Bank from time to time as the reference rate of interest for the determination of interest rates that the Bank charges to customers of varying degrees of creditworthiness for US dollar loans made by it in Canada.

Any interest rate based on a period less than a year expressed as an annual rate for the purposes of the Interest Act (Canada) is equivalent to such determined rate multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by the number of days in the period upon which it was based.

2. INTEREST CALCULATION AND PAYMENT

Interest on Prime Based Loans and USBR Loans is calculated daily and payable monthly in arrears based on the number of days the subject loan is outstanding unless otherwise provided in the Rate and Payment Terms Notice.

The Stamping Fee is calculated based on the amount and the term of the B/A and payable upon acceptance by the Bank of the B/A. The net proceeds received by the Borrower on a B/A advance will be equal to the Face Amount of the B/A discounted at the Bank’s then prevailing B/A discount rate for CDN$ B/As or US$ B/As as the case may be, for the specified term of the B/A less the B/A Stamping Fee. Interest on LIBOR Loans is calculated and payable on the earlier of contract maturity or quarterly in arrears, for the number of days in the LIBOR interest period. L/C and L/G fees are payable at the time set out in the Letter of Credit Indemnity Agreement applicable to the issued L/C or L/G.

Interest on Fixed Rate Term Loans is compounded monthly and payable monthly in arrears unless otherwise provided in the Rate and Payment Terms Notice. Interest is payable both before and after maturity or demand, default and judgment.

Each payment under this Agreement shall be applied first in payment of costs and expenses, then interest and fees and the balance, if any, shall be applied in reduction of principal.

For loans not secured by real property, all overdue amounts of principal and interest and all amounts 12

outstanding in excess of the Credit Limit shall bear interest from the date on which the same became due or from when the excess was incurred, as the case may be, until the date of payment or until the date the excess is repaid at 21% per annum, or such lower interest rate if the Bank agrees to a lower interest rate in writing. Nothing in this clause shall be deemed to authorize the Borrower to incur loans in excess of the Credit Limit.

3. DRAWDOWN PROVISIONS

Prime Based and USSR Loans

There is no minimum amount of drawdown by way of Prime Based Loans and USBR Loans, except as stated in the section of the Agreement titled “Business Credit Services Agreement”, if that section of the Agreement has not been deleted. The Borrower shall provide the Bank with 3 Business Days’ notice of a requested Prime Based Loan or USBR Loan over $51,000,000.

B/As

The Borrower shall advise the Bank of the requested term or maturity date for B/As issued hereunder. The Bank shall have the discretion to restrict the term or maturity dates of B/As. In no event shall the term of the B/A exceed the Contractual Term Maturity Date. The minimum amount of a drawdown by way of B/As is $31,000,000 and in multiples of $100,000 thereafter. The Borrower shall provide the Bank with 3 Business Days’ notice of a requested B/A drawdown.

The Borrower shall pay to the Bank the full amount of the B/A at the maturity date of the B/A.

The Borrower appoints the Bank as its attorney to and authorizes the Bank to (i) complete, sign, endorse, negotiate and deliver B/As on behalf of the Borrower in handwritten form, or by facsimile or mechanical signature or otherwise, (ii) accept such B/As, and (iii) purchase, discount, and/or negotiate B/As.

LIBOR

The Borrower shall advise the Bank of the requested LIBOR contract maturity period. The Bank shall have the discretion to restrict the LIBOR contract maturity. In no event shall the term of the LIBOR contract exceed the Contractual Term Maturity Date. The minimum amount of a drawdown by way of a LIBOR Loan is $1,000,000, and shall be in multiples of $100,000 thereafter. The Borrower will provide the Bank with 3 Business Days’ notice of a requested LIBOR Loan.

L/C and/or L/G

The Bank shall have the discretion to restrict the maturity date of L/Gs or L/Cs.

B/A - Prime Conversion

The Borrower will provide the Bank with at least 3 Business Days’ notice of its intention either to convert a B/A to a Prime Based Loan or vice versa, failing which, the Bank may decline to accept such additional B/As or may charge interest on the amount of Prime Based Loans resulting from maturity of B/As at the rate of 115% of the rate applicable to Prime Based Loans for the 3 Business Day period immediately following such maturity. Thereafter, the rate shall revert to the rate applicable to Prime Based Loans.

Notice

Prior to each drawdown and at least 10 days prior to each Rate Term Maturity, the Borrower will advise the Bank of its selection of drawdown options from those made available by the Bank. The Bank will, after each drawdown, other than drawdowns by way of BA, LIBOR Loan or under the operating loan, send a Rate and Payment Terms Notice to the Borrower. 13

4. PREPAYMENT

(a) 10% Prepayment Option Chosen. If the Borrower has elected a 10% Prepayment Option for a Facility the following shall apply to all Fixed Rate Loans made under that Facility. Each calendar year, (“Year”), the Borrower may prepay in one lump sum, once each Year, an amount outstanding under a Fixed Rate Term Loan not exceeding 10% of the original amount of the Fixed Rate Term Loan being prepaid, upon payment of all interest accrued to the date of prepayment (“Prepayment Date”) without paying any prepayment charge, provided that an Event of Default has not occurred. This privilege is not cumulative from Year to Year.

(b) 10% Prepayment Option Not Chosen or Borrower Prepaying More than 10%. During each Year, the Borrower may, provided that an Event of Default has not occurred:

i. if it has not chosen the 10% Prepayment Option, prepay all or any part of the principal then outstanding under Fixed Rate Term Loans, or,

ii. if it has chosen the 10% Prepayment Option, prepay more than 10% of the original amount of the Fixed Rate Term Loan being prepaid, in any Year,

in either case, upon payment of all interest accrued to the Prepayment Date and prepayment charges equal to the greater of:

(a) three months’ interest on the amount of the prepayment (and in the case where the Borrower has chosen the 10% Prepayment Option, the amount of prepayment is the amount of prepayment exceeding the 10% limit) using the interest rate applicable to the Fixed Rate Term Loan being prepaid; and

(b) the Interest Rate Differential, being the amount by which:

i. the total amount of interest on the amount of the prepayment using the interest rate applicable to the Fixed Rate Term Loan being prepaid calculated for the period of time equal to the Remaining Term, exceeds

ii. the total amount of interest on the amount being prepaid using the interest rate applicable to a fixed rate term loan that the Bank would make to a borrower for a comparable facility on the Prepayment Date, calculated for the period of time from the Prepayment Date until the Rate Term Maturity Date for the Fixed Rate Term Loan being prepaid (“Remaining Term”).

5. STANDARD DISBURSEMENT CONDITIONS

The obligation of the Bank to permit any drawdowns hereunder at any time is subject to the following conditions precedent:

a) The Bank shall have received the following documents which shall be in form and substance satisfactory to the Bank:

i) A copy of a duly executed resolution of the Board of Directors of the Borrower empowering the Borrower to enter into this Agreement;

ii) A copy of any necessary government approvals authorizing the Borrower to enter into this Agreement;

iii) All of the Bank Security and supporting resolutions and solicitors’ letter of opinion required hereunder;

iv) The Borrower’s compliance certificate certifying compliance with all terms and conditions hereunder;

v) all operation of account documentation; and

vi) For drawdowns under the Facility by way of L/C or L/G, the Bank’s standard form Letter of Credit Indemnity Agreement

b) The representations and warranties contained in this Agreement are correct.

c) No event has occurred and is continuing which constitutes an Event of Default or would constitute an Event of Default, but for the requirement that notice be given or time elapse or both. 14

d) The Bank has received the arrangement fee payable hereunder (if any) and the Borrower has paid all legal and other expenses incurred by the Bank in connection with the Agreement or the Bank Security.

6. STANDARD REPRESENTATIONS AND WARRANTIES

The Borrower hereby represents and warrants, which representations and warranties shall be deemed to be continually repeated so long as any amounts remain outstanding and unpaid under this Agreement or so long as any commitment under this Agreement remains in effect, that:

a) The Borrower is a duly incorporated corporation, a limited partnership, partnership, or sole proprietorship, duly organized, validly existing and in good standing under the laws of the jurisdiction where the Branch/Centre is located and each other jurisdiction where the Borrower has property or assets or carries on business and the Borrower has adequate corporate power and authority to carry on its business, own property, borrow monies and enter into agreements therefore, execute and deliver the Agreement, the Bank Security, and documents required hereunder, and observe and perform the terms and provisions of this Agreement.

b) There are no laws, statutes or regulations applicable to or binding upon the Borrower and no provisions in its charter documents or in any by-laws, resolutions, contracts, agreements, or arrangements which would be contravened, breached, violated as a result of the execution, delivery, performance, observance, of any terms of this Agreement.

c) No Event of Default has occurred nor has any event occurred which, with the passage of time or the giving of notice, would constitute an Event of Default under this Agreement or which would constitute a default under any other agreement.

d) There are no actions, suits or proceedings, including appeals or applications for review, or any knowledge of pending actions, suits, or proceedings against the Borrower and its subsidiaries, before any court or administrative agency which would result in any material adverse change in the property, assets, financial condition, business or operations of the Borrower.

e) All material authorizations, approvals, consents, licenses, exemptions, filings, registrations and other requirements of governmental, judicial and public bodies and authorities required to carry on its business have been or will be obtained or effected and are or will be in full force and effect.

f) The financial statements and forecasts delivered to the Bank fairly present the present financial position of the Borrower, and have been prepared by the Borrower and its auditors in accordance with Canadian Generally Accepted Accounting Principles consistently applied.

g) All of the remittances required to be made by the Borrower to the federal government and all provincial and municipal governments have been made, are currently up to date and there are no outstanding arrears. Without limiting the foregoing, all employee source deductions (including income taxes, Employment Insurance and Canada Pension Plan), sales taxes (both provincial and federal), corporate income taxes, corporate capital taxes, payroll taxes and Workers’ Compensation dues are currently paid and up to date.

7. STANDARD POSITIVE COVENANTS

So long as any amounts remain outstanding and unpaid under this Agreement or so long as any commitment under this Agreement remains in effect, the Borrower will, and will ensure that its subsidiaries and each of the Guarantors will:

a) Pay all amounts of principal, interest and fees on the dates, times and place specified herein, under the Rate and Payment Terms Notice, and under any other agreement between the Bank and the Borrower.

b) Advise the Bank of any change in the amount and the terms of any credit arrangement made with other lenders or any action taken by another lender to recover amounts outstanding with such other lender.

c) Advise promptly after the happening of any event which will result in a material adverse change in the financial condition, business, operations, or prospects of the Borrower or the occurrence of any Event of Default or default under this Agreement or under any other agreement for borrowed money. 15

d) Do all things necessary to maintain in good standing its corporate existence and preserve and keep all material agreements, rights, franchises, licenses, operations, contracts or other arrangements in full force and effect.

e) Take all necessary actions to ensure that the Bank Security and its obligations hereunder will rank ahead of all other indebtedness of and all other security granted by the Borrower.

f) Pay all taxes, assessments and government charges unless such taxes, assessments, or charges are being contested in good faith and appropriate reserves shall be made with funds set aside in a separate trust fund.

g) Provide the Bank with information and financial data as it may request from time to time.

h) Maintain property, plant and equipment in good repair and working condition.

i) Inform the Bank of any actual or probable litigation and furnish the Bank with copies of details of any litigation or other proceedings, which might affect the financial condition, business, operations, or prospects of the Borrower.

j) Provide such additional security and documentation as may be required from time to time by the Bank or its solicitors,

k) Continue to carry on the business currently being carried on by the Borrower its subsidiaries and each of the Guarantors at the date hereof.

1) Maintain adequate insurance on all of its assets, undertakings, and business risks.

m) Permit the Bank or its authorized representatives full and reasonable access to its premises, business, financial and computer records and allow the duplication or extraction of pertinent information therefrom and

n) Comply with all applicable laws.

8. STANDARD NEGATIVE COVENANTS

So long as any amounts remain outstanding and unpaid under this Agreement or so long as any commitment under this Agreement remains in effect, the Borrower will not and will ensure that its subsidiaries and each of the Guarantors will not:

a) Create, incur, assume, or suffer to exist, any mortgage, deed of trust, pledge, lien, security interest, assignment, charge, or encumbrance (including without limitation, any conditional sale, or other title retention agreement, or finance lease) of any nature, upon or with respect to any of its assets or undertakings, now owned or hereafter acquired, except for those Permitted Liens, if any, set out in the Letter.

b) Create, incur, assume or suffer to exist any other indebtedness for borrowed money (except for indebtedness resulting from Permitted Liens, if any) or guarantee or act as surety or agree to indemnify the debts of any other Person.

c) Merge or consolidate with any other Person, or acquire all or substantially all of the shares, assets or business of any other Person.

d) Sell, lease, assign, transfer, convey or otherwise dispose of any of its now owned or hereafter acquired assets (including, without limitation, shares of stock and indebtedness of subsidiaries, receivables and leasehold interests), except for inventory disposed of in the ordinary course of business.

e) Terminate or enter into a surrender of any lease of any property mortgaged under the Bank Security.

f) Cease to carry on the business currently being carried on by each of the Borrower, its subsidiaries, and the Guarantors at the date hereof.

g) Permit any change of ownership or change in the capital structure of the Borrower.

