Court File No.: CV-09-8240-CL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C.
1985, c. C-36, AS AMENDED
AND IN TIlE MATTER OF A PLAN OF COMPROMISE OR ARRNGEMENT OF
EDDIE BAUER OF CANADA, INC. AND EDDIE BAUER CUSTOMER SERVICES INC.
Applicants
MOTION RECORD
(returnable April
April 20, 20 i 0
29, 2010)
GOODMANS LLP
Barristers & Solicitors
Bay Adelaide Centre
333 Bay Street, Suite 3400
Toronto, ON M5H 2S7
L. Joseph Latham LSUC#: 32326A
Christopher G. Armstrong LSUC #: 55148B
Tel: 416.979.2211
Fax: 416.979.1234
Lawyers for the Applicants
INDEX
TAB 1
Court File No. 09-8240-CL 1
ONTARIO
JUSTICE
COMMERCIAL LIST
SUPERIOR COURT OF
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C.
1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRNGEMENT OF
EDDIE BAUER OF CANADA, INC. AND EDDIE BAUER CUSTOMER SERVICES INC.
Applicants
NOTICE OF MOTION
(returnable April 29, 2010)
Tenere of Canada, Inc. (formerly Eddie Bauer of Canada, Inc.) ("Tenere") and Yuma
Customer Services Inc. (formerly Eddie Bauer Customer Services Inc.) ("Yuma" and, with
Tenere, the "Applicants") wil make a motion to the Honourable Justice Morawetz of the
Commercial List on April
29, 2010, at 10:00 a.m., or as soon after that time as the motion can be
heard, at 330 University Avenue, Toronto, Ontario.
PROPOSED METHOD OF HEARING: The motion is to be heard:
D in writing under subrule 37.12.1 (l) because it is on consent or unopposed or made without
notice;
D in writing as an opposed motion under subrule 37.12.1(4);
I: orally.
1. THE APPLICANTS MAKE A MOTION FOR AN ORDER:
(a) If necessary, abridging the time for service of the Notice of Motion and Motion
Record in respect of this motion and dispensing with further service thereof;
(b) An Order approving the allocation of the Sale Proceeds (as defined below) as
between Tenere and Yuma;
\5837397.2
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2
( c) An Order approving the distribution of the Sale Proceeds by the Monitor to the
creditors of
the Applicants, subject to appropriate holdbacks;
(d) An Order releasing, expunging and discharging the Intercompany Charge (as
defined in the Initial Order (as defined below)) and reducing the Administration
Charge (as defined in the Initial Order) to $500,000;
(e) An Order extending the stay of proceedings through to and including September
30,2010;
(f) An Order approving the conduct and activities of the Monitor as set out in the
Eighth Report of the Monitor dated April 20, 2010 (the "Eighth Report"); and
(g) Such further and other relief as counsel may request and this Honourable Court
deems just.
2. THE GROUNDS FOR THE MOTION ARE:
Background
(a) On June 17, 2009, the Honourable Mr. Justice Morawetz granted an Initial Order
(as amended and restated, the "Initial Order") in respect of the Applicants under
the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended
(the "CCAA"). The Initial Order appointed RSM Richter Inc.' as the monitor of
the Applicants (the "Monitor") in the CCAA proceedings;
(b) Also on June 17, 2009, EBHI Holdings, Inc. (formerly Eddie Bauer Holdings,
Inc.) ("EBHI"), the indirect parent of the Applicants, Amargosa, Inc. (formerly
Eddie Bauer, Inc.) ("Amargosa"), the direct parent of the Applicants, and certain
of EBHI's subsidiaries (collectively, the "US Debtors" and, with the Applicants,
the "Company"), commenced proceedings in the United States Bankuptcy Court
for the District of Delaware (the "US Bankruptcy Court") under Chapter 11 of
Title 11 of
the United States Code, 11 U.S.C. §§ 101-1330;
(c) By Order dated July 14,2009, this Honourable Court extended the Stay Period (as
defined in the Initial Order) in respect of the Applicants until September 18, 2009,
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3
which Stay Period was subsequently extended to December 18, 2009, by a Stay
Extension Order dated September 17,2009, and to April 30, 2010, by a Stay
Extension Order dated December 8, 2009;
(d) Following a joint hearing with the US Bankuptcy Court on June 29, 2009, both
this Honourable Court and the US Bankuptcy Couii approved a stalking horse
sale process, as well as certain bidding procedures (the "Bidding Procedures") in
connection with the sale of substantially all of
the Company's business and assets;
(e) Following the completion of an auction held pursuant to the Bidding Procedures,
Everest Holdings LLC ("Everest"), a subsidiary of Golden Gate Capital, was
selected as the winning bidder and Everest, as buyer, entered into an asset
purchase agreement dated July 17, 2009 (the "Asset Purchase Agreement"),
with EBHI and each of the subsidiaries of EBHI listed on Schedule I of the Asset
Purchase Agreement (including the Applicants), as vendors. The sale of the
Company's assets to Everest (the "Everest Transaction") was approved by
Orders of both this Honourable Court and the US Bankuptcy Court following a
joint hearing on July 22, 2009;
(f) On July 22, 2009, this Honourable Court also issued a Claims Procedure Order
(the "Claims Procedure Order") which established a Claims Bar Date (as
defined in the Claims Procedure Order) in respect of claims against the
Applicants, being 4:00 pm (EDT) on September 21,2009;
(g) On August 3,2009, the Everest Transaction closed. In connection with the closing
of the transaction, US$11 milion (the "Sale Proceeds") was allocated to the
assets of the Applicants and this a.mount was paid by Everest to the Monitor;
(h) Everest now operates the worldwide "Eddie Bauer" business, including the
Canadian business. The Applicants no longer have any active business operations,
employees or assets (save for the Sale Proceeds and certain potential tax refunds);
(i) On August 20, 2009, this Honourable Court made an Order expanding the
Monitor's powers to authorize it to take certain actions on behalf of the
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4
Applicants and make certain payments from the Sale Proceeds including, inter
alia, the payment of federal and provincial sales taxes, the payment of amounts
owing to former employees of the Applicants pursuant to settlement agreements
reached regarding the termination of their employment, the payment of
professional fees covered by the Administration Charge, and changing the names
of
the Applicants to Tenere and Yuma as noted above;
(j) On December 8, 2009, this Honourable Court made an Order authorizing the
Monitor, for and on behalf of the Applicants, to engage Gowling Lafleur
Henderson LLP on a contingency fee basis to perform services in furtherance of
the recovery of potential tax refunds of the Applicants;
Allocation of the Sale Proceeds
(k) An allocation of the Sale Proceeds is required to allow the Monitor to distribute
the Sale Proceeds to the parties entitled thereto;
(1) Neither the Asset Purchase Agreement nor any other document related to the
Everest Transaction provided for an allocation of the Sale Proceeds as between
Tenere and Yuma;
(m) Alvarez & Marsal Taxand, LLC, financial advisor to EBHI, has established an
allocation based on the fair market value of the assets of Tenere and Yuma,
respectively, as determined for United States federal income tax purposes under
Internal Revenue Code Section 1060 (the "1060 Report");
(n) The 1060 Report establishes a fair market value of US$24.3 milion for the assets
of Tenere, and a fair market value of US$172,000 for the assets of Yuma;
(0) The resulting percentage ratio for the allocation of the Sale Proceeds is 99.297%
(US$10.9 milion) for Tenere, and 0.703% (US$77,000) for Yuma;
satisfied that
(P) The Monitor has reviewed the allocation of the Sale Proceeds and is
the allocation is reasonable in the
Distribution of the Sale Proceeds
circumstances;
-5-
5
(q)
As at April 16, 2010, approximately US$10.3 milion of the Sale Proceeds was
remainmg;
(r) The Claims Bar Date in respect of the Applicants was 4:00 pm EDT on
September 21,2009;
(s) The most significant claim
filed was the claim by Amargosa against Tenere in the
amount of $12,676,878, which was subsequently amended to $12,049,434, for,
inter alia, pre-filing intercompany loans (the "Amargosa Claim");
(t) The Monitor has allowed the Amargosa Claim in the amount of$12,049,434;
(u) The Monitor has reviewed the balance of the claims fied against the Applicants
and has resolved all claims, save for certain claims by the Canada Revenue
Agency (the "Tax Claims");
(v) The maximum potential Tax Claims against Tenere total approximately $314,000.
The Canada Revenue Agency has not released tax refunds owing to Tenere of
approximately $1 milion and, as such, it is expected that any amounts owed by
Tenere to the Canada Revenue Agency wil be set off from these amounts;
(w) There are also unresolved Tax Claims against Yuma. As described below, a
portion of the holdback ($2 milion) is specifically related to the Tax Claims
against Yuma;
(x) Accordingly, the Applicants seek authority to distribute the Sale Proceeds as
follows: (i) US$7.8 milion to Amargosa on account of
the Amargosa Claim; and
(ii) $1,200 to holders of three admitted unsecured claims against Tenere;
(y) There wil be a holdback of $2.5 milion of the Sales Proceeds as follows: (i)
$500,000 to satisfy potential obligations of the Applicants that would be secured
by the Administration Charge; and (ii)$2 milion to satisfy the potential Tax
Claims, which Tax Claims could also constitute liabilities of the Applicants'
former directors and offcers who would, in turn, have art indemnity claim against
-6-
6
the Applicants that is secured by the Directors' Charge to a maximum amount of
$2 milion;
Release of
the Intercompany Charge
(z) The Initial Order established the Intercompany Charge to secure post-filing
advances to Tenere by Amargosa that were required to ensure the continued
viability of Tenere's operations pending the completion of the sale process and
the closing of the Everest Transaction;
(aa) Amargosa assigned the various intercompany loan documents between Tenere
and Amargosa and the benefit of
the Intercompany Charge to
the DIP Lenders (as
defined in the Affdavit of Marvin Edward Toland sworn June 17, 2009), the
ultimate providers of post- filing liquidity to the Company as a whole;
(bb) Upon the closing of the Everest Transaction, all post-fiing advances from
Amargosa to Tenere were repaid;
(cc) The DIP Lenders were repaid in full by the U.S. Debtors upon the closing of the
Everest Transaction;
(dd) Amargosa has indicated that it does not intend to make a claim for amounts that
would be secured by the Intercompany Charge and has consented to the release of
the Intercompany Charge;
(ee) Accordingly, the Applicants seek the release of
the Intercompany Charge;
Reduction in Administration Charge
(ft) The Initial Order also established the Administration Charge to secure amounts
owing to the Monitor, counsel to the Monitor, and the Applicants' counsel and
financial advisors, to a maximum amount of $1 millon;
(gg) Amounts owing to these parties have
been paid intermittently from the Sale
Proceeds as invoices have been rendered. These amounts have been paid through
March 31,2010;
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7
(hh) Given the stage of these proceedings, a reduction in the Administration Charge
from $1 milion to $500,000 is appropriate;
Stay Extension
(ii) An extension of the stay to September 30, 2010, is necessary to complete the
claims process established by this Honourable Court, to distribute proceeds
appropriately, to resolve the Tax Claims, to continue the pursuit of tax refunds
the Applicants' affairs;
and to otherwise deal with the winding up of
(jj) Since the granting of the Initial Order, the Applicants have acted in good faith and
with due diligence;
(kk) No creditor of the Applicants wil suffer material prejudice if the stay period is
extended;
Miscellanèous
the Rules of
(11) Rules 2.03, 3.02,16 and 37 of
Civil Procedure, R.R.O. 1990, Reg.
194;
(mm) The provisions ofthe CCAA; and
(nn) Such further and other grourtds as counsel may advise and this Honourable Court
permit.
3. THE FOLLOWING DOCUMENTARY EVIDENCE WILL BE USED AT THE
HEARING OF THE MOTION:
(a) The Affdavit of
Kelly E. Green sworn April
(b) The Eighth Report; and
20, 2010;
- 8 -
8
( c) Such further and other material as counsel may advise and this Honourable Court
may permit.
April 20, 2010
GOODMANS LLP
Barristers & Solicitors
Bay Adelaide Centre
333 Bay Street, Suite 3400
Toronto, Ontario M5H 2S7
L. Joseph Latham LSUC#: 32326A
Christopher G. Armstrong LSUC #: 55148B
Tel: 416.979.2211
Fax: 416.979.1234
Lawyers for the Applicants
TO ATTACHED SERVICE LIST
9
Court File No.: CV~09~8240~CL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.c.
1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRNGEMENT OF
EDDIE BAUER OF CANADA, INC. AND EDDIE BAUER CUSTOMER SERVICES INC.
Applicants
SERVICE LIST
Last updated April 20, 2010
Party! (J/jtll1sel
GOOD
...
MANS LLP
Telephone
Facsbnile
Party RefJiêséfiteâ
416.979.2211
416.979.1234
Applicants
416.863.0871
Monitor
416.364.7813
Rainer Holdings LLC
.
Suite 3400
333 Bay Street
Toronto, Ontario
M5H 2S7
L. JOSEPH LATHAM
416.597.4211
E-mail: j latham(fgoodmans. ca
CHRISTOPHER G. ARMSTRONG
416.849.6013
E-mail: carmstrong(fgoodmans. ca
RSM RICHTER INC.
200 King Street West
416.932.8000
Suite 1100, PO Box 48
Toronto, Ontario M5H 31'4
ROBERT KOFMAN
416.932.6228
E-mail: b kofman (frsmrìchter. com
DAVIES WARD PHILLIPS & VINEBERG LLP
1 First Canadian Place
44th Floor
416.863.0871
Toronto ON M5X 1B 1
MATHEW GOTTLIEB
416.863.5516
E-mail: mgottlieb(fdwpv.com
JAvSWARTZ
E-mail: jswartz(fdwpv.com
416.863.5520
FASKEN MARTINEAU DuMOULIN LLP
416.366.8381
Toronto Dominion Bank Tower
P.O. Box 20, Suite 4200
66 Wellington Street West
Toronto-Dominion Centre
Toronto ON M5K IN6
10
~ 2 ~
AUBREY KAUFFMAN
416.366.8381
E-mail: akauffnan(ffasken.com
STUART BROTMAN
416.865-5419
E-mail: sbrotman(ffasken.com
OSLER, HOSKIN & HARCOURT LLP
416.362.2111
416.862.6666
Bank of America, N.A.
100 King Street West
1 First Canadian Place
Suite 6100, P.O. Box 50
Toronto, ON M5X lB8
TRACY SANDLER
416.862.5890
E-mail: tsandler(fosler.com
ALEXANDER COBB
416.862.5964
E-mail: acobb(fosler.com
CADILLAC FAIRVIEW CORPORATION LIMITED 416.598.8592
416.598.8222
250 Yonge Street
Suite 610, P.O. Box 11
Toronto, Ontario M5B 2L 7
ELLEN M. WILLIAMSON
Email: williamsoe(fcadillacfairview.com
MCCARTY TÉTRAULT
416.362.1812
416.868.0673
Cadilac Fairview Corporation
Limited
Suite 5300, TD Bank Tower
Toronto Dominion Centre
Toronto, ON M5K lE6
KEVIN McELCHERAN
416.601.730
E-mail: kmce1cheran(fmccarthy.ca
MCLEAN & KERR
130 Adelaide Street West
Suite 2800
Toronto, Ontario M5H 3P5
WALTER R. STEVENSON
E-mail: wstevenson(fmcleankerr.com
LINDA GALESSIER
E-mail: Igalessiere(fmcleanken.com
416.369.6602
416.366.8571
OMERS Realty Management
Corporation, Ivanhoe Cambridge
Inc., Morguard Investments
Limited and Retrocom Limited
Partnership
11
-3...
PartY!
LANG MICHENER LLP
Teleplione
c~.
416.360.8600
Facsimilé
Party Represented
416.365.1719
Proposed Counsel for the Offcial
Committee of Unsecured
Creditors of Eddie Bauer
Brookfield Place
181 Bay Street, Suite 2500
Toronto, Ontario M5J 2T7
SHERYL E. SEIGEL
E-mail:
Holdings, Inc. et 0/.
416.307.4063
sseigelrflangmi chener. ca
ALEX ILCHENKO
416.307.4116
E-mail: ai1chenkorflangmichener.ca
DEPARTMENT OF JUSTICE
The Exchange Tower
130 King Street West
Suite 3400, P.O. Box 36
Toronto, ON M5X 1 K6
DIANE WINTERS
E-mail: diane. winterstßiustice.gc.ca
416.973.3172
416.973.0810
HER MAJESTY THE QUEEN IN RIGHT OF THE
PROVINCE OF ONTARIO AS REPRESENTED BY
THE MINISTER OF FINANCE
(INCOME TAX, PST)
33 King Street West, 6th Floor
Oshawa, ON LlH 8E9
-------
KEVIN J. O'HARA
E-mail: kevin. ohararfo ntar j o. ca
DEPARTMENT OF JUSTICE CANADA
604.666.3049
604.775.5942
PWGSC
416.952.6010
416.973.0809
PWGSC
250.356.8589
250.387.0700
900 - 840 Howe Street
Victoria, B.C. V6Z 2S9
DONNAREE NYGARD
E-mail: mailto: donaree .nygardrii usti ce. gc. ca
DEPARTMENT OF JUSTICE CANADA
Business Law Section
Ontario Regional Offce
Suite
3400, Box 34, The Exchange Tower
130 King Street West
Toronto, ON M5X lK6
JACQUELINE DAIS-VISCA
E-mail: Jacqueline.Dais- Viscatßiustice.gc.ca
MINISTRY OF ATTORNEY GENERAL REVENUE
& TAXATION GROUP
Legal Services Branch
601 - 1175 Douglas Street
Victoria, B.C. V8W 917
AARON
WELCH
E-mail: aaron.we1chrfgov. bC.ca
1'2
-4.........
Party! Coiüise!
T é/(qJ!i()ne
..
HER MAJESTY THE QUEEN IN RIGHT OF THE
PROVINCE OF NEWFOUNDLAND AND
LABRADOR AS REPRESENTED BY THE
MINISTER OF FINANCE
Fadiiiilê
PaFtjRep'1esènted
416.947.0866
Everest Holdings LLC
416.863.1716
Wilmington Trust Company
416.218.4832
CRA
.
709.729.3775
Department of Finance Confederation Building
2nd Floor, East Block P.O. Box 8700
St. John's, Newfoundland AlB 4J6
KEITHREES
MANAGER, TAX AUDIT & COMPLIANCE
E-mail: kreesíahwv.nL.ca
STIKEMAN ELLIOTT LLP
416.869.5500
Barristers & Solicitors
5300 Commerce Court West
199 Bay Street
Toronto, ON M5L IB9
MARIA KONYUKHOVA
416.869.5230
E-mail: mkonyukhovarfstikeman.com
BENNETT JONES LLP
3400 One First Canadian Place
P.O. Box 130
Toronto, ON M5X lA4
S. RICHARD ORZY
416.777.5737
E-Mail: orzyrtßbennettj ones. com
SEAN ZWEIG
416.777.6254
E-Mail: zwe j gs(ßbennettj ones. com
GOVERNMENT OF CANADA
Resource Officer/Complex Case Offcer
Insolvency Program/Revenue Collections
Division Toronto North Tax Services Offce,
Ontario Region Canada Revenue Agency
5001 Yonge Street
Toronto, Ontario M2N 6R9
JOSIELYNN LAZAGA
E-mail: josielynn.lazagarfcra.gc.ca
CANADA REVENUE AGENCY
GST INTERIM PROCESSING CENTRE
(GST,HST)
333 LAURIER AVENUE WEST
OTTAWA,ON KIAOL9
416.218.0943
....
13
-5Party . r 'nIlM~nl
.'
HER MAJESTY THE QUEEN IN RIGHT OF THE
PROVINCE OF BRITISH COLUMBIA AS
REPRESENTED BY THE MINISTER OF SMALL
BUSINESS AND REVENUE (PST-BC/INCOME
TAX)
HER MAJESTY THE QUEEN
MINISTER OF SMALL BUSINESS
2200 - 4464 MARKHAM STREET
VICTORIA, B.c. V8W 9N6
HER MAJESTY THE QUEEN IN RIGHT OF THE
PROVINCE OF ALBERTA AS REPRESENTED BY
THE MINISTER OF FINANCE (INCOME TAX)
THE TAX AND REVENUE ADMINISTRATION
9811-109 STREET
EDMONTON, AB T5K 2L5
HER MAJESTY THE QUEEN IN RIGHT OF THE
PROVINCE OF SASKATCHEWAN AS
REPRESENTED BY THE MINISTER OF FINANCE
(PST SASKATCHEWAN)
REVENUE DIVISION
2350 ALBERTA STREET, 11TH FLOOR
REGINA, SK S4P 4A6
HER MAJESTY THE QUEEN IN RIGHT OF THE
PROVINCE OF MANITOBA AS REPRESENTED BY
THE MINISTER OF FINANCE (INCOME TAX)
MANITOBA FINANCE - TAXATION DIVISION
RM 101-401 YORK
AVENUE
WINNIPEG, MB R3C OP8
HER MAJESTY THE QUEEN IN RIGHT OF THE
PROVINCE OF NOVA SCOTIA AS REPRESENTED
BY THE MINISTER OF FINANCE 1723 HOLLIS
STREET, P.O. Box 187
HALIFAX, NS B3J 1V9
HER MAJESTY THE QUEEN IN RIGHT OF THE
PROVINCE OF NEW BRUNSWICK AS
REPRESENTED BY THE MINISTER OF FINANCE
DEPARTMENT OF FINANCE CENTENNIAL
BUILDING
ROOM 371, 3RD FLOOR, 670 KING STREET
FREDE:RICTON, NB E3B 1G1
Telephone
i~
..
Party Represented
14
-6'.
forty!
HER MAJESTY THE QUEEN IN RIGHT OF THE
PROVINCE OF PRINCE EDWARD ISLAND AS
REPRESENTED BY THE MINISTER OF FINANCE
TAXATION & PROPERTY RECORDS
SHAW BUILDING, 1ST FLOOR
95 ROCHFORD STREET, P.O. Box 2000
CHARLOTTETOWN, PEl CIA 7N8
PENSION BENEFIT GUARANTY CORP
OFFICE OF THE CHIEF COUNSEL
1200KSTNW
WASHINGTON, DC 20005-4026
CANADA REVENUE AGENCY
GST INTERIM PROCESSING CENTRE
(GST,HST)
333 LAURIER A VENUE WEST
OTTAWA,ON KIAOL9
CANADA REVENUE AGENCY (INCOME TAX)
REVENUE CANADA TAXATION CTRE.
875 HERON ROAD
OTTAWA, ON KIAIA2
CANADA REVENUE AGENCY (LEGAL
SERVICES)
555 MACKENZIE A VENUE
OTTAWA,ON KIAOL5
DESK AUDIT - CORPORATE TAX
MINISTRY OF REVENUE (ONTARIO) GOV'T
TAX COMPLIANCE AND REGIONAL
OPERATIONS BRANCH
A WA TAX OFFICE
SUITE 300, 3RD FLOOR
OTT
1400 BLAIR PLACE
OTTAWA,
ON KIJ9B8
Telephone
Facsimile
forty Represeiited
TAB
2
15
Court Filc No. 09-8240-CL
ONTARIO
SUPEIUOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER O:F THE COMPANIES' CREDITORS ARRANGEMENT ACT, RS.C.
1985, c. C"36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
EDDIE BAUER OF CANADA, INC. AND EDDrE BAUER CUSTOMER SERVICES INC.
Applicants
AFFIDAVIT OF KELLY E. GREEN
(sworn April 20, 2010)
I, Kelly E. Green, of the City of Seattle, in the State of Washington, in the United States of
America, a Seniôr Director of Alvarez & MarsaI Taxand, LLC ("Alvarez") financial advisors to
EBHI Holdings, Inc!'(former Eddie Bauer Holdings, Inc.) ("EBHI"), the indirect parent company
of Tenere of Canada, Inc. (formerly Eddie Bauer of Canada, Inc.) ("Tenere") and Yuma
Customer Services Inc. (formerly Eddie Bauer Customer Services Inc.) ("Yuma" and, with
Tenere, the "Applicants") MAKE OATH AND SAY:
1. I am one of the employees of Alvarez vvith primary carriage of Alvarez's engagement in
connection with the U.S. Debtors' (as defined below) restructuring. As such, I have
knowledge of the matters hereinafter deposed to, except where stated to be on information
and belief, and where so stated, I believe such informatIon to be true.
