Dov Charney has scored a significant win in the ongoing battle for control of American Apparel. A week after the suspended founder and CEO entered into an agreement with Standard General to buy 27 million shares in the company, all three parties have reached a deal.
According to SEC documents filed Wednesday, Standard General will provide American Apparel with up to $25 million in funding to repay any debt including the $10 million owed to Lion Capital. The agreement also calls for a restructuring of AA's board of directors, which Charney had requested (and was denied) a little over a week ago. All but two of the company's seven board members are required to resign and the remaining two, along with Standard General, will select their replacements. The agreement also calls for the formation of a committee of independent directors to oversee the investigation into Charney's alleged misconduct and "determine if it is appropriate for Mr. Charney to be reinstated as CEO of the Company or serve as any officer or employee of the Company or any of its subsidiaries." Standard General also agreed not to acquire any shares in the company and to remain committed to to the retailer's sweatshop-free, “Made in the USA” manufacturing philosophy.
For his part, Charney has been given the role of consultant -- he cannot become a board member -- which allows him to receive a base salary, but he has agreed "not to interfere with or attempt to influence the outcome of the investigation." No word on whether or not he's allowed to visit stores, which he did on Monday. Regardless, Charney is in a much better position now than he was a couple of days ago, as it's pretty clear that Standard General is on his side.
Shares in AA rose 3.6 percent following confirmation of the agreement.