9. ENVIRONMENTAL

The Borrower represents and warrants (which representation and warranty shall continue throughout the term of this Agreement) that the business of the Borrower, its subsidiaries and each of the Guarantors is being operated in compliance with applicable laws and regulations respecting the discharge, omission, spill or disposal of any hazardous materials and that any and all enforcement actions in respect thereto have been clearly conveyed to the Bank. 16

The Borrower shall, at the request of the Bank from time to time, and at the Borrower’s expense, obtain and provide to the Bank an environmental audit or inspection report of the property from auditors or inspectors acceptable to the Bank.

The Borrower hereby indemnifies the Bank, its officers, directors, employees, agents and shareholders, and agrees to hold each of them harmless from all loss, claims, damages and expenses (including legal and audit expenses) which may be suffered or incurred in connection with the indebtedness under this Agreement or in connection with the Bank Security.

10. STANDARD EVENTS OF DEFAULT

The Bank may accelerate the payment of principal and interest under any committed credit facility hereunder and cancel any undrawn portion of any committed credit facility hereunder, at any time after the occurrence of any one of the following Events of Default:

a) Non-payment of principal outstanding under this Agreement when due or non-payment of interest or fees outstanding under this Agreement within 3 Business Days of when due.

b) If any representation, warranty or statement made hereunder or made in connection with the execution and delivery of this Agreement or the Bank Security is false or misleading at any time.

c) If there is a breach or non-performance or non-observance of any term or condition of this Agreement or the Bank Security and, if such default is capable to being remedied, the default continues unremedied for 5 Business Days after the occurrence.

d) If the Borrower, any one of its subsidiaries, or, if any of the Guarantors makes a general assignment for the benefit of creditors, files or presents a petition, makes a proposal or commits any act of bankruptcy, or if any action is taken for the winding up, liquidation or the appointment of a liquidator, trustee in bankruptcy, custodian, curator, sequestrator, receiver or any other officer with similar powers or if a judgment or order shall be entered by any court approving a petition for reorganization, arrangement or composition of or in respect of the Borrower, any of its subsidiaries, or any of the Guarantors or if the Borrower, any of its subsidiaries, or any of the Guarantors is insolvent or declared bankrupt.

e) If there exists a voluntary or involuntary suspension of business of the Borrower, any of its subsidiaries, or any of the Guarantors.

f) If action is taken by an encumbrancer against the Borrower, any of its subsidiaries, or any of the Guarantors to take possession of property or enforce proceedings against any assets.

g) If any final judgment for the payment of monies is made against the Borrower, any of its subsidiaries, or any of the Guarantors and it is not discharged within 30 days from the imposition of such judgment.

h) If there exists an event, the effect of which with lapse of time or the giving of notice, will constitute an event of default or a default under any other agreement for borrowed money in excess the Cross Default Threshold entered into by the Borrower, any of its subsidiaries, or any of the Guarantors.

i) If the Bank Security is not enforceable or if any party to the Bank Security shall dispute or deny any liability or any of its obligations under the Bank Security.

j) If, in the Bank’s determination, a material adverse change occurs in the financial condition, business operations or prospects of the Borrower, any of the Borrower’s subsidiaries, or any of the Guarantors.

11. ACCELERATION

If the Bank accelerates the payment of principal and interest hereunder, the Borrower shall immediately pay to the Bank all amounts outstanding hereunder, including without limitation, the amount of unmatured B/As and LIBOR Loans and the amount of all drawn and undrawn L/Gs and L/Cs. All cost to the Bank of unwinding LIBOR Loans and all loss suffered by the Bank in re-employing amounts repaid will be paid by the Borrower.

The Bank may demand the payment of principal and interest under the Operating Loan (and any other uncommitted facility) hereunder and cancel any undrawn portion of the Operating Loan (and any other uncommitted facility) hereunder, at any time whether or not an Event of Default has occurred. 17

12. CURRENCY INDEMNITY

US$ loans must be repaid with US$ and CDN$ loans must be repaid with CDN$ and the Borrower shall indemnify the Bank for any loss suffered by the Bank if US$ loans are repaid with CDN$ or vice versa, whether such payment is made pursuant to an order of a court or otherwise.

13. TAXATION ON PAYMENTS

All payments made by the Borrower to the Bank will be made free and clear of all present and future taxes (excluding the Bank’s income taxes), withholdings or deductions of whatever nature. If these taxes, withholdings or deductions are required by applicable law and are made, the Borrower, shall, as a separate and independent obligation, pay to the Bank all additional amounts as shall fully indemnify the Bank from any such taxes, withholdings or deductions.

14. REPRESENTATION

No representation or warranty or other statement made by the Bank concerning any of the credit facilities shall be binding on the Bank unless made by it in writing as a specific amendment to this Agreement.

15. ADDED COST

If the introduction of or any change in any present or future law, regulation, treaty, official or unofficial directive, or regulatory requirement, (whether or not having the force of law) or in the interpretation or application thereof, relates to:

i) the imposition or exemption of taxation of payments due to the Bank or on reserves or deemed reserves in respect of the undrawn portion of any Facility or loan made available hereunder; or,

ii) any reserve, special deposit, regulatory or similar requirement against assets, deposits, or loans or other acquisition of funds for loans by the Bank; or,

iii) the amount of capital required or expected to be maintained by the Bank as a result of the existence of the advances or the commitment made hereunder;

and the result of such occurrence is, in the sole determination of the Bank, to increase the cost of the Bank or to reduce the income received or receivable by the Bank hereunder, the Borrower shall, on demand by the Bank, pay to the Bank that amount which the Bank estimates will compensate it for such additional cost or reduction in income and the Bank’s estimate shall be conclusive, absent manifest error.

16. EXPENSES

The Borrower shall pay, within 5 Business Days following notification, all fees and expenses (including but not limited to all legal fees) incurred by the Bank in connection with the preparation, registration and ongoing administration of this Agreement and the Bank Security and with the enforcement of the Bank’s rights and remedies under this Agreement and the Bank Security whether or not any amounts are advanced under the Agreement. These fees and expenses shall include, but not be limited, to all outside counsel fees and expenses and all in-house legal fees and expenses, if in-house counsel are used, and all outside professional advisory fees and expenses. The Borrower shall pay interest on unpaid amounts due pursuant to this paragraph at the All-in Rate plus 2% per annum.

17. NON WAIVER

Any failure by the Bank to object to or take action with respect to a breach of this Agreement or any Bank

Security or upon the occurrence of an Event of Default shall not constitute a waiver of the Bank’s right to take action at a later date on that breach. No course of conduct by the Bank will give rise to any reasonable expectation which is in any way inconsistent with the terms and conditions of this Agreement and the Bank Security or the Bank’s rights thereunder.

18. EVIDENCE OF INDEBTEDNESS

The Bank shall record on its records the amount of all loans made hereunder, payments made in respect thereto, and all other amounts becoming due to the Bank under this Agreement. The Bank’s records constitute, in the absence of manifest error, conclusive evidence of the indebtedness of the Borrower to the Bank pursuant to this Agreement. 18

The Borrower will sign the Bank’s standard form Letter of Credit Indemnity Agreement for all L/Cs and L/Gs issued by the Bank.

With respect to chattel mortgages taken as Bank Security, this Agreement is the Promissory Note referred to in same chattel mortgage, and the indebtedness incurred hereunder is the true indebtedness secured by the chattel mortgage,

19. ENTIRE AGREEMENTS

This Agreement replaces any previous letter agreements dealing specifically with terms and conditions of the credit facilities described in the Letter. Agreements relating to other credit facilities made available by the Bank continue to apply for those other credit facilities. This Agreement, and if applicable, the Letter of Credit Indemnity Agreement, are the entire agreements relating to the Facilities described in this Agreement.

20. ASSIGNMENT

The Bank may assign or grant participation in all or part of this Agreement or in any loan made hereunder without notice to and without the Borrower’s consent.

The Borrower may not assign or transfer all or any part of its rights or obligations under this Agreement.

21. RELEASE OF INFORMATION

The Borrower hereby irrevocably authorizes and directs the Borrower’s accountant, (the “Accountant”) to deliver all financial statements and other financial information concerning the Borrower to the Bank and agrees that the Bank and the Accountant may communicate directly with each other.

22. FX CLOSE OUT

The Borrower hereby acknowledges and agrees that in the event any of the following occur; (i) Default by the Borrower under any forward foreign exchange contract (“FX Contract”); (ii) Default by the Borrower in payment of monies owing by it to anyone, including the Bank; (iii) Default in the performance of any other obligation of the Borrower under any agreement to which it is subject; or (iv) the Borrower is adjudged to be or voluntarily becomes bankrupt or insolvent or admits in writing to its inability to pay its debts as they come due or has a receiver appointed over its assets, the Bank shall be entitled without advance notice to the Borrower to close out and terminate all of the outstanding FX Contracts entered into hereunder, using normal commercial practices employed by the Bank, to determine the gain or loss for each terminated FX contract. The Bank shall then be entitled to calculate a net termination value for all of the terminated FX Contracts which shall be the net sum of all the losses and gains arising from the termination of the FX Contracts which net sum shall be the “Close Out Value” of the terminated FX Contracts. The Borrower acknowledges that it shall be required to forthwith pay any positive Close Out Value owing to the Bank and the Bank shall be required to pay ant negative Close Out Value owing to the Borrower, subject to any rights of set-off to which the Bank is entitled or subject.

23. SET-OFF

In addition to and not in limitation of any rights now or hereafter granted under applicable law, the Bank may at any time and from time to time without notice to the Borrower or any other Person, any notice being expressly waived by the Borrower, set-off and compensate and apply any and all deposits, general or special, time or demand, provisional or final, matured or unmatured, in any currency, and any other indebtedness or amount payable by the Bank (irrespective of the place of payment or booking office of the obligation), to or for the credit of or for the Borrower’s account, including without limitation, any amount owed by the Bank to the Borrower under any FX Contract or other treasury or derivative product, against and on account of the indebtedness and liability under this Agreement notwithstanding that any of them are contingent or unmatured or in a different currency than the indebtedness and liability under this Agreement. 19

When applying a deposit or other obligation in a different currency than the indebtedness and liability under this Agreement to the indebtedness and liability under this Agreement, the Bank will convert the deposit or other obligation to the currency of the indebtedness and liability under this Agreement using the Bank’s noon spot rate of exchange for the conversion of such currency.

24. USE OF INFORMATION

The word “Information” means the Borrower’s business and credit information and the Guarantor’s personal, business and credit information. It includes information provided to the Bank by the Borrower and Guarantors, including through the products and services the Borrower and Guarantor(s) uses, and information obtained from others.

The Borrower and the Guarantor agree to the use of its Information as follows:

i. Use of Information - The Bank may use Information to establish and serve the Borrower as its customer, determine whether any products or services of the TD Bank Financial Group are suitable for the Borrower and offer them to the Borrower, or when required or permitted by law. The Bank may share Information within the TD Bank Financial Group where permitted by law;

ii. Collection and Use of Credit Information - THE BANK MAY OBTAIN INFORMATION FROM PARTIES OUTSIDE THE TD BANK FINANCIAL GROUP, INCLUDING THROUGH A CREDIT CHECK, AND VERIFY INFORMATION WITH THEM. THE BORROWER AND THE GUARANTOR AUTHORIZE THOSE PARTIES TO GIVE THE BANK INFORMATION. The Bank may disclose Information to other lenders and credit bureaus.

The Borrower and the Guarantor may obtain the Bank’s Privacy Code - “Protecting Your Privacy” or review its options for refusing or withdrawing this consent, including its option not to be contacted about offers of products or services, by contacting the Branch or calling the Bank at 1-800-9TD BANK.

25. MISCELLANEOUS

i) The Borrower has received a signed copy of this Agreement;

ii) If more than one Person, firm or corporation signs this Agreement as the Borrower, each party is jointly and severally liable hereunder, and the Bank may require payment of all amounts payable under this Agreement from any one of them, or a portion from each, but the Bank is released from any of its obligations by performing that obligation to any one of them;

iii) Accounting terms will (to the extent not defined in this Agreement) be interpreted in accordance with accounting principles established from time to time by the Canadian Institute of Chartered Accountants (or any successor) consistently applied, and all financial statements and information provided to the Bank will be prepared in accordance with those principles;

iv) This Agreement is governed by the law of the Province or Territory where the Branch/Centre is located.

v) Unless stated otherwise, all amounts referred to herein are in Canadian dollars

26. DEFINITIONS

Capitalized Terms used in this Agreement shall have the following meanings:

“All-In Rate” means the greater of the Interest Rate that the Borrower pays for Prime Based Loans (which for greater certainty includes the percent per annum added to the Prime Rate) or the highest fixed rate paid for Fixed Rate Term Loans.