2. I swc'ar this affdavit in support of a motion by the Applicants seeking, inter alia, an Order
approving the allocation of the Sale Proceeds (as defined below) as between Tenere and
Yuma which wil, in turn, allow the Monitor (as defined below) to distribute the Sale
Proceeds to the parties entitled thereto and for no improper purpose.
- 23. Unless otherwise stated, all amounts specified herein are in United States dollars.
i. BACKGROUND
4. On June 17, 2009, thc Honourable Mr. Justice Morawctz granted an Initial Order (as
amended and restated, the "Initial Order") in respect of the Applicants under the
Companies' Creçlitors Arrangement Act, R,8.C. 1985, c. C-36, as amended (the "CCAA").
The Initial Order appointed RSM Richter Inc. as the monitor of the Applicants (the
"Monitor") in the CCAA procecdings.
5.
Also on June i 7, 2009, EBlIT (together with its direct and indirect subsidiaries, the
"Company"), Amargosa, Inc. (formerly Eddie Bauer, Inc.) ("Amargosa"), the direct
,~,r
parent" of the Applicants, and certain of EBHI's subsidiaries (collectively, the "U.S.
Debtors"), commenced proceedings in the United States Bankruptcy Court for the District
of Delaware (the "US Bankruptcy Court") under Chapter 11 of Title 11 of the United
States Code, 11 U.S.C. §§ 101-1330,
6. Following a joint hearing with the US Bankruptcy Court on June 29, 2009, both this
HunoutableCourt and the US Bankruptcy Cour approved a stalking horse sale process, as
well as certain bidding procedures (the "Bidding Pi'ocedures") in connection with the sale
of substantially all of
the Company's business and assets.
7. Following the completion of an auction held pursuant to the Bidding Procedures, Everest
Holdings LLC ("Rvercst"), a subsidiary of Golden Gate Capital, was selected as the
winning bidder and Everest, as buyer, entered into an asset purchase agreement dated July
17, 2009 (the "Asset Purchase Agreement"), with EBHI and eaeh of the subsidiaries of
EBHI listed on Schedule I of
the Asset Purchase Agreement (including the Applicants), as
116
'ï ~7'
-3-
vendors. The sale of the Company's assets to Everest (the "Everest Transaction") was
approved by Orders of both this Honourable Court and the US Bankruptcy Court
following a joint hearing on July 22, 2009.
8. On August 3, 2009, the Everest Transaction closed. In connection with the closing of the
Everest Transaction, $11 milion (the HSale Proceeds") was allocated to the assets of the
Applicants and this amount was paid by Everest to the Monitor.
9, Everest now operates the worldwide "Eddie Bauer" business, including the Canadian
business. The Applicants no longer have any active business operations, employees or
assets (save for the Sale llrocceds and potential tax refunds).
10. I alli advised by the Monitor that as at April
16, 2010, approximately $10.3 millon of
the
Sale Proceeds is remaining.
II. ALLOCATION OF TIlE SALE PROCEEDS
11. As detailed in the Affidavit of Marvin Edward Toland sworn June 17, 2009, and filed in
connection with the Applicants' initial application to this Honourable Court (the "Toland
Affdavit"), a copy of which, excluding all cxhibits except Exhibit "C", is attached as
Exhibit "A" hereto, Tenere, formerly Eddie Bauer of Canada, Inc., was the entity that
operated the business of Eddie Bauer's 36 retail stores and one warehouse store in Canada
and, as such, was the core Canadian operating company. Aside, from intercompany
borrowing from Amargosa to fund the build of up inv~ntory in advance of peak sales
periods, Tenere was self-fuding in the years leading up to the filing of these proceedings.
As stated in the balance sheet attached as Exhibit "C" to the Toland Affdavit, as at May
18
-4-
30, 2009, the book value of Tenere's assets (excluding an intercompany payable owing to
Amargosa) was approximately $21.2 milion,
12. Yuma, formerly Eddie Bauer Customer Seivices Tnc., operated a call centre in St. John,
New Brunswick for Eddie Bauer catalogue orders and customer service calls. As such, as
detailed in the Toland Affidavit, Yuma did 110t generate any üidependent revenue, but
instead was operàted as a cost-centre that was funded by Amargosa. As stated in the
balance sheet attached as Exhibit "e" to the Toland Affidavit, as at May 30, 2009, the
book value of Yuma's assets (excluding an intercompany payable owing to Amargosa)
was approximately $1.34 million, approximately $986,000 of
which was prepaid expenses.
I understand that Everest is in the process of taking steps to shut down the call centre as it
is not economically viable.
13. Substantially aU of the assets of both Tenere and Yuma were sold to Everest under the
Asset Purchase Agreement. As noted above, the closing of the Everest Transaction
resulted in $11 milion of the purchase price payable under the Asset Purchase Agreement
being allocated to the assets of the Applicants. In addition, Everest assumed
approximately $6.287 milion of Tenere's liabilties, and approximalely $277,794 of
Yuma's liabilties.
i 4.' Neither the Asset Purchase Agreement nor any other document related to the Everest
Transaction provided for an allocation ofthe Sale Proceeds as between Tenere and Yuma.
15. Accordingly, Alvarez, as financial advisor to EBI-ll, has established an allocation based on
the fair market value of the assets of Tenere and Yuma, respectively, as deterrnined for
United States fedcral income tax purposes under Internal Revenue Code Section 1060,
19
- 5 -
which outlines the rules for the allocation of considcration received in the pUlchase and
sale of a business. The report (the "1060 Report"), prepared by PricewaterhouseCoopers
on behalf of Everest and delivered to the U.S. Debtors, cstablishcs a fair market value of
$24.643 milion for the total "foreign assets" sold in cOlUection with the Everest
Transaction, Supporting work papers for the 1060 Report show that the assets of Tenere
accouhted for $24.3 milion of this amoWlt and the assets of Yuma accounted for
$172,000. Attached as Exhibit "B" hereto is a copy of
the 1060 Report and the supporting
work papers. The resulting percentage ratio for the allocation of the Sale Proceeds is
99.297% ($10.9 milion) fat' Tenere, and 0.703% ($77,000) fat' Yuma (the "Sale Proceeds
Allocation").
16. I understand that the Monitor has revie\ved the Sale Proceeds Allocation and is satisfied
that it is reasonable in the circumstances.
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-6-
III. RELIEF REQUESTED
17. In light of the torcgoing, the Applicants respectfully requcst that this Honourable Cour
approve the Sale Proceeds Allocation as described above.
SWORN before me at the City of
W"Po ,1-:lçtV\c1,w_' in the State of
~on ,onApril'tO ,2010.
~
"
./(',
.,"w.._-'-t,)~~ELLY
E. GREEN
A Notary Publie of and for the State of
CV1cjOü
OFFICIAL SEAL
PAUL F BREUER
NOTARY PUBLlC.OREGON
COMMISSION NO. 435706
fI COMMISSION EXPIRES JAN. 16, 2013
EXHIBIT" A"
'21
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OFFICIAL SEAL
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PAUL F BAEUER____
NOTARY PUBLlC.OREGON
COMMISSION NO. 435706
COMMISSION EXPIRES JAN. 16, 2013
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A Notary Public of and
for the State òf Oregon
emirt File No.: cJ- 09 - ~1.4a - c L.
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTIUi OF THE COMPANIES' CREDlTORS ARRANGEMENT ACT, RiS.C.
1985, c. C.36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF
EDDIE BAUER OF CANADA, INC. AND EDDIE BAUER CUSTOMER SERVICES INC.
Applicants
AFFiDA VlT OF MARVIN EDWARD TOLAND
(sworn June J 7,20(9)
I. Marvin Edward Toland, of the City of Bellevue, in the State of Washington, in the
United Statcs of America, the ChiefFinuiiciaJ Offcer (the "CFO") of
(liED Holdings") and a Vice President of Eddie Bauer of
Eddie BHuer Holdings, Inc.
Canada, Inc. ("EBCaiiads") and Eddie
Baur.r Customer Services Inc. (HEßeS" and, with EB Canada, the "Applicants"), MAKE OATH
AND SAY:
i. I um the eFa of ED Holdings and a Vice President of each of the Applicants. As such, i
have knowledge of the matters hereinafter deposed to, except where stated to be
on
information and helief, and where so stated, 1 believe such information to be true, The
AppUc¡ints and their U.S. affliates are collectively referred to herein as "Eddie Bauer",
i. INTRODUCTION
2, The Applicants have co"mnicnced this Application (the "CCAA Proceedings") for relief
pimuant to the Companies' Creditors Arrangement Act, R.S.C. i 985, c. C-36, as amended
(the "CCAA"), as part of Eddie Bmier's efforts to effect a global restruëturiiig of its
22
.2.
business and affairs so that it can continue as a goiUg concern. lmrnediately prior to the
cômmencement of the CCAA Proceedings, certain of the Applioants' U.S. affliates,
including Eddie Bauer's ultimate parent company, EB Holdings, the Applicants' parent,
Eddie Bauer, Inc. ("ED Inc,") and othersl (collectively, tbe "U,S. Debtors"), will fie
volunt~ry petitions (the "ChaptCl' 1 L Proceedings") for relief pursuant to title 11 of the
United Stutes Code, i i U,S,C, §§ 1 OJ -1330, lis aiDonded (the "Bankruptcy Code") in the
United States Bankruptcy Court for the District of Delaware (the "US BankJ'ptcy
Court"). It is expected thM the typical "First Day Motions" in the Charter I J Proceedings
wil be heard immediately before 01' COiicillTcntly with the hearing of this Application,
3. If granted, the relief sought in these CCAA Proceedingii and the Chapter i I Proceedings
(together, the "Insolvency Proceedings") will allow Eddie Baner to implement a
comprehensive restructU1'ing and sale of assets that has been negotiated between Eddie
Bauer, its lenders ¡iud note-holders and the prospective purchaser following months of
effort As part of that process, ~he Applicants now seek the grnting of 8n Initial Order
under tho CCAA that, among other things:
(0) declares that each Applicant is ii company to which the CCAA applies;
(b) stays all proceedings and remedies takcn or that might be tåken in respecl
of the Applicants, any of the Applicants' property 01' aiiy default of the
The Debtors iii tho U.S, Chapter 1 I Proceedings ¡ire: Eddie Bauer Holdings, IIiC., a Delawam
corporation; Eddie Bauer, Tnc., ß ()e'lawßre corporation; Eddie Bauer Fulfillment Services, Inc., Ii
Delaware corporation; Eddie Bauer Diversified SaJes, LLC, a Delaware limited liabilty company;
Eddie Bauer Services, LLC, an Ohio limited liability company, Eddie Buuer lnternationiil
Development, LLC, a Delaware limited liability company; Eddie Bauer InfOimatiou Technotogy, LLC,
a Delaware limited líability compuiiYi Fiiiahcial Services Acceptance Corporation, a Delaware
corporation; and Spiegel Acccptance Corporation, a Delaware corporation.
23
. 3 ,
ApplicHnts without leavc of the Court, except as otherwise sct forth
therein;
(0) authories the Applicants to cmy on business in a manner consistent
with thc preservation of their propert and curring on business in the
nonnal course, incl11ding making all pre.
filing payments in connection
with their business;
(d) grants eoiirt-ordcred charges to secure intercompany fìnancjng, a
directors' and 0 ffcers' indemnity and eertin professional fees incurred
in these proceedings;
(0) approves a cross-border insolv.ency protocol to allow for joint heElrings as
may become necessary or appropdate in carring out the proposed
restructuring and allows for Court-to-Court communications in
accordance wiili established protocols;
(I) appoints RSM Richter Inc. ('cRichter") as Monitor of the Applicants in
these CCAA Proceedings; and
(g) pennits the Applioants to fie with this Court a plan or plans of
compromise or. nrrangement concerning the Applìcaiits and their
respective creditors.
4. Like many other retailers, Eddie Bauer has been adversely affocted by the recent Iraumatic
economic deoline in the UiiitecJ Slates and elsewhere. The timing of the economic
downturn was particularly unIominatc tor Eddie Bauer as it was in the midst of u stnitcgic
24
.4"
rctum to its heritage of alruc dual.gender brand with a reputation for expedition-quality
outerwear, and recovering from the cftects of a protructed insolvency proct:cding of its
former owner, Spiegel, Inc,
5, Following months 01' investigating its sirategic altel'ativcs, on J\Jie i 6, 2009, the Board of
Directors for EB Holdings approvod an offer (the "Stalking HOI'se Offer") from Rainier
Holdings LLC, an affliate of CCMP Capital Advisors ("CCMP") to purchase
substantially all of the assets, propert and undertaking of Eddie Rauer. The $talking
Hoise Offer contemplates tbat the offer wil be approved by the US Bankruptcy Court as a
stalking horse bid in a sales proc.ess to be carried oul under both the Chapter 1 J
Proceodiogs and these CCAA Proceedings (tho "Contemplated Sales Process"). If the
Initial Order is granted, the Aiiplicants aiiticípiite rel1iming to this Honourable Court
shortly to seek appwval of the Stalking Horse Offer, of bidding procedures and,
ultimately, a sale of their assets, in conjunction with similar orders being sought in the
Chapter J I Proeoedings. In the meantime, the Applicants and the US Debtors anticipate
operating in the normal course. The Applicants are of the view that pto.coeding in this
fashion wil allow Eddie Bauer to continue operations with the least amount ofdisruplion
to its business operations, wbich wil preserve tho going-concern value of the enterprise
imd maximize tho potential recovery for all stakeholders.
6. The Applicants uro of the view that coordinating these CCAA Proceedings with the
Chapter J i Proceedings is, appropriate given that the Applicants do not operate separately
from the US Debtors. Rather, the operations iiud mii.ngement of the Applicants are
coinpletely iiitcgratcd into Eddie Bauer's glohal Gorporatc enterprise, The Applicants are
reliant upon the US Debtors for all of their merchandise ordering, cash nnd payroll
25
- 5 .
management fìinction~ and to fund their working capital and capital expeiidiHlre needs. In
aiiy event, allowing Eddie Bauer to effect a coordinated, global restructuring is thc best
way to protect value for all stakeholders.
7. As will be described further below, the Applicants believe it is neaessary, appropriate and
in tbe best interests of their stakeholders to apply to this Honourable Court for relief
pursuant to the CCAA.
II. OVERVIEW OF EDDIE BAUER'S BUSINESS
A. Description and HIstory of the ßusiness
8. Eddie Bauer sells outerwear, appiirel arid accessories, targeted at men and women thirty
(30) to fifty-four (54) years of age, that rctleets Eddie Bauer's distinctive outdoor heiitage,
as well as selected down product~ Jhr the horne such as comforters, pilows and throws.,
The Eddie Bauer brand is internationally recognízed - Eddie Bauer products are iivailable
at approximately 371 retail and outlet stores throughout the United States and Canada,
through catalogLie sales and on Eddie Bauer's website located at www,eddiebauer,eom.
For its 2008 fiscal yoiir, Eddie Buuer re¡iorded tJ.S,$l.023 bilion
in consolidated net sales
and tolu1 revenues,
9. Headquartei'cd in Bellevue, Washington, Eddie Bauer's origins cun be tmeed back to i 920.
when founder Eddie Bauor (the person) opened his first store in Seiiltle, Washington, to
sell spórting equipment, clothing and accessories, The first Eddie Buiier store specialized
in spoTting goods such as tewiis rackets and fishing tackle. Later, Eddie Bauer began 10
focus on outerwear, a change that oce\llTidpartially as the result of
Mr. Bauer's personal
experience with hypothermia on a winter fishing tTip in 1935, Alter neHrly freezing to
26
.6death, Mr, Bausr designed a quilted down parka called tbe "SkylineI''' that he patented in
1940, TIiis innovation ÌIi down outerwear became a conicrstone of tho Eddie Bauer
business and one of the sources of its vaunted reputation as "The Original Outdoor
Outfi tter Qì."
I O. During World War 1I, the United S tatcs Army commissioned more tban 50,000 "Eddie
Bauer B-9 Flight Parkas" to keep pilots warm during high altitude tlghts. Eddie Bauer
also produced 250,000 down sleeping bags and many other items to meet U.S, military
purchase orders, Eddie Bauer was the first U.S. government supplier given Iieeiise to put u
brand label on its products dllÌ1ig i
World War II, which rais'cd brand awaniness with
service personnel and the public at large and created a wider market for Eddie Bauer
TIlewllandise,
11. Throughiiui its hisiory, Eddie Bauer has outfited notiible scientific and exploratory
expeditions in Eddie Bauer outerwear, ihcluding ii uumber of notable "l1rst iiscents" such
as that of Jim Whjnaker, who became the first American to reach the summit of Mount
Everest in 1963, w(laring Bddie Bauer outerwcar.2 From 1953 to 1983, Eddie Bauer
outfitted more than fort (40) major mountaiueering expeditions, including the tirst
American ascents of Mount Everest, Dhaulagiri, Peak Lenin and Makalu; as well as thr.
first worldwide ascents of Gasherhnim I and Vinson Massif, Through these expeditions,
The desigiiation "first ascenl" has a special meuning among mountain climbingprofessiona!s iind enthusiasts,
reterring to tile first documeiied successful climb to tlie top of a mountain, or tlie first to follow a particular
climbing route, Beca\ls~ of the sigiúficaiit challenges and l'sk ciitaiJcd, a "first ascent" is always a momentous
ocoasion, "Big lim" Whittaker's first Aiiiericaii asceat ofMouut Eveæst in 1963 iii Eddie Bauer gear is regarded
us u Cold War triumph and recalled as n morale boostör by an önlire gencriitioIl of Amciicnns.
27
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. 7 .
Eddie Bauer honed and field-tested its designs and gear under the most demanding of
conditions.
12, Eddie Bauer's heritage is more than just interesting lore, however, It is a wellspring of
inspiration for new products, innovation and commercial ideas, For oxample, in 2008,
following in ihis tradition of expedition-quality outtitjng, Eddic Bauer contracted with a
design tcam 0 r world-class mountain climbers and crcative lind production personncl (the
"First Ascent Contriictols"), The First Ascent collaboration combines Eddie Biiuer's
legacy as the original r;xpedilion outlítter wiih the expertise of some of today's most
renowned mountain guides and climbers, including Petcr Whittaker, Ed Vîestur:;, and
Dave Hahn. The: First Ascent Contraetors collaborate with Eddie Bauer's corporate
personnel and Rainier Mountaineering, Inc. - the largest mountain guide service in the
U.S. - to çreate, lest, launch and promote the First. Ascent™ line of world-class
mountaineering outerwear, As part of the development of tJie First Asccnt™ line of
products, tIm First Ascent Contractors have just completed testing their latest
mountaineering aiiterwenr on a much publicized climb of Mount Everest (the "11irst
Ascent Return to Everest").
13. The First Ascent Cöntracturs provide ongoing consiilijng services related to the design of
the First Ascent products, as well as public relations opportunities ~ind publicity
n:inforciiig Eddie Bauer's image as a leading provider ofouidoor apparel and accessories
and thereby helping Eddie Biiuer to increase sales, brund loyalty and market sharc, Thc
First Ascent collaboration aiiù products enhance Eddie Bauer's reputation for active,
adventure-oriented outerwear -- an area of strength that origimilly established the brand's
~, 'n:.,'
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acclaim - and add to and compleimint the wide array of more casual, recreation-oriented
sporlswear product tbat Eddie Bauer offers.
14. In addition, Eddie Bauer continues to modernize and promote many of its historio Dest
selling outeiwear items, such as the Kuru Koram™ p¡irka and Yukon Classic™ down vest.
as well as 1ìeld and strearnjackets. These heritage pieces, along with the First Ascent line
of outeiwear, reinforces Eddie Baucr's positioning as "The Oiiginal Outdoor Outttter.Qì"
B." Eddie Bauer's Corporate Structure
15. Eddie Bauer is principally located iii the United Slates, where essentially all of its Iiead
offce functions, and most of its administrative Hinctions, continue to operate out of
Bè!loVllC, Waiihiiigton. A copy ofEddie Bauer's corporate organizational chart is attached
as ExhIbit HN',
16. . EB Holdings is a corporation incorporated LInder the laws of Delaware, and is the ultimate
parent company of Eddie Bauer. EB Holdings is a public company, trading on the
NASDAQ Global Market under the trading symbol "BBHI", As of March 1 i, 2009, there
were 30,829,530 shares of SBHl common stock outstanding. As of MarcIi J I, 2009,
EBHI common stock was held by approximately 456 holders of record. Stockholders'
equity as of January 3, 2009, tötaJlcd U.S.$72.8 million, dowii U.S.$J8J.5 milion from
December 29,2007, 00 June 15,2009, EB Holding's shares'closed at $0,249 per shUTe on
the NASDAQ, reflecting a current market capitalizatioii of$7.6 milion.
17. EE Inc, is also a corporation incorporated under the laws of Delaware; and is tl1e pi-ncipal
operating company for Eddie Bauer. EB Inc, is ¡¡ wholly-owned subsidiary of EB
Holdings. EB rnc. manages all of tbe product developrient, product procurements.
29
- 9marketing, merchandising, salcs, finance, treasury, accounting, and most humun resource
functions fot the entirc Eddie Bauer enterprise.
18., The applicant EB Canada is a corporation incorporated under the liiws of Canada, and is
located in Vaughan, Ontario. EB Canada is II whol.y-owlied subsidiary of EE IiiC, BB
Canada is the main operating company in Canada, focussing on operating the business of
Eddie Bauer's 36 retail stores find its one warehouse store in Canada. The Applioants hl:ve
no independent business apart from the sale of Eddie Bauer qriinded merohandise.
i 9. Apart trom some senior managers who perform field manageitint at th~ ætaíl stores, or
who work at the EBeS call centre or EB Canada's w£lrehmise, the management of the
Applicants, including senior management, finance and accounting, legal, buying, design.
marketing, and al! other corporate functions are carried out at BB Inc.'s offces in
Bellevue, Washington,
20, The vast majority of merchandise sold at Eddie Bauer stores in Canada is Eddie Bauer
branded merchan.dise. AI! of the intellectual propert associated with the brands is owned
by EB Inc, EB Iric, has granted EB Canada the right to manage and operate the Eddie
Dauer retail stores, und to market and distribute Eddie Bauer products, across Canada
pursuant to a Trademark/Copyright Licence Agreement between EB Inc, and BB Canada
dated J¡iuury i, 1996, lind a Licence Agreement between BB Inc, and Ee Canada dated
Febniary 13, 1990 (the "IP Licences"), copies of which are attached hereto as Exhibit
"B". ED Ino. can lenninnte the IF Licences for any breach thereunder, and the TP Licmices
caoiiot be assigned without EE Inc. 's prior written approval.
----I
),
~","Od,"",
- 10.
2 L The applicant EBes is a corporation incorporated iinder the luws of Onturio and is located
in 51. fohn, New Brullwick. EBCS is also a wholty-owned subsidiary of EB Inc" and js
IIH'refore an affiliate orEB Canada. RBCS operates an,
approximately 38,000 square foot
call Centre from Št, John, New Bninswick, which hiindles telephone calls from customers
and emails related to catalogue orders, and provides services to customers in the nature of
suggesting additional products or assistance with purchases. The call centro, which
employs approximately 171 people, handles customer catalogue orders, customer
complaints and requests for information. EEeS' sole source ofreve"ne is amounts paid to
it by EB Inc. in retuii for the call centre services.
