WARRANT TO PURCHASE SHARES OF COMMON STOCK OF AMERICAN APPAREL, INC.

Exhibit 10.3

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE OF ASSURANCE REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

AMERICAN APPAREL, INC.

Expires March 13, 2016

FOR VALUE RECEIVED, the undersigned, American Apparel, Inc., a Delaware corporation (together with its successors and assigns, the “ Issuer ”), hereby certifies that Lion Capital (Guernsey) II Limited or its registered assigns is entitled to subscribe for and purchase, during the Term (as hereinafter defined), in whole or in part, up to sixteen million (16,000,000) shares (subject to adjustment as hereinafter provided) of duly authorized, validly issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise price per share equal to the Warrant Price then in effect, subject, however, to the provisions and upon the terms and conditions hereinafter set forth. Capitalized terms used in this Warrant and not otherwise defined herein shall have the respective meanings specified in Section 11 hereof.

1. Term . The term of this Warrant shall commence on the Original Issue Date and shall expire at 11:59 p.m., New York City time, on March 13, 2016 (such period being the “ Term ”).

2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange .

(a) Time of Exercise . The purchase rights represented by this Warrant may be exercised in whole at any time or in part during the Term.

(b) Method of Exercise . The Holder hereof may exercise this Warrant, in whole or in part, by the surrender of this Warrant (with the exercise form attached hereto duly executed) at the principal office of the Issuer, and by the payment to the Issuer of an amount of consideration therefor equal to the Warrant Price in effect on the date of such exercise multiplied by the number of shares of Warrant Stock with respect to which this Warrant is then being exercised, payable at such Holder’s election (i) by certified or official bank check or by wire transfer to an

account designated by the Issuer, (ii) by “cashless exercise” in accordance with the provisions of subsection (c) of this Section 2, or (iii) by a combination of the foregoing methods of payment selected by the Holder of this Warrant.

(c) Cashless Exercise . Notwithstanding any provisions herein to the contrary, if the Per Share Market Value of one share of Common Stock on the date of exercise is greater than the Warrant Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the Holder may exercise all or a portion of this Warrant by a cashless exercise and shall receive the number of shares of Common Stock equal to an amount (as determined below) by surrender of this Warrant at the principal office of the Issuer together with the properly endorsed exercise form (in the form attached hereto) in which event the Issuer shall issue to the Holder a number of shares of Common Stock computed using the following formula:

X = Y     –     (A)(Y)

                    B

(d) Issuance of Stock Certificates . In the event of any exercise of this Warrant in accordance with and subject to the terms and conditions hereof, certificates for the shares of Warrant Stock so purchased shall be dated the date of such exercise and delivered to the Holder hereof within a reasonable time, not exceeding three (3) Trading Days after such exercise (the “ Delivery Date ”) or, at the request of the Holder (provided that the Warrant Stock is then freely tradeable under Rule 144 under the Securities Act), issued and delivered to the Depository Trust Company (“ DTC ”) account of the Holder or its designee on the Holder’s behalf via the Deposit Withdrawal Agent Commission System (“ DWAC ”) within a reasonable time, not exceeding three (3) Trading Days after such exercise, and the Holder hereof shall be deemed for all purposes to be the holder of the shares of Warrant Stock so purchased as of the date of such exercise. Notwithstanding the foregoing to the contrary, the Issuer or its transfer agent shall only be obligated to issue and deliver the shares to the DTC on a holder’s behalf via DWAC if the Issuer and its transfer agent are participating in DTC through the DWAC system. The Holder shall deliver this original Warrant, or an indemnification undertaking with respect to such Warrant in the case of its loss, theft or destruction, at such time that this Warrant is fully exercised. With respect to partial exercises of this Warrant, the Issuer shall keep written records of the number of shares of Warrant Stock exercised as of each date of exercise.

