American Apparel to Receive $25 Million in Support, Charney Given Role as Strategic Consultant
American Apparel, Los Angeles, announced it has reached a Nomination, Standstill and Support Agreement with Standard General L.P. and company founder Dov Charney, the beneficial owners of nearly 44 percent of the company's outstanding stock. Under the agreement, Standard General will provide up to $25 million in immediate financial support to the American Apparel, the company's board will be reconstituted, and an independent board committee will be formed to oversee the continuing investigation into alleged misconduct by Charney.
As part of the agreement, Standard General affirmed its support for American Apparel's sweatshop-free, made-in-USA manufacturing philosophy and commitment to maintain the company's manufacturing headquarters in Los Angeles. Standard General and Charney also agreed to certain standstill and voting limitations through the company's 2015 annual meeting.
Other key points of the agreement include:
- A reconstitution of American Apparel's board of directors, in which five of the seven current members, including Charney, will voluntarily step down. The departing directors will be replaced by two new directors, chosen jointly by Standard General and the current board, and three new directors designated by Standard General. All but one of the new directors are expected to be independent directors and unaffiliated with either Standard General or Charney. The board will continue to be led by its current co-chairmen, David Danziger and Allan Mayer. Charney will not serve as a board member or be nominated by the company or Standard General as a board member.
- A continuation of the ongoing investigation into Charney's alleged misconduct overseen by a newly appointed, independent board committee. Charney will serve as strategic consultant until the end of the investigation. Based on the findings of the investigation, the committee will determine if it is appropriate for Charney to serve as CEO or an officer or employee of American Apparel.
- Adoption of a standstill agreement through the company's 2015 annual meeting that, among other things, prohibits Standard General and Charney from acquiring any additional shares in American Apparel and limits their vote to no more than one third of the company's shares on any issue put to stockholders. Their remaining shares would be voted proportionately to the vote of other stockholders.
"This truly marks the beginning of an important new chapter in the American Apparel story," said Mayer. "With the support of Standard General, we are confident the company will finally be able to realize its true potential."
"The last few weeks have been difficult ones for the company, and we are especially indebted to our special committee members Robert Greene, Marv Igelman and William Mauer, who have worked so tirelessly on the company's behalf," said Danziger. "Any success the company enjoys in the future will in large part be the result of their efforts."
American Apparel is concurrently filing a Current Report on Form 8-K with the SEC attaching the Nomination, Standstill and Support Agreement in its entirety.
For more information, visit www.americanapparel.net.