Replies to post #487 on Eddie Bauer Holdings (fka EBHIQ)

[Halada]

press release
May 27, 2009, 5:15 p.m. EST

Eddie Bauer Reports Anticipated Warrant Issuance
SEATTLE, May 27, 2009 /PRNewswire-FirstCall via COMTEX/ -- Eddie Bauer Holdings, Inc. /quotes/comstock/15*!ebhi/quotes/nls/ebhi (EBHI 0.56, +0.02, +3.69%) previously announced the execution of a First Amendment ("First Amendment"), dated April 2, 2009, to the $225 million Amended and Restated Term Loan Agreement with various lenders, Goldman Sachs Credit Partners L.P., as syndication agent, and JP Morgan Chase Bank, N.A., as administrative agent.

Consideration for the First Amendment included our agreement to issue to the term loan lenders $0.01 exercise price warrants exercisable for 19.9% of our common stock on a fully-diluted basis, or approximately 7,842,456 shares. The warrants are subject to adjustment for any conversion of our 5.25% Convertible Senior Notes due 2014 ("Convertible Notes") in accordance with the terms of the Convertible Note Covenant of the First Amendment, new capital infusions of less than $40 million (unless otherwise agreed to) and exercise of equity compensation grants. If we fail to either retire or convert into common stock at least 75% in principal value of the $75 million aggregate principal amount of Convertible Notes that we have outstanding, or raise $50 million in new capital with the proceeds used to pay down the principal balance of our term loan (the "Convertible Notes Covenant"), within 90 days following execution of the First Amendment (which time period may be extended under certain circumstances), we may obtain two 60-day extensions of the performance period for the Convertible Notes Covenant. Upon each potential extension of the Convertible Notes Covenant, we will be required to issue additional $0.01 exercise price warrants exercisable for 15% of our common stock on the same fully-diluted basis as the initial warrant issuance..

We requested and received from Nasdaq an exemption under Section 4350(i) of the Nasdaq Marketplace Rules from stockholder approval of the issuance of the warrants. This exception provides that such stockholder approval is not required if the delay in closing the underlying transaction due to the time that it would take to seek stockholder approval would have a significant detrimental impact on our financial viability. Our reliance on this exception was approved by our Audit Committee and by Nasdaq. The grant of this exception permitted us to complete the First Amendment on a timely basis while also retaining our listing on the Nasdaq Global Market.