2

(e) Transferability of Warrant . Subject to Section 2(g) hereof, this Warrant (together with all rights and obligations hereunder) may be transferred by a Holder, in whole or in part, without the consent of the Issuer. If transferred pursuant to this paragraph, this Warrant may be transferred on the books of the Issuer by the Holder hereof in person or by duly authorized attorney, and new Warrant(s) shall be made and delivered by the Issuer to reflect such transfer, upon surrender of this Warrant at the principal office of the Issuer, properly endorsed (by the Holder executing an assignment in the form attached hereto) and upon payment of any necessary transfer tax imposed upon such transfer. This Warrant is exchangeable at the principal office of the Issuer for Warrants to purchase the same aggregate number of shares of Warrant Stock, each new Warrant to represent the right to purchase such number of shares of Warrant Stock as the Holder hereof shall designate at the time of such exchange. All new Warrants issued on transfers or exchanges (i) shall be dated the Original Issue Date, (ii) shall be identical to this Warrant except as to the number of shares of Warrant Stock issuable pursuant thereto and (iii) shall be delivered to the Holder within a reasonable time, not exceeding three (3) Trading Days after written notice to the Issuer of such Holder’s request for such transfer or exchange. All expenses (other than transfer taxes) and charges related to the preparation, execution and delivery of any new Warrants by the Issuer pursuant to this Section 2(e) shall be paid by the Issuer.

(f) Continuing Rights of Holder . The Issuer will, at the time of or at any time after each exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing the extent, if any, of its continuing obligation to afford to such Holder all rights to which such Holder shall continue to be entitled after such exercise in accordance with the terms of this Warrant, provided that if any such Holder shall fail to make any such request, the failure shall not affect the continuing obligation of the Issuer to afford such rights to such Holder.

(g) Compliance with Securities Laws .

(i) The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Warrant Stock to be issued upon exercise hereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock to be issued upon exercise hereof except pursuant to an effective registration statement, or an exemption from registration, under the Securities Act and any applicable state securities laws.

(ii) Except as provided in paragraph (iii) below, this Warrant and all certificates representing shares of Warrant Stock issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE OF ASSURANCE REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

3

(iii) The Issuer agrees to reissue this Warrant or certificates representing any of the Warrant Stock, without the legend set forth above if at such time, prior to making any transfer of any such securities, the Holder shall give written notice to the Issuer describing the manner and terms of such transfer. Such proposed transfer will not be effected until: (a) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that the registration of such securities under the Securities Act is not required in connection with such proposed transfer, (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Issuer with the Securities and Exchange Commission and has become effective under the Securities Act and the Holder has represented that the Warrant Stock has been or will be sold, (iii) the Issuer has received other evidence reasonably satisfactory to the Issuer that such registration and qualification under the Securities Act and applicable state securities laws are not required, or (iv) the Holder provides the Issuer with reasonable assurances acceptable to the Issuer that such security can be sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer has received an opinion of counsel reasonably satisfactory to the Issuer, to the effect that registration or qualification under the securities or “blue sky” laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or “blue sky” laws has been effected or a valid exemption exists with respect thereto. The Issuer will respond to any such notice from a Holder within three (3) Trading Days. In the case of any proposed transfer under this Section 2(g), the Issuer will use reasonable efforts, at the Holder’s expense, to comply with any such applicable state securities or “blue sky” laws, but shall in no event be required, (x) to qualify to do business in any state where it is not then qualified, or (y) to take any action that would subject it to tax or to the general service of process in any state where it is not then subject. The restrictions on transfer contained in this Section 2(g) shall be in addition to, and not by way of limitation of, any other restrictions on transfer contained in any other section of this Warrant. Whenever a certificate representing the Warrant Stock is required to be issued to the Holder without a legend, in lieu of delivering physical certificates representing the Warrant Stock, the Issuer shall use its reasonable best efforts to cause its transfer agent to electronically transmit the Warrant Stock to the Holder by crediting the account of the Holder’s prime broker with DTC through its DWAC system (to the extent not inconsistent with any provisions of this Warrant). Notwithstanding the foregoing to the contrary, the Issuer or its transfer agent shall only be obligated to issue and deliver the shares to the DTC on a holder’s behalf via DWAC if such exercise is in connection with a sale and the Issuer and its transfer agent are participating in DTC through the DWAC system.

