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American Apparel adopts one-year stockholder rights plan

June 28, 2014 (United States Of America)

American Apparel, Inc. announced that a special committee of its Board of Directors has adopted a one-year stockholder rights plan that is designed to strengthen the ability of the Board of Directors to protect the Company's stockholders. 
 
The Company's stockholder rights plan was adopted in response to reports of rapid accumulations of the Company's outstanding common stock. The special committee believes this plan is an important tool to ensure that all American Apparel stockholders are treated fairly. This decision was made in the context of today's SEC filing by Dov Charney in which he expressed an intent to acquire control or influence over the Company. 
 
The Board of Directors previously suspended Mr. Charney as CEO and declared its intent to terminate him for cause based on an ongoing investigation of misconduct. The rights plan is designed to limit the ability of any person or group, including Dov Charney, to seize control of the Company without appropriately compensating all American Apparel stockholders. It is intended to provide the Board of Directors and stockholders with time to make informed judgments. 
 
It does not affect trading by passive investors, as it allows such investors to accumulate as much as 15% of the Company's common stock and has no impact on a takeover proposal for the entire company acceptable to the holders of a majority of the Company's shares. 
 
Initially, the rights will be attached to all shares of common stock and be represented by the certificates representing the common stock. Each right entitles the holder to purchase one ten-thousandth of a share of preferred stock at an exercise price of $2.75, subject to adjustment as provided in the rights plan. Upon the occurrence of certain events, the rights may separate from the common stock. 
 
Until such separation occurs, if at all, outstanding stock certificates (or, in the case of shares reflected on the direct registration system, the notations in the book entry accounts) will represent both shares of the Company's common stock and the rights. The rights distribution is not taxable to stockholders. Stockholders are not required to take any action to receive the rights distribution. The rights will expire at 5:00 P.M. (New York City time) on June 27, 2015, unless such date is extended or the rights are earlier redeemed, exchanged or terminated. 
 
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