- POSTED: 10 Jul 2014 06:58
The majority of the board of directors at American Apparel will resign under an agreement released on Wednesday that was negotiated by investment firm Standard General.
NEW YORK: The majority of the board of directors at American Apparel will resign under an agreement released on Wednesday that was negotiated by investment firm Standard General.
The agreement creates a path forward at the struggling retailer after the company board's dismissed chief executive and founder Dov Charney on June 19 following allegations of bizarre behaviour and sexual harassment.
Charney will be one of five board members to resign from the seven-person board under the agreement, which was negotiated between Charney, the company and Standard General.
Other elements of the deal include a pledge by Standard General to keep the company's manufacturing headquarters in Los Angeles; a promise by Standard General to provide the retailer with US$25 million in financing; and a requirement that Charney cede his management responsibilities while the board oversees investigations into Charney's behaviour.
Charney agreed "not to interfere with or attempt to influence the outcome of the investigation or access the company's computer system," the company said in the filing.
The deal allows Standard General to designate three new members to the board and to appoint two more directors that are mutually agreed with the company.
After being founded in 1989 by Charney, American Apparel grew aggressively, billing itself as a "sweatshop-free" manufacturer that manufactured all its clothes inside the United States.
It became known for very racy advertising pitched at teens, the main customers.
But the company has reported losses the last three years and has seen its stock price tumble from US$15 to less than US$1.
The company's direction was thrown into doubt after Charney vowed to fight his dismissal. Under Wednesday's agreement, Charney called off a special shareholders meeting scheduled for September.
Shares of American Apparel rose 3.6 per cent to 88 cents in after-hours trade.