(h) No Rights as Stockholder . A Warrant does not entitle the Holder thereof to any of the rights of a stockholder of the Issuer, including, without limitation, the right to receive dividends or other distributions, exercise any preemptive rights to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Issuer or any other matter.

4

3. Stock Fully Paid; Reservation and Listing of Shares; Covenants .

(a) Stock Fully Paid . The Issuer represents, warrants, covenants and agrees that all shares of Warrant Stock which may be issued upon the exercise of this Warrant or otherwise hereunder will, when issued in accordance with the terms of this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges (other than liens or charges created by the Holder and any income taxes attributable to the issuance and delivery of Common Stock upon exercise of this Warrant). The Issuer agrees that the shares of Warrant Stock so issued will be deemed to have been issued to the Holder as of the close of business on the date on which this Warrant and payment of the Warrant Price are delivered to the Issuer in accordance with the terms of this Warrant, notwithstanding that the stock transfer books of the Issuer may then be closed or certificates representing such shares of Warrant Stock may not be actually delivered on such date. The Issuer further covenants and agrees that during the period within which this Warrant may be exercised, the Issuer will at all times have authorized and reserved for the purpose of issuance upon exercise of this Warrant a number of shares of Common Stock equal to at least the aggregate number of shares of Common Stock necessary to provide for the exercise of this Warrant, as such necessary number of shares of Common Stock may be adjusted from time to time pursuant to Section 4 hereof.

(b) Reservation . If any shares of Common Stock required to be reserved for issuance upon exercise of this Warrant or as otherwise provided hereunder require registration or qualification with any governmental authority under any federal or state law before such shares may be so issued, the Issuer will in good faith use its best efforts as expeditiously as possible at its expense to cause such shares to be duly registered or qualified. If the Issuer shall list or cause to have quoted any shares of Common Stock on any securities exchange or market it will, at its expense, list or cause to have quoted thereon, maintain and increase when necessary such listing or quotation, of, all shares of Warrant Stock from time to time issued upon exercise of this Warrant or as otherwise provided hereunder, and, to the extent permissible under the applicable securities exchange rules, all unissued shares of Warrant Stock which are at any time issuable hereunder, so long as any shares of Common Stock shall be so listed or quoted. The Issuer will also so list or cause to have quoted on each securities exchange or market, and will maintain such listing or quotation of, any other securities which the Holder of this Warrant shall be entitled to receive upon the exercise of this Warrant if at the time any securities of the same class shall be listed or quoted on such securities exchange or market by the Issuer.

(c) Covenants .

(i) The Issuer shall not by any action including, without limitation, amending the certificate of incorporation or the by-laws of the Issuer, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder hereof against dilution (to the extent specifically provided herein) or impairment. Without limiting the generality of the foregoing, the Issuer will (A) not permit the par value, if any, of its Common Stock to exceed the then effective Warrant Price, (B) not amend or modify any provision of the certificate of incorporation or by-laws of the Issuer in any manner that would adversely affect the rights of the Holders of the Warrants, (C) take all such action as may be

5

reasonably necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock, free and clear of any liens, claims, encumbrances and restrictions (other than as provided herein) upon the exercise of this Warrant, and (D) use its best efforts to obtain all such authorizations, exemptions or consents from its stockholders and any public regulatory body having jurisdiction thereof as may be reasonably necessary to enable the Issuer to perform its obligations under this Warrant.

(ii) The Issuer covenants that it will use commercially reasonable efforts to timely file all reports and other documents required to be filed by it under the Exchange Act other than Form 8-K reports (or, if the Issuer is not subject to such reporting requirements, it will, upon the request of any Holder, make publicly available such information as necessary to permit sales pursuant to Rule 144 under the Securities Act), and it will use commercially reasonable efforts to take such further action as any Holder may reasonably request, in each case to the extent required from time to time to enable such holder to sell the Warrants without registration under the Securities Act within the limitation of the exemptions provided by (A) Rule 144 under the Securities Act, as such rules may be amended from time to time, or (B) any successor rule or regulation hereafter adopted by the U.S. Securities and Exchange Commission. Upon the written request of any Holder, the Issuer will deliver to such Holder a written statement as to whether it has complied with such requirements.

