Exhibit 10.2

Date: December 30, 2009

THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT (this “Seventh Amendment”) is made to the Credit Agreement (as amended, the “Credit Agreement”; capitalized terms used herein but not defined have the meanings given to them in the Credit Agreement, as amended by this Seventh Amendment) dated as of July 2, 2007 by and among:

(a) AMERICAN APPAREL (USA), LLC (f/k/a AAI Acquisition LLC (successor-by-merger to American Apparel, Inc.)), a limited liability company organized under the laws of the State of California, with its principal executive offices at 747 Warehouse Street, Los Angeles, California 90021, for itself and as agent (in such capacity, the “Lead Borrower”) for the other Borrowers now or hereafter party to the Credit Agreement; and

(b) the BORROWERS now or hereafter party to the Credit Agreement; and

(c) the FACILITY GUARANTORS now or hereafter party to the Credit Agreement; and

(d) BANK OF AMERICA, N.A. (successor by merger to LaSalle Business Credit, LLC, as agent for LaSalle Bank Midwest National Association, acting through its division, LaSalle Retail Finance), with offices at 100 Federal Street, 9th Floor, Boston, Massachusetts 02110, as administrative agent (in such capacity, the “Administrative Agent”) for its own benefit and the benefit of the other Credit Parties; and

(e) BANK OF AMERICA, N.A. (successor by merger to LaSalle Business Credit, LLC, as agent for LaSalle Bank Midwest National Association, acting through its division, LaSalle Retail Finance), with offices at 100 Federal Street, 9th Floor, Boston, Massachusetts 02110, as collateral agent (in such capacity, the “Collateral Agent”, and together with the Administrative Agent, individually an “Agent” and collectively, the “Agents”) for its own benefit and the benefit of the other Credit Parties; and

(f) WELLS FARGO RETAIL FINANCE, LLC, with offices at One Boston Place, 19^th Floor, Boston, Massachusetts 02108, as collateral monitoring agent (in such capacity, the “Collateral Monitoring Agent”) for its own benefit and the benefit of the other Credit Parties; and

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

(h) BANK OF AMERICA, N.A. (successor by merger to LaSalle Bank National Association), a national banking association with offices at 100 Federal Street, 9th Floor, Boston, Massachusetts 02110, as Issuing Bank;

in consideration of the mutual covenants herein contained and benefits to be derived herefrom, the parties hereto agree as follows:

Background:

A. Amendment. The parties hereto entered into that certain First Amendment to Credit Agreement on October 11, 2007, that certain Second Amendment and Waiver to Credit Agreement on November 26, 2007, that certain Third Amendment to Credit Agreement on December 12, 2007, that certain Fourth Amendment to Credit Agreement on June 20, 2008, that certain Fifth Amendment to Credit Agreement on December 19, 2008 and that certain Sixth Amendment to Credit Agreement on March 13, 2009. The parties hereto desire to further amend the Credit Agreement on the terms and conditions set forth herein.

B. Canadian Loan Refinancing. The Loan Parties have advised the Agents and the Lenders that the Canadian Subsidiaries intend to refinance and replace the Canadian Loan (as defined prior to giving effect to this Seventh Amendment) by terminating all commitments and repaying in full all obligations thereunder, and entering into the Canadian Loan Documents (as defined below). In connection with the entering into of the Canadian Loan Documents, the Canadian Subsidiaries will (i) repay in full all obligations under the Canadian Loan (as defined prior to giving effect to this Seventh Amendment), (ii) grant liens on substantially all of their assets in favor of the Canadian Lender (as defined below), and (iii) incur Indebtedness in favor of the Canadian Lender (as defined below) under the Canadian Loan Agreement (as defined below) (collectively, the “Canadian Refinancing Transaction”).

The Agents and the Required Lenders have agreed to consent to and approve the Canadian Refinancing Transaction and to the modifications to the Credit Agreement provided for herein, subject to the terms and conditions set forth herein.

Accordingly, it is hereby agreed, as follows:

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“ “Borrowing Base” means, at any time of calculation, an amount equal to:

(a) (i) the Raw Materials Appraisal Percentage of the Appraised Inventory Liquidation Value with respect to Eligible Inventory consisting of raw materials, and (ii) the Appraisal Percentage of the Appraised Inventory Liquidation Value with respect to all other Eligible Inventory;

plus

(b) with respect to any Eligible Letter of Credit, the Appraisal Percentage of the Appraised Value of the Inventory supported by such Eligible Letter of Credit, multiplied by the Cost of such Inventory when completed, net of Inventory Reserves;

plus

(c) the face amount of Eligible Wholesale Receivables (net of Receivables Reserves applicable thereto) multiplied by the Receivables Advance Rate;

minus

(d) the then amount of all Availability Reserves.