C. Siiies Chaniiels
22. Eddie Bauer offers its products through three interdependent sales channels that share
product sourcing, design and marketing resources: (i) retail stores, which sell premium
Eddie Bauer merchandise; (iJ) outlet stores, which seU value priced versions of Eddie
ßauer mercliandise and overstocked inventory at clearance price points; and (iii) dircct
sales, Which consist of sales through Eddie Bauer eatal9gucs and tbe Eddie Bauer website,
23. Eddie Baiier operates 330 plus stores in the U.S. and only 36 stores in Caiiada. Eddie
Bauer's retElil stores are gencraJly located in regional malls and lifestyle centers, and are iii
metropolitan areas. Eddie Buuer also has retail stores in sinaller markets where lurge
conce'ntratioiis of its target customers exist.
4
24. Eddie Bauer's retail stores generated net mcrchUlidise sílfes (nct of returns) of
LJ.S.$443.9 iniliòn in líscal year 2008, coinprising 45.7% of Eddiß Bauer's net
~11
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-ii.
merchandise sales, Of
those sales, iipproximately lJ,S.$355.4 milion (80.1 %) occurred in
rhe U.S., and U.S.$88.5 million (19.9%) occurred in Canada.
25. Eddie Bauer's outlet stores target customers seeking Eddie Bauer apparel at lower prices.
Eddie Bauer outlet merchandise consists of apparel designed exclusively for theautlel
stores and exeess inventory iÌom its retail stores, Eddie Bauer's outlet stores are located
predominantly in outlet centers, value strip eeiiters and "destination" outlet areas such as
Palm Springs, California, and Hilton Head, South Cnrolina. Eddie Bauer's outlet stores
generaled net rnerehandise sales of U.S.$253.2 million in tiseal year :?OOR, comprising
26, I % of Eddie Bauer's not merchandise sales, Of those sales, approximately U.S.$249.8
(98.7%) occurred in t1ie U.S., and U.S,$3.4 milion (1.3%) occurred iii the warehouse store
in Canada.
26. The Eddie Bauer catalogues and website offer the broadest assortment of available colors,
styles and sizes, including petite, tall and plus sizes, as well as certin products, such as
swiniwcar, dresses mid footwear, that are not nvailable in the stores. In fiscal yeiir 2008,
Eddie Bauer's direct channel sales generuted !Jet merchandise sales of V.S. $274.2 inìlion,
comprising 28.2% of Eddie Bntier's net merchandise sales. All direct cbannel sales are
book(',d through Eddie Bauer's U.S. companies.
27. A key salos strategy for Eddie ßlIuer Jias been to leverage synergies among its multiple
sales and marketing channels, maximizing cross-promotional opportimitics. Eddie Bauer's
U.S. stores offer a direct phone connection to the BEes ctistOf1er call contre that allows an
in-store customer to order for home delivery a particular size, color or item tJiat may 110t be
available in the stOre. Eddie ßauer's website and catalogues are linked through its
32
- 12 -
"Catalogue Quick Order" feature, which allows a customcr to input a catalogue item
number to place an order on the website, In addition, Eddie Buiier structures its operations
to offer customers a seamless transition between sales channels, Custoniers can purchase
products through any of the sales channels aiid rerum or exchange products at any otthc
Company's stores, regardless oftlie channel of
purchase.
28. Eddie Bauer's sales follow a seasonal pattern, with sales and earnings peaking dUi'l1g the
fourth quarter, particularly during tho November through December holiday perio-ds. In
additiou, Eddie I3UUCI' typically experiencös higher sales ofrnens' products and accessories
in June for Father's Day. In response to these seasonal sides patterns, Eddie Bauer
increases inventory levels during peak seIJing periods, and places its orders tor peak
seasons approximately six (6) to oight (8) months in advance of such seasons.
Accordingly, orders for the imporlant Chrisrnias shopping season need to be completed by
the end of June 2009.
D. EinpltJyecs
29. Eddie 'Bauer hus approximiitely 7;700 U.S. employees (89% of lolal) iiml 933 C£luadian
employees (J 1% of
tot
Ill). Approximately 6,795 of its U.S, employees are outlet and retail
associates and thê remaining employees are corporate personneL. By contrast, 745 of
Eddie
Bauer's Canadian employees are outlot and fttail associates, 171 lire call centre telcphone
operitors and customcr support personnel (employed by EBC:'), and only 17 employees
áre employed at Be Canada's headquarters in Vaughan (as the vust majority of Eddie
Baiier's head offce and administrative nUlctions are locatcd in Bellevue, Washington).
35
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30. Eddie Bauer al~o hires aùditional tempontry stäff at its retail stores and at its di~tribution
and call centers durng the peak fourth quarter sales season.
3 i. ' None of Eddie Bauer's employees are represented by a union, nor are they covered by
any
collective hargaining iigreemenls. Eddie Bauer has never had aiiy labour.related work
stoppages, and Eddie Bauer's management considers it relations with its employees to be
good.
32, In Jiinuary 2008, as part of its turnaround efforts, Eddie Bauer eliminated 123 positions
from its non-retail support personnel (J 20 in the U.S. and 3 in Canada). As a result of
the
downturn in the economy, in Jamiaiy 2009, Eddie Bauer's work force was reduced by a
tUrtber 193 non-retail employees (i 65 in the U,S. and 28 in Canada, including i 2% of tbe
posit:ons at the EECS call centre) in a further effort to reduce its administrative costs.
33. As discussed in greater detiiil below. Eddie Bauer sponsors a defined-contribution pension
plan thut is administered out of
its head offce in the Uniled Slates and thus subject to U.S.
jUrÎf;óiction. A donned contribl1tioo pension plan is also made available to Eddie Bauer's
Canadian employees. As a "defined contrbution plan", there arc no special payments nor
any actuarial deficit associated with the plari(s), and EB Ca"nada and EBCS are current in
the payment of uti contributions required by Uiose plans savc tor amounts owing in tbe
normal cbime,
E. Product Sourcing
34. Eddie Hauer contracts with third-party sourcing agents and directly with vendors for the
soutcing and manufacturing oral! of its merchandise. AJI of the product sourcing tor the
34
- 14-
A pplicant9 is conducted iiml managed from Eddie Bauer's head offce in Beflevue,
Wasliington.
35. This sourcing stmtegy to date has helped Eddie Bauer maintain quality control standards,
while allowing it to enhance its spced to market to respond to customers' preferences. To
ensuI' thatEddie Bauer's standards of product quafity and timely product delivery are
met, Eddie Bauer retains c1osc: controJ over brand image, design standards and product
quality by designing and developing most clothing and accessory products in-house. In
addition, Eddie Bauor enforces auality control stindards through inspeotion of preproduction samples, periodic sile visits to vendors' factories and selectlve ifLspee1:iriJ1~ of
inbound sb ipricnts at distribution centers.
36, Eddie Bauer has foul' sourcing se~sons por year Ilnd typically places orders with its
vendors approximately six (6) months prior to the initial sale date, with approximately
cloven (l i) to twel.ve (12) weeks for reorders and seven (7) to nine (9) weeks for
replenishment of its basic non-seasonal items. Eddie Bauer uses a similar sourcing
calendar fOT each of its sales channels. It purcJlllses approximately 85% to 90% of
inventory fol' its stores in ¡¡dvance so as to permit all of it~ stores to have suffcient product
to support demand. In the case of direct sules, Eddie Bauer liinits its purchases to
approximately 75% to 80% of inventory in advance in order to better gauge anticipated
demand for products through its preview catDJogue, wbicb iß typically sent to customers
¡ipproxiimitely ten (i 0) to twelve (12) weeks in advanee of a season's product launcb.
37; In 2008, Eddie Bauer reviewed its sourcing and supply procedures, and sourcing agtJiley
relationships, to fuiiher reduce costs whlle improving adherence to new, higher quality
35
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.is-
standards. In 2009, to improve its pricing for goods and increase its speed of delivery,
Eddie Bauer added u new Asian sourcing agent without prior affliations to the company,
and opened un offce in Hong Kong (operuting under the name Pacific Northwest Sourcing
Co" Limited) to enable it to source more product directly from Asian vendors. Eddie
Bauer manages cost negotiations and production directly with ractories in Mexico, Ccntl'l
and South America and the Caribbean for basic bottoms and knit products.
38. Eddie Baiier's sourcing network consists of more than 250 vendors, who operate in 37
countries. In 2008, Eddie Bauer's largest countries of import were China (approximately
54% of total imports), Sri Lanka (12% of tolal imports), Thailand (6% of total imports)
and India (6% of tolal imports). Eddie Bauer's lop thirfy (30) vendors have supplied it for
an average of approximately ten (J 0) years and (ire essential to Eddie Bauer's continiied
operations. These long-term m!litioIlShi¡Js with vendors ensure un effcient flow of supply
to Eddie BmJcr at favourable pricing terms, further improving Eddie Bauer's overoll cost
stnicturc.
F. Tnidemarks and Licensing
39. Eddie Batter's trademarks are kcy assets with substantial value that arc critical to the
ongoing operation of the company iis a recognIzed brand name. Eddie Baut:r's primary
trademarks include Eddie Bauul\I, the Eddie Bauer signature logo, an Eddie Bauer goose
logo and First Ascent™. The trademarks arc fied or registered witb the U.S. and
Canadian patent and trademark offces, and with governmental agencies in other countries,
particularly whcre Eddie Bauer products are inanunictured and/or sold. Eddie Rauer
works vigorously to enforce and protect its trademark rights by filing for appropriate
36
. 16.
trademark protection, engaging in monï'oring services, issuing ceuse-and-desist letters
agains!. third parties infringing or denlgraling Edùie Buuer traùemarks and initiating
litigation as necessary. As of Jurie 1, 2009, Eddie Bauer had 68 active U.S. trademarks
i'egistrafions and 85 pending U.S. trudomJlk applications, as well as 3 I 0 active foreign
rcgistriitions iind i 2 i pending foreign registrations.
40. Eddie !:auer selectively licenses its brand name niid logo to be included on products sold
by other companies to enhiince and extend the Eddie Buuer brand. Eddie Bimer received
U.S.$ 12.8 million in royalty revcnues in fiscal 2008 rei
at ing to its ,licensing urrungeinents.
Eddie Bauer seeks licensees who arc leadel' in tiie outdool,juveniJe, home, SUV, personal
and other categorie~, and typically enters into lIulti-year license agreements with one
licensee per prodiict category to prevent price competition and market saturation of the
brand,
G. 'l'hc Applicants uro Fully Integrated Into the U.S.
41. As can be seen fròm the following, Eddie Bauer's operations are centred in the United
States, The proportion of the "Canadian" business, asscts and creditors is vcry sman
compared to the Eddie Bauer's ovcraJl business, assets and creditorsJ;
(a) Except for some Can~dian-spccifie functions, all ofthc "bead offce"
functions for Eddie Bauer's global operations - including executive
management, product development., product sourcing, marketing,
metchnndising, logistics (except local distribution), finance, treasury,
Ássurning parity between the u.s. And Canadian dollars.
_'__."",-'_' - .,.. '" -'--' ,- ".,.-..- ..__..., ..... ...-w... ;,....,,. ....-..-'~. ..,..",~,. ",.:-. ~"
37
-,~,..-., ,H ,,. .,,' ,. ",M~' ,..._, ~v ,....(. "'WhW"~""';'-''"_- ~.(O";." .,om "..,.~"_..'",,.-"" '''.H..v_ ;-._.=m...~",~_~=,,,=;.,".w.....'A'~__""''"''''''',''.w,,h'''_ ~:'_'''''~.~'''T_'''''~T'''''''"_'''''''~'''''"'''.O
- 17 -
lcgnl, accounting, quality control, etc. - are based out of Eddie Bauer's
head offce in Bellevue, Washington, EB Caiiadu's function is solely to
manage thc Canadian retail stores, and EBCS's sole function is to support
Eddie Bauer's customers and on-line and catalogue sales channels, which
ure prcdominaritly focussed all the U.S. market (only 1.6% of
on-line and
catalogue sales come from Canadian ciistomeni);
(b) Based upon the Balance Sheet (as herein defined), the value of the assets
of EB Cmiada and EBCS total only approximately U.8.$ i 5,259,000 or
3.Q'!!o of I3ddie Bauer's total assets of approidmately U.S.$S02,51 2,000;
(c) ER Canada only operates 36 retail stores and 1 warehouse store across
Ciinadu, compared to 330 plus retail stores and outlet stores across the
United St¡II'os. In addition, Eddie Bauer's catalogue has a circiilation of
over 77 million in thr; United States, compared to only 310,000 in
Canada;
(d) The U.S. Debtors collectively had reveiiue of U.S.$l,023.4 milion foi'
tho yeilr t:ndíng January 3, 2009, whereas EB Canada only had sales of
U.S.
$,9 1. miJJion, representing only 9% of
Eddie Bauer's consolidated
sales, BBCS docs not generate any revenue, but instead is operated iis a
cost-centre thil is funded by BB Inc.;
(e) Oilier than ecr11in amounts owing to EB Inc. due to routine Interrompany
Transfers (discussed'below), EB Canada and EBeS have relatively little
trade debt as well as a(:ciued expenses and lease related obligations; ¡md
-/ 1")
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- 18.
(f) Neitlier EE Canada nor BBeS bave any independent right to market or
sell Eddie Bauer produl:s except as provided fbr by the IP LiGel1ces. The
IP Licences provide that EB Canada may only usa the Eddie Bauer l1iima,
marks, products and systems in accordance with the tenns of the IP
Licences and standards set by EB Inc.
II. CAPITAL STRUCTURE
Á. Current Ciipltal struclure ofEB Canada and ERCS
42. A copy of an internally prepared, unauditcd balance sheet as at May 30, 2009, for HB
Canada and nBCS (the "Balance Sheet") is attached as Exhibit "CO'.
43. The principal indebtedness of
each Applicant is the intercompany loans that arise between
each Applicant and the US Debtors. Other than these loans and certain trade debt
discussed below, ncrthor EB Canada nor BBes has any non-trade debt, or any security
interests registered against its property in Canada. I am advised by L. Joseph Lathum of
Goodmaiis LLP, the Applicants' Canadiaii counsel, that Goodmans LLP has conducted the
customary searches of personal property security registries tbroug1Olit Canada, and that
the results of those searches indicate that, as ul May 18, 2009, no sccmity interests have
been registered against the Applicaiit.~ in any province or terrtory ofCaniida.
44. The Applicfluts and the US Debtors maintain close business relationships with each other
us a result of EB Jnc.'s control of tho Applicants and the integrated Cash
Management
System (described in detail below). As a result, there Hre numerous cross-border
intcrcoinpaily claims that reflect intercompany receivables and payments made in the
39
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- 19-
ordinary course of Eódie Bauer's businesses throughout the United States and Canaóa (the
"Intercompany Claims"). These claims include, but are not limited to:
(a) Accrued interest. The Applicants owe interest to EB Inc. on outstanding
Intercompany Claims. Such interest;s charged montbly based on the net
Inter Company Claims outstnndíog at the end of
the prior month,
(b) Administrative fees. Tho Applicants are charged administrative fees for
serviGcs nmderecl by the US Debturs to support th¡; ApplicuriL~1 business,
including some services associated witb biling and accounts payable lind
other overhead expenses.
(e) Intercompany Tran4i¡rs. Tn the ordinary course of business, the daily
operations 0 f the vaiious companies are funded via casb transfers
between Eddie Btluer's c01ll,eiitratíol1 and disbursement accounts (the
"Intercompany Transfers") (discussed in more detail below). These
transfers consist of revenues t:!lried and öxpenses incurred that are
transferred to and from the conoentl'tion accounts in order to process and
fund the ongoing operations of the Applicaiits aud US Debtors,
(d) Ruyaltles and License Fees. Royalties are charged as a percentage of
sales to the Applicants for the use of certain intellectiial property of the
Debtors.
45.. Despite the fact that EB Canada has been self-fundu1g for the past several years, the
cyclical nature of the retail industry and the need to build inventory before peak sales
-11"
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.2.0.
periods means that EB Canada miiy incur caHli detícits and require short-tort financing on
a periodic basis from the US Debtors. Since thii Applicants do not Garr any independent
third.part financial debt, they have historically met their short-term financing needs as
well as some long-terni capital expenditures through Iiiterconipany Transfers from the US
Dobtors using f'Unds from their secured and unsecured tlnancing facilities (which results in
the Intercompany Claims between the Applicants and BE Inc.). The Intercompany Claims
between EB Inc. and ED Canada pdor to tbe date hereof nrc evidenced by an
intercompany promissory note between EE Canada and EB Inc. dated October i, 2008
(the "Promissory Note"), a copy of
which is attached as .Exhibit "D".
46. Without the financing provided by EE Inc., the Applicants wil be unable to satisfy their
coiimitments to .existing vendors and suppliers, meet payroll and fund ordinary course
operations, Such inability would jeopardize Eddie Bauer's relationships with vendors and
manufactarers in Canada and worldwide.
47. As can be seen fl01U tbe Balance Shoet, as of May 30, 2009, EB Canadii owes EB Inc.
more than U,S.$6.5 milIo,ll pW'sliaiit to the Promissory Note. In addition to the
Proinissory Note, EE Canada has approximately U.S.$4 milion in current liabilities, of
which only U,S.$ 1.4 milion is trade debt, and morc than U.S.$2.22 milion of long term
liabilities. EE Canada's principal current assets include approKimately U.S.$69.5,OOO in
cash and approximately U.S.$l 0.678 million in inventory.
48, EBCS, as of May 30, 2009, hud no cush iind no net accounts reccivables, Its principal
current asset is U.S.$49,OOO in prepaid expenses. Its principal liability is apPl'ximlitely
U.S.$575,OOO 'owing to EB Inc. pursuant to certain iiitercompany transfers.
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.I
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- 21 49, Eddie Bauer has prepared u Uiirleen-week cash flow lòrecast (the "Cash Flow Forecast")
(01' the period from the wcek ending June 6,2009, to the week ending August 29, 2009, in
consultation with its financial advisor Alvarez and Marsat LLC. A copyofthe Cash Flow
Forecast is attached as Exhibit HE", Eddie Bauer forecasts that the Applicants'
foreseeiible funding requirements over the next eleven (11) weeks is approximatdy
U.S.$S.75 milion. The Cash Flow Foreciist shows that the Applicants could mn out of
cash as soon as the week ending June 20, 2009, without additional funding from the US
Debtors, Specifically, although the Applicants are presently current with all 1'ent payments
for their real property leases, they wil be unable to pay l),S,$1.54 milion m rent that
comes due in the week euding Jwie 27, 2009, In addition, EB Canada wil be unable to
fund its rent coming due at the end of July 2009, or make the necessall purchases of
merchandise inventory that wil become due over the next eleven (I i) weeks that UB
Canada requires 10 stay in business. Therefore, the Applicants are insolvent.
8, The Spiegel Bankruptcr and Its Effect 011 Eddie Baiie)'
50. In 1988, Spiegel, Inc, ("Spiegel") ucq11ired EB Inc. from General Mils, Inc" which bad
acquired EE Inc, in 1971. From 1988 1mt¡1 2005, Spiegel was the 100% owner,
5 L The Spiegel era wits one of rapid growth for Eddie Bauer. By the end of fiscal year 2002,
EB Inco's retail stores had inercised from 58 to 399 and outlet stores from 3 to 102. In
addition, from fiscal year 1990 tofiscu! year 2002, EB Inc.'s catalogue circulation
increased from 61.2 million to 1 () 1.6 million. During the Spiegel era, Eddie Bauer also
altered its focus and brand identity, as the Eddic Bauer brand shifted from its outdoor
outfitter heritage to the market for casual apparel aimed primarily at women,
42
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, . 22.
52. In 2001 and 2002. Spiegel ran into ii number of diffculties with its other business, which
lead La reduced liquidity for EB Inc, These diffculties ultimately lcd to Spiegel, together
with iis subsidiaries and affliate,~i including EE Inc" to fie petiions for relief under
Chapter 1 i of the Bankrptcy Code on
the Southern District of
Marcli 17,2003 in the U,S, D¡mkruptcy Court tor
New York. (In re Spiegel, Inc. et aL, Case No, 03-! 1540 (BRL)
(jointly administered case in which other Debtors iDcluded Eddie Bauer Diversified Sales,
LLC, Eddie Bauer International Development LLC and Edd!e Bauer Services, LLC) (Filed
March 17, 2003)) (the "Spiegel Biiikruptcy"), At approxiinately the same time, BB
Inc. 's Canadian subsidiaries, EB Canaela and Spiegel Group Teleservices - Canada, Inc,
(the tanner name of EBCS), obtained relief und!;r Section i 8.6 of the CCAA. In the US
proceedings, EB Holdings emerged from the Spiegel Bnnkniptcy as a stand-alone
company pursuant to the "Eddie Bnuer, Inc, and its related Debtor affliates' Amended
Joint Plan of Reorganization", which plan was confirmed all May 25, 2005, and became
ct1èctivc all Juiie 21,2005. BB Canada and ERCS remained subsidiaries ofEB Inc. and
emerged from thc CCAA proceedings at the same time as EB Holdings,
53, Upon emerging from the Spiegel Bankruptcy, Eddie Bauer was required to borrow $300
million under tho original Tem1 Loan Agreement díscussed below, In addition, Eddie
Bauer assumed the total Spiegel post-retirement, defined-benefit healtheare and life
insurance plans and pension plans. Thus, upon emerging from the Spiegel Bankrptcy, the
liabilities associated with these plans, in additioual to those liabilities related to the
Company's employees, were reflected in Eddie Bauer's consolidated balance sheet
¡ilthougb 1hey are not Iiabil"ties ortbe Applicants,
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43
- 23 54. ' Furtber,
Eddie Bauer inherited support :iacHìties, including an information technology
center in Westmont, 1IillOis and a distribution center in Groveport, Ohio that were not
optimally suited for Eddie Baucr's operations and, as a result, Eddie Bmier had to bear the
overhead costs of these facilties.
55. Fi'oni 2005 to early 2007, Eddie B¡iuer focused significant efforts on navigating and
emerging ti'om the Spiegel bankruptcy tiling, while pi'escivìiig and maintabiing its existing
'Business, rather than strategizillß tor business growth, Tn iidditioii, lìiich of the revenue
gencl'ted by Eddie BaLier during the Spiegel bankruptcy was used to support Spiegel's
. operating costs rather than being re-invested in the Eddie Bauer brand or devoted to capital
spending,
S6, In 2007, after an offer to pllChllSe Eddie Bauer was rejected by its shareholders, a Ilew
managemcnt team Was hired, .including a new CEO, C.FO mid Senior Vice Presidents of
Design, .Human Resources, Legal, Merch;indising and Sourcing, and tiiskcd with tUlning
the Business around and reducing the debt load,
57. Eddie Bauer emerged fi'om the Spiegel Bankruptcy highly leveraged and the economic
, downturn has resulted in ¡his leverage being a greater debt bUlden Ibmi Eddie Bauer can
carry in these depressed economic and retail markets, As ofJune.!7, 2009, Eddie Bauer's
toted consolidated debt (excluding trtdc debt) WEIS oppwxiniately lJ,S,$295.8 niillion, This
debt level, in turn, is projected to result in an annual cash interest expense fai' Eddie Bauer
Dfover U.S.$21,2 million. Accordingly, apPl'ximutcly 50% DrEddJc Bauer's EflTDA is
dedicated to the: servicing of its existing indebtedness and, in tl1n, tùnds ¡rvailabJc tor
operations have been gi'catly reduced,
44
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- 2458,' This substantial amount of debt service has adversely affected the finaucial health and
business operations of Eddie Bauer in other ways by, among other things, limiting its
iibility to fund working capital and capital expenditure nt:eds and increasing its
vulnerability to adverse economic conditions,
C. Pre-Filng Loans of the US Debtors
5'9. The US Debtors have the following three credit facilities as at the date before
commencement of
these proceedings: (i) a senior sccured term loan; (ii) a senior secured
revolving fiicilily; and (iii) convertible senior unsecured 5.25% nutes due 2014 (the
"Convertible NMes"). The Applicants have not guaranteed any líaiiiIties of the US
Debtors under these facilities nor huve they grinted security over their assets to the fenders
under these facilities, although two-thirds of
the stock of each of the Applicants has bcon
pledged as security for the senior sccured ter11 loan.
