Eddie Bauer seeks to extend limitations on stock ownership

By Angela McDaniels

Tacoma, Wash., Aug. 4 - Eddie Bauer Holdings, Inc. will seek shareholder approval to extend the current limitation on ownership of its common stock and other equity securities to Jan. 1, 2012 from Jan. 4, 2009, according to an 8-K filing with the Securities and Exchange Commission.

The ownership limitation states that no person may acquire 4.75% or more of the company's stock or equity securities and that anyone owning 4.75% or more can only acquire additional stock after receiving company approval.

The limitation was put into place because the company's ability to use the net operating loss carryovers from before its bankruptcy emergence would be materially limited if a change in ownership occurred, especially if Eddie Bauer stock remains at or near its current price, according to the filing.

"We believe that occurrence of a future ownership change prior to the utilization of a material portion of our federal NOLs [net operating loss carryovers] could have a material adverse effect on the company and that providing our board of directors with the ability to assure the availability of current federal NOLs to offset against future income through January 1, 2012 would be of great value to the company," Eddie Bauer said in the filing.

The company said it considered alternatives to extending the ownership limitation, including the adoption of a poison pill, but decided to seek extension of the ownership limitation because of the greater level of certainty in its ability to prevent an ownership change.

The extension would require approval from holders of both a majority of the company's common stock and a majority of its 5.25% convertible senior notes due 2014.

The company said it will hold a shareholder meeting to vote on the extension if initial discussions with stockholders and noteholders are positive.

Eddie Bauer is a Bellevue, Wash.-based specialty retailer that sells casual sportswear and accessories.

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