NEW YORK (AP) — American Apparel Inc. announced late Wednesday it had reached a deal with investment firm Standard General to receive an investment of up to $25 million to bolster the clothing chain's finances. It will also mean a shake-up in the board.
The deal will help pay off a $10 million loan from investment firm Lion Capital, which made a formal demand for payment Monday. Lion Capital claimed that the chain defaulted under its credit agreement because the Los Angeles-based clothing chain ousted its founder and CEO Dov Charney.
As part of the shake-up of the board, five of its seven 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 chosen by Standard General. All but one of the new directors are expected to be independent and not affiliated with the investment firm or Charney.
The board will continue to be led by its current co-chairmen David Danziger and Allan Mayer.
On June 18, American Apparel's board fired Charney as chairman and suspended him as president and CEO. His contract required a 30-day period before he can be terminated. The board cited "alleged misconduct." The new pact calls for an independent board committee to be formed to oversee the continuing investigation into the alleged misconduct by Charney.
The pact comes two weeks after Charney signed a five-year loan agreement with Standard General to increase his stake in American Apparel to 43 percent, but the terms stripped him of his rights to vote on those shares without Standard General's consent.
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