(i) Senior Secured Term Loan
60. On June 21,2005, EB Joe, entered into a .$300 míliori senior sccured term loan agreement
(the "Ol'igiiial Term Loaii Agreement") upon iis emergence D'om biitiptcy. 1n 2007,
EB Holdligs issued $75 mílion ofthe Convertible Notes, and 'Used thc proceeds to reduce
the principal balance under the Original Teim Loan Agreement from U,S.$273.8 milion to
U,S.$225 milion, As part of such reduction, EB Holdings and EB Inc., and JPMorgan
Chase Bank, N .A., as administrative agent, and the several banks and other financial
institutions or entities from time to time porties thereto (collectively, tbe "Term Loan
Lenders") entered into an Amended and Restated Term Lonn Agreement (the "Amended
,J
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. 25 -
Tei'm Loan Agreement") that refinanced the loan evidenced by the Original Term Loan
Agreement.
ó I. The Amended Term Loan Agreement is secured by a first lien Oil certain real estate assets
and trademarks, and by a second lien on substiintially all of the other assets of BB
Holdings, ER Tnc. and Rddie Bauer's U.S. based subsidiaries.
62. Aner two proposals to the Term Loan Lenders 10 amend the Amenûed Term Loali
Agreement at market rates, both of which were tumed down, l\Id facing potentif¡1
violations Qrvariou~ financial covenants contained in the Amended Terni Loan Agreemcnt
duc to increased leverage. EB Inc, was forced to entcr into an amendment to the Amended
Term Loan Agreement òn April 2, 2009 (the "Term Loan FIrst Amendment"). The
Term Loan First Amendment, among other things, allowed EE Holdings and EB Inc, to
inCfease the permitted senior secured leverage ratio and ûecrease the permitted fixed
oharge coverigc ratio through the end of fiscal 2009, and to do tbc same through the fourth
quarter or 20 10 if Eddie Bauer was ahle to mcet certain stringent conditions. In exchunge
for the amendment, the Teim Loan Lenders received a substantiiil level of "payment i.n
kind" interesl and fees, cash fees and warrants ex.ereisable lor 19.9% of BB Holdings'
common stock, with the nbility to receive warrunts exercisable tor an additional 30% of
the common stock of EB Holdings jf certain dondlines for the conversion of 75% of the
Convertible Notes to cquity werc not met.
63. Unfortnately, despite cxtensive and repented attempts to negotiate a conversion of the
Convertible Notes to equity, EB Holdings was unable to reach any agreement with its
Convertible Noteliolders.
¿i6
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- 26(it) /:enior Secured Revolving Credii Facllily
64. EB Inc. entered into a U,S,$150 milion ~enior secured revolving loan and security
iigreemenl dated as ofJune 21,2005 (the "Original Revulving Loan Agreement"), with,
iimong others, Bunk of America, N.A. ("BofA"), General Electric Capital Corporation and
The CIT Group/Business Credit, Inc., as co-syndication agent.
65. In order to fuciltate (i) the issuance of the Convertible Notes and Oi) the amendment lind
restatement of the Original Term Loan Agreement. the Revolving Loan Agreement was
amcnded by a First Amendment and Waiver to Loan and Security Agreement dated as of
April 4, 2007 (the Original Revolving Loan Agreement as so amended, the "Revolving
I~oun Agreement").
66, Amounts borrowed under the Revolving Loan Agreement are secured by 0 first lien on EB
Inc. 's inventory, certain accounts receivable balances and by ¡¡ second lie~J on all of EB
Inc. 's other assets other than a distribution facility in Groveport, Ohio. The Revolving
Loan Agl'ement is guaranteed by EB Holdings /lod certain of its subsidiaries (noi
including the Applicants). The Revolving Loan Agreement is scheduled to mature On June
21, 2010. As of Iliac 17, 2009, there was approximately U,S$33 Ini1íon drawn under the
Revolving Loan Agreement, an.d U.S,$9.8 milion of letters of credit outstanding.
(iii) Converible Senior Unsecured 5.25% NOles Due 2014
67. As noted above, on April 4,2007, EB Hold ings is,~ued U.S.$75 millon of
the Convertible
Notes. The Convertible Notes biiv~aiiaturilYCi!)e_gfA.prii 1,20 14,nnd puyintcrest at an
,ot... __".'- H'" .."'..a,.... .,
~7
- 27 -
8nmiul nife of 5.25% semi-annually in arrears on April 1 and October J of each year,
unless earlier redeemed, repurchased or converted.
6IL The Convertible Notes are fully and unconditionally guaranteed by all of EB Holdings'
existing and fìllure subsidiaries that are paiiies to any U.S. credit facilities, whether as a
borròwer. eo-borrower or guariintor, including EB Inc. As a result, the Applicants have
not guaranteed the Convertible Notes, The Convertible Notes a1'C unsecured,
69. Under the indentilre governing the Convmtible Notes, the Convertible Notes may be
converted to stoek or cash depending on wl1eii they are oonverted. Subsequent to January
4, 2009, aiid prior to April I, 2013, holdm may convert all or 8 portion of their
Convertible Notes under certain circumstances.
iv. EVENTS LEADING TO THE COMMENCEMENT OF THE CCAA
PROCE:EDlNGS
70. Various internal and external cvcnts and faotots have hud a severe negative impact all
Eddie Bauer - most prominently the debt loads and other expenses described above that
Eddie Bauer ~btaincd on its emergence from the Spiegel Bankuptcy, a diniiiiishment in
brand identiy by vaiious owners of Eddie Bauer over time and the historic economic
upheaval tbat bogan to affcct Eddie Bauer and retail markets worldwide in the fOllth
quarter of 2008.
A. The Recession and Decline in Consumer Spending
7 i. Eddie Bauer, !.ke all other businesses, is suffering as li result of tbe worst global cconomic
downturn since the Gniat Depression. Adver:~e economic: conditions in general lind
increased levels of unemployment have led to a d,()cl'ease in conSUmer confidence and a
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48
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. 28 -
decline in consumer spending since
the second half of2008. The effects of
this crisis have
been deep and widespread in the .specialty retail apparel industry, which is heavily
dependent on discretionary consumer spending patterns, In 2008, the retail industiy
experienced slowing saJes gl'wth in the tirst half of the yeur and negative silies growth in
the soeond half oftbe year.
72. In addition, with the downtim in the oeonomy und the decline in consumer spending, the
eompeWioli for consumer dollars became much more promotional, eveii prior to and
during the holiday season. Eddie Bauer competQs with a variety of retailers, including
national department store chains, nationa.l and international specialty apparel chuins,
global discouiit chains. outdoor specialty stores, catalogue businesses, sportSWear
marketers and online businesses that sell similar lines of merchandise, Some of these
competitors have greater 'fnancial, distributio1l, logistics and marketing resources than
Eddie Bauer flid, as a result, have been able to adopt inore iiggressive pricing policies than
Eddie Bnuer.
73, Notwithstanding these dificult economic oircumstances, Eddie Bauer has consistently
outperformed the majority of its competitors in the retail sector over the past six (6)
quarters and has actually increased its BBITDA for 2008 relative to 2007. In. additloii,
through cost Cllring measures, Eddie Bauer reduced its expenses by U,S.$48 million in
2008. In the tírst quaitcr of 2009, principally as a result of the cost-cutting measures
described previously, Eddie Bauer's simple efish flow was comparable to the first quarter
of 2008. Despite this relatively strong performance under rliffDult circumstances, Eddie
Baiær's debt load prevents it froni restrcturing its business outside formal insolvency
proceedings.
-.",.~ ~~~v--". ,
49
,,'~ h-..."~.", .-.'".-. ~
.29.
ß. Erosion of Brand Identity
74. The rapid era of growth thiit began in i 988 when Eddie BUllcr was acquired by Spiegel
was also flccompiinied by a slow erosion of Eddie Bauor's brand identity as the brand
shifted from its outdoor mittítter heritage nnd bcgan to become associated more with
casual apparel aimed primarily at rmhire women.
75. This shift in focus léd to a decrease in profitability - whereas Eddie Bauer had previously
avcraged U,S.$440 in sales per squaro foot, this figure dropped to U.S.$230 in sales per
square foot when focus shifted away from men's apparel and gear to women's appareL.
C. Pre-Filng Miirketlng lind Sale Related Effott~
76. Eddie Bauer retained Peter J. Solomon Company, L.P. (the "hivestinent Hankers") on
December I; 2008. to aet DS investment banker in ril advisory ciipm;iiy to evaluate
finaneiii) and strategic alternatives to preserve Eddie Bauer as a going concern and pursue
a sale process. -Eddie Buiier and thr. Investment Hankei's undertook efforts to first
restructure and them amend the tenn loan debt, and then to solicit interest in tbo eoinpriny
fi-om private equity investors Bod stnitegk: buyers with the potential to acquire
substantially fill of Eddie Bauer's assets,
77.. The Applicants were not marketed as separate entities in this process due to their complete
iiitegratioii with the U.S. business. As described ahove, the Applicailts have no
independent ability to carr on business without' the branding and support of tbe U~
Debtor,~ as described above.
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- 30 .
78. Eddie Bauer imd thr: Investment Bankers ìdentlfkd and contacted approximately fifty-five
(55) potentiul t1nimcial and strategic counterpartics. ApPJ'xiniately twenty (20) of thesc
partics entered into c,onfidentiality agreements with Eddie Biiuer aiid were provided
cKtcnsive due dilgciice materials on an electl'nic data site, as well as the opportnity 10
speak with Eddie Bauer and their advisors and to conduct site visits with respect to the
Assets. Five (5) of these parties submitted non-binding letters of ì.iitent to Eddie Bauer
(each, II "Letter of Intent" and, collectively, the "Letters ofIliteiit").
79, After an extensive review and in coiisultation with the Investment Bankers, Eddie Ba.uer,
with the approval of Eddie Dauer's board of directors, selected Rainier Holdings LLC, an
affliate of CeMP (the "Stalking Horse Bidder") to be the stalking horse for the sale of
substantially aU of Eddie Dauer's assets (the "Assets") (or in whatever fonn such a sale
takes to any purchaser, the "Sale"). Eddie Bauer provided dratt asset purchase iigreements
to three of the parties submitting Letters of Intent and, based on the Stalking Horse
Bidder's bid submitted in EI Letter ofIntent dated April 23, 2009 (as subsequently amended
on May (2.2009, and May 15,2009), Eddie Bauer and its adv,isors actively negritiated
with the Stalking Horse Bidder regarding the terms and conditions of an asset purchase
¡¡grcomeut (the "Stalking Horse Asset Purchase Agreement") and faciltated various
diligence requests made by the Stalkng Horse Bidder's representatives and advisors. On
June 16, 2009, Eddie Bauer and the Stalking Horse Bidder executed the Stalking Horse
Asset Purchase Agreement, which remains subject to approval in the lnso lveney
Proceedings.
80. While negotiating the Stalking Horse Asset Purchase Agreement, tbc Stalking Horse
Bidder indicated to Eddie Bauer thElt a relatively expedited sale process with respect to the
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51
.31 .
Assets w~s critical to their decision to provide a stalking horse bid. In addition, the post-
petition debtor-in-possession flniiieing for the U.S. Debtors (the "U.S. DIP Fiicilty") is
conditioned on Eddie Bauer's pursuit of a sale process within a specified tinie framc.
Given Eddie Bauer's liquidity situation, Eddie Bauer believes th(lt a Sale process that
includes a Sale of substantially all ofthc Assets will maximize the vulue of Eddie Bauer's
estates. Consequently, Eddie Buuer has detennined that it is in the best ùiterest of its
various estates, creditors and other stakeholders to movc forward with thc Sale process
discussed below.
81. Eddie Bauer is confident thut tbe merchandising, management and marketing initiatives
that are underway, coupled with the urrangcmeiit of a Sale, wil revitalize Eddie Bauer's
business, and that the strategies and gunls estlblisbcd during these CCAA Proceedings and
the Chapter 11 Proceedings wil provide thc bcst opportiiiity for returning to financial
vigour. Eddie Bauer believes that these CCAA Proceedings and the Chapter i I
Proceedings wil be essential tools in the continuation of the Eddie Bauer brand in a
healthier lind profitrible business, capable of canying on the great tradition ofBddic Bauer,
iind re-establishiiig its renowned rcpiitation as "The Origiriàl OutdOor Outfitter (I".
82. 111 short, these CCAA Proceedings and the Chaptcr II Proceedings wil bclp restore a good
company with a great bm,nd and a bad balance sheet.
D. Commencement of the Chapter 11 Proceedings
83. As noted above, in order to effect tbe reorganization and potential sale, the US Debtors
intend tò file voluntary petitions to coiiucnce the Chapter J I Proceedings on Wediiesday,
."'..W...'W........... .,-." ._'. Mn~"_"".""'M' .. "At" = Y" .;.....,,,.. .. ...,
52
...... ....~... ~""~""""~,,..".' ."n__... 0 ..~~....r;:~.."'.""..,._"....-..~..~"_...~.-_r..O~.TO....'.
~ 32.
June 17. 2009, and concurrently therowith or immediately theti:after, the ApplicElnts will
commence these CCAA Proceedings.
84. In addition, the US Debtors intend to bring the usual "First Dáy Motions" before the US
Bankruptcy Court on Wednesday, June 17, 2009. fn particular, the US Debtors wil be
bringing the following motions:
(EI) Critical Vendors - Motion to allow for the payment of certain pre-
petition claims of critical vendors. The critical vendors include certain
manufacturers, distribution network vendors, customs brokers, and
fureign purchasing ugcnts that are necessary for the continued operations
of the business in the normal course;
(b) Employee Wages and8(mefits~ Motion to continue p¡iymenl oral! wages
and other employee benefits;
(c) Independent Contrac(ors - Motion to continue payment of certain
obligations to independent contnictors, inctuding the First Ascent
Contractors who are Ì1itegral in establishing the Eddie. Bauer brand;
(d) Utilties - Motion to continue payment for utility providers;
(e) Taxes - Motion to approve the payment of
taxes;
(f) Prafessional Relenitoii - Motion to apprOve the retention of certain
protessionals during the Chapter 1 I Proceedings; and
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53
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- 33 -
(g) Cash Marwgemenl System - Motion to approve the continued usc of the
cash management system (the ¡'Cush Management System Motion").
85. The US Debtors also intend to bring u motion, li1cclyio beheurd ín about two (2) weeks, to
approve the proposed Sale proi.ess ¡md the Stalking Horse Asset Purchase Agreement,
E. Commencement (If the Cf:AA Proceedings
gEL Tii order to ensure that Eddie Bauer can effect a coordinated global reorganization, the
Applicants wish to commence these CCAA Proceedings.
87. Similar to the US Debtors in the Chapter i i Proceedings, thc Applícants intend to seek
authorization in the Initial Order to continue to honour all pre-filing debts and obligations
feinting to employces, customer plOgranis, and other creditors jn order to ensure that tbere
are no disruptions to tbe Applicants' business so tbat the Applicants' value caii be
maximized. To be clear, given their size and the current state of BB Canada's fiiiancial
situation, we propose to continue paying pre-fiing trade creditors on ordinary payment
terms, regardless of any stay lUder tbe CCAA.
88. Because there is no viable possibilty of I'stneturing or selling Eddie Bauer's Canadian
operation separately, particularly in light of the Applicatts' reliance on the US Debtor's
for funding and the inability to assign the IP Licences, the Applicmits unticipale that they
wil bring a motion in the near futuJ'e askig tbis Honourable Cour to adopt thc stalking
horse sales process that is expected to be approved by the US Bankruptcy Court. If the
motion is grunted, bidders tor the Applicants' business or 'assets will be required to
pmticipute in the U.S. bidding process; liowever, approval of the ultimate successful bid
'~~.. ="_;,;;¡~,:;,,F~"'~ "~'""r-_.,"
54
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- 34 -
involving the Applicants wil be subject to Il motion before this Honourable Court for the
approval of Oie successful biddor, whether at a joint hearing or otherwise.
V. THE APPLICANTS ARE INSOLVENT
89. The Applicants' total indebtedness 10 their creditors, including tile US Debtors, !1S at
May 30, 2009, exceeds $5 milion.
90.. As set out in the Cash Flow Forecast, although the Appliciints are not yet out of cash, they
wnI be by the end of June 2009 as a resii!t of their need to pay rent tor July and August
and to purchase inventory by the end of June for the winter.
and holiday scason,
91. As a result, the Applicants have an immediate !leed for funding in order to ensure that they
can pay rent and purchase tbe necessary merchandise inventory in order to carr on
business,
VI. CARRYING ON BUSINESS
A. Ciisb Miinagement System
(i) Description of
92
the Debtor.)" Cash MClnagement System
Eddie Bauer's business and finanoial affairs are complex, requiring the collection,
disbursement and movement of funds through iuinierous bank accounts throughout the
Ullited States and Canada. In the ordinary course of business Eddie Bauer uses a
centralized cash maiiugement system controlled by EB Inc. and in which all of the various
Eddie Bauer companiespaiticipate. As puTt ofthiil intcgmtcd system, EB Canndu coutrol~
I
the company's CLloadial1 bank aCGClUllts, The Cash MlIl1l1geitcnt System is funded by
~-"A'.C__"''' ,,'..... "". ....~~...~, y +."*.i...-....................~. A/', ...,. ," N~-... ..-.............:..~, ;......-_.:......:..; "7 "_,,__,",.,.__.. __. y._,." ".
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- 35 -
receipts and revenues generated prillHirily Ihrough Eddie Bauer's retail and outlet stores, c-
commorce operations and telephonic and mail catalogue transactions.
93, Eddie Bauer believes that the continued operation of the Càsh Management System is the
iiiost effcient way for the US Debtors to provide the post-filing financing to the
Applicants.
94. The t10w of funds into the Cash Mmiageinenl Systcm is described in detail below and in
the Oowcliurt of the Cash Mmiageincnt System attached as Exlilbit "F". Under that
system, the funds generatcd from US and Canadian salos are deposited daily into
d?posilory accounts and thereafter, transferred to concentration accounts maintained at
BofA for U.S. sales ancl The Bank of Nova Scotia ("Scotia") iii Canada for Canadian
salrs. Eddie Ba.uer lT11intains multiple disbursement accounts from which obligations to
vendors, employees and customers are paid. The majority of these accounts are zero
halance accounts that are fiinded by one of the concentmtion accounts. n is customary to
have a separate disbursement sub-¡iccoiint for each type of obligation which sub-account is
linked to' the main controlled disbursement account to which it relates. These include such
accounts as an accounts payable disbursement account in U.S. dollars, a payroll
disbursement account for Canadian payroll, or a customer refund account, as required.
95. The Bank Accounts uscd in the Cash Management System are as follows:
(a) Cash Colleetion mid Concentration - United States
(i) BolA Ma8ter Concentration Accouni. The focal point oftlie Debtors' Cash
Management system is a master concentration account maintained by BB
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56
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- 36 -
Inc. at BofA (the "BofA Master Concentration Accuunt"). The BofA
Master Concentration Account pools nil deposits for EB lnc. and is the
primary account that provides the fiinds for the BofA Master Disbursement
Account (defined below). The BotA Master Concentration Account
receives funds from two stOJ' deposliory concentration accounts, a retail
bankcard depository concentration account, electronic transfers from
various credit cards, wire transfers from credit card ¡md corporate
customers and transfers ftom separate depository accounts controlled by
affliHle Debtors Eddie Bauer Fulfillment Services, Inc. ("EßFS"), Eddie
Bauer Divemified Siiles, LLC (''EBDS'') and Eddie Bauer International
Development ("EElD"). The BolA Moster ConeoiitlRtiOll Account also
receives excess funds from the Canadian Master Dcpositury Account,
maintained at Scotia in Canada by EB Canada (the "Scotia Mastel'
Depository Canadian Account").
(ii) StOl'e Depository Accounts. BB Inc. maintains approximately 15 U.S.
depository bunk accounts (the "Store Depository Accounts") at 14 banks
(the "Store Depository Banks") wili brimchcs located across 47 statos.
These accounts receive d(;posits from the US Debtors' 335 U.S.. stores.
Sales a1 the U,S. retail stores are made by customers paying by cai;h, debit
or credit eatd. Cash and cheques received at each of tbe U.S. retai i stores
are deposited on a daily basis (or severnl times throughout a given w~ek,
depending on the IOG'ation of the store and tbe time of year) into the Store
Depository Accounts, Weekly deposits in tbe Store Depository Accounts
'1-7
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- 37 -
range from approximately $4 milion during peak selling seasons to
approximately $1 million in non-peak periods.
(iii) Store Depository Conccntralion Accounts. The funds oll deposit jn the
Store Depository Accounts are transmitted via automated olearing house
drawdowns ("ACH") on l\ daily hasis til one of two BofA concentration
acoounts for the Store Depository Banks (the "Store .Depository
Conccntratian Accounts"). The funds from these concentration accounts
are then transtèrred each day by ACH dniwdowns into the BofA Master
Coiicentl'tion Accoiiit.
(iv) Card Depository Accounts. Ret.dl Baiiccard, Direct Bankcards, Amex,
Discover and ADS Credit Deposits are collected in two separate depository
accounts at BofA and transferred each day into tbe DorA Master
Concentration AccDlint. Corporate deposits and other credit card receipts
arc directly transtcrred by the n:rnitting purly through wire transfers and
ACH dn¡wdowns into the BofA Master Concentration Account.
(v) Affiliate Deb/or DeposilOlY Accounts. EBDS, EBFS nud EBID all hold
BoCA dopository accounts iii thciri'cspectivc names and trin¡¡fer deposits by
ACH on a daily basis into the BofA Master Concentration Account.
(b) Cash Collection and Concentration - Canada
(i) Canadian Store Depository Accounts. EB Canada holds three local
Canadian depository bunk nccouiits (the "Canadian Store Depository
~fi1 ,"''''''.c'F "''''. ,~.¡.. ,. '''!-'~'.'.~'.
58
y....~.....v, ',"'~T'""""V_"~.'~'''_'''"_''_:_~'~'''~~''''''''.'"''''''T'''''~'-...;-=-..,l,.'".-....""_..".....~.~-.""...q~"_i-:t,.UJ.:;~~"'_..~:h~3.:to;1;¡¡i
- 38 Accounts") at three separate Canadian banks (i
he "CanadJan Store
Depository Biiiks") looatecl ¡¡cross eight (8) provinces. These aocounts
receive deposits denominateù in
Canadian doJlars from approxiinatety36 of
EB Canada's stores aoross Canuela. Sales at each of EB Canaùa's retail
stores are Ilude by oustomers paying by cash, debit or credit card and
deposited on a duily basis into the Canadian Store Depository Accounts,
rruinlained by the Canadian Slore Depository Banks.
(ii) Scotia Cuncentratlon Accounts. The funds on deposit in the Canadian
Store Depository Accounts Ilrc transmitted via ACII drawdowris on a daily
basis 10 one of
two Scotia concentration accounts. These accouuts are tben
emptied into the Scotio Moster Depository Clliiudian Account.
(iii) Canadian Card DeposïtOlY Accounts, Canadian Amex payments arc
transferred by ACH drawdowns directly by the remitting party into the
Scotia Master Depository Canadian Account. Customer payments made by
Canadian MasterCard, Visa and dehit ciirds are all held in separately named
Scotia depository accounts and trmisfcrrcd daily into the Scotia MEtster
Depository Canadian Account.
(c) Disbursements - United States
(1) BolA Master Disbursement Account. BE Inc. pays its obligations oiit of a
master operating disbursement iiCCO\Uit maintained by Bof: (the "BofA
Master Disbul'sement Account"). Eucli morning. Lhe company analyzes
Ihe day's tol£11 disbursements and transfers required funds from the BofA
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5'9
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. 39.
Master Depository Concentration Account to the Master Disbursement
Accouiit.