(d) Loss, Theft, Destruction of Warrants . Upon receipt of evidence satisfactory to the Issuer of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity or security reasonably satisfactory to the Issuer or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Issuer will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same number of shares of Common Stock.

4. Adjustment of Warrant Price and Number of Shares Issuable Upon Exercise . The Warrant Price and the Warrant Share Number shall be subject to adjustment from time to time as set forth in this Section 4. The Issuer shall give the Holder notice of any event described below which requires an adjustment pursuant to this Section 4 in accordance with the notice provisions set forth in Section 5.

(a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger or Sale . In case the Issuer after the Original Issue Date shall do any of the following (each, a “ Triggering Event ”): (i) consolidate or merge with or into any other Person and the Issuer shall not be the continuing or surviving corporation of such consolidation or merger, or (ii) permit any other Person to consolidate with or merge into the Issuer and the Issuer shall be the continuing or surviving Person but, in connection with such consolidation or merger, any Capital Stock of the Issuer shall be changed into or exchanged for securities of any other Person or cash or any other property, or (iii) effect a share exchange or similar transaction with any other Person, or (iv) transfer all or substantially all of its properties or assets to any other Person, or (v) effect a capital reorganization or reclassification of its Capital Stock (other than any transaction covered by Section 4(b) hereof), then, and as a condition to each such Triggering Event, proper and adequate provision shall be made so that, upon the basis and the terms and in the manner provided in this Warrant, the Holder of this Warrant shall be entitled upon the exercise hereof at

6

any time after the consummation of such Triggering Event, to the extent this Warrant is not exercised in full prior to such Triggering Event, to receive at the Warrant Price in effect at the time immediately prior to the consummation of such Triggering Event in lieu of the Common Stock issuable upon such exercise of this Warrant prior to such Triggering Event, the number or amount of the securities, cash and property to which such Holder would have been entitled upon the consummation of such Triggering Event if such Holder had exercised the rights represented by this Warrant immediately prior thereto (including the right of a shareholder to elect the type of consideration it will receive upon a Triggering Event), subject to adjustments (subsequent to such corporate action) as nearly equivalent as possible to the adjustments provided for elsewhere in this Section 4. In determining the kind and amount of cash, securities or other property receivable upon exercise of this Warrant following the consummation of such Triggering Event, if the holders of Common Stock have the right to elect the kind or amount of consideration receivable upon consummation of such Triggering Event, then the Holder shall have the right to make a similar election upon exercise of this Warrant with respect to the kind and amount of cash, securities and/or other property which the Holder will receive upon exercise of this Warrant.

(b) Stock Dividends, Subdivisions and Combinations . If at any time the Issuer shall:

(i) make or issue, or set a record date for the holders of the Common Stock for the purpose of entitling them to receive, a dividend payable in, or other distribution of, shares of Common Stock,

(ii) subdivide or reclassify its outstanding shares of Common Stock into a larger number of shares of Common Stock, or

(iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares of Common Stock,

then (1) the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to such record date or effective date would own or be entitled to receive after such date, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price in effect immediately prior to such record date or effective date multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the new number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment as determined in accordance with this Section 4(b).