“Agreement” means the agreement between the Bank and the Borrower set out in the Letter and this Schedule “A” - Standard Terms and Conditions.

“Business Day” means any day (other than a Saturday or Sunday) that the Branch/Centre is open for business.

“Branch/Centre” means The Toronto-Dominion Bank branch or banking centre noted on the first page of the Letter, or such other branch or centre as may from time to time be designated by the Bank.

“Contractual Term Maturity Date” means the date set out in the Letter under the heading “Contractual Term”. 20

“Face Amount” means, in respect of:

(i) a B/A, the amount payable to the holder thereof on its maturity;

(ii) A L/C or L/G, the maximum amount payable to the beneficiary specified therein or any other Person to whom payments may be required to be made pursuant to such L/C or L/G.

“Fixed Rate Term Loan” means any drawdown in Canadian dollars under a Credit Facility at an interest rate which is fixed for a Rate Term at such rate as is determined by the Bank as its sole discretion.

“Inventory Value” means, at any time of determination, the total value (based on the lower of cost or market) of the Borrower’s inventories that are subject to the Bank Security (other than (i) those inventories supplied by trade creditors who at that time have not been fully paid therefore and would have a right to repossess all or part of such inventories if the Borrower were then either bankrupt or in receivership, (ii) those inventories comprising work in process and (iii) those inventories that the Bank may from time to time designate in its sole discretion) minus the total amount of any claims, liens or encumbrances on those inventories having or purporting to have priority over the Bank.

“Letter” means the letter from the Bank to the Borrower to which this Schedule “A” - Standard Terms and Conditions is attached.

“Letter of Credit” or “L/C” means a documentary letter of credit or similar instrument in form and substance satisfactory to the Bank.

“Letter of Guarantee” or “L/G” means a stand-by letter of guarantee or similar instrument in form and substance satisfactory to the Bank.

“Person” includes any individual, sole proprietorship, corporation, partnership, joint venture, trust, unincorporated association, association, institution, entity, party, or government (whether national, federal, provincial, state, municipal, city, county, or otherwise and including any instrumentality, division, agency, body, or department thereof).

“Purchase Money Security Interest” means a security interest on equipment which is granted to a lender or to the seller of such equipment in order to secure the purchase price of such equipment or a loan to acquire such equipment, provided that the amount secured by the security interest does not exceed the cost of the equipment, the Borrower provides written notice to the Bank prior to the creation of the security interest, and the creditor under the security interest has, if requested by the Bank, entered into an inter-creditor agreement with the Bank, in a format acceptable to the Bank.

“Rate Term” means that period of time as selected by the Borrower from the options offered to it by the Bank, during which a Fixed Rate Term Loan will bear a particular interest rate. If no Rate Term is selected, the Borrower will be deemed to have selected a Rate Term of 1 year.

“Rate Term Maturity” means the last day of a Rate Term which day may never exceed the Contractual Term Maturity Date.

“Rate and Payment Terms Notice” means the notice sent by the Bank setting out the interest rate and

payment terms for a particular drawdown.

“Receivable Value” means, at any time of determination, the total value of those of the Borrower’s trade accounts receivable that are subject to the Bank Security other than (i) those accounts then outstanding for 90 days, (ii) those accounts owing by Persons, firms or corporations affiliated with the Borrower, (iii) those accounts that the Bank may from time to time designate in its sole discretion, (iv) those accounts subject to any claim, liens, or encumbrance having or purporting to have priority over the Bank, (v) those accounts which are subject to a claim of set-off by the obligor under such account, MINUS the total amount of all claims, liens, or encumbrances on those receivables having or purporting to have priority over the Bank.

“Receivables/Inventory Summary” means a summary of the Customer’s trade account receivables and inventories, in form as the Bank may require and certified by a senior officer/representative of the Borrower. 21

“US$ Equivalent” means, on any date, the equivalent amount in United States Dollars after giving effect to a conversion of a specified amount of Canadian Dollars to United States Dollars at the Bank’s noon spot rate of exchange for Canadian Dollars to United States Dollars established by the Bank for the day in question. 22

EX-10.23

Exhibit 10.23

Exhibit 10.23

CONFIDENTIAL

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”), dated to be effective as of October 26, 2006, is made by and between American Apparel, Inc., a California corporation (the “Employer”), and Joyce E. Crucillo, a California resident (the “Employee”).

I. EMPLOYMENT: Employer hereby employs the Employee, and Employee hereby accepts such employment, on the terms and conditions set forth herein. The parties understand and agree that Employee is working for Employer as an employee, not as an independent contractor.

II. EMPLOYEE’S TITLE AND POSITION: Chief Legal Counsel

III. TERM: The initial term (“Initial Term”) of Employee’s employment shall be one (1) year, beginning on December 1, 2006 and ending on November 30, 2007, unless terminated earlier pursuant to this Agreement. The term of this Agreement shall automatically renew for successive, additional one (1) year terms unless either party delivers written notice to the other at least ninety (90) days prior to the expiration date of this Agreement not to renew.

IV. COMPENSATION: Employee shall earn an annual base salary of Two Hundred Twenty- Five Thousand Dollars ($225,000.00) (“Annual Compensation”), minus customary federal and state withholdings and other required employment taxes and/or deductions, payable as follows:

1. One hundred fifty thousand dollars ($150,000.00), payable in accordance with Employer’s customary

payroll practices with respect to senior management employees; and

2. Seventy-five thousand dollars ($75,000.00) as a vested guaranteed bonus, payable in two equal lump sum payments of thirty-seven thousand five hundred dollars ($37,500.00), on every May 31st and December 31st that this Agreement is in effect, with the first such payment to be made on May 31, 2007 (“Semi-Annual Vested Guaranteed Bonus”). Although payable semi-annually, this Semi-Annual Vested Guaranteed Bonus shall accrue and vest for each day Employee’s remains employed.

V. BENEFITS: Employer shall also provide Employee with the usual health insurance benefits it generally provides to its other senior management employees. Ay Employee becomes eligible in accordance with criteria to be adopted by the Employer, the Employer shall provide Employee with the right to participate in and to receive benefits from accident, disability, medical, pension, bonus, stock, profit-sharing and savings plans and similar benefits made available generally to employees of the Employer.

VI. TERMINATION

1. EMPLOYEE’S TERMINATION OF AGREEMENT: Employee may resign at anytime, provided she give Employer one hundred twenty days (120) days prior written notice. In the event of such resignation, Employer shall pay Employee all accrued and unpaid portion of her Annual Compensation, including but not limited to the Semi-Annual Vested Guaranteed Bonus, at the effective date of Employee’s resignation (i.e., last day of Employee’s employment).

2. EMPLOYER’S TERMINATION OF AGREEMENT: Employer may terminate Employee with or without cause, provided that Employer gives Employee thirty (30) days prior written notice of its intent to terminate Employee, which notice shall include a detailed explanation of each reason for termination. Within thirty (30) days of receiving a notice of termination For Cause (as defined below), Employee shall have the right, but not the obligation, to attempt to cure and/or resolve Employer’s stated causes for termination. Termination shall be

CONFIDENTIAL

for “Clause” is defined as follows: (a) any intentional action or intentional failure to act by Employee which was performed in bad faith and to the material detriment of Employer; (b) Employee intentionally refuses or intentionally fails to act in accordance with any lawful and proper direction or order of the Employer; or (c) Employee willfully and habitually neglects the duties of employment.

a. Termination During the Initial Term: It is the intent of the parties that Employee receives the entire amount of her Annual Compensation during the Initial Term of this Agreement, unless Employee voluntarily resigns during this Initial Term. Accordingly, If Employer terminates Employee (with or without cause) during the Initial Term of this Agreement, then Employer shall pay Employee the entire unpaid balance of Employee’s Annual Compensation, including but not limited to the Semi-Annual Vested Guaranteed Bonus, irrespective of whether this amount has accrued or been earned, payable in accordance with Employer’s standard payroll practices with respect to senior management employees. By way of example, but not limitation, if Employee is terminated on May 30, 2007 (6 months into the Initial Term), at which time, Employee has already received half of her Annual Compensation, then Employer must continue paying Employee during the remaining six (6) months of the Initial Term in accordance with Employer’s standard payroll practices.

b. Termination After Initial Term: If Employer terminates Employee after the Initial Term of this Agreement, then Employer shall pay Employee any accrued and unpaid portion of her Annual Compensation at the effective date of Employer’s termination. If termination during this period is without cause, then Employer shall also continue to pay to Employee as provided herein Employee’s Compensation For four (4) months, for a maximum of seventy-five thousand dollars ($75,000.00), from the effective date of such termination as severance compensation. Employee shall not be entitled to any severance compensation if she was terminated For Cause after the Initial Period which has not been cured.

VII. AUTHORITY TO ENTER INTO THIS AGREEMENT. The parties represent and warrant that they have been vested with full authority to enter into this Agreement, and that all necessary approvals to enter into this Agreement have been obtained.

VIII. ATTORNEYS FEES: If any legal action arises under this Agreement or by reason of any asserted breach of it, the prevailing party shall be entitled to recover all costs and expanses, including reasonable attorneys’ fees, incurred in enforcing or attempting to enforce any of the terms, covenants or conditions, including costs incurred prior to commencement of legal action, and all costs and expenses, including reasonable attorneys’ fees, incurred in any appeal from an action brought to enforce any of the terms, covenants or conditions hereof.

IX. INDEPENDENT LEGAL ADVICE: Each party acknowledges that they have had the opportunity to be represented and advised by attorneys of their own choosing and are satisfied that they have been adequately informed of the nature, extent, and impact of this Agreement.

EMPLOYER:

EMPLOYEE:

AMERICAN APPAREL, INC.

By: /s/ Dov Charney

Dov Charney, President

Date:

Joyce E. Crucillo

OCTOBER 29, 2006

DATE: 10/29/06

EX-10.24

Exhibit 10.24

Exhibit 10.24

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (“Agreement”) is made and entered into as of

December 1, 2007 by and between, PNS Apparel, Inc., a California Corporation

(“PNS”), and Blue Man Group, Inc., a California Corporation (“BMG” and together with PNS “Sellers” and each a “Seller”), , all with a business address at 2654 Sequoia Drive, South Gate, CA 90280, (collectively “Seller”), Allen S. Yi (“Yi”) and American Apparel, Inc., a California Corporation, with a business address at, 747 Warehouse Street, Los Angeles, CA (“Buyer”).

RECITALS

A. Sellers are engaged in the business of garment dying and finishing which operates under the name PNS Apparel, Inc. and Blue Man Group, Inc. (the “Business”) in the State of California with a business location at business address of Sellers in South Gate, Los Angeles County, California.

B. Buyer desires to purchase from Sellers certain assets of Sellers related to the Business, as identified in this Agreement.

C. Subject to the terms and conditions contained in this Agreement, Sellers desire to sell to Buyer, and Buyer agrees to purchase from Sellers, the assets of Sellers expressly identified herein.

NOW, THEREFORE, in consideration of the mutual covenants, representations, and warranties set forth in this Agreement, the parties agree as follows:

ARTICLE

1. PURCHASE AND SALE OF ASSETS

1.1. Purchase and Sale of Assets.

Sellers agree to sell to Buyer, and Buyer agrees to purchase from Sellers, at Closing (as defined below), all of Sellers’ right, title, and interest in and to the following (the “Assets”):

(a) All tangible personal property, furnishings, fixtures, equipment, machinery, parts, accessories, inventory and any other property listed on Schedule A (the “Personal Property”); and

(b) The real estate lease listed on Schedule B, together with all of Sellers’ interest in any security deposit, prepaid rent, leasehold improvements, and appurtenances to the leased property (the “Real Property Leases”);

1.2. Liens.

Seller shall convey title to the Assets to Buyer free and clear of all liens, security interests, easements, and encumbrances of any kind or nature.

1.3. Risk of Loss.

Sellers assume all risk of loss or damage to the Assets prior to the Closing. In the event there is any material loss or damage to all or any portion of the Assets prior to the Closing, Buyer may either terminate this Agreement pursuant to Article 13, or negotiate with Sellers for a

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proportionate reduction in the Purchase Price to reflect the loss or damage. For the purposes of this provision, the term “material loss or damage” shall mean any loss or damage to the Assets with an aggregate cost of $5,000.