(iJ) BolA Zero Balance Di~'bur.\ement A ccotlnts, The BorA Master
Concentrutlon Account then funds the obligations of the U.S, Debtors and
the Applicants through wire and ACH transfers to varioiis zero-balaIH.:e
disbursement accounts established at RofA. These zero balance
disbursement accounts are named for their separate purposes, incliiding the
Accounts Payable Electronic Disbllsement Account, tbe Payroll
Disbursement Acoount and the Re1ìind Cbeck Disbursemont Accoiiil:
(iii) VERA Benefit Accounts, The BofA Master Concentration Account also
ti'ansfers funds into two VEDA Benefit tax eXempt trust accounts. Funds
transfered into the VEBA accounts inolude employee contributions made
through payroll deductions as weJl flS pæmiums paid by the U.S. Debtors as
part otthe U.S. Debtors' benefits program.
Cd) Disbursements.. Canada
(í) Scotia Canadian Master Disbursement Accoimt. EB Canada oiid BBCS
pay their CanadiilU-obligutions using two disbursement accounts. Tlic first
is a liiaster disbur.~emen~ account denominated in Canadian dollars and
maintained at Scotia by EB Canada (the "Scotia Canadian Master
Disbursement AccOlmf'). The SCOtif\ Master Depositoiy Canadian
Account directly funds the Scotia Master Disbursement Account and is
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..,.,':~..';..!lo.i...~",~".,.~
J
60
- 40.
used to pay for thc obligati~ns of
the Applicants' payroll, cusromer refunds
and accounts payable that are denominated in Canadian dollars.
(iJ) USD Canadian Disbursement Account. A second disbursement account for
EB Canada is held in U.S. dollars and maintaim:t1 at BorA by EB Canada
(the "USD Canadiaii Disliurscmaut Account") but funded by the tiofA
Master Depository Concentraiion Account. The USD Canadian
Disbursement Account is used to pay ED Canada's and BDCS's accounts
payable thai arc dcliOininated in US dollars. Canadian receipts and
disbursements are analyzed Oil a daily basis. Excess receipts that will not
be requircd tOI' short ter'in payrnciits are wired eacb day from the Scotia
Muster Depository Canadian Accouiit to the BofA Master Depository
Conccntnition Account. When necessary, funds ure also wired back to the
Scoti¡i Master Depository Canadian Account to handle cash shortfalls.
(e) Dishursements -Iiiteniational
(i) Foreign Escrow Account. An escrow accoiint used for payments to the
Debtors' logistics services provider, Rxpeditor's International, is
inaintained at BofA by En Inc. (the "iloreign Escrow Account"). The
Foreign Escrow Account is used to fund IogistÎlJ,~ services and payment of
customs fees for the shipment ofmerchiindise into the US.
6 1
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- 41 .
(f) .Investments
(i) BalA Overnight Sweep Accouiit. The Debtors maintain accounts for
investing excess cash with BofA. The first is a shorHenn Overnight
Investment Sweep' Account (the "BofA Overnight Sweep Account")
which transfers daily excess balances from the BofA Master Concentration
Account into Eiiros overnght and relmIlS tbese funds to the BorA Mastcr
Concentration Account the following day.
(ii) BofA Direeter'lnvestment Account. The second account is an Investment
Account maintained ut Bunk of America Secmitics (lhe "BofA's Directed
Investment Account"). At the end of each business day, if a balance iii
cxcessof the discretiol111IY balance remains in the BofAMuslef
Concentration Account, the excess bßlance iß transferred .
into the BorA's
Directed Iiivestmcnt Account for iJlvestment in treasury funds. Amounts
deposited in BofA' Ii Directed Investinent Account tlrc then transferred
back to the DofA Master Concentration Account, as 011sli is needed by the
Debtors. The Directed Investment Account may only invest iii "Permitted
fnvestments," as defined therein.
(ii) Continuing Bddie Bauer's Integrated GàshManagement Is In the Stakeholders'
Best Interest
96. As part of the First Day Motions, the U~ Debtors wil be bri.nging thc Cash Management
System Motion to ohliin authorization to continue to use the Cash Management System,
and for iln Older that tbat any net amounts owing as a result of
the transfers that are made
6..
". "')
t
ù, ,¡.-.: " .......~ .' 'Y"=.v.,. ....'.=,~'".~-, '"'" .y,s-'.,A.:.."'~""-.~....-:~,;l~""".,~!,":..H"'~.._,;..~,~, .., c.. '-,y,,"'''~'~l.~.,'~_a.'',,:~ w.¡"-"!,",""..-",i~,'::.~;i~Y;t,";;""\'l)",h~Ä.",",,,..~~..q-4i'i.~'¡¡..
. 42.
under the Cash Management System are accorded "administrative priority expens(; status"
pursiiani to sections 503(b)(I) and 364(b) of the Bankniptcy Code. Similarly, the
Applicants seek, as part of the Jnitiiil Order, authorization to use the Cash Management
System and the grinting "of the Intercompany Charge (as defined below) in favour of the
US Debtors to secure aiiy net amounts that the US Debtors fund to lbe Apjilícants'
operations. To this end, each of the Applicants wil issue in favour of EE Inc, a grid
promissory note to reflect futurc advances imd a gl11ieml seciirity l1grcbmcnt as security
therefor.
97, Eddie Bauer has utili.,ed the Cash Management System substantially in its CUlTout
stnicturc as pait of the companies' ordinary, usual and esscnliiil business practices. The
Cosli Mimugcinent System resembles those commonly employed by large retail enterprises
conipRriible to Eddie Bauer's size and complexity. Such Iiirge, complex retail businesses
teud to lise such systems because of the numerous benefits they provide, including the
ability to; (a) quickly create status reports on the location and amount of fìinds, allowing
management to track and control corporate funds; (b) invest idle cash at higher retums;
(c) ensure cash availability and (d) reduce administrative expenses by facilitating the
!nO vement of funds. TJies6 controls are particularly important here. in a reruíl context,
given the sigtiitìcant amount of cash that flows through the companies' integrated Cash
Management System.
98, Given Eddie Bauer's cr¡rnple'x corporate and finllleiiil structure, I believe it would be
diffcult to establish an entirely neW system of accounts and a iiew cash management
system for Eddie Dauer company. If the companies bad to open separate accounts and
rearrange their Cash Management System, it would necessitate opening nunicl'US iiew
'-'Y"-"'~N. mo..-..._ A '.-.W",' "-'.. - h .~;...., -""''; '~'.-. .,., ",~'_;-.,'. "Y ~y_, v'
63
,..v."_.~.__._,.~,~,,..~ -m.....'"'~...,.o,,,.,,...;"'.,_.~'" "" .".,.,..,....'...""ï....'''.-....~~"Ä1;.=i.;..''''.l,.,....À''lWvl,Ù;'')'~_..w...~i¡..I,¡j~¿.~..,k~""..-t";¡Lf~),~..
- 43 -
¡iceounts for receipts, cash com;¡;lltration and disbursements, The delays that would result
from open ing new nccounts, revising cash management procedures, rnodí(ving technology
systems and inslructing customers and other (hird partíes to redirect payments would
negatively impact tbe ability to operate tbe businesses while pursuing this reorganization.
99. Under these circumstimees, maintaining the Cash Management System is hoth essential
and in the best interests Df Eddie Bauer's stakeholders, Furthemiore, preserving thc
"business as usual" atmosphere and avoiding the unnecessary distractions that would
inevitably be aSfiociated with any substantial disruption in the Cash Mimngemcnt System
will fiicilítate Eddie Bauer's reorganization efforts. The US Debtors and the Applicants
wil continue their historical practice of maintaining records with respect to transfers Df
cash, so that transactions can be ascertained, traced and recorded properly Oil applicable
iiiiercoinpwiy lJccOtllls. For these reasons, the Applicants request the authority to continue
to use their Cash Management System,
LOa. Furthennote, as noted above, the US Debtors have tied a First Day Motion to seek
authorization to pay certain pre-petition employee and other claims. Similarly, Îli these
CCAA Proceedings, the Applicants arc seeking authorization to pay pre-filing employee
and other claims. If
that niliof is granted by this Honourable Court and the US Bankruptcy
Court, it wiJ be essential for the companies to maintain their existing Bank Accounts,
books and records aiid centralized Cash Management System in order to làeilitate the
payment of the pre-petition and pre-fiing claims. i believe the continued use of the
existing Bank Accounts, books aad records and centralized Cash Management System will
faciltate and streamline the Debtors' Sale iind reorganization process.
'.. ';N.~ ,~, . ...' _... 'C'~'V" ,"v,,,
,Vi
6~
'..."N~ ~;~,.__:~N.'~,. -..",...~..-~_~,;",,-~-._~,,,,.c~""''"''',..::Ú+,,,,,,,~,,:'...;,,..;;~..-;"-.""~"".ü",i'~"'''¡¡;#~~~W"''M",~.,¡-;~'(;1......:";¡''';:WK-~''~4.""
. 44 (Ii) The Intercompany Charge
iO i. As part of the Cliapter 11 Proceedings, BorA and ()ertain other institutions (the "DIP
Lendei's") have agreed to advance the U,S. DIP Facility to the US Debtors pursuant to un
agreement (0 be signed iii eonncctioii with the commencement of the Chapter 11
Proceedings (the "DIP Agreement"), The DIP Agreement also provides that rhe BB Inc.
may continue to provide funding to the Applicants (the "Permitted Loans") up to a
maximum amount of U.8.$7.5 million, subject to availability based on a margining of
the
assets of the Applicants, by continuing advances through the Cash Management System in
the event that the Cash Maniigemcnt System Motion is granted in the Chapter 11
Proceedings. TIie DIP Lenders have specified an advance rate to the Applioants of 45% of
eligible inventories, with advance ratcs for other asset categories to be at thc discretion of
the DlP Lendel'll. However, it is a condition to EB liic. making the Permitted Loans that
EB Inc. obtain security in its tàvour in tho fom of new promissory notes and a general
security 81,eernent (uol1ectively, the "New Intercompany Loan Documents") and obtain
8' court-order ¡¡barge (the "In tercoinpaiiy Charge"). In turn, EB Iiic. wHl assign its
interest under the New Intercompany Loan Documents and the Intercompany Chargc to
the DIP Lenders,
102. Because of (ì) the Applicants' inability to meet their obligations as they coiie due over the
next eleven (II) weeks; (ii) the US Debtors' inability to continuing t'nding the
Applicants' outside of the US Bankruptcy Proceedings; and (iii) the DIP Lenders'
requirement that the US Debtors receive security from the Applicants before the US
Debtors mcike any furthor advunces to the Applioants, the Applicants wil not he able to
cuny on business unless they are able to gl'lIttbe necessary security to secure the future
65
~.., ~'_V . .~~v,.. w~ ~"""" "".4-..'"..""'~ .,,-...'"....,_~"'....~ ,....."'N._.._..¡.~ &-.,.'..,.._.....~,.,. .._ -':'7 ..-~ii"~..:.~.. '
- 45 .
'"
iidvances from EB fnc. for amounts thai are sourced from the U.S, DIP Facility. 1 believe
that this arrangement is appropriate aJiJ does the least damage to Eddie Hauer's Cash
Management Syste.m.
J 03. To the extent that they extend, receive, defer, subordinate or repay the Permitted Loans to
or from the Applicants, the US Debtors have iigreed that they wil (i) record such
payments, subordination or receipts u-ppropriately in their books and rccords; and
(ii) provide such noticc as is set forlh in the Order.
104. As a result of the tOl'egoing, tho Applicants seek the Intercompany Charge with respect to
any future iidv!lIces made to the Applicants under the Permitted Loans,
105, For all
the foregoing reasoliS, I believe that the relief requested is necessary to allow Eddie
Baucr to prcsClVC fhe value ofk:ey assets aiid the oii.going viability ortne Applicants, iiud
to ensure that the Applicants can meet their collective commitments to vendors apd
customers and thus miiximize value for the benefit ofthcir estates and creditors.
B. Other Creditors
106. As noted above, certain of the US Debtors' First Day Motions seek to obtain authorization
to continue to honour obligations to employees, critical vendors and customer pnigrams.
Given that the persoiis who fiil! within these categories make up aiL or substantially all. of
tlÌc Applicants' creditors, Eddie Buuer hag decided, if allowed, to honour all pre- and 1)08t.
filing ohligations of the Applicants' creditors in the nonnal couJ"se of business.
.... .~".~_ . ....,-",_ v_ ~-. 'Ow'" - n'~ ¿- _.A ,~. ,-
66
w.",,..h~Wh '.,,,,~~.. .-'__.'~_-".._..;_~_.~. '~"'_' ~,' ,..'.._",.,!" ~';"'""'~""""."''''",'i''''-' .V".''-'~~'''-ffÜO',,..''h
. 46C. Cross.Border IllsolvcncyProtocoJ
i 07. 'The Applicants are also seeking this Honourable Court's recognition and approval of a
c:ross.bordcr insolvency protocol (the "Cross-Border Protocol"), in substantially the 10nn
includcd in the Application Record. The US Debtors are simultaneously seeking approval
of
the proposed Cross-Border Protocol by the US Biiiiknrptcy Court.
108. In light of the transenatìonal nature of Eddie Baiier's business, and the facl that ull
management decisions regarding the Applicants are made by Eddie Bauer's officers and
directors in the United States, I believe that it is necessary to implement the Cross-Border
Protocol between this HOIIOl¡rablc Coui1 and the US Bankmptcy Court (collectively, the
"Courts") to address certain issues thut lire anticipated to urise in coordinating tbe
lnsolvcncy Proceedings.
109. Specifically, r believc thc Cross-Border Protocol is needed to ensure that: (i) both the
CCAA and Chapter J 1 Proceedings are coordinated to avoid illCOI1,~istent, conflicting or
duplicative rulings by the Co\irts; Oi) a 1I parties in interest are provided with Slfft:iciit
notice of key issues in both Insolvency Proceedings: (iii) the substantive rights of all
parties in interest are protected: and (iv) the jurisdictional integrity of the Courts is
preseived. T am advised by Mr. Latham that the proposed Cross-Border Protocol is
consistont with cross-border protocols approved by this Court in other cases, and is
designed to achieve these objectives by implementing II iImnework of general principles
and timing considerations 10 address the basic administrative and procedural issues arising
out of the cross-border nature of the Insolvency Proceedings. I believe that such
)
67
- 47 .
coordination is essential and should, among other things, maximize the efficiency of the
Insolvency Proceedings and reduce the costs associated therewith.
i i 0.. The Cross-Border Protocol provides that it shull not divest or diminish the independent
jurisdiction of this Court over these CCAA Proceedings, or the US Bankruptcy Court over
the Chapter I I Proceedings. In particular, nothing iii the Cross.Border Protocol shall be
construed to, among other things: (a) require this Court tu take aiiy iiction inconsistent with
the laws of Canada; (b) require the US Dankrptcy Court to take any action inconsistent
with the laws of the United States; (c) require Bddie Bauer or any professionals to take uny
action, or rcfrain from taking any action, lhal would result in a breach of duty imposed on
thorn by applicable law; (d) authorize any aotion that otherwise requires thc specific
approval 0 f thi¡; Co'ui1:, except to the oxtent such action is specitíciilly provided for iii the
Cross-Border Protocol as approved by this Court; 01' (e) preclude Eddie Bauer or any party
iii interest from asserting such party's substantive rights under the applicable laws of the
United States, Cuiiadn, or !lny other jiu'isdictioii.
i i 1. For the foregoiltg reasons, I believe that the interests of
Eddie Baner and Îts stakeholders
would be best served by fill order approving the Cross-Border Protocol.
VII. THE MONITOR AND CASH-)?LOWS
112. !tichter has consented to act as the Monitor of the Applicants (the "Proposed Monitor")
in these CCAl\ Proceedings. A copy of Richter's consent 10 act is annexed hereto as
Exhibit IIG".
113. The Applicants and their advisors hiive consulted with the Proposed Monitor to ensure that
the proposed l'cstiucturing met with th~ Proposed Monitor's approval. The Applicants'
,,~'~-~-H" '_~ '..'l..."~y :_~_.....__.~"'._'. .-,~.,.= ~..~ 'O.~"",_--¡....-,; _,_.; ~... ~ ,_, ", ~. ('N'.k ..¥ "'_'~"' "',.,.v. ,_ ,., ~;.,,;,.......,~.-..té
; x' ~y:...,;..'._.._v...,."...-..y.,..",,_., .....-,.... .,-,,-.. ,... .., -.. ... ....- .................c
68
... .."..u..,..~"..,.. ~~..._..~.,~,,".... ...._..,"._.,..;"".C.._.A...~..,~~C....._._...'4.~~.~_._"..~........~,," .... ..._.,._- ~
-18 -
legal oounse! has discussed thiv key components of the Applicant's business with the
Proposed Monitor. In particular, the Proposed Monitor has benefited from discussions
with the Applic¡ints regarding, iiiioiig other things, the Cash Management System (as
defined below) and has reviewed the Cash Flow Forecasts prepared by the Applicants.
114. The Proposed Monitor has also discussed with the Applicants' counsel the general terms
of the Stalking Horse Asse! Purchase Agreement as it relates to the assets of the
Applicants and the Applicants' intentions in tcrms of the proposed bid procedures and
aiJction process.
VIU. REQUESTED CHARGES
i 15. It is contemplated that the Proposed Monitor, its counsel, counsel for the Applicants and'
the App\ic¡mts' financiul advisors will have the 'benefit of a Court-ordered c!iarge (the
"Adinióistriitlon Charge") over the propert of the App1ìcunts, ír order to secure
payment of their fees and disbursements inCUlred at their respective standard rates and
charges. It is contemplated that the Administration Charge shall be in nn aggregate
amount of $1,500,000.
A.' Directors' and Offcers' ChaJ'ge
116. In order to continue to carr on business during these CCAA Pro(~eedings, the Applic!lDts
require the active and committed inyolveli1ent of the members of their boards of directors
und senior offceri/o
117. Tlie Applicants request a Cowt-ordered charge (the "D&O Cliurge") in the amount of
$2,000,000 over the propert of the Applicants iii order to indemnify the directors und
"".. .0'..,..,..';,..:,,..
. . . ..:.¡ .~".'''-.-''... ....,. .w...'..:;."" ... M"
6~7
I
i
- 49.
offcers of the Applicants in respect of any liabilities that they may incur from and after
tlic commencement of these CCAA Proceedings. The amount of the D&O Charge bas
been calculated with reference to the following:
(n) amount of
wages for une fuJi pay period (approximately U.S,$635,OOO, as
rcl1ected in the Cash Flow Statement);
(b) ilccnied vacation pay (approximately U.S,$600,OOO, according to thc
Applicants' records as at May 30,2009); and
(c) an estimate for one month at' GST and other sales laxes (appr?ximalely
$400,000, representing an amount suffcient to cover one rronth of GST
and other sales taxes payable by the Applicants, with rcference to the J:rst
5 months of this calendar year),
i 18. The directors and offcers of the Applicants arc covered by the directors and oftïcers'
liability insurance held by BB Holdings.
B. Priorities ot' Charges
i i 9.' It is contemplated that the Administration Charge, the Intercompany Charge and the D&O
Charge wíl be super-priority charges over all tbe property, iissets and undertaking of the
Applicants, and, as between them, wil have the following priorities:
First -- the Administration Charge, to a max ¡mum of CAD$I,500,OOO;
Second - the Intercompany Charge, to a maximum of U.8.$7,500,000; aud
Third - th? D&O Charge, to a maximum of CAD$2,OOO,DOO.
~. .".,¡ .""~, o. ...,..~c.."J "~.' .", ~:.'''''' ;~, ,~.., '+-~ ..''''- ~:yN~ .., ~
..0.-. ....";.:. h
I
7J
I
.50 -
ex. CONCLUSION
120. The Appl icn nts are Canadian. companies and are insolvent. They are members of a
corporato group, Eddie BUlier, tbnt is seeking to reorganize its affairs on a global basis to
ensure that the enterprise continues as a going-concern.
l21. Eddie Bauer has reached un ag1'ecment with a prospeclive purcJiaser that wil see Eddie
Bauer, including the Canadian Applicants' business operations, ~ontiiiue as a going
concern, with most, if not all of the Canadian pre- tìing unseoured debt being paid in fulL.
Eddie Bauer's principal secured creditors support this process.
122. By reaching these agreements wilh ils principal secured creditors prior to commencing
¡brmal proceedings, Eddie Bauer has worked towurds, and will continue Lo work towards,
a consensual plan of reorganization and to exiL from lbese proceedings as swiftly as
practicable.
l23. In order to implement the restlUcturing while carrying 011 its business, it is essential that
Eddie Bimer'obtain stay protection for its operitions in both Canada and till; United States,
imd thl3T)fore the Applicants respectfully seek the relief set out in the within Application.
SWORN before me at the City of
",, N e.\V 't l' It.~ in the State of
. Ne~ ~oie K, on
June lt ,2009.
r'" '~J, C"'! ê.' (
\ç. ,'~-' '. ~? ,~!c.~
~~)~v..~"~-' -.,_.-~~~.:~~~~~
",õ"...u,,~
-".~~,,",.'"
, A Nntl\ry Piblic of a.nd for the State
o f ~Jl t!w'1 G, ~ _ìÇ_::
"" in i
J;-"-:..-:~._m-,~..._..,.w..._,",'~',-, .....d._.tt
,i NolaryNi:wYoik .
¡ "" ",' Count\'
if
,VMAñVïNWARD 'fOLiD./- .
, ",' ""
.' .~f!~;;""-F''''''~'~~''';:Y llfl,'20(lì Ii
~ -.¡. ".'""_".+..,~_"'"",,,,,,,,~ ._~ ',.. .,_.' ,.-.-_',.~_'~'h.'
7 Î
,~.~","'''' ....~....". .'~ ~..._~.. "..~.~. .. ~.._~ ,.,,,.......,.....~~~.+._,,V.n__~.y._.,...,~.... ,...~.,.....".,-. v' ,;.~.~ . ._,-,",. .. .., .. ,~., ...... ~.',~_.....~......_..__......_...v_ .."',..._....._".._y~.,_..~,y...,"__._.v...., ~....._.........,. .._.~_..."._'"..,_....-._..._-.._..._........."''_,....~.,
THIS IS EXHIDIT "C'I REf/ERRED
TO IN TI-IE AF:FID A VrT OF MARVIN
EDWARD TOLAND SWORN BEFORE
ME ON JUNE 17,2009.
''-.'.'1 " .,\ '"
( " -;/- / / (
::.;::,)~~,:.~.~_.. ~::=:~,~:.=..:~:_~:::.~.~~~~::
A Commissioner for Tiiking Affdavits
SARITA CHALEN
Noliiry Public; Slale 01 New York
No. OICH6020175
tlualllîad in Bron~ County
Comrnlsslon Exprres July ;~6. 2ná-
72
Eddie Bauer Holdings, Iiic.
ned Onlaiicc Sheets
Consolldnter' and Camhi
($OOOs iinilHetf)
Mil)' 3011i, 2009
Canada
iis
ImC
EBCSC
Consol
IWm
Canso I
...;"',"--~....
ASSETS:
Cnsh and ensh cquivalents
Rcstricted Cash
Accounts receivable. net
.$
Tnvcntor1es
Prepaid expenses
Total current assets
Properly and equipment, iiet
Goodwill
Trademarks
Other iiiiiiiigible assels, not
2,682
8:
695
°
$'
$'
695
$
8:
10,678
24,545
2B:i
98'1
1,267
156,943
12.793
986
13,778
1'10,721
146,494
8,408
357
8,765
155,259
43,175
105,110
12,228
16,019
(6,504)
(780)
(7.2M)
14A2~,$..
56j_~$'
15,259
i 82
1,13
i,138
16,34 i
125.009
25,813
IO,G7B
-----....-_.
43,175
105,ILO
)2,228
lIi,019
Other nssels
InvcsimentEBC nad EBCSC
(10,637)
7,284
Inferno (puyable) mccivablß
Deferred tux iissets noii,mireiit
10,637
0
Total lisselB
3,378
18?