(c) Certain Other Distributions . If at any time the Issuer shall make or issue, or set a record date for the holders of the Common Stock for the purpose of entitling them to receive, any dividend or other distribution of:

(i) cash (other than a regular cash dividend payable out of surplus or net profits legally available for the payment of dividends under the laws of the jurisdiction of incorporation of the Issuer on a quarterly, semi-annual or annual basis pursuant to a publicly announced dividend policy),

7

(ii) any evidences of indebtedness of the Issuer or any of its Subsidiaries, or any shares of Capital Stock of any Person or any other securities or property of any nature whatsoever of any Person (other than cash, Common Stock Equivalents or Additional Shares of Common Stock), or

(iii) any warrants or other rights to subscribe for or purchase any evidences of indebtedness of the Issuer or any of its Subsidiaries, any shares of Capital Stock of any Person or any other securities or property of any nature whatsoever of any Person (other than cash, Common Stock Equivalents or Additional Shares of Common Stock),

then (1) the number of shares of Common Stock for which this Warrant is exercisable shall be adjusted to equal the product of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such adjustment multiplied by a fraction (A) the numerator of which shall be the Per Share Market Value of Common Stock at the date of taking such record and (B) the denominator of which shall be such Per Share Market Value minus the amount allocable to one share of Common Stock of any such cash so distributable and of the Fair Market Value of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributable, and (2) the Warrant Price then in effect shall be adjusted to equal (A) the Warrant Price then in effect multiplied by the number of shares of Common Stock for which this Warrant is exercisable immediately prior to the adjustment divided by (B) the new number of shares of Common Stock for which this Warrant is exercisable immediately after such adjustment. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 4(c) and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision, combination or reclassification, as the case may be, of the outstanding shares of Common Stock within the meaning of Section 4(b).

(d) Issuance of Additional Shares of Common Stock .

(i) In the event the Issuer shall at any time following the Original Issue Date sell or issue any Additional Shares of Common Stock (otherwise than as provided in the foregoing subsections (a) through (c) of this Section 4) without consideration or at a price per share that is lower than the Per Share Market Value on the last Trading Day immediately preceding the earlier of the date of announcement of such sale or issuance and the date on which the price for such sale or issuance is agreed or fixed, then the number of shares of Common Stock for which this Warrant is exercisable immediately after such sale or issuance shall be adjusted to equal the number determined by multiplying the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such sale or issuance by a fraction, (i) the numerator of which shall be the number of shares of Common Stock outstanding immediately after such sale or issuance and (ii) the denominator of which shall be (x) the number of shares of Common Stock which the aggregate consideration received for such sale or issuance would purchase at such Per Share Market Value plus (y) the number of shares of Common Stock outstanding immediately prior to such sale or issuance. In such event, the Warrant Price shall be adjusted to that price determined by multiplying the Warrant Price then in effect by a fraction, the numerator of which is the number of shares of Common Stock

8

issuable upon the exercise of this Warrant before such adjustment, and the denominator of which is the new number of shares of Common Stock issuable upon exercise of this Warrant determined in accordance with the immediately preceding sentence; provided , however , the Issuer shall not enter into any transaction that would result in the Warrant Price to be adjusted pursuant to this Section 4(d) below $1.93 (the “ Floor Price ”), or such higher price that would apply so as not to require approval of the issuance of the Warrant, the adjustments provided in this Section 4(d) or Section 4(e) or the corresponding issuance of shares of Common Stock hereunder by the Issuer’s stockholders under the NYSE Alternext U.S. requirements or the applicable requirements of any other securities exchange or market on which the Common Stock is then listed or quoted or by any other Governmental Authority on of the date of such issuance (“ Issuer Stockholder Approval ”), unless Issuer Stockholder Approval is obtained for the adjustments provided in this Section 4(d) and Section 4(e) and the corresponding issuance of shares of Common Stock hereunder (provided that, for the avoidance of doubt, this Section 4(d) shall not be construed to prohibit the Warrant Price, Floor Price or such other price from being adjusted to reflect any other adjustments made in accordance with this Section 4 (other than adjustments pursuant to this Section 4(d) or Section 4(e))).

(ii) No adjustment of the number of shares of Common Stock for which this Warrant shall be exercisable shall be made under paragraph (i) of this Section 4(d) upon the issuance of any Additional Shares of Common Stock which are issued pursuant to the exercise of any Common Stock Equivalents, if any such adjustment shall previously have been made upon the issuance of such Common St