ARTICLE

2. ASSUMPTION OF LIABILITIES

2.1. Excluded Liabilities.

Except as expressly provided in this Agreement, Buyer shall not assume or become liable for any obligations, commitments, or liabilities of any Seller or Yi, whether known or unknown, absolute, contingent, or otherwise, and whether or not related to the Assets, including, without limitation, any employment, employee relationships, employment contracts, business, sales, income tax or use tax relating to Sellers’ operation of the Business and use and ownership of the Assets prior to the Closing.

ARTICLE

3. PURCHASE PRICE

3.1. Purchase Price.

The purchase price to be paid by Buyer to Sellers for the Assets (the “Purchase Price”) shall be One Million Six Hundred Dollars (US$1,600,000) to be paid as follows:

$800,000 to Young Hwan Kim to be paid on or before December 20, 2007.

$800,000 jointly to PNS Apparel, Inc. and Blue Man Group, Inc., as follows: $600,000

to be paid on Closing and $200,000 to be paid on or before December 20, 2007.

3.2. Payment of Purchase Price.

Buyer shall pay the Purchase Price to Seller in cash or immediately available funds as set forth in Section 3.1 of this Agreement.

3.3. Allocation of Purchase Price.

The Purchase Price shall be allocated among the Assets as follows:

(a) Personal Property: $1,550,000.

(b) Real Property Leases: $50,000.

3.4. Effect of Allocation.

The parties agree to abide by the allocation of the Purchase Price specified in this Agreement, and agree to report the transaction as allocated for income tax purposes.

ARTICLE

4. INSPECTION OF ASSETS

4.1. Inspection Period.

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Subject to the provisions of this Agreement, Buyer shall have a period of up to 20 days (the “Inspection Period”) from the date of mutual execution of this Agreement (the “Execution Date”), to conduct an inspection of the Assets and any related documents or other items relating to the Assets to determine the suitability of the Asset for Buyer’s intended purposes. At any time during the Inspection Period, Buyer may terminate this Agreement and receive a refund of the Purchase Price by giving written notice to Sellers based upon a material misrepresentation, a material breach of this Agreement, or a mutual mistake of material fact. If Buyer does not terminate this Agreement prior to the expiration of the Inspection Period, the Purchase Price shall be nonrefundable to Buyer unless otherwise provided in this Agreement.

4.2. Title Matters.

(a) On or before Closing, Sellers, at their sole cost and expense, shall remove all exceptions to title of the Assets, including, without limitations all UCC liens. In the event that Sellers fail to cure or remove any exception that it has agreed to cure or remove, Buyer may terminate this Agreement and receive a refund of the Purchase Price.

4.3. Access to Assets.

Prior to the Closing and during the Inspection Period, Buyer and its agents, employees, and contractors shall, at Buyer’s sole cost and expense, be afforded reasonable access to the Assets, including the Real Property, during normal business hours for the purpose of inspecting the physical condition of the Assets.

ARTICLE

5. CLOSING

5.1. Time and Place of Closing.

The closing for the purchase and sale of the Assets (the “Closing”) shall be held at 747

Warehouse St., Los Angeles, California 90021 on Dec 1, 2007 or at such

other time and place as the parties may mutually agree in writing (the “Closing Date”). At Closing Seller shall convey title to the Assets to Buyer as provided in this Agreement.

5.3. Seller’s Closing Obligations.

At the Closing, Seller shall execute, acknowledge, and deliver, as appropriate, each of the

following items:

(a) A duly executed bill of sale (the “Bill of Sale”), in substantially the form attached as Exhibit 1 and incorporated by reference, conveying all of Seller’s right, title, and interest in and to the Personal Property to Buyer.

(b) A duly executed assignment of leases (the “Assignment of Leases”), in substantially the form attached as Exhibit 2 and incorporated by reference, pursuant to which Seller shall assign to Buyer all of its right, title, and interest in and to, and Buyer shall accept and assume all of Seller’s obligations in respect of, the Real Property Leases.

(c) All other deeds, bills of sale, motor vehicle titles, warranty deeds, assignments, endorsements, licenses, and other good and sufficient instruments and documents of conveyance and transfer as shall be necessary and effective to transfer, convey, and assign to Buyer at the Closing all of

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Seller’s right, title, and interest in and to the Assets, free and clear of any liens or encumbrances as required by the terms of this Agreement.

5.4. Buyer’s Closing Obligations.

At the Closing, Buyer shall execute, acknowledge, and deliver, as appropriate, each of the following items:

(a) The amount of the Purchase Price in cash or immediately available funds, together with any funds as may be necessary to comply with Buyer’s obligations regarding the payment of prorations, costs, and expenses under this Agreement.

(b) Executed counterparts of any documents required to be signed by Buyer pursuant to this Agreement, including, but not limited to, the Assignment of Leases.

(c) All other instruments and documents necessary to consummate the transactions contemplated by this Agreement.

5.5. Expenses of Closing.

The expenses of Closing shall be paid as follows:

(a) Seller shall pay:

(i) Any sales or use tax arising out of the transfer of the Assets and Real Property Leases, if any.

(b) Except as otherwise expressly provided in this Agreement, all other Closing fees and costs, including, but not limited to, legal fees, accounting fees, consulting fees, and other incidental expenses in connection with the transactions contemplated by this Agreement shall be borne by the party that incurs the expenses.

5.6. Proration of Expenses.

Except as otherwise expressly provided in this Agreement, all expenses associated with the Assets being conveyed to Buyer, including, but not limited to, taxes, rent, insurance premiums, and utility charges, shall be apportioned ratably between the parties as of the Closing Date on the basis of a 30-day month. This obligation to make apportionments shall survive the Closing.

ARTICLE

6. REPRESENTATIONS AND WARRANTIES OF SELLER

Sellers and Yi jointly and severally, make the following representations and warranties to Buyer, each of which is true and correct as of the date of this Agreement, and shall survive the Closing Date:

6.1. Sellers’ and Allen S. Yi’s Representations and Warranties.

(a) PNS Apparel, Inc., and Blue Man Group, Inc., are each duly organized, validly existing, and in good standing under the laws of the state of its organization, and are qualified to transact business in the State of California.

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(b) Each of PNS and BMG have full legal power and authority to enter into and perform this Agreement, and this Agreement constitutes the valid and binding obligation of each of PNS and BMG, enforceable in accordance with its terms,

(c) The execution and delivery of this Agreement does not conflict with, violate, or constitute a default under the terms, conditions, or provisions of any agreement or instrument to which any Seller or Yi are a party, or any law, judgment, or order of which any Seller or Yi are aware, and will not result in the creation of any lien, security interest, or encumbrance on any of the Assets.

(d) There are no actions, suits, proceedings, or claims now pending or, to the best of any Seller’s and Yi’s knowledge, threatened against Seller, Yi, or the Assets that would affect Sellers’ ability to fulfill their obligations under this Agreement or that would impair, Sellers’ good and marketable title to any of the Assets or the value of the Assets.

(e) Sellers have, and will have at Closing, good and marketable title to all the Assets free and clear of all liens, charges, and encumbrances.

(f) Sellers have provided Buyer with true and correct copies of all Real Property Leases. To Sellers’ and Yi’s knowledge, the Real Property Lease is in full force and effect, and neither Seller nor any other party is in default under the Real Property Lease.

(g) Sellers have provided Buyer with true and correct copies of all documents evidencing Sellers’ and Yi’s rights in the Personal Property. To Sellers’ and Yi’s knowledge, each agreement, instrument, or license with respect to the Personal Property is in full force and effect, and neither Seller nor any other party is in default under any such agreements.

(h) Neither of the Sellers or Yi are not a party to, or otherwise bound by, any collective bargaining agreement, multi-employer pension fund, or other labor union agreement with respect to any persons employed by any Seller in connection with its operation of the Business.

(i) No individual or entity, including, without limitation, Yi, D-Fabrik Los Angeles Inc., and ASY, Inc., has any existing rights in or to the Assets, including, but not limited to, any rights of first refusal to the Assets.

(j) ASY, Inc., is not an existing entity or corporation.

(k) Yi disclaims any rights or interests in any of the Assets. Yi further represents and warrants that he has no rights, interests, claims, or liens that would restrict, limit or encumber the Sellers’ title to the Assets, Sellers’ rights to enter into this Agreement, or Sellers’ ability to perform any of Sellers’ obligations under this Agreement. Yi agrees to execute any disclaimer, written acknowledgement, or assignment reasonably requested by the Buyer to evidence or perfect this disclaimer or to assign any rights in or to any of the Assets, residual or otherwise to Buyer.

(l) The parties acknowledge that Sellers has begun operations within the past (6) six months at its current location and that certain permits, licenses, or registrations (collectively “Permits) have been applied for, are pending, and not yet approved. The parties acknowledge that certain permits, licenses, or registrations are non-transferable under the applicable law, regulation or administrative rule. The Sellers represents that it has either received approval or has applied in good faith for all necessary permits, licenses and registrations.

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(m) Schedule E sets forth all Permits held or applied for by Sellers. No Permit other than those listed on Schedule E is necessary for the use and operation of the Personal Property at the Business location. No notice of any violation has been received in respect of any such Permit and neither of the Sellers or Yi have any knowledge of any proceeding which is pending or threatened that would suspend or revoke or limit any such Permit.

6.2 Environmental Matters. Compliance with Environmental Laws. The Assets and lease property identified in Schedule B (“Lease Property”) have been maintained in compliance with all federal, state, local or foreign laws, statutes, ordinances, regulations, rules, judgments, orders, notice requirements, court decisions, agency guidelines or principles of law, restrictions and licenses, which (i) regulate or relate to the protection or clean-up of the environment; the use, treatment, storage, transportation, handling, disposal or release of Hazardous Substances, the preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants or other natural resources; or the health and safety of persons or property, including without limitation protection of the health and safety of employees; or (ii) impose liability with respect to any of the foregoing, including without limitation the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), Resource Conservation & Recovery Act (42 U.S.C. § 6901 et seq.) (“RCRA”), Safe Drinking Water Act (21 U.S.C. § 349, 42 U.S.C. § 300f-300j-26), Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), Clean Air Act (42 U.S.C. § 7401 et seq.), Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.) (“CERCLA”), California Health & Safety Code (§ 25100 et seq., § 39000 et seq.), and California Water Code (§ 13000 et seq.), or any other similar federal, state or local law of similar effect, each as amended. (All of the above are, collectively, the “Environmental Laws”).

The Lease Property and the Assets are, and at all times have been, owned, leased and operated in compliance with all Environmental Laws and in a manner that will not give rise to any liability under any Environmental Laws.

(b) Neither of the Sellers have, and at all times has had, all licenses, permits, franchises, approvals, authorizations, consents or orders of, or filings with, any Governmental Authority (collectively “Permits”), whether foreign, federal, state or local, or any other person, necessary or desirable for the past, present or anticipated conduct of, or relating to the operation of the Business required under any Environmental Law and the Lease Property and the Assets is, and at all times has been, in compliance with all such Permits.

(c) The Seller has not received any notice at any time that it is or was claimed to be in violation of or in non-compliance with the conditions of any Permit required under any Environmental Law or the provisions of any Environmental Law.

(d) There is not now pending or threatened, nor any basis for, nor has there ever been, a no litigation, action, suit, proceeding or investigation (collectively, “Actions” and each, an “Action”) against any Seller or Yi under any Environmental Law or otherwise with respect to any release or mishandling of any Hazardous Substance.

(e) There are no consent decrees, judgments, judicial or administrative orders or agreements with, or liens by, any governmental authority or quasi-governmental entity relating to any Environmental Law which regulate, obligate, bind or in any way affect any Seller or the Lease Property or the Assets.

(f) “Hazardous Substance” shall mean any quantity of asbestos in any form, urea formaldehyde, PCB’S, radon gas, crude oil or any fraction thereof, all forms of natural gas,

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petroleum products or by-products, any radioactive substance, any toxic, infectious, reactive, corrosive, ignitable or flammable chemical or chemical compound and any other hazardous substance, material or waste (as defined in or for purposes of any Environmental Law), whether solid, liquid or gas.

There is not and has not been any Hazardous Substance used, generated, treated, stored, transported, disposed of, handled or otherwise existing on, under, about or from the Lease Property and the Assets, except for quantities of any such Hazardous Substances stored or otherwise held on, under or about any such facilities in full compliance with all Environmental Laws and necessary for the operation of the Business.

(g) Each of the Sellers have at all times used, generated, treated, stored, transported, disposed of or otherwise handled its Hazardous Substances in compliance with all Environmental Laws and in a manner that will not result in liability of any Seller under any Environmental Law.