15.203
J 14,331
$'
4Z~,§L6
$
$
21.925
9,804
70,128
7,087
$
,f-
10.63'1
$
0
502,512
$
23,39 i
LIAßIUTmS:
Trade uccaiinls payable
Bank overdraft
Accrned expenses
DefelTed (nx 1iab/Hlles. Current
Current Liabilties lU Spiegel Crediiors Trust
55
,t
3,044
(526)
209
1,466
87
$
9,89J
3,253
73,381
6,561
(526)
181
1'1,375
i 7,37,)
""'-Y:ì¡;;500
Deferrod ront obligations
J7533
Unfhvornble lease obligii!ioiis,nc(
Convertible Ilote.q, net
1,'19
21,417
Long-teriu debt, ncr
4,016
--'264
4,280
---'-00,780
3,011
455
12
3,023
40,556
2,184
21,417
166.872
32,753
'155
166,872
Deferred iax liability -, Non Clirrcnl
33,999
Other nOIl-GHren! liability
Pension and other POSi rotireiient "endli linhilitles
Totnllinhilit!os not subjecl to cumpromise
$
87
181
ShorHenn horrowings
CUlTent portion of long-lean debt
Total current liabilities
1,41 i
(1,246)
(1,246)
16,571
i 6,571
n"m
-$'~;¡2717
$
6.23(r.$..~~'276
:£
22,552
6,5 íJ'-~~--$
433,686 .
STOCJWOLDEllS' EQUllY:
Common Stoele
Treasii ry aloek, iit cual
Additional paid-in capital
$
-
$
(8i4)
(9,B24)
16,331
1,142
J,953
"lt49,44I. .$
8,460
$
(40)
2BS""T'"
47r~~!1
14,696
$
5ó4
$
$
$
-
:&
30B
(157)
(573,6J5)
(9,153)
ACCUmulated other oorn)Jreheiisive loss, net
Total liabilities and stockholdcr'8 equity
$
632,05'1
Relainød earning8 (delicit)
Tolal stockholder's equity
30B
om
$
6n,056
10,637
(JO,638)
17,473
1,913
(556,142)
(7,40)
8,748
$
iõ;m u$(5l0."ir'
$"-- 15,26J
$
10,637
$
502,512
\$:132695
EDDIE BAL""R OF CAJ~ADA, INC. Ar'I EDDIE BAUER CUSTOMER SERVICES INC.
AN'" IN THE MATlßR OF A PLAN OF CQMPROMISE OR ARRANGEMENT OF
1985, Co C.36, AS AMENDED
m THE MATTER OF TH COMPANIES' CREDITORS ARRA.l'irEMENT ACT, R.S.C
Lawyers for the Applicants
Tel: 416.979.2211
Fax: 416.979.1234
L Joseph Latham LSUC#: 32326A
Fred Myers LSUC#: 26301A
Chrstopher G. Arstrong LSUC #: 55148B
Toroato, Canada M5B 2M6
Barrters & Solicitors
250 Yonge Street, Suite 2400
GoDM.A,"'S LLP
.A.FIDA VIT OF M.ARVIN EDWARD TOLAD
Pr=dir,g commenced 2( Toronto
COM.'1RCIAL LIST
SUPERIOR COURT OF .JUSTICE
ONTAlUO
Coi.FleNo: cv- 0'\- ~"24-ci-cL
'J
(..,"
EXHIBIT "B"
74
1\ ri ..
This Is ,l!Xhlb~'ddd' ',J+?. ,?~røfef!er to in t~9
OFFICIAL SEAL
PAUL F BREUER
affdavit Of...f,jJi" .ç... .. i; r;. ·
NOTARY PUBLIC-OREGON
COMMISSION NO. 435706
COMMISSION EXPIRES JAN. 16, 2013
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A Notary Public of and for the State of Oregon
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5.78 F
(14247) 0
(5,783) F
i,a gift c:s. pur:M:a.r:d in US biit reeemed in Canada, or vice vers. The: difreæ it .$SK:
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(See "EddIe Saue Cost Summary 12.16,09" docume:i and tt-e atched ""Etùit' dcct1ment)
$4.1 M (idenL'tsd on PeC sced;.le:fur pos 2005 pençd, atthe f;er) plus. $~.seM ($1,.931M identrnsd en Dlff and Pheps report for ¡;re20 alicwnce less Si4SK pe!tair;ir:g to Canai:i'i::r: COnstRJct011 ;ailC\'an::-s)
G -, Prpaid GGC rr.sr.agerre:'t fee íncu1T s:.b.o:QtJ~ to the. trnsaction 2nd' is no a purch3S!ed aset (See th aichd MEqi.ty: docuant)
H ~ US Deferred financìí" cost - trnsadion relatd c:"t whiet were capitalizec for boak: pi.;'rTCses but stlc-u1c! not bs considE!ed fof secon 1060 purpos
D - li~ilites tht\'fiVe a$SUed 10r book purposes l:~.:t \Yhfch do not ha basis fe US fE pu~ M se ne page for reçori=matio~
E. . Cash :onti'-t:t:ted by GGC direly tc Everest Holdings LC and not cc!".sidergd ~rt of purchase price paid' to O;dco (Se tt~ std "Equio/l dowment)
F ¥ ConlJ..ion aiicrilnce tht TEPfeSêIt leasholCl improveents p:id by nldco's lesor. Which for tax ptJse were considere ovned by tle jesso
and thus not j.ruded in purctased assets (for tax purpses only). The 55,7M attax ass no a~'L£red is ealcuLa as 1oilcws:
Grow~¡:rt llCs assets \"lere valued at$2SM per DLi1f and PhefpYd!lktiO'1 report
C ~ Refect G:"Jeport LLC'.: as which. a"2 no: Ynducej in the E.vere Holdings lLCs U.S. Federal Form 1120 due to æ2i: of a comon coome parsnt
Class\!
8,.$06
cre-ck
cheCk
Class V~l
Class V
Class V
21.149
23.872
j"3,OO
CI"".1
ClassW
Class iv
Secticn 1DSQ
17,00
2,2
Tax Purposes .?i.rpo.ses
Asst.:ned for 1000
Líabmties No! 10!' Section
6 - R.efiects ES Iritematiori¡:J ~~~,~~'":O~~~at~$Il~~.Js,,!S~~~-:iQ~3ttr$US Q,,"¡~~:id~2d'~ns'~-c~.;s!'~~
\lab..e.s príMde b-¡ Eddie ~~.19ry~_~!!'~~~~tiWp'~~.n:.~~I~ r~Cf~.,V:,rS~.ttai~ct,.ltf~l~lS0PEN:NG Balance She _ E\.'S~ LlC at August -:. 20OS'')
to ine i:rtOi¡caled open¡ng balance srieet 1Jnoe- -Everet LLCu coumn, exih.xHng deteed inco-e ta asers anj llabiFii~s
(See !:e atai: ''Corisofidang OPE"'ING e.ai~"co Shet- EYeret l.iÇ at,~9U-o: ¡. :ZOOS" a.,~ "Eqúìt'j" dcci.:Tenn
A - Agre
TO! Uabiiit a.~d Equit
Equity
Long-trm Debt
T0t! Non C""1rnt Li6ti~t~S.
unfavO:a1S lease ~b¡ig2!iO'tS
Deerr rent oh~i9i:ns and
Total Curl't UabU!fies
Sho:t-t"T oorr'irQs
Deferd tax fia!WtìêS - ClrT.nt
t-..~~n:es
Payable 1c(from) affiliate
Bank 'Jvsrorafi
Accl;!1 payatie
liabilities and Equity
Asset
Prepari?.d by P';. ar:d reRW9d by Evet Holcfngs u.c
Closing d.ete: 6,'3/2009
DQUars 1n ThcûS.:nds
iRe 1000 Aloc!on
Ever€:st HOldings LLC
L) .
.~
\5837085
EDDIE BAUER OF CANADA, INC. AND EDDIE BAUER CUSTOMER SERVICES INC.
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRNGEMENT OF
IN THE MATTER OF THE COMPANIES' CREDITORS ARRGEMENT ACT, R.S.c.
1985, c. C.36, AS AMENDED
MANS LLP
20, 2010)
Lawyers for the Applicants
Tel: 416.979.2211
Fax: 416.979.1234
-.
0"
L. Joseph Latham LSUC#: 32326A
Christopher G. Arstrong LSUC #: 55148B
Barsters & Solicitors
Bay Adelaide Centre
333 Bay Street, Suite 3400
Toronto, Ontario M5H 2S7
GOOD
(sworn April
AFFIDAVIT OF KELLY E. GREEN
Proceeding commenced at Toronto
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
ONTARIO
Court File No: 09-8240-CL
TAB
3
RSM Richter
Eighth Report of RSM Richter Inc.
as CCM Monitor of
Eddie Bauer of Canada, Inc. and
Eddie Bauer Customer Services Inc.
RSM Richter Inc.
20, 2010
Toronto, April
RSM Richter is an independent member firm of RSM International,
an affliation of independent accounting and consulting firms.
77
7d
Table of Contents
1. INTRODUCTION.................................................................................................................1
1.1
Purposes of this Report
2
2. BACKGROUND .................................................................................................................. 3
2.1
The Transaction
3
3. ALLOCATION OF THE CANADIA PROCEEDS.............................................................. 4
4. CLAMS PROCEDURE........................................................................................................5
4.1 Eddie Bauer US
4.2 CRA
4.3 Contingent Claim
4.4 Trade Claims
6
7
8
9
5. DISTRIBUTION OF FUNDS .............................................................................................. 9
5.1 Holdback
5.2 Potential Priority Claims
10
10
5.3 Recommendation
11
6. ASSETS UNDER ADMINISTRATION ........................ ......................................................12
6.1 Cash
6.2 Potential Tax Refunds
12
12
7. COMPAN'S REQUEST FOR AN EXTENSION ...............................................................13
7.1
Cash Flow
13
8. CHAPTER 11 PROCEEDINGS ............................................ ...............................................14
9. OVERVIEW OF THE MONITOR'S ACTMTIES ..............................................................14
10. CONCLUSION AND RECOMMENDATION .................. ...................................... .............15
RSM Richter
79
Table of Appendices
Appendix "A"
Appendix "B"
Amended and Restated Initial Order of the Ontario Superior Court of
Justice (Commercial List) dated June 17, 200g
Statement of Receipts and Disbursements for the period ending April
2010
Appendix "C"
RSM Richter
Notice of Effective Date dated April
6, 2010
12,
3vD
Court File No. 09-8240-CL
ONTARO
SUPERIOR COURT OF JUSTICE
- COMMERCIA LIST -
IN THE MATTER OF THE COMPANIES' CREDITORS ARGEMENT ACT,
R.S.C. 1985, C.C-36, AS AMENDED
AND IN THE MATTER OF A PIA OF COMPROMISE OR ARGEMENT OF
EDDIE BAUER OF CANADA, INC. AND
EDDIE BAUER CUSTOMER SERVICES INC.
EIGHTH REPORT OF RSM RICHTER INC.
AS CCAA MONITOR OF
EDDIE BAUER OF CANADA, INC. AND
EDDIE BAUER CUSTOMER SERVICES INC.
April 20, 2010
1. INTRODUCTION
Pursuant to an order of the Ontario Superior Court of Justice (the "Court") made on June 17,
200g, as amended and restated (the "Initial Order")!, Tenere of Canada Inc. (formerly,
Eddie Bauer of Canada, Inc.) ("Tenere") and Yuma Customer Servces Inc. (formerly, Eddie
Bauer Customer Servces Inc.) ("Yuma") Gointly, the "Company") were granted protection
under the Companies' Creditors Arrangement Act (the "CCAA") and RSM Richter Inc.
("Richter") was appointed the Monitor (the "Monitor"). A copy of the Initial Order is
attached as Appendix "A".
This report ("Report") is fied by Richter in its capacity as Monitor.
1 The Initial Order was amended and restated on consent shortly after its issuance to include provisions
requested by counsel to certain landlords and by counsel to the US DIP Lender.
RSM Richter is an independent member firm of RSM International,
an affliation of independent accounting and consulting firms.
8 1
Page 2
On June 17, 2009, Eddie Bauer Holdings, Inc., the Company's US based parent company,
and certain other US affliates (collectively, "Eddie Bauer US") commenced reorganization
cases under chapter 11 of title 11 of the United States Code in the United States Bankruptcy
Court for the District of Delaware (the "US Court") (the "Chapter 11 Proceedings"). The
Company is not subject to the Chapter 11 Proceedings. A cross-border protocol was
approved by this Honourable Court on June 25, 2009.
1.1 Purposes of this Report
The purposes of this Report are to:
a) Provide background information about the Company and these proceedings;
b) Summarize the proposed allocation of the proceeds of the Transaction (as
defined below) allocated to the Company (US$11 milion) as between Tenere
and Yuma;
c) Summarize the results of the claims procedure ("Claims Procedure")
administered by the Monitor in accordance with an Order made on July 22,
2009 (the "Claims Procedure Order");
d) Set out the proposed distributions to Tenere's unsecured creditors with
admitted claims in the Claims Procedure, net of a holdback in the amount of
$2.5 millon (the "Holdback");
e) Summarize potential tax refunds from Canada Revenue Agency ("CRA") to
the Company;
f) Provide an overvew of the Monitor's activities since December 8, 2009, the
date on which its activities were previously approved; and
g) Recommend that this Honourable Court make an order:
· Approving the proposed allocation of the Transaction proceeds
between Tenere and Yuma;
· Reducing the Administration Charge from $1 milion to $500,000;
· Releasing and discharging the Intercompany Charge (as defined in the
Initial Order), as consented to by Eddie Bauer US, the beneficiary of
the Intercompany Charge;
· Authorizing and directing the Monitor to make a distribution in the
amount of US$7.8 millon to Eddie Bauer US;
Page
3
· Authorizing and directing the Monitor to make a distribution totallng
approximately $1,200 in respect of three admitted claims against
Tenere in the Claims Procedure;
· Approving the Holdback;
· Granting the Company's request for an extension of its stay of
proceedings from April 30, 2010, the date that the stay expires, to
September 30,2010; and
· Approving the Monitor's activities, as described in this Report.
2. BACKGROUND
Eddie Bauer US and the Company Gointly, the "Eddie Bauer Group") sold outerwear,
apparel and accessories, as well as down products for the home, including comforters,
pilows and throws. Eddie Bauer Holdings, Inc. was a publicly traded company, the shares
of
which were listed on the NASDAQ Global Market under the trading symbol "EBHI". The
Eddie Bauer brand is internationally recognized and Eddie Bauer products are available at
approximately 370 retail and outlet stores, including approximately 36 retail stores and one
warehouse store located throughout Canada, through catalogue sales and on the Eddie Bauer
Group's website. At the commencement of these proceedings, the Company employed
approximately 933 individuals in Canada.
2.1 The Transaction
At a joint hearing conducted on July 22, 2009, the US Court and this Honourable Court
approved a transaction ("Transaction") between the Eddie Bauer Group and Everest
Holdings LLC, an affiiate of Golden Gate Private Equity, Inc. (the "Purchaser"). The
Transaction included, among other things, the purchase and sale of all of the Company's
business and assets. The purchase price pursuant to the Transaction was US$286 milion, of
which US$11 milion (the "Canadian Proceeds") was allocated to the Company's assets. The
Transaction did not set out an allocation of the Canadian Proceeds between Tenere and
82
Page
4
Yuma. The allocation was to be addressed subsequent to closing. The Transaction closed on
August 3, 2009 and the Canadian Proceeds were paid to the Monitor and deposited into a
trust account which it controls (the "Trust Account").
3. ALLOCATION OF THE CANADIAN PROCEEDS
As detailed in the affidavit filed in the accompanying motion materials, it is proposed that of
the Canadian Proceeds, US$1O.923 milion (99.3%) be allocated to Tenere and US$77,OOO
(0.7%) be allocated to Yuma. The proposed allocation is based on the fair market value of
the respective purchased assets as determined for US Federal tax purposes per the LR.C.
Section 1060 allocation.
The proposed allocation has been reviewed by the Monitor, the Company and Deloitte &
Touche Inc. ("Deloitte"), the Company's tax advisor. Those parties have worked with Alvarez
& Marsal Taxand, LLC ("Alvarez"), Eddie Bauer US' financial advisor in the Chapter 11
Proceedings, to review the calculations and documentation supporting the proposed
allocation.
In its assessment of the proposed allocation, the Monitor considered the following:
· The principal Canadian assets acquired by the Purchaser, being retail
inventory and the Canadian realty leases, were assets of Tenere. In this
regard, the closing balance sheets used for tax and accounting purposes by
the Company reflect a book value of the assets of Tenere and Yuma of
approximately US$26.1 milion and US$468,000, respectively;
· The Purchaser's opening balance sheet reflects a book value
of the assets of
Tenere and Yuma of approximately US$24.3 milion and US$172,000,
respectively;
· The Monitor understands that the Purchaser is in the process of winding
down Yuma's operations. The call centre functions at Yuma ceased in early
April, 2010 and the entire operation is scheduled to be discontinued by
May 30, 2010. The Yuma business has no tangible assets and is not saleable
independent of Tenere; and
83
Pages
· The consistency of the treatment of the allocation of the Canadian Proceeds in
the CCAA proceedings and the Chapter 11 Proceedings. In this regard, the
proposed allocation has been used by the Company, the Purchaser and Eddie
Bauer US in their respective tax filings and other Canadian and US reporting
obligations resulting from the Transaction.
Based on the foregoing, and for the reasons set out in the accompanying affidavit, the
Monitor believes the proposed allocation is reasonable and appropriate in the
circumstances.
4. CLAIMS PROCEDURE
The Claims Procedure Order solicited pre-fiing claims against the Company, post-filng
restructuring claims and claims against the Company's directors and officers. A summary of
the results of the Claims Procedure is provided in the table below:
Claims
Disal1owed3
and
Withdrawn
($)
Allowed
Claims ($)
4
12,049,434
130,490
183,393
(118,451)
12,049,434
130,490
64,942
1
1,000,000
(1,000,000)
("WCB") (unsecured)
1
804
804
UPS Canada Ltd. ("UPS") (unsecured)
Shoppertrak RCT Corp. ("Shoppertrak")
(unsecured)
1
222
222
1
8,166
57,752
13,430,261
(7,981)
(57,752)
(1,184,184)
(3,459,260)
No.
Creditor2
of
Claims
Filed
Claims Filed
($)
Tenere
Eddie Bauer US (unsecured)
CRA (property claim)
CRA (unsecured)
Contingent claim (unsecured)
1
1
BC Workers Compensation Board
Other trade claims (unsecured)
Subtotal
11
21
185
12,246,077
Yuma
CRA (propert claim)
1
CRA (unsecured)
Other sundry claims (unsecured)
2
3,709,652
2,635,076
1
137
(137)
6,344,865
(4,910,635)
(6,094,819)
Subtotal
Total
4
25
19,775,126
(1,451,238)
250,392
1,183,838
1,434,230
13,680,307
2 Certain creditors fied their claims against both entities. Those claims are reflected in the chart as claims fied
against Tenere.
3 Represents claims that have been disallowed or are in the process of
being disallowed.
84
Page 6
As the table reflects, the Company does not have any secured obligations. The property
claims filed by CRA (discussed in Section 4.2 below) against Tenere and Yuma reflect the
only potential priority claims against the Company, other than the claims covered by the
charges created under the Initial Order (discussed in Section 5.2 below). The limited
number of claims filed in the Claims Procedure is a result of the assumption by the
Purchaser of the majority of the Company's landlord and vendor obligations and the fact
that the Initial Order permitted the Company to pay for pre-filing goods and servces.
Further information on the claims filed in the Claims Procedure is provided in the following
sections of this Report.
4.1 Eddie Bauer US
Eddie Bauer US financed the Company's operations prior to and during the restructuring
proceedings. The Monitor reviewed the proof of claim filed by Eddie Bauer US, including
banking and other documentation supporting Eddie Bauer US' advances to the Company.
The Monitor worked with Alvarez on certain adjustments to
Eddie Bauer US' claim,
including to the foreign exchange rate utilized therein and an adjustment resulting from a
tax refund received by Eddie Bauer US which reduced the intercompany claim. Eddie Bauer
US has since fied an amended proof of claim in the amount of approximately $12 milion.
The Monitor is satisfied that the amended claim reconciles to Tenere's books and records
and accurately reflects Tenere's obligations to Eddie Bauer US.
85
86
Page 7
The claim of Eddie Bauer US includes a contingent claim under a letter of credit provided by
Eddie Bauer US in respect of a bond posted by Tenere in the amount of US$430,000. The
letter of credit expires on May 5, 2010 and it is not anticipated that there will be any
exposure under the letter of credit. The Monitor intends to request that Eddie Bauer US file
an amended proof of claim adjusting for this contingency when its exposure under the letter
of credit, if any, is crystallzed4.
4.2 eRA
Prior to the claims bar date (September 21, 2009), CRA fied three proofs of claim totallng
approximately $2.6 milion and 11 "placeholder" claims - one for each of the Company's tax
accounts and "placeholder" claims against the Company's directors. CRA has since
completed its audits and filed amended proofs of claim, which claims are reflected in the
table above.
CRA's amended claims against Tenere total approximately $314,000, including a property
claim for unremitted GST in the amount of approximately $130,000. Based on a review
performed by the Monitor and Deloitte, on March 9, 2010, the Monitor issued a Notice of
Disallowance reducing CRA's unsecured claim against Tenereby approximately $118,000.
On March 23,2010, CRA filed a Notice of
Dispute. Under the Claims Procedure Order, there
is no deadline for the Monitor to refer the matter to a Claims Officer or this Honourable
Court. Accordingly, the Monitor intends to continue to work with CRA to try to resolve this
claim.
4 The forthcoming amendment to the claim of Eddie Bauer US is not expected to have a consequence on any
further distributions in these proceedings as Eddie Bauer US will be Tenere's only unsecured creditor following
the proposed distributions and the setoff by eRA of its claim against Tenere.
Page 8
As at the date of this Report, CRA is holding refunds owing to Tenere totallng
approximately $1 milion. There are further refunds owing by CRA to Tenere of
approximately $700,000 which are in the process of being assessed by CRA. The Monitor
has requested that CRA release the refunds owing to Tenere, net of the claims admitted by
the Monitor in the Claims Procedure (totallng $313,000, of which $118,000 is subject to the
Notice of Dispute). As at the date of this Report, CRA has not released the refunds. Should
the Monitor and the Company be unable to resolve these issues with CRA in the short term,
it may be necessary to seek an Order from this Honourable Court regarding this matter.
CRA has also filed amended claims against Yuma totallng approximately $6.3 millon,
including a property claim in the amount of $3.7 milion for unremitted HST. CRA is the
only creditor of Yuma. The Monitor is in the process of disallowing Yuma's property claim
on the basis that the servces rendered by Yuma were "zero-rated" for the purposes of HST.
The Notice of Disallowance is expected to be issued shortly and will be issued at the
Company's request as a result of the potential Directors' obligations in connection with this
claim. Deloitte advises that there are further discrepancies in the amounts claimed by CRA
against Yuma, which would result in further Notices of Disallowance totallng approximately
$ 1.5 milion; however, other than for the HST property claim, the Monitor does not intend to
advance the Claims Procedure as it relates to Yuma given that there are no proceeds
available for distribution from Yuma's estate, subject to the Court's approval of the proposed
purchase price allocation.
4.3 Contingent Claim
A contingent claim of $1 milion was fied in respect of a "slip and fall" incident that allegedly
took place outside one of
the Company's retail
locations on March 25,2008. This
claim was
disallowed in accordance with the Claims Procedure on November 23,2009 on the basis that
87
Page
9
there is no evidence that the injury that may have resulted from the incident was caused by
the Company. The claimant did not file a Notice of Dispute and the deadline for it to do so
(December 8, 20(9) has passed.
4.4 Trade Claims
Given that the Purchaser assumed the majority of the Company's trade obligations and that
the Initial Order permitted the Company to pay pre-fiing trade obligations, the majority of
the trade claims filed in the Claims Procedure were either misfied claims that were actually
claims against Eddie Bauer US or claims that had been assumed or paid by the Purchaser.