“ “Canadian Lender” means the lender(s) party to the Canadian Loan Agreement. As of the Seventh Amendment Effective Date, the Canadian Lender is Bank of Montreal.”

“ “Canadian Loan” means (i) the loans made by the Canadian Lender to the Canadian Subsidiaries pursuant to the Canadian Loan Agreement, and (ii) any refinancing thereof, which refinancing is on terms and conditions satisfactory to the Agents in their sole discretion.”

“(n) Liens in favor of the Canadian Lender securing the obligations of American Apparel Canada Wholesale Inc. and American Apparel Canada Retail Inc. under the Canadian Loan Documents;”

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“(m) Indebtedness due the Canadian Lender under the Canadian Loan Documents;”

“ “Canadian Loan Agreement” means that certain Credit Agreement dated as of December 30, 2009 by and among the Canadian Subsidiaries and the Canadian Lender, as amended, supplemented, or otherwise modified from time to time to the extent any such amendment, supplement or other modification is not materially adverse to the Agents and the Lenders, entered into in connection with the Canadian Refinancing Transaction, together with any refinancing thereof permitted in accordance with the definition of “Canadian Loan”.”

“ “Canadian Loan Documents” means the Canadian Loan Agreement and the other documents, instruments and agreements executed in connection therewith, in each case (i) to the extent entered into and continuing in effect as permitted by the terms of this Agreement, and (ii) as amended, supplemented, or otherwise modified from time to time to the extent any such amendment, supplement or other modification is not materially adverse to the Agents and the Lenders.”

“ “Canadian Refinancing Transaction” has the meaning assigned to such term in the Seventh Amendment.”

“ “Seventh Amendment” means that certain Seventh Amendment to Credit Agreement dated as of December 30, 2009, by and between, among others, the Loan Parties, the Agents, the Collateral Monitoring Agent, and the Lenders party thereto.”

“ “Seventh Amendment Effective Date” means December 30, 2009.”

“(vi) payments of obligations under the Canadian Loan Agreement or the other Canadian Loan Documents, provided that (x) such payments shall be made only by a Canadian Subsidiary, and (y) no Loan Party may transfer proceeds of any Loan to any Canadian Subsidiary for purposes of making any such payments;”

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“Notwithstanding anything in this SECTION 6.09 to the contrary, neither (i) (a) the prohibition on the pledge of security interest in the Capital Stock of the Canadian Subsidiaries, nor (b) the prohibition on the granting of any guaranty or security interest by the Canadian Subsidiaries, nor (c) the prohibition on repatriation of funds or making of distributions or payments of any kind to the Parent, any other shareholder of the Canadian Subsidiaries, or any Affiliate of the Parent, the Canadian Subsidiaries or any other shareholder of the Canadian Subsidiaries, in each case as set forth in the Canadian Loan Agreement, nor (ii) the prohibitions, restrictions and impositions of conditions expressly set forth in the Merger Agreement and Lim Option Agreement (to the extent such prohibitions, restrictions and impositions of conditions are in connection with the consummation of the merger or the transactions related thereto as expressly set forth in the Merger Agreement and would not result in a Material Adverse Effect) shall be prohibited by this SECTION 6.09.”

“The Loan Parties shall, promptly upon (but in any event within five (5) Business Days after) entering into any amendment, modification or waiver of any Charter Document, Material Agreement or Material Indebtedness, deliver to the Administrative Agent a duly executed copy of such amendment, modification or waiver.”

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[Signatures Follow]

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

Signature Page to Seventh Amendment to Credit Agreement

Signature Page to Seventh Amendment to Credit Agreement

Signature Page to Seventh Amendment to Credit Agreement

Signature Page to Seventh Amendment to Credit Agreement

Exhibit A

Amended Pledge Schedules

[see attached]

Exhibit A to Seventh Amendment to Credit Agreement

SCHEDULE I

to

AMENDED AND RESTATED OWNERSHIP INTEREST AND

INTERCOMPANY NOTE PLEDGE AND SECURITY AGREEMENT

Pledged Securities

SCHEDULE II

to

AMENDED AND RESTATED OWNERSHIP INTEREST AND

INTERCOMPANY NOTE PLEDGE AND SECURITY AGREEMENT

Liens on Pledged Collateral

Liens described in clause (o) of the definition of “Permitted Encumbrances” as defined in the Credit Agreement

Updated Schedules to Loan Documents

[see attached]

Schedule 3.06

Bailees, Warehousemen, Etc.

Knitting

Dye Houses