(h) There are no present or past Environmental Conditions (as defined below) in any way relating to any Seller, or the Lease Property or the Assets. “Environmental Conditions” means the introduction into the environment of any pollution, including without limitation any contaminant, irritant or pollutant or other Hazardous Substance (whether or not upon the Lease Property or other property of any Seller and whether or not such pollution constituted at the time thereof a violation of any Environmental Law as a result of any Release of any kind whatsoever of any Hazardous Substance) as a result of which any Seller has or may become liable to any person or by reason of which the Lease Property or the Assets may suffer or be subjected to any lien.

(i) CERCLA or RCRA. No current or past use, generation, treatment, transportation, storage, disposal or handling practice of the Seller with respect to any Hazardous Substance has or will result in any liability under the CERCLA or RCRA or any state or local law of similar effect.

(j) Storage Tank or Pipeline. There is not now and has not been at any time in the past any underground or above-ground storage tank or pipeline at the Lease Property where the installation, use, maintenance, repair, testing, closure or removal of such tank or pipeline was not in compliance with all Environmental Laws and there has been no release from or rupture of any such tank or pipeline, including without limitation any release from or in connection with the filling or emptying of such tank.

(k) Environmental Audits or Assessments. True, complete and correct copies of the written reports, and all parts thereof, including any drafts of such reports if such drafts are in the possession or control of either Seller or Yi, of all environmental audits or assessments which have been conducted at the Lease Property within the past five (5) years, either by eitherSeller, Yi or any attorney, environmental consultant or engineer engaged for such purpose, have been delivered to Buyer and a list of all such reports, audits and assessments and any other similar report, audit or assessment of which either Seller or Yi has knowledge is included on Schedule C.

(1) Proposition 65. Sellers do not manufacture or distribute any product in the State of California which requires the warning mandated by the California Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65”), California Health and Safety Code § 25249.5 et seq.

(m) Indemnification Agreements. Neither Seller is a party, whether as a direct signatory or as successor, assign or third party beneficiary, or otherwise bound, to any lease or other Contract

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under which such Seller is obligated by or entitled to the benefits of, directly or indirectly, any representation, warranty, indemnification, covenant, restriction or other undertaking concerning environmental conditions.

(n) Releases or Waivers. Neither Sellers nor Yi havereleased any other person from any claim under any Environmental Law or waived any rights concerning any Environmental Condition.

(o) Notices, Warnings and Records. Each Seller and Yi has given all notices and warnings, made all reports, and has kept and maintained all records required by and in compliance with all Environmental Laws.

6.3 Labor and Employment Matters.

(a) Each Seller (i) has withheld and paid to the appropriate Governmental Authorities, or is withholding for payment not yet due to such authorities, all amounts required to be withheld from its employees; (ii) is not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing; and (iii) has complied in all material respects with all Applicable Laws, rules and regulations relating to the employment of labor, including Title VII of the Federal Civil Rights Act of 1964, as amended, OSHA, and those relating to hours, wages, collective bargaining and the payment and withholding of Taxes and other sums as required by appropriate authorities.

(b) Neither Seller is a party to any collective bargaining agreement or other labor contract applicable to the employees of such Seller; there has been no breach or other failure to comply with any material provision of any such agreement or contract; and neither Seller is subject to any (i) unfair labor practice complaint pending before the National Labor Relations Board or any other federal, state, local or foreign agency, (ii) pending or threatened labor strike, slowdown, work stoppage, lockout, or other organized labor disturbance, or threat thereof, (iii) pending grievance proceeding, (iv) pending representation question respecting the employees of such Seller, (v) pending arbitration proceeding arising out of or under any collective bargaining agreement or (vi) attempt by any union to represent employees of such Seller as a collective bargaining agent.

6.4 Insurance.

Schedule D sets forth a list and brief description of all policies or binders of fire, liability, product liability, worker’s compensation, vehicular and other insurance held by or on behalf of each Seller. Such policies and binders are valid and enforceable in accordance with their terms, are in full force and effect, and insure against risks and liabilities of the kinds and in amounts customarily insured against by persons of established reputation engaged in the same or a similar business similarly situated. All premiums on all such policies have been paid to date and each of the Sellers has complied with all conditions of such policies and has received no notice of any failure to comply with the terms of such policies. In addition, Schedule D sets forth in respect of such policies and binders (i) the type and amount of coverage provided thereby, (ii) their respective effective dates, and (iii) claims made or occurrences reported during the past two (2) years with respect to products liability and workers compensation.

6.5. Correctness of Representations.

No representation or warranty of any Seller or Yi in this Agreement or any other information furnished by any Seller or Yi pursuant to this Agreement contains any untrue statement of

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material fact or fails to state any fact necessary in order to make the statements not misleading in any material respect. All statements, representations, and other information provided by each Seller and Yi to Buyer shall be true and correct on and as of the Closing Date as though made on that date.

The parties agree that no representation, other then what is expressly set forth herein, have been relied upon and the representations expressed herein are the sole and exclusive inducement to enter into this Agreement.

ARTICLE

7. REPRESENTATIONS AND WARRANTIES OF BUYER

7.1. Buyer’s Representations and Warranties.

Buyer makes the following representations and warranties to Sellers, each of which is true and correct as of the date of this Agreement and shall be true and correct as of the Closing Date:

(a) Buyer is a California Corporation duly organized, validly existing, and in good standing under the laws of the state of its organization, and is qualified to transact business in the State of California.

(b) Buyer has full legal power and authority to enter into and perform this Agreement, and this Agreement constitutes the valid and binding obligation of Buyer, enforceable in accordance with its terms.

(c) Provided that Buyer has obtained the consents referred to in Section 10.1 hereof, the execution and delivery of this Agreement does not conflict with, violate, or constitute a default under the terms, conditions, or provisions of any agreement or instrument to which Buyer is a party, or any law, judgment, or order of which Buyer is aware, and will not result in the creation of any lien, security interest, or encumbrance on any of the Assets.

(d) There is no action, proceeding, or claim pending, or, to Buyer’s knowledge, threatened, against Buyer that would affect Buyer’s ability to consummate the transactions contemplated by this Agreement.

(e) No consent, approval, or authorization of or declaration, filing, or registration with any governmental or regulatory authority is required in connection with the execution, delivery, and performance by Buyer of this Agreement or the consummation of the transactions contemplated by the Agreement,

7.2. Correctness of Representations.

No representation or warranty of Buyer in this Agreement or any other information furnished by Buyer pursuant to this Agreement contains any untrue statement of material fact or fails to state any fact necessary in order to make the statements not misleading in any material respect. All statements, representations, exhibits, and other information provided by Buyer to Sellers shall be true and correct on and as of the Closing Date as though made on that date.

ARTICLE

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8. SELLER’S PRE-CLOSING OBLIGATIONS

8.1. Maintenance of Property Pending Closing.

At all times prior to the Closing Date, Seller shalls continue to maintain the Assets and shall conduct their operation of the Business in the same manner as they have been maintained and operated by Seller prior to the execution of this Agreement.

8.2. Access and Information. Each and Yi shall promptly provide Buyer with all information concerning the Business and the Assets that Buyer may reasonably request, and Buyer and its accountants and other representatives shall have access during normal business hours to all of the Assets and to the books and records of the Business.

8.3. Consents. On or before the Closing Date, Sellers, at their expense, shall use their best efforts to obtain all necessary consents required to assign Sellers’ interest in any of the Assets to Buyer as contemplated by this Agreement. In the event Sellers are unable to obtain any such consent on or before the Closing Date, Buyer may terminate this Agreement as provided in Article 13.

8.4. Discharge of Liens. All liens, claims, charges, security interests, pledges, assignments, or encumbrances relating to the Assets that are not Permitted Liens shall be satisfied, terminated, and discharged by Sellers on or prior to the Closing Date, and evidence reasonably satisfactory to Buyer and its counsel of the satisfaction, termination, and discharge shall be delivered to Buyer at or prior to the Closing.

8.5. Seller Employees. Each Seller shall be responsible without exception for all compensation, taxes, insurance, and other benefits and amounts relating to its employees and shall indemnify and hold Buyer harmless from any claims made against Buyer with respect to such obligations. Buyer shall not assume or in any way become responsible or liable for obligations, commitments, or liabilities, including, without limitation, any compensation, taxes, insurance or other benefits and amounts payable by any Seller on account of any of its employees.

ARTICLE 9. MUTUAL COVENANTS 9.1. Further Assurances Prior to Closing.

Each Seller, Yiand Buyer shall, prior to Closing, execute any and all documents and perform any and all acts reasonably necessary, incidental, or appropriate to effect the transactions contemplated by this Agreement.

9.2. Notification of Changed Circumstances. At any time after the Execution Date and prior to the Closing, if either party becomes aware of any fact or circumstance that would materially change a representation or warranty made under this Agreement, the party with knowledge of those facts shall notify the other parties in writing as soon as possible after the discovery of the changed circumstances.

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9.3. Compliance With Bulk Sales Law.

Buyer shall give notice if necessary, in compliance with Division 6 of the California Uniform Commercial Code, of the sale contemplated by this Agreement. Seller shall furnish Buyer with all information necessary for Buyer to prepare the notice, including all names and business addresses used by Seller within the past 3 years and the location of all of the assets to be transferred to Buyer under this Agreement.

9.4. Broker’s Fees.

Each party represents and warrants that no broker, finder, or any other person or entity has any claim for any brokerage commissions or fees in connection with any of the transactions contemplated by this Agreement. Sellers and Yi shall indemnify the other against any claim or loss suffered as a result of any claim for brokerage commissions or fees payable, or claimed to be payable, on the basis of any actions in connection with this Agreement.

ARTICLE

10. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

10.1. Buyer’s Conditions.

The obligation of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions:

(a) The representations and warranties of Sellers and Yi set forth in Article 6 shall be true and correct as of the Closing Date.

(b) Each Seller shall have performed and complied with all of the agreements, covenants, and conditions required of each Seller by this Agreement on or before the Closing Date.

(c) No action, suit, or proceeding before any court or any governmental body or authority that would in any way affect the Assets or the ability of the parties to consummate the transactions contemplated by this Agreement shall have been instituted or threatened on or before the Closing Date.

(d) The Assets shall be in substantially the same condition on the Closing Date as on the Execution Date, and there shall be no loss or damage to the property prior to the Closing.

(e) Each Seller shall have obtained all necessary lien releases, agreements and consents of any parties required to consummate the transactions contemplated by this Agreement, including, without limitation, consent from the landlord related to the Real Property Lease.

(f) Buyer shall have received a corporation tax clearance certificate from the State Board of Equalization (with respect to each Seller’s sales and use tax liabilities) and the Employment Development Department (with respect to each Seller’s employment tax obligations), as of a date not more than 5 days prior to the Closing Date for each Seller.

(g) Buyer shall have received a Certificate of Release from the California Employment Development Department stating that, as of a date not more than 5 days prior to the Closing Date, no contributions, interest, or penalties are due from Seller.

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(h) Buyer shall have received consents to Agreement from its lenders as required by Buyer’s credit agreements with the Lenders

10.2. Failure to Satisfy Buyer’s Conditions.

Any of Buyer’s conditions precedent may be waived in whole or in part by Buyer in writing at any time on or before the Closing Date. In the event all Buyer’s conditions precedent have not been waived by Buyer or satisfied in full on or before the Closing Date, Buyer may elect to terminate this Agreement and receive a refund of the Purchase Price.

ARTICLE

11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

11.1. Sellers’ Conditions.

The obligation of Sellers to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions:

(a) Seller shall have received the amount of the Purchase Price in cash or immediately available funds at Closing.

(b) The representations and warranties of Buyer set forth in Article 7 shall be true and correct as of the Closing Date.

(c) Buyer shall have performed and complied with all of the agreements, covenants, and conditions required of Buyer by this Agreement on or before the Closing Date.

11.2. Failure to Satisfy Sellers’ Conditions.

Any of Sellers’ conditions precedent may be waived in whole or in part by either Seller in writing at any time on or before the Closing Date. In the event all Sellers’ conditions precedent have not been waived by either Seller or satisfied in full on or before the Closing Date, Sellers may elect to terminate this Agreement as provided in Article 13.

ARTICLE

12. POST-CLOSING OBLIGATIONS

12.1. Additional Assurances.

Each party agrees to do all acts and things and to make, execute, and deliver such written instruments as shall be reasonably necessary to carry out the terms and provisions of this Agreement. This covenant of further assurances shall survive the Closing.

ARTICLE

13. TERMINATION

13.1. Termination.

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This Agreement may be terminated as follows:

(a) By the mutual consent of Buyer and Sellers at any time prior to the Closing.

(b) By Buyer at any time prior to the Closing as expressly provided in this Agreement, or if any condition precedent to Buyer’s obligations set forth in Article 10 has not been satisfied in full or previously waived by Buyer in writing at or prior to the Closing.