Accordingly, the majority of those claims were either disallowed or withdrawn by the
creditors when contacted by the Monitor. The Monitor did not receive any Notices of
Dispute in response to the disallowances and the deadline for filing a Notice of Dispute has
also passed. The Monitor has admitted the claims of WCB, UPS and Shoppertrak, totallng
approximately $1,200.
5. DISTRIBUTION OF FUNDS
The Company is seeking this Honourable Court's approval of the following distributions
from the Canadian Proceeds in the Monitor's possession:
. US$7.8 milion to Eddie Bauer US, as a partial distribution to be applied
against its admitted claim against Tenere in the Claims Procedure; and
. $804.24 to WCB, $221.51 to UPS and $185 to Shoppertrak, representing
payment in full of their respective admitted claims against Tenere in the
Claims Procedure.
The Monitor is proposing to pay WCB, UPS and Shoppertrak the full amount of their
admitted claims given their nominal value and the professional costs associated with dealing
with them otherwise - the costs of additional partial distributions to, and further
correspondence with, these creditors would exceed the value of their claims.
88
Page 10 89
5.1 Holdback
The proposed distributions would leave approximately $2.5 milion in the Trust Account.
The Holdback is comprised of the Administration Charge ($500,000) and the Directors'
Charge ($2 milion). The Monitor believes that the Holdback of $500,000 under the
Administration Charge is sufficient to fund the costs incurred, or to be incurred, to the
completion of these proceedings.
5.2 Potential Priority Claims
The Initial Order created the following charges (collectively, the "Charges"):
. Administration Charge (up to $1 milion). The Administration Charge
provides a charge in favour of certain professionals involved in these
proceedings in the event that their fees are unpaid at the time of distribution,
or otherwise. As of the date of this Report, the majority of the professional
March, 2010 have been paid.
fees through to the end of
The Moùitor intends to withhold $500,000 from the Transaction proceeds
and, accordingly, is proposing to reduce the Administration Charge from $1
milion to $500,000.
. Intercompany Charge (up to US$Z.5 milion, plus interest). The
Intercompany Charge provides a charge in favour of Eddie Bauer US for any
advances made to the Company over the course of the CCAA proceedings.
The Intercompany Charge was created in order to allow Eddie Bauer US to
continue to fund the Company's operations through its pre-filng cash
management system. The Intercompany Charge contemplated that Eddie
Bauer US could advance up to US$7.5 milion to the Company pursuant to
New Intercompany Loan Documents (as defined in the Initial Order).
As at the date of this Report, there are no amounts outstanding that are
secured by the Intercompany Charge - Eddie Bauer US' claim was fied on an
unsecured basis. Accordingly, the Company is proposing to release and
discharge the Intercompany Charge. Eddie Bauer US, the beneficiary of the
Intercompany Charge, has consented to this relief.
Page 11 9 iJ
. The Directors' Charge (up to $2 milion). The Directors' Charge is for claims,
costs, charges and expenses relating to the failure of the Company to make
payments of the nature referred to in subparagraphs 6(a), 8(a), 8(b) and 8(c)
of the Initial Order. Based on the results of the Claims Procedure, the
Monitor understands that:
~ The potential HST obligation of Yuma referred to in Section 4.2 of this
Report will be disallowed. This is the only potential GST jHST claim
submitted in the Claims Procedure resulting from the audits conducted by
CRA;
~ The Company does not have a provincial sales tax obligation. No claims
were filed in the Claims Procedure by the Ontario Ministry of Finance or
other Provincial taxing authorities;
~ The Company is current on its payroll remittances; and
~ The Company's accrued vacation pay obligation was assumed by the
Purchaser pursuant to the Transaction.
Should any amounts covered by the Directors' Charge remain outstanding, the full amount
of the Directors' Charge ($2 milion) will be available to satisfy these
obligations from the
Holdback. The Monitor is in discussions with the Company's counsel regarding the
elimination of the Directors' Charge; however, the Directors' Charge is likely to remain in
place until the resolution of CRA's HST claim against Yuma.
Other than the claims that are subject to the Charges, the Monitor is not aware of any other
claim that ranks in priority to the Company's unsecured creditors with admitted claims
under the Claims Procedure.
5.3 Recommendation
Given that the administration of the Claims Procedure is complete and that the Holdback is
sufficient to cover any potential priority claims, the Monitor is of the view that the proposed
distributions, Holdback and amendments to the Charges are appropriate in the
circumstances.
Page 12 91
6. ASSETS UNDER ADMINISTRATION
6.1 Cash
As at the date of this Report, there is approximately US$1O.3 milion on deposit in the Trust
Account. A statement of receipts and disbursements for the period ending April
16, 2010 is
attached as Appendix "B".
6.2 Potential Tax Refunds
Based on discussions with Deloitte, the Monitor understands that there may be additional
tax refunds available to the Company (over and above the refunds currently held by CRA), as
follows:
. A refund resulting from losses incurred in fiscal 2009. In order to quantify
and realize this potential refund, the Company's 2009 fiscal tax return must
be prepared and fied. Deloitte is in the process of preparing the tax returns
and the Monitor expects to file those returns shortly on the Company's behaif
(the deadline for doing so is June 30,2010); and
. The completion of the Competent Authority transfer pricing refund request
being administered by Gowling Lafleur Henderson LLP ("Gowlings"),
engaged on a contingency fee basis in accordance with a Court Order made on
December 8, 2009. The Monitor understands that this refund could be
material; however, the timing and quantum of the refund is highly speculative
and uncertain.
Other than the funds on deposit in the Trust Account and these potential tax refunds, the
Monitor is not aware of any further material assets yet to be monetized.
5 Pursuant to an Order made on August 20, 2009, the Monitor's powers were expanded to include, inter alia,
filng tax returns on the Company's behalf.
Page 13
7. COMPANY'S REQUEST FOR AN EXTENSION
The Monitor supports the Company's request for an extension of the stay of proceedings for
the following reasons:
· The Company is acting in good faith and with due dilgence;
· It will enable the Monitor to complete the outstanding matters in the Claims
Procedure and to faciltate the proposed distributions detailed in this Report,
subject to the approval of this Honourable Court; and
· An extension will provide the Company and the Monitor with the opportunity
to work with Deloitte to pursue the tax refunds that may be owing to the
Company, as described in Section 6.2 of this Report.
Given the nature of the outstanding issues, being tax matters which tyically are not resolved
on a timely basis, the Monitor believes an extension of the stay of proceedings until
September 30, 2010 is reasonable as it should eliminate the need to bring a further motion
solely for the purpose of extending the stay of proceedings. The Monitor does not expect
there to be material developments through to that date.
7.1 Cash Flow
A cash flow projection has not been prepared for the stay extension period. The remaining
costs in these proceedings (largely professional fees) are to be funded from the Holdback.
The Monitor believes the Holdback is sufficient to cover post-filng expenses incurred, or to
be incurred, through to the completion of these proceedings.
92
93
Page 14
8. CHAPTER 11 PROCEEDINGS
Recent material developments in the Chapter 11 Proceedings include the following:
. March 18, 2010 - The US Court entered an order confirming Eddie Bauer US'
First Amended Joint Plan of Liquidation (the "Plan");
. March 29, 2010 - Pursuant to Section 7.2 of the Plan, Larry Waslow of
Recovery Servces, Inc. was appointed as the Liquidating Trustee and the
assets of the US Debtors (including the equity interests in Tenere and Yuma)
were transferred to a liquidating trust established pursuant to the Plan. The
Liquidating Trustee's appointment effectively replaces Kugman Partners, Inc.
as the Chief Restructuring Offcer of Eddie Bauer US; and
. April 6, 2010 - The Plan became effective on this date. A copy of the Notice
of Effective Date is attached as Appendix "C".
The Monitor has corresponded with the Liquidating Trustee following its appointment in
order to, inter alia, update the Liquidating Trustee on the Company's CCAA proceedings,
including the quantum and timing of distributions to Eddie Bauer US and further potential
refunds that may be available to the Company, as described in this Report.
9. OVERVIEW OF THE MONITOR'S ACTIVITIES
In addition to the activities described in this Report, the Monitor's activities have included:
. Corresponding with legal counsel in connection with all matters in these
proceedings, including the proposed allocation, distribution issues and
Claims Procedure issues generally;
. Corresponding extensively with Deloitte and the Company's former in-house
tax advisors, regarding tax issues;
. Corresponding with representatives from Gowlings with regards to the
Competent Authority refund application process;
. Faciltating payments, filng certain tax returns and following up on potential
tax refunds on behalf of the Company in accordance with a Court Order dated
August 20, 2009;
94
Page 15
. Carryng out the Claims Procedure in accordance with the Claims Procedure
Order, including issuing notices of disallowance;
. Corresponding with Alvarez on financial and accounting matters in
connection with the Company's books and records;
. Reviewing documents filed with the US Court in the Chapter 11 Proceedings;
. Responding to creditor inquiries regarding the CCAA proceedings and the
Claims Procedure;
. Placing on the Monitor's website copies of materials fied II these
proceedings;
. Corresponding with counsel concerning the issues described in this Report;
. Corresponding with the Liquidating Trustee;
. Drafting this Report; and
. Other matters pertaining to the administration of this mandate.
10. CONCLUSION AND RECOMMENDATION
Based on the foregoing, the Monitor respectfully recommends that this Honourable Court
make an order granting the relief detailed in Section 1.1(g) of this Report.
* * .*
All of which is respectfully submitted,
KSv0
(6Jv. I ¡J C p
RSM RICHTER INC.
IN ITS CAPACITY AS CCAA MONITOR OF
EDDIE BAUER OF CANADA, INC. AND
EDDIE BAUER CUSTOMER SERVICES INC.
AND NOT IN ITS PERSONAL CAPACITY
Appendix "A"
.1.
Court File No. 09-8240-CL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
)
WEDNESDAY, THE i 7TH
)
)
DA Y OF JUE, 2009
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRNGEMENT OF
EDDIE BAUER OF CANADA, INC. AND EDDIE BAUER CUSTOMER SERVICES INC:
Applicants
AMENDED AND RESTATED INITIAL ORDER
TI-IS APPLICATION, made by the Applicants, pursuant to the Companies J Creditors
Arrangement Act, RS.C. i 985, c. C-36, as amended (the "CCAA") was heard this day at 330
University Av~nue, Torònto, Ontario.
ON READING the affidavit of Marvin Edward Toland sworn June 17, 2009 (the
"Toland Affidavit"), and tIie Exhibits thereto; and on hearing the submissions of counsel for the
Applicants, counsel
for Rainier Holdings LLC, counsel for Bank of America, N.A., and counsel
. for the proposed monitor, RSM Richter IIic. ("Richter"), and on reading the consent of Richter
to act as the monitor of the Applicants (in ~~ch capacity, the "Mönit~J'''),
SERVICE
1. THIS COURT ORDERS that the time for service of the Notice of Application and the
Application Record is hereby abridged so that this Application is properly retunable today and
hereby dispenses with further service thereof.
95
..~\ I'
\)
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APPLICATION
2. THIS COURT ORDERS AND DECLARES that the Applicants are companies to
which the CCAA applies.
PLAN OF ARRNGEMENT
3. THIS COURT ORDERS that the Applicants shall have the authority
to file and may,
subject to further order of this Court, file with this Court a plan of compromise or arrangement
(hereinafter referred to as the "Plan") between, inter alia, the Applicants and one or more classes .
of
their secured and/or unsecured creditors as they deem appropriate.
POSSESSION OF
PROPERTY AND OPERATIONS
4. THIS COURT ORDERS that the Applicants shall remain in possession and control of
their current and future assets, undertakings and properties of every nature and kind whatsoever,
and wherever situate including all proceeds thereof (the "Property"). Subject to further Order of
this Cour, the Applicants shall continue to carryon business in a manner consistent with the
preservation of
their business (the "Business") and Property. The Applicants shall be authorized
and empowered to continue to retain and employ the employees, consultants, agents, experts,
accountants, counsel and such other persons (collectively "Assistants") currently retained 01'
employed by them, with liberty to retain such further Assistants as they deem reasonably
necessary or desirable in the ordinary course of business or for the carrying out of the terms of
this Order.
5. THIS COURT ORDERS that the Applicants shall be entitled to continue to utilize the
central cash marüigement system curreIiiIy in place as described in the Toland Affidavit or
replace it with another substantially 'similar central cash managemeiit system (the "Cash
Management System") and that any present or future ban providing the Cash Management
System shall not be under any obligation whatsoever to inquire into the propriety, validity or
legality of any transfer, payment, collection or other action taken under the Cash Management
System, or as to the use or application by the Applicants of funds transferred, paid, collected or
otherwise dealt with in the Cash Management System, shall be entitled to provide the Cash
Management System without any liabilty in respect thereof to any Person (as hereinafter
.Q 1
.1 If
-3defined) other than the Applicants, pursuant to the terms of the documentation applicable to the
Cash Management System, and shall be, in its capacity as' provider of the Cash Management
System, an unaffected creditor under the Plan with regard to any claims or expenses it may suffer
or incur in connection with the provision of the Cash Management System.
6. THIS 'COURT ORDERS that the Applicants shall be entitled but not required to pay the
following expenses whether incurred prior to or after this Order:
(a) aU outstanding and future wages, salaries, employee and pension benefits,
vacation pay, bonuses and expenses payable on or after the date of this Order, in
each case incurred in the ordinary course of business and consistent with existing
compensation policies and anangements;
(b) the fees and disbursements of any Assistants retained or employed by the
Applicants in respect of these proceedings, at their respective standai:d rates and
charges; and
( c) amounts owing for goods and services actually supplied to the Applicants prior to
the date of
this Order.
7. THIS COURT ORDERS that, except as otherwise provided to the contrary herein, the
Applicants shall be entitled but not required to pay all reasonable expenses incurred by the
Applicants in catrying on the Business in the ordinary course after this Order, and in carrying out
the provisions otthis Order, which expenses shall include, without limitation:
(a) all expenses and capital expenditures reasonably necessai'y for the preservation of
tl:e Property or the Business including, without limitation, .payments on account
of insurance (including directors and officers insurance), maintenance and
security services; and
(b) payment fol' goods or services actually supplied to the Applicants following the
date of
this Order.
8. THIS COURT ORDERS that the Applicants shall remit, in accordance with legal
requirements, or pay:
,"1 ...~
ïö
-4(a) any statutory deemed trust amounts in favour of
the Crown in right of Canada or
of any Province thereof or any other taxation authority which are required to be
deducted from employees' wages, including, without limitation, amounts in
respect of (i) employment insurance, (ii) Canada Pension Plan, (iii) Quebec
Pension Plan, and (iv) income taxes;
(b) all goods and services or other applicable sales taxes (collectively, "Sales Taxes")
required to be remitted by the Applicants in connection with the sale of goods and
services by the Applicants; and
(c) any amount payable to the Crown in right of Canada or of any Province thereof or
any political subdivision thereof. or any other taxation authority in. respect of
of
municipal realty, municipal business or other taxes, assessments or levies
any
natue or kind which are entitled at law to be paid in priority to claims of secured
creditors and which are attributable to or in respect of the cariying on of the
Business by the Applicants.
9. THIS COURT ORDERS that, until such time as the Applicants deliver a notice in
(c) of this Order (a
"Notice of Repudiation"), the Applicants shallpay all amounts constituting rent or payable as
writing to repudiate a real propeity lease in accordance with paragraph i
i
rent under real property teases (including, for greater ceitainty, common area maintenance
charges, utilities and
realty taxes and any other amounts payable to the landlord
under thè lease)
or as otherwise may be negotiated between the Applicants and the landlord hom time to time
("Rent"), for the period commencing from and including the date of this Order monthly, in
advance. On the date of the first of such payments, any arrears relating to the. period
commencing from and including the date of this Order shall also be paid. Upon delivery' of a
Notice of Repudiation, the Applicants
paragraph 11(c) of
shall pay all Rent due for the notice period stipulated in
this Order, to the extent that Rent for such period has not already been paid.
10. THIS COURT ORDERS that, except as specifically permitted herein, the Applicants
are hereby directed, until fuiiher Order of this Court: (a) to make no payments of principal,
interest thereon or otherwise on account of amounts owing by the Applicants to EB Inc. (as
defined below) as of the date hereof; (b) to grant no security interests, trust, liens, charges or
99
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encumbrances upon or in respect of any of their Property; and (c) to not grant credit or incur
liabilities except in the ordinary course of
the Business.
RESTRUCTURING
11. TI-IIS COURT ORDERS that the Applicants shall, subject to any covenants contained
in the New Intercompany Loan Documents (as defined below) except that subsection 11 (c)
below shall apply regardless of the covenants contained in the New Intei'company Loan
Documents, have the right to:
(a) permanently or temporarily cease, downsize or shut down any of
their business or
operations mid to dispose of redundant or non-material assets not exceeding
$250,000 in anyone transaction or $500,000 in the aggregate, subject to
paragraph 11 (c), if applicable;
(b) terminate the employment of such of their employees or temporarily layoff such
of
their employees as they deem appropriate on such terms as may be agreed upon
between the Applicants and such employee, or failing such agreement, to deal
with the consequences thereof in the Plan;
(c) in accordance with paragraphs 12 ahd 13, vacate, abandon or quit the whole but .
not part of any leased premises and/or repudiate any real propeity lease and any
ancilm'y agreements relating to any leased premises, on not less than foureen
(14) days notice in writing to the relevant landlord on such terms as may be
agreed upon between the Applicants and such landlord, or failng such agreement,
to deal with the consequences thereof in the Plan; and
(d) repudiate such of their arrangements or agreements of any nature whatsoever,
whether oral or written, as the Applicants deem appropriate on such terms as may
be agreed upon between the Applicants and such counter-paities, or failng such
agreement, to deal with the consequences thereof in the Plan.
all of the foregoing to permit the Applicants to proceed with an orderly restructuring of the
Business (the "Restructuring").
" r-, 0
¡ U~,
-612. THIS COURT ORDERS that the Applicants shall provide each of
the relevant landlords
with notice of the Applicants' intention to remove any fixtues from any leased premises at least
seven (7) days prior to the date of the intended removaL. The relevant landlord shall be entitled
to have a representative present in the leased premises to observe such removal and, if the
landlord.disputes the Applicants' entitlement to remove any such fixture under the provisions of
the lease, sucldixture shall remain on the premises and shall be dealt with as agreed between any
.~ .
appliê~qle secured creditors, such landlord and the Applicants, or by fuiiher Order of this Cour
upoa~pplication by the Applicants on at least two (2) days notice to such landlord and any such
secured creditors. If the Applicants repudiate the lease governing such leased premises in
accOrdance'with paragraph 11 (c) of this Order and vacate such leased premises, they shall not be
required to pay Rent under such lease pending resolution of any such dispute (other than Rent
payable for the notice period provided for in paragraph 11 (c )of this Oi-der), and the repudiation
of
the lease shall be without prejudice to the Applicants' claim to the fixtures in dispute,
13. THIS COURT ORDERS that if a Notice of Repudiation is delivered, then (a) during the
notice period prior,to the effective time of the repudiation, the landlord may show the affected
leased premises to prospective tenants during normal business hours, on giving the Applicants.
and the Monitor 24 hours' prior written notice, and (b) at the effective time of the repudiation,
the relevant landlord shall be entitled to take possession of any such leased premises without
waiver of or prejudice to any claims or rights such landlord may have against the Applicants in
respect of such lease or leased premises and such landlord shall be entitled to notify the
Applicants of the basis on which it is taking possession and to gain possession of and re-lease.
such leased premises to any third part or parties on such terms as such landlord considers
advisable, provided that nothing herein shall relieve such landlord of its obligation to mitigate
any damages claimed in connection therewith.
14. THIS COURT ORDERS that, subject to the rights of a trustee in banuptcy, (i) subject
to the paragraphs 9, 11, 12 and 13 of
this Order, or except as expressly permitted by the terms of
the Applicants' real property leases (collectively, the "Leases"), none of the Leases shall, absent
further Order of the Court, be amended or varied, or deemed to be amended or varied, in any
way without obtaining the prior written consent of the applicable landlords (collectively, the
"Landlords"); and (ii) where any Leases are not, in accordance with their terms, transferable or
ì¡ ~H
-7-
assignable to a purchaser without first obtaining the consent of the applicable Landlord, none of
the Leases shall, absent further Order of the Court, be transferred, conveyed, assigned or vested
in a purchaser by operation of this Order, save and except to the extent that respective .consents
have been, or are in the future, obtained from the respective Landlords.
NO PROCEEDINGS AGAINST 'fHEAPPLICANTS OR THE PROPERTY
15. THIS COURT ORDERS that until and including July 17, 2009, or such later date as
this Court may order (the "Stay Period"), no proceeding or enforcement process in any court or
tribunal
( each, a "Proceeding") shall be .commenced or continued against or in respect of the
Applicants or the Monitor, or affecting the Business or the Property, except with the written
consent of the Applicants and the Monitor, or with leave of this Cour, and any and all
the Applicants or affecting the
Proceedings currently under way against or in respect of either of
this Court~
Business or the Property are hereby stayed and suspended pending further Order of
NO EXERCISE OF RIGHTS OR REMEDIES
16. TilS COURT ORDERS that during the Stay Period, all rights and remedies of any
individual, firm, corporation, governmental body or agency, or any other entities (all of the
foregoing, collectively being "Persons" and each being a "Persoii") against or in fespect of
either of the Applicants or the Monitor, or affecting the Business or the Property, are hereby
stayed and suspended except with the wrìtteri consent of
the Applicants and the Monitor, or leave.
of this Court, provided that nothing in this, Order shall (i) empower the Applicants to carryon
any business which the Applicants are not- lawflly entitled to carryon, (ii) exempt the
Applicants from compliance with statutory or regulatory provisions relating to health, safety or
the environment, (iii) prevent the fiing Many registration to
preserve or perfect a security
interest, or (iv) prevent the registration of a claim for lien.
NO INTERFERENCE WITH RIGHTS
17. THIS COURT ORDERS that, during the Stay Period, no Person shall discontinue, fail
to honour, alter, interfere with, repudiate, terminate or cease to perform any right, renewal right, _
contract, agreement, licence or permit in favour of or held by the Applicants, except with the.
written consent of
the Applicants and the Monitor, or leave of
this Court.
1 02
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CONTINUATION OF SERVICES
18. THIS COURT ORDERS that, during the Stay Period, all Persons having oral or written
agreements with the Applicants or statutory or regulatory mandates for the supply of goods
and/or services, including without limitation all computer software, communication and other
data services, .centralized baning services, payroll. services, insurance, transportation, services,
utility or other services to the Business or the Applicants, are hereby restrained until further
Order of this Court from discoritinuing, altering, interfering with or terminating the supply of
such goods or services as may be required by the Applicants, and that the Applicants shall be
entitled to the continued use of their current premises, telephone numbers, facsimile numbers,
internet addresses aid domain names, provided in each case that the normal prices or charges for
all such goods or services received. after the date of this Order are paid by the Applicants in
accordance with normal payment practices of the Applicants or such other practices as may be
agreed upon by the
supplier or service provider and each of the Applicants and the Monitor, or as
may be ordered by this Court.
NON-DEROGATION OF IUGHTS
19. THIS COURT ORDERS that, notwithstanding anything else contained herein, no
creditor of
the Applicants shall be under any obligation after the making of
this Order to advance
or re-advance any monies or otherwise extend any credit to the Applicants. Nothing in this
Order shall derogate from the rights conferred and obligations imposed by the CCAA.
PROCEEDINGS AGAINST DIRECTORS AND OFFICERS
20. TmS .COl!RT ORDERS that, duiing the Stay Period, and except as permitted by
subsection 11.5(2) of
the CCAA, no Proceeding may be commenced or continued against any of
the former, current or future directors or offcers of the Applicants with respect to any claim
against the directors or officers that arose before the date hereof and that relates to any
obligations of the Applicants whereby the directors or offcers are alleged under any law to be
liable in their capacity as directors or officers for the payment or performance of such
obligations, until a compromise or arrangement in respect of the Applicants, if one is filed, is
sanctioned by this Court or is refused by the creditors of the Applicants or this Court.
