American Apparel, Inc. 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% of the Company's outstanding stock. Under the agreement, Standard General will provide up to $25 million in immediate financial support to the Company, the Company's board will be reconstituted, and an independent board committee will be formed to oversee the continuing investigation into alleged misconduct by Mr. 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 Mr. 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 the Company's board of directors in which five of the current seven members, including Mr. 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 Mr. Charney. The board will continue to be led by its current co-chairmen, David Danziger and Allan Mayer. Mr. 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 Mr. Charney's alleged misconduct overseen by a newly appointed, independent board committee. Mr. 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 Mr. 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 Mr. 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 Mr. 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 Mr. Danziger. "Any success the company enjoys in the future will in large part be the result of their efforts."