(c) By Sellers at any time prior to the Closing as expressly provided in this Agreement, or if any condition precedent to Seller’s obligations set forth in Article 11 has not been satisfied in full or previously waived by Seller in writing at or prior to the Closing.

(d) By a non-breaching party if the Closing has not occurred on or before December 31,2007 and the delay in closing was not the result of any act or omission of the party electing to terminate under this section.

13.2. Effect of Termination.

In the event of the termination of this Agreement pursuant to the provisions of this Article 13, this Agreement shall become void and have no effect, without any liability on the part of any of the parties.

13.3. Remedies Cumulative.

The remedies set forth in this Agreement are cumulative and not exclusive of any other legal or equitable remedy otherwise available to any party.

ARTICLE

14. INDEMNIFICATION

14.1. Sellers’ Indemnification.

In addition to any other agreement on the part of either Seller or Yi to indemnify Buyer set forth in this Agreement, Seller and Yi jointly and severally shall defend, indemnify and hold Buyer harmless from and against any and all loss, cost, damage, claim, liability, or expense, including without limitation reasonable attorney fees and costs, in any way arising from or related to (a) Sellers’ ownership or use of the Assets, or either Sellers operation of the Business, prior to the Closing Date, including, but not limited to, any claim of right which D-Fabrik Los Angeles Inc., may claim in and to the Assets, (b) the failure or falsity of any representation or warranty of either Seller or Yi contained in this Agreement, or (c) the failure by either Seller or Yi to observe or perform any other covenant or agreement to be observed or performed by such Seller or Yi under this Agreement.

14.2. Survival of Indemnities.

The agreements to indemnify set forth in this Article 14 shall survive the Closing.

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ARTICLE

15. GENERAL PROVISIONS

15.1. Assignment.

The respective rights and obligations of the parties to this Agreement may not be assigned by any party without the prior written consent of the other parties, which consent may not be unreasonably withheld or delayed.

15.2. Successors and Assigns.

The terms and provisions of this Agreement shall be binding on and inure to the benefit of the successors and assigns of the parties.

15.3. Entire Agreement.

This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior agreements, oral and written, between the parties to this Agreement with respect to the subject matter of this Agreement.

15.4. Modification and Waiver.

This Agreement may not be amended, modified, or supplemented except by written agreement in signed by the party against which the enforcement of the amendment, modification, or supplement is sought. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision. No waiver shall be binding unless executed in writing by the party making the waiver.

15.5. Attorney’s Fees.

If any legal action or other proceeding is brought to enforce the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable attorney fees and other costs incurred in the action or proceeding, in addition to any other relief to which the prevailing party may be entitled.

15.6. Fees and Expenses.

Except as otherwise specifically provided in this Agreement, Sellers and Buyer shall pay their own fees and expenses in connection with the negotiation and consummation of the transactions contemplated by this Agreement.

15.7. Notices.

All notices, requests, demands, and other communications required by this Agreement shall be in writing and shall be (a) delivered in person or by courier, (b) mailed by first class registered or certified mail, or (c) delivered by facsimile transmission, as follows, or to such other address as a party may designate to the other in writing:

(i) If to either Seller or Yi:

20 THE VILLAGE UNIT 409, REDONDO BEACH, CA, 90277

(ii) If to Buyer: American Apparel, Inc., c/o Marty Bailey, 747 Warehouse Street, Los Angeles, CA 90021

14 of 19

If delivered personally or by courier, the date on which the notice, request, instruction, or document is delivered shall be the date on which the delivery is made, and if delivered by facsimile transmission or mail as aforesaid, the date on which the notice, request, instruction, or document is received shall be the date of delivery.

15.8. Headings.

All section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement, and shall not affect in any way the meaning or interpretation of this Agreement.

15.9. Counterparts.

This Agreement may be executed in two (2) or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one counterpart has been signed by each party and delivered to the other party hereto.

15.10. Time of Essence.

Time shall be of the essence with respect to the obligations of the parties to this Agreement.

15.11. Governing Law.

This Agreement shall be governed by and construed under the laws of the State of California without reference to its conflicts of laws provisions. The venue of any dispute, claim or action regarding this agreement shall be the Los Angeles Superior Court, Central District.

15.12. Severability.

In the event any provision of this Agreement is deemed to be invalid, illegal, or unenforceable, all other provisions of the Agreement that are not affected by the invalidity, illegality, or unenforceability shall remain in full force and effect.

15.13 All parties have been represented by their own legal counsel.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

PNS APPAREL, INC.

ALLEN S.Y, PRESIDENT

[Name and title of representative for PNS Apparel, Inc.]

BLUE MAN GROUP, INC.

ALLEN S.Y, PRESIDENT

[Name and title of representative for Blue Man Group, Inc.]

15 of 19

ALLEN S. YI

ALLEN S.Y, PRESIDENT

AMERICAN APPAREL INC.,

ALLEN S.Y, PRESIDENT

[Name and title of representative for buyer]

LIST OF SCHEDULES AND EXHIBITS

Schedule A - List of Personal Property

Schedule B - List of Real Property Leases

Schedule C - List of Environmental Audits and Assessments

Schedule D - List of Insurance Policies

Schedule E - List of Permits

Exhibit 1 - Bill of Sale

Exhibit 2 - Assignment of Real Property Leases

Exhibit 3 - Miscellaneous Due Diligence

16 of 19

EXHIBIT 1

BILL OF SALE

17 of 19

BILL OF SALE

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, and pursuant to that certain Asset Purchase

Agreement dated as of 12/1/07 (the “Asset Purchase Agreement”), by and

among P.N.S. Apparel, Inc., a California corporation (“PNS”) and Blue Man Group, Inc., a California corporation (“BMG”) (“collectively the “Sellers” and each, a “Seller”) and American Apparel, Inc., a California corporation (“Buyer”), the Sellers, and each of them, does hereby grant, bargain, transfer, sell, assign, convey and deliver to Buyer all right, title and interest in and to the Assets as such terms are defined in the Asset Purchase Agreement.

Each Seller, for itself and its successors and assigns, hereby jointly and severally represents and warrants that, except as otherwise set forth in the Asset Purchase Agreement, the Sellers are the owner absolutely of the Assets, that the Assets are free and clear of and from all encumbrances, that the Sellers have good right to sell and assign the Assets to Buyer as aforesaid, and will warrant and defend the same to Buyer against the lawful claims and demands of all persons in accordance with and subject to the limitations of the Asset Purchase Agreement.

Each Seller hereby covenants and agrees that, at any time and from time to time forthwith upon the written request of Buyer, such Seller will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, each and all of such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be required by Buyer in order to assign, transfer, set over, convey, assure and confirm unto and vest in Buyer, its successors and assigns, title to the Assets sold, conveyed, transferred and delivered by this Bill of Sale.

[This space intentionally left blank. Signature page follows.]

18 of 19

6IN WITNESS WHEREOF, the Sellers have executed this Bill of Sale as of [Date].

P.N.S. Apparel, Inc.,

a California corporation

By

Its PRESIDENT

BLUE MAN GROUP INC.

a California corporation

By.

Its PRESIDENT

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Schedule A

Fixed Assets

Value USD

Machinery and Equipment

Digital Scale 1059.22

Compresor Cylender 2721.40

Sample Washer 6710.79

Sample Washer 6710.79

Sample Washer 6710.79

Sample Washer 6710.79

Sample Washer 6710.78

11 8 Washers Transferon ( Two in reapir Status ) 571526.28

8 - 9 Washers Washex 122500.00

10 Washer Washex 76775.00

Washer Washex (Sold) 0.00

5 Washer(Sample) FTTurkey 35832.09

Washer(Sample) Uni-Wash 2706.25

3-7 Dryer Transferon 261264.29

Stoner Transferon 41806.72

Conveyer - Dryer 40647.73

Spray Booths FTItaly 42581.79

Curring Oven 46807.59

Boiler Dixon 19345.50

Boiler Hurst 19345.52

1 Compressor Benze/Atlas 57014.12

Forklift Electrical 0.00

Manaquins 131447.47

Potasium Manaquies 804.90

Welding Equipment 12809.09

Threading Machine 2165.00

Water Sediment Tank 12000.00

75LB Dryer Rebuilt 1353.13

Water Tanks 5412.50

Sample Washer INTERSAC 9550.00

MDH COMPANY INC. -BOILER 80176.00

2 Benz Compressed Air Systems , -Sales tax 3236.11

Oven Hanger 134.22

10 CARTS 1180.00

200 BUGGIES 9480.72

- Machinery and Equipment 1082.50

POTASSIUM CABINET 6393.61

Life Electric - TRANSFORMER 480VOLTS - 200 AMPS 4250.00

20 MANNAQUINS 34630.73

Les Pringle Service, Inc. - Machinery and Equipment 1623.75

ALPHA SUPPLY CO.BACKHOE 15411.00

VACUUM FOR PRESS 2010.94

EXTRACTOR 20LB FOR SAMPLING DEPT 1500.00

DAG MACHINE (PLASTIC STAPLE) 1600.00

UPGRADING MANIQUES 13649.69

Trenching And Piping repair 62587.33

BELLY WASHER MACHINE 50 LBS 7255.00

SAMPLE DRIER PASSAT 50 LBS 5330.00

STEAM IRON 690.00

STEAM IRON 690.00

10 WASHER MACHINE ( LAUNDRY CONTAINER) $340 EACH ONE 3400.00

10 HAND WHEELBARROW (LAUNDRY CONTAINER 850.00

8 PLASTIC LAUNDRY CONTAINER (BLUE) 550.00

LUMINATION CABINET GRETAGMACBETH 700.00

6 LAUNDRY CONTAINER 990.00

17 NAOMOTO ALL STEAM IRON 1870.00

LIFT CAR 230.00

2 INSPECTION TABLES 215.00

MIXER SOLUTIONS 190.00

SMALL WEIGHING SCALE 260.00

LARGE WORKSTATION (FURNITURE) 170.00

SMALL WORKSTATION (FURNITURE) 170.00

WEIGHNING SCALE 890.00

LIFT CAR 130.00

5 PORTABLE STACKING RACK 425.00

TRANSPOR ROLLS 450.00

PARKER 3.5 HP BOILER 1500.00

10HP COMPRESSOR 1500.00

2 SPRAY SAMPLE BOOTH WITH EXTRACTOR 3000.00

7 METAL PARTICLE ADJUSTABLE SHELVES 420.00

Replacement motor 2209.65

Stainless piping and calibration work for machines 103600.00

SAND-TECH, INC - MODEL F6 800 RPM POWER 791.69

SAND-TECH, INC - MODEL F6 800 RPM POWER 791.68

Industrial Oven 58906.18

Machine Dennison type 1894.38

Strapping industrial machine 350.00

Compresor Model SS-EP50SE SERIAL No. G457J96165 15000.00

Motor & Inverter 18000.00

Wash Machinery M & A Sample machines Dye 54125.00

Labor(may-july) 0.00

Parts 14338.19

Parts 2656.13

Parts 1746.29

Parts 325.68

Dye Lab equipment 27500.72

finishing presses 7 8400.00

TOTAL 2132486.72

Office equipment TR Trading Company - Conference table and Wardrob Cabinet 476.30

4 chairs/4 cabinets 1733.82

12 chairs / 1 cabinet 1204.65

2 cow hiderues 538.00 Rubens glass 550.00

1 sofa 2 chairs 2432.38 TR Trading Com

377.79 2 clock / 5 chairs 317.23

COST PLUS - Office Furniture

4510.02

2 Hon - tables 335.55 6 chairs 605.68

PETTY CASH OCT 430.98 Telephone equipment 10825.00 BAY ALARM 261.27

BAY ALARM 1056.27 BAY ALARM

545.66 BAY ALARM

545.66 Standard Tel - TRUNK CARD-6CKT

2074.87 CHAIRS (DEVELOPMENT) JUNKO

235.99 SHELFS (DEVELOPMENT)JUNKO

336.60 DESK (J. DICKINSON)

121.23 FILING CABINET (J. DICKINSON)

103.91 BOOKCASE (J. DICKINSON) 69.27 TABLE FOR CONF. ROOM (C PANCARDO)

427.59

CABINETS FOR QC (C PANCARDO)

409.19

CENTRAL TELEPHONE PANASONIC -FTMEX

350.00

30874.91

Computor Equipment

Comput0r System

NEXCOR

10488.95

1509.01

Dell Lap Top Comput0r

2053.50

Dell Desk Top Accounting

2162.25

Dell Desk Top Production

2162.26

NEXCOR

4078.86

LAP TOP TOSHIBA

1558.78

NEXCOR

1812.11

NEXCOR

1478.97

DITACS - SURVEILLANCE SYSTEM IFA CAMERAS 18

19352.28

NEXCORE

1864.34

DITACS - COMPUTER SYSTEM WIRELESS ACCESS FOR THE GUAR

COMPUTER & SOFTWARE (J. Dickinson)

1626.36

1993.95

Link card (J. Dickinson)

SERVER USB

53.86

100.00

52295.48

Leasehold imporovements

July (2005)

8129.49

January to July

August

September

0.00

166509.95

0.00

Octuber

0.00

November

0.00

December

0.00

February

852.50

June

2990.00

August

September

1875.04

697.43

Octuber

7556.08

March (2006)

140.00

April (2006)

415.70

May (2006)

646.67

September (2006)

59.46

Ocober

Novemeber

37520.26

16052.43

December

4200.53

January

February

March

April May 6800.25 11000.57 19250.00 9752.00 26579.26 June

July

August

Septtember 2007

29075.27

27052.91

24659.72

12267.45

414082.97

FIXED ASSESTS TOTAL

2629740.08

Schedule B

List of Real Property Leases

1) 2654 Sequioa Dr, South Gate, CA 90280

Schedule C

List of Environmental Audits and Assessments

1) Phase One Report – Prepared by Project JMK

2) Waste Water Control Audit

Schedule D List of Insurance Policies

1) Commercial General Liability (includes building/lease insurance policy

2) Workers Compensation and Employers’ Liability

Schedule E List of Permits

1) Certificate of Occupancy

2) Public Health Permit (includes Garment Registration Permit)

3) South Gate Business License

PNS APPAREL, INC.

ALLEN S.Yi PRESIDENT

[Name and title of representative for PNS Apparel, Inc.]

BLUE MAN GROUP, INC.

ALLEN S.Yi PRESIDENT

[Name and title of representative for Blue Man Group, Inc.

ALLEN S.Yi

AMERICAN APPAREL INC.,

[Name and title of representative for buyer]

2 of 2

EX-10.25

Exhibit 10.25

Exhibit 10.25

PROMISSORY NOTE

$3,804,300

Maturity Date: December 10, 2012

FOR VALUE RECEIVED, American Apparel Canada Wholesale Inc., a corporation formed under the Canada Business Corporations Act (the “Maker”), hereby promises to pay to the order of Dov Charney (the “Payee”), his successors and assigns, on or before the Maturity Date (as hereinafter defined), the principal sum of THREE MILLION EIGHT HUNDRED FOUR THOUSAND AND THREE HUNDRED DOLLARS ($3,804,300), in lawful money of the United States of America, together with accrued and unpaid interest hereon from the date hereof plus all other unpaid amounts to be paid or reimbursed by the Maker pursuant to this Note, in accordance with the terms hereinafter set forth.

1. Interest Rate. The outstanding principal amount of this Note, together with all accrued and unpaid interest hereon, shall bear interest at 6.00% per annum (the “Interest Rate”). Interest shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31, 2007.

Overdue amounts in respect of this Note shall bear interest at a rate per annum equal to the Interest Rate [+2.00%]. In no event, however, shall any interest exceed the legal maximum rate of interest permissible by law. Interest on this Note will accrue from December 11, 2007. Except as otherwise provided herein, interest shall be calculated on the basis of a 360-day year of twelve 30-day months.

2. Maturity Date. The principal amount of this Note (or, if less, the unpaid principal balance of such amount) together with all accrued and unpaid interest hereon plus all other unpaid amounts to be paid or reimbursed by the Maker hereunder shall be due and payable by the Maker in full on December 10, 2012 (the “Maturity Date”).

3. Application of Payments; Overdue Payments. Each payment on this Note shall be credited first to the payment of all fees, costs and expenses for which the Payee is entitled to reimbursement pursuant to Section 10 hereof, then to accrued and unpaid interest, and then to the principal amount. All payments of the unpaid principal balance and interest will be made without withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature, unless the withholding of such taxes or duties is required by law.

4. Manner of Payment. All payments hereunder shall be made in immediately available funds to the Payee or to such other payee or address as the Payee may designate from time to time. If any payment of principal or interest on this Note is due on a day which is not a Business Day, as defined below, such payment shall be due on the next succeeding Business Day, and such extension of time shall not be taken into account in calculating the amount of interest payable under this Note. “ Business Day” means any day, other 1

than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in Montreal are authorized or required by law, regulation or executive order to close.

5. Prepayment. The Maker shall have the right to prepay the principal amount hereof in full or in part, together with all accrued interest on the amount prepaid to the date of such prepayment at any time and from time to time (the “Prepayment Right”). Any prepayment amount received by the Payee in connection with the Prepayment Right shall be applied first to the payment of all fees, costs and expenses for which the Payee is entitled to reimbursement pursuant to Section 10 hereof, then to accrued but unpaid interest on this Note through the date of such prepayment, then to principal. Any such prepayment shall be payable without any premium or penalty of any kind.

6. Covenant. The Maker agrees that, until this Note shall have been repaid in full, the Maker shall pay the principal amount of and interest on this Note on the dates and in the manner provided herein.

7. Further Assurances. At the Maker’s reasonable expense, the Maker shall do all acts, furnish to the Payee all agreements, consents, instruments or other documents, and do or cause to be done all such other things as the Payee may reasonably request from time to time in order to give full effect to the purpose and provisions of this Note. If the Maker fails to perform any act required by this Note, the Payee may perform, or cause performance of, such act, and the expenses of the Payee therewith shall be reimbursed upon demand by the Maker in accordance with Section 10 hereof.

8. Events of Default. Each of the following events shall constitute an “Event of Default” hereunder (whether it shall be voluntary or involuntary or occur or be effected by operation of law or otherwise):

(a) a failure on the part of the Maker to make any payment of principal when due under this Note;

(b) a failure on the part of the Maker to make any payment of interest when

due under this Note and such failure shall continue for 30 days;

(c) the Maker shall commence (or take any action for the purpose of commencing) any proceeding under any bankruptcy, insolvency, readjustment of debt, moratorium or similar law or statute or make (or take any action for the purpose of making) a general assignment for the benefit of its creditors or shall admit in writing its inability to pay its debts generally as they become due;

(d) a proceeding shall be commenced against the Maker under any bankruptcy, insolvency, readjustment of debt, moratorium or similar law or statute and relief is ordered against it, or the proceeding is controverted but is not dismissed within thirty (30) days after the commencement thereof;

(e) the Maker consents to or suffers the appointment of a receiver, trustee or custodian to any substantial part of its assets that is not vacated within thirty (30) days after such appointment; or 2

(f) any event occurs in relation to the Maker which under the law of any relevant jurisdiction has an analogous or equivalent effect to any of the events mentioned in clause (c), (d) or (e) of this Section 8.

The Maker shall notify the Payee promptly (but in no event later than three (3) Business Days following the occurrence of any Event of Default) in writing of the occurrence of such Event of Default.

9. Remedies.

(a) If an Event of Default shall occur and be continuing, then the Payee may, by notice in writing to the Maker, (i) declare the principal of and accrued interest on this Note to be, and the same shall upon such notice forthwith become, immediately due and payable and (ii) in addition to all rights and remedies available to it at law, exercise any or all of its rights and remedies under this Note; provided, however, that when any Event of Default described in clause (c), (d), (e) or (f) of Section 8 has occurred and is continuing, then all amounts in respect of principal and interest under this Note shall immediately become due and payable, without presentment, demand of payment, protest, notice of intent to accelerate, notice of acceleration or notice of any kind, all of which are hereby expressly waived.

(b) No failure or delay by the Payee in exercising any remedy, right, power or privilege under this Note shall operate as a waiver of such remedy, right, power or privilege, nor shall any single or partial exercise of such remedy, right, power or privilege preclude any other or further exercise of such remedy, right, power or privilege. No remedy, right, power or privilege conferred upon or reserved to the Payee by this Note is intended to be exclusive of any other remedy, right, power or privilege provided or permitted by law, but each shall be cumulative and in addition to every other remedy, right, power or privilege so provided or permitted and each may be exercised concurrently or independently from time to time and as often as may be deemed expedient by the Payee.

10. Expenses. From time to time, the Maker shall reimburse the Payee upon demand for all reasonable fees, costs and expenses (including the fees, costs and expenses of counsel and court costs) incurred after the date of this Note in connection with (a) the collection of any outstanding principal and interest accrued hereunder (whether or not suit is filed to enforce the terms hereof) and (b) the enforcement of any rights or remedies provided for pursuant to this Note. The provisions of this Section 10 shall survive the termination of this Note.

11. Waivers. The Maker hereby waives diligence, presentment, demand of payment, protest, notice of intent to accelerate, notice of acceleration and all other notices and demands whatsoever with respect to such liabilities and obligations or to any action under this Note, except as specifically provided for in this Note. The Maker further agrees that it shall remain liable for all amounts due hereunder notwithstanding any extension of time or any change in the terms of payment of this Note granted by the Payee or any delay or failure by the Payee to exercise any rights hereunder. 3

12. Governing Law; Severability. This Note shall be deemed to have been made in the Province of Quebec and shall be governed and construed in accordance with the laws of the Province of Quebec and the federal laws of Canada. All claims and proceedings arising from or related to this Note, shall be adjudicated solely by a court or by a tribunal of competent jurisdiction in the Province of Quebec, in the judicial district of Montreal and the parties hereby attorn to the jurisdiction thereof. Whenever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision hereof is in conflict with any applicable law or is otherwise unenforceable for any reason whatsoever, then such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

13. Amendment; Waiver. No amendment to this Note shall be effective unless in writing signed by the Maker and the Payee. No waiver of any provision of this Note and no consent to any departure by the Maker hereunder shall be effective unless in writing signed by the Payee.

14. Registration. The Maker will maintain, at its principle place of business, a register of the Payee(s) of this Note (the “ Register”), and will update the Register to reflect any permitted assignments or transfers subsequent to the date hereof. The Maker will make payments of principal and interest as specified hereunder to the Payee(s) named as such in the Register. The Payee shall notify the Maker in writing prior to any assignment, transfer or other disposition of this Note (or any portion hereof) or such Payee’s rights or interests hereunder, with such written notice to be delivered to the Maker not later than one (1) Business Day prior to any such assignment, transfer or disposition and which notice shall specify the principal amount hereunder that is the subject of such assignment, transfer or disposition. Notwithstanding anything to the contrary herein, (i) the registered owner of this Note (or any portion hereof) as indicated on the Register shall be the party with the exclusive right to receive payment of any principal amount and accrued and unpaid interest on this Note and (ii) payments required to be made hereunder shall not be subject to counter-claim or offset of any nature whatsoever.

15. Loss, Mutilation, Etc. Upon notice from the Payee to the Maker of the loss, theft, destruction or mutilation of this Note, and upon receipt of an indemnity reasonably satisfactory to the Maker from the Payee or, in the case of mutilation hereof, upon surrender of the mutilated Note, the Maker will make and deliver a new note of like tenor in lieu of this Note.

16. Notices. All notices, consents, waivers or other communications required or permitted hereunder to be delivered to the Maker shall be in writing and shall be mailed by registered or certified mail, return receipt requested, postage prepaid or otherwise delivered by hand, by messenger or an internationally recognized courier (charges prepaid) or facsimile transmission, addressed to the Maker at 350 rue de Louvain West, Montreal, Quebec, H2N 2E8. Each such notice, consent, waiver or other communication shall for all purposes hereunder be treated as effective or as having been given when delivered, if delivered by hand or by messenger (or internationally recognized courier), 24 hours after confirmed receipt if sent by facsimile transmission or at the earlier of its receipt or on the second (2nd) Business Day after mailing, if mailed, as aforesaid. 4

17. The parties hereto have required that this Note be drawn in the English language only. Les parties ont exigé que le présent billet à ordre soit rédigé en langue anglaise seulement.

IN WITNESS WHEREOF, this Note has been executed and delivered by the

undersigned on the 11th day of December, 2007.

AMERICAN APPAREL CANADA WHOLESALE INC.

By: /s/ Lorne Gold

Name: Lorne Gold

Title: Chief Financial Officer 5

EX-10.26

Exhibit 10.26

PROMISSORY NOTE

CAD $2,200,000 Maturity Date: December 10, 2012

FOR VALUE RECEIVED, American Apparel Canada Wholesale Inc., a corporation formed under the Canada Business Corporations Act (the “Maker”), hereby promises to pay to the order of Dov Charney (the “Payee”), his successors and assigns, on or before the Maturity Date (as hereinafter defined), the principal sum of TWO MILLION TWO HUNDRED THOUSAND DOLLARS ($2,200,000), in lawful money of Canada, together with accrued and unpaid interest hereon from the date hereof plus all other unpaid amounts to be paid or reimbursed by the Maker pursuant to this Note, in accordance with the terms hereinafter set forth.

1. Interest Rate. The outstanding principal amount of this Note, together with all accrued and unpaid interest hereon, shall bear interest at 6.00% per annum (the “Interest Rate”). Interest shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on December 31,2007.

Overdue amounts in respect of this Note shall bear interest at a rate per annum equal to the Interest Rate [+2.00%]. In no event, however, shall any interest exceed the legal maximum rate of interest permissible by law. Interest on this Note will accrue from December 11, 2007. Except as otherwise provided herein, interest shall be calculated on the basis of a 360-day year of twelve 30-day months.

2. Maturity Date. The principal amount of this Note (or, if less, the unpaid principal balance of such amount) together with all accrued and unpaid interest hereon plus all other unpaid amounts to be paid or reimbursed by the Maker hereunder shall be due and payable by the Maker in full on December 10, 2012 (the “Maturity Date”).

3. Application of Payments; Overdue Payments. Each payment on this Note shall be credited first to the payment of all fees, costs and expenses for which the Payee is entitled to reimbursement pursuant to Section 10 hereof, then to accrued and unpaid interest, and then to the principal amount. All payments of the unpaid principal balance and interest will be made without withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature, unless the withholding of such taxes or duties is required by law.

4. Manner of Payment. All payments hereunder shall be made in immediately available funds to the Payee or to such other payee or address as the Payee may designate from time to time. If any payment of principal or interest on this Note is due on a day which is not a Business Day, as defined below, such payment shall be due on the next succeeding Business Day, and such extension of time shall not be taken into account in calculating the amount of interest payable under this Note. “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in Montreal are authorized or required by law, regulation or executive order to close.

1

5. Prepayment. The Maker shall have the right to prepay the principal amount hereof in full or in part, together with all accrued interest on the amount prepaid to the date of such prepayment at any time and from time to time (the “Prepayment Right”). Any prepayment amount received by the Payee in connection with the Prepayment Right shall be applied first to the payment of all fees, costs and expenses for which the Payee is entitled to reimbursement pursuant to Section 10 hereof, then to accrued but unpaid interest on this Note through the date of such prepayment, then to principal. Any such prepayment shall be payable without any premium or penalty of any kind.

6. Covenant. The Maker agrees that, until this Note shall have been repaid in full, the Maker shall pay the principal amount of and interest on this Note on the dates and in the manner provided herein.

7. Further Assurances. At the Maker’s reasonable expense, the Maker shall do all acts, furnish to the Payee all agreements, consents, instruments or other documents, and do or cause to be done all such other things as the Payee may reasonably request from time to time in order to give full effect to the purpose and provisions of this Note. If the Maker fails to perform any act required by this Note, the Payee may perform, or cause performance of, such act, and the expenses of the Payee therewith shall be reimbursed upon demand by the Maker in accordance with Section 10 hereof.

8. Events of Default. Each of the following events shall constitute an “Event of Default” hereunder (whether it shall be voluntary or involuntary or occur or be effected by operation of law or otherwise):

(a) a failure on the part of the Maker to make any payment of principal when due under this Note;

(b) a failure on the part of the Maker to make any payment of interest when due under this Note and such failure shall continue for 30 days;

(c) the Maker shall commence (or take any action for the purpose of commencing) any proceeding under any bankruptcy, insolvency, readjustment of debt, moratorium or similar law or statute or make (or take any action for the purpose of making) a general assignment for the benefit of its creditors or shall admit in writing its inability to pay its debts generally as they become due;

(d) a proceeding shall be commenced against the Maker under any bankruptcy, insolvency, readjustment of debt, moratorium or similar law or statute and relief is ordered against it, or the proceeding is controverted but is not dismissed within thirty (30) days after the commencement thereof;

(e) the Maker consents to or suffers the appointment of a receiver, trustee or custodian to any substantial part of its assets that is not vacated within thirty (30) days after such appointment; or

2

(f) any event occurs in relation to the Maker which under the law of any relevant jurisdiction has an analogous or equivalent effect to any of the events mentioned in clause (c), (d) or (e) of this Section 8.

The Maker shall notify the Payee promptly (but in no event later than three (3) Business Days following the occurrence of any Event of Default) in writing of the occurrence of such Event of Default.

9. Remedies.

(a) If an Event of Default shall occur and be continuing, then the Payee may, by notice in writing to the Maker, (i) declare the principal of and accrued interest on this Note to be, and the same shall upon such notice forthwith become, immediately due and payable and (ii) in addition to all rights and remedies available to it at law, exercise any or all of its rights and remedies under this Note; provided, however, that when any Event of Default described in clause (c), (d), (e) or (f) of Section 8 has occurred and is continuing, then all amounts in respect of principal and interest under this Note shall immediately become due and payable, without presentment, demand of payment, protest, notice of intent to accelerate, notice of acceleration or notice of any kind, all of which are hereby expressly waived.

(b) No failure or delay by the Payee in exercising any remedy, right, power or privilege under this Note shall operate as a waiver of such remedy, right, power or privilege, nor shall any single or partial exercise of such remedy, right, power or privilege preclude any other or further exercise of such remedy, right, power or privilege. No remedy, right, power or privilege conferred upon or reserved to the Payee by this Note is intended to be exclusive of any other remedy, right, power or privilege provided or permitted by law, but each shall be cumulative and in addition to every other remedy, right, power or privilege so provided or permitted and each may be exercised concurrently or independently from time to time and as often as may be deemed expedient by the Payee.

10. Expenses. From time to time, the Maker shall reimburse the Payee upon demand for all reasonable fees, costs and expenses (including the fees, costs and expenses of counsel and court costs) incurred after the date of this Note in connection with (a) the collection of any outstanding principal and interest accrued hereunder (whether or not suit is filed to enforce the terms hereof) and (b) the enforcement of any rights or remedies provided for pursuant to this Note. The provisions of this Section 10 shall survive the termination of this Note.

11. Waivers. The Maker hereby waives diligence, presentment, demand of payment, protest, notice of intent to accelerate, notice of acceleration and all other notices and demands whatsoever with respect to such liabilities and obligations or to any action under this Note, except as specifically provided for in this Note. The Maker further agrees that it shall remain liable for all amounts due hereunder notwithstanding any extension of time or any change in the terms of payment of this Note granted by the Payee or any delay or failure by the Payee to exercise any rights hereunder.

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12. Governing Law; Severability. This Note shall be deemed to have been made in the Province of Quebec and shall be governed and construed in accordance with the laws of the Province of Quebec and the federal laws of Canada. Al1 claims and proceedings arising from or related to this Note, shall be adjudicated solely by a court or by a tribunal of competent jurisdiction in the Province of Quebec, in the judicial district of Montreal and the parties hereby attorn to the jurisdiction thereof. Whenever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision hereof is in conflict with any applicable law or is otherwise unenforceable for any reason whatsoever, then such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

13. Amendment; Waiver. No amendment to this Note shall be effective unless in writing signed by the Maker and the Payee. No waiver of any provision of this Note and no consent to any departure by the Maker hereunder shall be effective unless in writing signed by the Payee.

14. Registration. The Maker will maintain, at its principle place of business, a register of the Payee(s) of this Note (the “Register”), and will update the Register to reflect any permitted assignments or transfers subsequent to the date hereof. The Maker will make payments of principal and interest as specified hereunder to the Payee(s) named as such in the Register. The Payee shall notify the Maker in writing prior to any assignment, transfer or other disposition of this Note (or any portion hereof) or such Payee’s rights or interests hereunder, with such written notice to be delivered to the Maker not later than one (1) Business Day prior to any such assignment, transfer or disposition and which notice shall specify the principal amount hereunder that is the subject of such assignment, transfer or disposition. Notwithstanding anything to the contrary herein, (i) the registered owner of this Note (or any portion hereof) as indicated on the Register shall be the party with the exclusive right to receive payment of any principal amount and accrued and unpaid interest on this Note and (ii) payments required to be made hereunder shall not be subject to counter-claim or offset of any nature whatsoever.

15. Loss, Mutilation, Etc. Upon notice from the Payee to the Maker of the loss, theft, destruction or mutilation of this Note, and upon receipt of an indemnity reasonably satisfactory to the Maker from the Payee or, in the case of mutilation hereof, upon surrender of the mutilated Note, the Maker will make and deliver a new note of like tenor in lieu of this Note.

16. Notices. All notices, consents, waivers or other communications required or permitted hereunder to be delivered to the Maker shall be in writing and shall be mailed by registered or certified mail, return receipt requested, postage prepaid or otherwise delivered by hand, by messenger or an internationally recognized courier (charges prepaid) or facsimile transmission, addressed to the Maker at 350 rue de Louvain West, Montreal, Quebec, H2N 2E8. Each such notice, consent, waiver or other communication shall for all purposes hereunder be treated as effective or as having been given when delivered, if delivered by hand or by messenger (or internationally recognized courier), 24 hours after confirmed receipt if sent by facsimile transmission or at the earlier of its receipt or on the second (2^nd) Business Day after mailing, if mailed, as aforesaid.

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17. The parties hereto have required that this Note be drawn in the English language only. Les parties ont exigé que le présent billet à ordre soit rédigé en langue anglaise seulement.

IN WITNESS WHEREOF, this Note has been executed and delivered by the undersigned on the 11 ^th day of December, 2007.

AMERICAN APPAREL CANADA WHOLESALE INC.
By:	/s/ Lorne Gold
Name:	Lorne Gold
Title:	Chief Financial Officer

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EX-21.1

Exhibit 21.1

List of Wholly-Owned Subsidiaries American Apparel

as of December 31, 2007

Investment In	Jurisdiction of Incorporation/ Organization	Owned By	Percentage of Ownership
American Apparel (USA), LLC	California, USA	American Apparel, Inc.	100	%
American Apparel LLC	California, USA	American Apparel (USA), LLC	100	%
American Apparel Canada Retail Inc.	Canada	American Apparel, Inc.	100	%
American Apparel Canada Wholesale Inc.	Canada	American Apparel, Inc.	100	%
American Apparel Retail, Inc.	California, USA	American Apparel (USA), LLC	100	%
KCL Knitting, LLC	California, USA	American Apparel (USA), LLC	100	%
American Apparel Dyeing and Finishing, Inc.	California, USA	American Apparel (USA), LLC	100	%
American Apparel Deutschland GmbH	Germany	American Apparel (USA), LLC	100	%
American Apparel (Carnaby) Limited	United Kingdom	American Apparel (USA), LLC	100	%
American Apparel (UK) Limited	United Kingdom	American Apparel (USA), LLC	100	%
American Apparel Australia Pty Ltd.	Australia	American Apparel Retail, Inc.	100	%
American Apparel New Zealand Limited	New Zealand	American Apparel Retail, Inc.	100	%
American Apparel Mexico, SdeRLde CV	Mexico	American Apparel Retail, Inc.	99.97	%
		American Apparel (USA), LLC	0.03	%
American Apparel Mexico Labor, SdeRLde CV	Mexico	American Apparel Retail, Inc.	99.97	%
		American Apparel (USA), LLC	0.03	%
American Apparel Retail (Israel), Ltd.	Israel	American Apparel Retail, Inc.	100	%
American Apparel Japan Yugen Kaisha.	Japan	American Apparel Retail, Inc.	100	%
American Apparel Korea Co., Ltd.	Korea	American Apparel Retail, Inc.	100	%
American Apparel Italia SRL	Italy	American Apparel Deutschland GmbH	100	%
American Apparel Spain, S.L.	Spain	American Apparel Deutschland GmbH	100	%
Fresh Air Freight, Inc.	California, USA	American Apparel (USA), LLC	100	%

All direct and indirect subsidiaries of the Company are wholly owned by their respective parent companies.

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 301 of the Sarbanes-Oxley Act of 2002

I, Dov Charney, certify that:

1. I have reviewed the annual report on Form 10-K of American Apparel, Inc., as amended by this Amendment No. 1 (together, “this report”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2008

/s/ Dov Charney

Dov Charney

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Section 301 of the Sarbanes-Oxley Act of 2002

I, Ken Cieply, certify that:

1. I have reviewed the annual report on Form 10-K of American Apparel, Inc., as amended by this Amendment No. 1 (together, “this report”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2008

/s/ Ken Cieply

Ken Cieply

Chief Financial Officer

(Principal Accounting Officer)

EX-32.1

Exhibit 32.1

Certification of the Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of American Apparel, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on March 17, 2008 and as amended by this Amendment No. 1 as filed with the Securities and Exchange Commission on the date hereof (together, the “Report”), I, Dov Charney, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date: March 28, 2008

/s/ Dov Charney

Dov Charney

President and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of the Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of American Apparel Inc. (the “Company”) on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on March 17, 2008 and as amended by this Amendment No. 1 as filed with the Securities and Exchange Commission on the date hereof (together, the “Report”), I, Ken Cieply, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date: March 28, 2008

/s/ Ken Cieply

Ken Cieply

Chief Financial Officer