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DIRECTORS' AND OFFICERS' INDEMNIFICATION AND CHARGE
21. THIS COURT ORDERS that the Applicants shall indemnify their directors and officers
from all claims, costs, charges and expenses relating to the failure of the Applicants, afer the
the nature referred to in subparagraphs 6(a), 8(a), 8(b) and 8(c)
date hereof, to make payments of
of this Order which they sustain or incur by reason of or in relation to their respective capacities
as directors and/or officers of the Applicants except to the extent that, with respect to any officer
or director, such officer or director has actively participated in the breach cif .any related fiduciary
duties or has been grossly negligent or guilty of wilful misconduct.
22. THIS COURT ORDERS that the directors and officers of the Applicants shall be
entitled to the benefit of and are hereby granted a charge (the "Directors' Charge") on the
Property, whiCh charge shall not exceed an aggregate amount of $2,000,000, as security for the
this Order. The Directors' Charge shall have the priority
indemnity'provided in paragraph 21 of
set out in paragraphs 39 and 41 herein.
23. THIS COURT ORDERS that, notwithstanding any language in any applicable
insurance policy to the contrary, (a) no insurer shall be entitled to be subrogated to or claim the
benefit of the Directors' Charge, and (b) the Applicants' directors and officers shall only be
entitled to the benefit of
the Directors' Charge to the extent that they do not have coverage under
any directors' and officers' insurance policy, or to the extent that such coverage is insufficient to
pay amounts indemnified in accordance with paragraph 21 of
this Order.
APPOINTMENT OF MONITOR
24. THIS COURT ORDERS that Richter is hereby appointed pursuant to the CCAA as the
Monitor, an offcer of this Court, to monitor the Property and the Applicants' conduct of the
Business with the powers ,Rnd obligations set out in the CCAA or set forth herein and that the
Applicants and their shareholders, offcers, directors, and Assistants shall advise the Monitor of
all material steps taken by the Applicants pursuant to this Order, and shall co-operate fully with
the Monitor in the exercise of
its powers and discharge of
its obligations.
25. THIS COURT ORDERS that the Monitor, in addition to its prescribed fights and
obligations under the CCAA, is hereby directed and empowered to:
1 04
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(a) monitor the Applicants' receipts and disbursements;
(b) report to this Court at such times and intervals as the Monitor may deem
appropriate with respect to matters relating to the Property, the Business, and such
other matters as may be relevant to the proceedings herein;
(c) assist the Applicants, to the extent required by the Applicants, in their
dissemination of financial and other information to EB Inc. and Banle of America,
N,A. (as agent to the lenders providing certain debtor-in-possession financing to
EB Inc. and certain of its affiihltes in
connection with EB. Inc. ' s and certain of its
affiiates' banlciuptcy petitions under chapter i i of title 11 of the United States
Code) (the "U.S. Lender") on a periodic basis as agreed to between the
Applicants, the U.S. Lender and EB Inc., which information may be used in these
proceedings;
(d) advise the Applicants in their preparation of the Applicants' cash flow statements
and reporting required by EB Inc., which information shall be reviewed with the
Monitor;
( e) advise the Applicants in their development of the Plan and any amendments to the
Plan;
(f) assist the Applicants, to the extent required. by the Applicants, with the holding
and adriünistering of creditors' or shareholders' meetings for voting on the Plan;
(g) have full and complete access to the books, records and management, employees
and advisors of the Applicants and to the Business and the Property to the extent
required to perform its duties arising under this Order;
(h) be at libeiiy to engage independent legal counsel or such other persons as the
Monitoi' deems necessary or advisable respecting the exercise of its powers and
performance of its obligations under this Order;
(i) consider, and if deemed advisable by the Monitor, prepare a report and
assessment on the Plan; and
'I 05
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G) perform such other duties as are required by this Order or by this Couit from time
to time.
26. THIS COURT ORDERS that the Monitor shall not take possession of the Property and
shall take no pait whatsoever in the management 01' supervision of the management of the
Business and shall not; by fulfillng its obligations hereunder, be deemed to have taken or
the Business or Property, or any part thereof.
maintained possession or control of
27. THIS COURT ORDERS that nothing herein contained shall require the Monitor to
occupy or to take control, care, charge, possession or management (separately and/or
collectively, "Possession") of any of the Propeiiy that might be environmentally contaminated,
might be a pollutant or a contaminant, or might cause or contribute to a spil, discharge, release
or deposit of a substance contrary to any federal, provincial or other law respecting the
protection, conservation, enhancement, remediation or rehabiltation of the environment or
relating to the disposal of waste or other contamination including, without limitation, the
Canadian Environmental Protection 'Act, the Ontario Environmental Protection Act, the Ontario
Water Resources Act, or the Ontario Occupational Health and Safety Act and regulations
\
thereunder (the "Environmental Legislation"), provided however that nothing herein shall
exempt the Monitor from any duty to report or make disclosure imposed by applicable
Environmental Legislation. The Monitor shall not, as a result of this Order or anything done in
pursuance of
the Monitor's duties and powers under this Order, be deemed to be in Possession of
any of the Property within the meaning of any Environmental Legislation, unless it is actually in
possession.
28. THIS COURT ORDERS that that the Monitor shall provide any creditor of the
Applicants and the U.S. Lender with information provided by the Applicants in response to
reasonable requests for information made in writing
by such Person addressed to the Monitor.
The Monitor shall not have any responsibility or liability with respect to the information
disseminated by it pursuant to this paragraph. In the case of information that the Monitor has
been advised by the Applicants is confidential, the Monitor shall not provide such information to
creditors unless otherwise directed by this Court or on such terms as the Monitor and the
Applicants may agree.
'1 J6
-12 -
29. THIS COURT ORDERS that, in addition to the rights and protections afforded the
Monitor under the CCAA or as an officer of this Court, the Monitor shall incur no liability or
obligation as a result of its appointment or the carrying out of the provisions of this Order, save
and except for any gross negligence or wilful misconduct on its part. Nothing in this Order shall
derogate from the protections afforded the Monitor by the CCAA or any applicable legislation.
30. THIS COURT ORDERS that the Monitor, counsel to the Monitor and counsel to the
Applicants shall be paid their reasonable fees and disbursements, in each case at their standard
rates and charges, by the Applicants as paii of
the costs of
these proceedings. The Applicants are
hereby authorized and directed to pay the accounts of the Monitor, counsel for the Monitor and
counsel for the Applicants as and when accounts their respective accounts are rendered.
31. THIS COURT ORDERS that'he Monitor and its legal counsel shall pass their accounts
from time to time, and for this purpose
hereby referred to ajudge ofthe Commercial List of
the accounts of the Monitor and its legal counsel are
the
Ontario Superior Court of Justice.
32. THIS COURT ORDERS that the Monitor, counsel to the Monitor, and the Applicants'
counsel and financial advisors shall be entitled to the benefit of and are hereby granted a charge
(the "Administration
Charge") on the Property, which charge shall not exceed an aggregate
amount of $1,000,000, as security for their professional fees and disbursements incuned at the
standard rates and charges of the Monitor and such counsel, both before and after the making of
this Order in respect of
these proceedings. The Administration Charge shall have the priority set
out in paragraphs 39 and 41 hereof.
INTERCOMP ANY FINANCING
33. THIS COURT ORDERS that the Applicants are hereby authorized and empowered to
obtain and borrow under intercompany promissory grid notes (the "New Intercompany
Promissory Notes") issued by the Applicants in favour of
Eddie Bauer, Inc. ("EB Inc.") in order
to finance the Applicants' working capital requirements and other general corporate purposes
and capital expenditures (the "Intercompany Financing"), provided that borrowings in
connection with such Intercompany Financing, from and after the date hereof, shall not exceed
U,S.$7,500,000 unless permitted by further Order of
this Court.
r 07
. -13-
34. THIS COURT ORDERS that the Intercompany Financing shall be on the terms and
subject to the conditions set forth in the New Intercompany Loan Documents.
35. THIS COURT ORDERS that the Applicants are hereby authorized and empowered to
execute and deliver the New Intercompany Promissory Notes, general security agreements and
other definitive documents (collectively, the "New Intercompany Loan Documents"), as are
contemplated in connection with the Intercompany Financing or as may be reasonably required
. '
by EB Inc. pursuant to the terms thereof: and the Applicants are hereby authorized and directed
to pay and perform all of their indebtedness, interest, fees, liabilities' and obligations to EB Inc.
under and pursuant to the New Intercompany Loan Documents as and when the same become
due
this Order.
and are to be performed, notwithstanding any other provision of
to the benefit of and is hereby
36. THIS COURT ORDERS that the EB Inc. shall be entitled
granteda charge (the "Intercompany Charge") on the Propeity, which charge shall not exceed
U.S.$7,500,000 plus accrued and unpaid' interest, allowable costs and expenses. The
Intercompany Charge shall have the priority set out in paragraphs 39 and 41 hereof.
this
37. THIS COURT ORDERS that, subject to the provisions of
Order:
(a) EB Inc. may take such steps from time to time as it may deem necessary or
appropriate to file, register, record or perfect the Intercompany Charge or any of
the New Intercompany Loan Documents;
(b) upon the occurrence of an event of default under the New Intercompany Loan
Docwnents, EB Inc" upon seven (7) days notice tó the Applicants
and the
and remedies against the
Monitor, may exercìse ~nyand all of its rights
Applicants or the Property (save that any such rights and remedies relating to
Leases shallbe subject to the terms of
the applicable Leases) under or pursuant to
the New Intercompany Loan Docwnents and the Intercompany Charge, including
without limitation, to cease making advances to the Applicants and set off and/or
consolidate any amounts owing by EB Inc. to the Applicants against the
obligations of the Applicants to EB Inc. imder the New Intercompany Loan
Documents or the Intercompany Charge, to m~ke demand, accelerate
payment
and give other notices, or to apply to .this Couii for the appointment of a receiver,
'/08
- 14receiver and manager or interim receiver, or for a bankruptcy order against the
Applicants and for the appointment of a trustee in banptcy of the Applicants,
and upon the occurrence of an event of default under the terms of the New
Intercompany Loan Documents, EB Inc. shall be entitled to seize and retain
proceeds from the sale of the Property and the cash flow of the Applicants to
repay amounts owing to EB Inc. in accordance with the New Intercompany Loan
Documents and the Intercompany Charge, but subject to the priorities as set out in
paragraphs 39 and 41 of this Order; and
( c) if, as and when EB Inc. executes a collateral assignment of the New Intercompany
Loan Documents to the U.S. Lender, the foregoing rights and remedies of EB Inc.
shall be
enforceable by the U.S. Lender
the New
in accordance vyith the terms of
Intercompany Loan Documents, including without limitation the agreement
evidencing such collateral assignment,
the foregoing rights and remedies of EB Inc. and the U.S. Lender shall be enforceable against
the Applicants or
any trustee in bankuptcy, interim receiver, receiver or receiver and manager of
the
Property.
38. THIS COURT ORDERS AND DECLARS that EB Inc., solely in its capacity as the
provider ofthe Intercompany Financing, and the U.S. Lender, solely in its capacity as collateral
assignee of
the New Intercompany Loan Documents, shall be treated as unaffected in any plan of
arrangement or còmpromise filed by the Applicants under the CCAA, or any proposal filed by
the Applicants under the Bankruptcy and Insolvency Act of Canada (the "BIA"), with respect to
any advances made under the New Intercompany Loan Documents..
VALIDITY AND PRIORITY OF CHARGES CREATED BY THIS ORDER
39. THIS COURT ORDERS that the priorities of
the Directors' Charge, the Administration
Charge and the Intercompany Charge, as among them, shall be as follows:
First - Administration Charge (to the maximum amount of $ 1 ,000,000);
1 09
- 15Second - Intercompany Charge (to the maximum amount of
U.S.$7,500,000 plus accrued and unpaid interest, allowable costs and
expenses payable by the Applicants); and
Third - Directors' Charge (to the maximum amount of $2,000,000).
40. THIS COURT ORDERS that the filìng, registration or perfection of the Directors'
Charge, the Administration Charge or the Intercompany Charge (collectively, the "Charges")
shall not be reqnired,and that the Charges shall be valid and enforceable for all purposes,
including as against any right, title or interest fied, registered, recorded Or perfected subsequent
to the Charges coming into existence, notwithstanding any such failure to fie, register, record or
perfect.
/
41. THIS COURT ORDERS that each of the Charges shall constitute a charge on the
Property and shall rank in priority to all other security interests, trusts, liens, charges and
encumbrances, statutory or otherwise (collectively, "Encumbrances") in favour of any Person.
42. THIS COURT ORDERS that except as otherwise expressly provided for herein, or as
may be approved by this Court, the Applicants shall not grant any Encumbrances over any
Property that rank in priority to, or pari passu with, any of the Charges, unless the Applicants
also obtain the prior written consent of the Monito~~EB I~c~-~d th~benefi6Taries- ofeacliofthe
Charges.
43. THIS COURT ORDERS that the Charges shall not be rendered. invalid or
unenforceable an,d the rights and remedies of the. chargees entitled to the benefit of the Charges
(collectively, the'''Chargees'') shall not otherwise be limited or impaired in any way by (a) the
pendency of. these proceedings and the declarations of insolvency made herein; (b) any
application(s) for bankruptcy order(s) issued pursuant to BIA, or any bankruptcy order made
pursuant to such applications; (c) the filing of any assignments for the general benefit cif
creditors made pursuant to the BIA; (d) the provisions of any federal or provincial statutes; or ( e)
any negative covenants, prohibitions or other similar provisions with respect to borrowings,
incurring debt or the creation of Encumbrances, contained in any existing loan documents, lease,
sublease, offer to lease or other agreement (collectively, at "Agreement") which binds the
Applicffits, and notwithstanding any provision to the contrary in any Agreement:
'I 1 d
- 16 (a) neither the creation of the Charges nor the execution, delivery, perfection,
registration or performance of the New Intercompany Loan Documents shall
create or be deemed to constitute a breach by the Applicants of any Agreement to
which they are a
party;
(b) none of the Chargees shall have any liability to any Person whatsoever as a result
of any breach of any Agreement caused by or resulting from the creation of the
Charges, or the execution, delivery or performance of the New Intercompany
Loan Documents; and
(c) the payments made by the Applicants pursuant to this Order, the New
Intercompany Loan Documents, and the granting of the Charges, do not and wil
not constitute fraudulent preferences, fraudulent conveyances, oppressive
conduct, settlements or other challengeable, voidable or reviewable transactions
under any applicable law.
44. THIS COURT ORDERS that any Charge created by this Order over leases of real
property in Canada shall only be a Charge in the Applicants' interest in such real property leases.
SERVICE AND NOTICE
45. THIS COURT ORDERS that the Applicants shall, within ten (10) business days of the
date of entry of this Order, send a copy of this Order to their known creditors, other than
employees and creditors to which the Applicants owe less than CAD$l,OOO, at their addresses as
they appear on the Applicants' records, and shall promptly send a copy of ths Order (a) to all
parties fiing a Notice of Appearance in respect of this Application, and (b) to any. other
interested Person requesting a copy of this Order, and the Monitor is relieved of its obligation
under Section 11(5) of
the CCAA to provide similar notice, other than to supervise this process.
46. THIS COURT ORDERS that the Applicants and the Monitor be at liberty to serve this
Order, any other materials and orders in these proceedings, any notices or other correspondence,
by forwarding true copies thereof by prepaid ordinary mail, courier, personal delivery or
electronic transmission to the Applicants' creditors or other interested parties at their respective
addresses as last shown on the records of the Applicaiits and that any such service or notice by
'I 1 1
- 17 -
courier, personal delivery or electronic transmission shall be deemed to be received on the next
business day following the date of forwarding thereof, or if sent by ordinary mail, on the third
business day after mailing.
47. THIS COURT ORDERS that the Applicants, the Monitor, and any party who has filed a
Notice of Appearance may serve any court materials in these. proceedings bye-mailing a PDF or
othèr electronic copy of such materials to counsels' email addresses as recorded on the Service
List from time to tim'e .and the Monitor may post a copy of any or all such materials on its
. website at: http://ww.rsmrichter.com/Restructuring/EddieBauer. aspx.
GENERAL
48. THIS COURT ORDERS that the Applicants or the Monitor may from time to time
apply to this Couii for advice and directions in the discharge of their respective powers and
duties hereunder.
49. THIS COURT ORDERS that nothing in this Order shall prevent the Monitor from
the
acting as an interim receiver, a receiver, a receiver and manager, or a trustee in bankuptcy of
Applicants, the Business or the Property.
50. TilS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,
regulatory or administrative body having jurisdiction in Canada or in the United States, to give
effect to this Order and to assist the Applicants, the Monitor and their respective agents in
carrying out the terms of this Order. All cours, tribunals, regulatory and administrative bodies
. .
are hereby respectfully requested to make such orders and to provide such assistance to the
Applicants and to the Monitor, as an offcer of this Court, a$ may be necessary or desirable to
give effect to this Order, to grant representative status to the Monitor in any foreign proceeding,
or to assist the Applicants and the Monitor and their respective agents in carrying out the terms
of
this Order.
51. THIS COURT ORDERS that each ofthe Applicants and the Monitor be at liberty and is
hereby authorized and empowered to apply to any court, tribunal,
regulatory or administrative
body, whereVer located, for the recognition of this Order and for assistance in carrying out the
terms of
this Order.
ij t 2
- 18 -
52. THIS COURT ORDERS that any interested party (including the Applicants and the
Monitor) may apply to this Couii to vary or amend this Order on not less than seven (7) days
notice
to any other party or parties
likely to be affected by the order sought or upon such other
notice, if any, as this Court may order.
53. TI-IIS COURT ORDERS that this Order and all of its provisions are effective as of
12:01 a.m. Eastern Standard/Daylight Time on the date of
this Order.
~
ENTERED AT /INSCRIT À TORONTO
ON/BOOK NO:
lE I DANS LE AEGISTAE NO,:
JUL 07 2009
PER/PAR: A. tj
.~
rV"
~
Cour File No: 09-8240-CL
Lavvers for the Applicants
Tel: 416.979.2211
Fax: 416.979.1234
L. Joseph Lath LSUC#: 32326A
Frederick L. Myers LSUC#: 26301A
Chrstopher G. Arstrong LSUC #: 55148B
Toronto, Canada MSB 2M6
Baristers & Solicitors
250 Yonge Street, Suite 2400
GOODMAS LLP
INTIA ORDER
Proceedig commenced at Toronto
COMMERCIA LIST
ONTARO
SUPERIOR COURT OF.nSTICE
BAUER OF
N :rHE MATTER OF THE COMPANES' CREDITORS ARGEMENT ACT, R.S.C. 1985, c. C.36, AS
\.\tNDED
llD..IN THE MATTER OF A PLAN OF COMPROivSE OR ARRGEMENT OF EDDIE
::ANADA, INC. AN EDDIE BAUER CUSTOMER SERVICES INC. .
\5729897.11
Appendix "8"
11 4
RSM Richter Inc.
Eddie Bauer of Canada Inc.
Statement of Receipts and Disbursements
For the Period Ended Apri/16, 2010
Receipts
Proceeds of sale of assets
Sundry collections
Interest income
USD Account
CAD Account
11,000,000
100
199,872
7,743
Transfers between estate accounts
761,650
11,007,843
961,522
Disbursements
Transfers between estate accounts
Professional fees
700,000
281
GST on disbursements
33,566
229,926
PST remittances (for July, 2009)
20,570
Publication costs
Payroll obligations
Miscellaneous expenses
Balance in Estate Accounts
670,646
2,771
113
321
700,394
957,799
10,307,449
3,723
Appendix "C"
1 1 5
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:
Chapter 11
EBHI HOLDINGS, INC.,
et al., 1
Case No. 09-12099 (MFW)
Jointly Administered
Debtors.
NOTICE OF (A) THE EFFECTIVE DATE OF THE DEBTORS'
FIRST AMENDED JOINT PLAN OF LIQUIDATION OF EBHI HOLDINGS,
INC., ETAL., (B) THE SUBSTANTIAL CONSUMMATION OF THE PLAN; AND
eC) BAR DATES FOR CERTAIN CLAIMS
PLEASE TAKE NOTICE OF THE FOLLOWING:
1. Confii'mation of the Plan. The above-captioned debtors and debtors in possession (as
reorganized, collectively, the "Debtors") hereby give notice (the "Notice") that, on March 18,20 I 0 (the
"Confirmation Date"), the Honorable Mary F. Walrath, United States Bankruptcy Judge, entered the
Order Confirming Debtors' First Amended Joint Plan of Liquidation (the "Confirmation Order") (Docket
No. 1450). Unless otherwise defined in the Notice, capitalized terms used herein have the meanings set
forth in the First Amended Joint Plan of Liquidation ofEBHl Holdings, Inc., et aI, (the "Plan") (Docket
No. 1269).
2. Effective Date. Pursuant to the Confirmation Order, the Debtors hereby certify and give notice
that the Plan became effective in accordance with its terms, and the Effective Date occurred, on April 6,
2010 (the "Effective Date").
3. Substii ntial Con
of
sum mation. The Debtors hereby give notice that, pursuant to section 1 101(2)
the Bankruptcy Code, the Plan has been substantially consummated:
4. Effect of the Occu rrence of the Effective Date. Pursuant to section 1141 of
the Bankruptcy
Code, and except as otherwise provided in the confirmed Plan or the Confirmation Order, upon the
occurrence ofthe Effective Date, the distributions and rights provided in the Plan and the treatment of
Claims and Interests under the Plan, shall be in exchange for, and in complete satisfaction, discharge, and
release of all Claims against and Interests in the Debtors. The provisions of
the confirmed Plan and the
The Debtors in these cases, along with the last four digits of each Débtor's federal tax identification
number, are: EBHI Holdings, Inc., a Delaware corporation (2352); Amargosa, Inc., a Delaware corporation (9737);
Gobi Fulfillment Services, Inc., a Delaware corporation (0882); Arabian Diversified Sales, LLC, a Delaware limited
liability company (1567); Gibson Services, LLC, an Ohio limited liability company (disregarded); Karalcum
International Development, LLC, a Delaware limited liability company (1571); Simpson Information Technology,
LLC, a Delaware limited liability company (disregarded); Sandy Financial Services Acceptance Corporation, a
Delaware corporation (7532); and Sonoran Acceptance Corporation, a Delaware corporation (7253). The mailing
address for EBHI Holdings, Inc. is 10401 N.E. 8th
Street, Suite 500, Bellevue, WA 98004. On or about the Petition
Date, Tenere of Canada, Inc. and Yuma Customer Services, Inc., affliates of
the Debtors, commenced a proceeding
before the Superior C01l1 of Justice, Commercial List, for the Judicial District of
Ontario, for a plan of compromise
or arrangement under the Companies' Creditors Arrangement Act.
OB02:9467 J 76. i
068417.1001
16
Confirmation Order, pursuant to section lI41(a) of
the Bankruptcy Code, are binding upon all Persons,
including each of the Debtors and any and all Holders of Claims or Interests (irrespective of whether such
Claims or Interests are Impaired under the Plan or whether the Holders of such Claims or Interests
accepted, rejected, or are deemed to have accepted or rejected the Plan), any and all non-debtor paities to
executory contracts and unexpired leases with any of
the Debtors, and any and all Persons who are paities
to or are subject to the settlements, compromises, releases, waivers, discharges and injunctions described
in the Plan, and the respective heirs, executors, administrators, trustees, affiiates, officers, directors,
agents, representatives, attorneys, beneficiaries, guardians, successors or assigns, if any, of any and all of
the foregoing.
5. Release, Injunction, Exc ulpation and Indemnification Provisions. The Plan and Confirmation
Order also contain additional protections, including certain release, injunction, exculpation and
indemnification provisions, in favor of the Debtors, the Liquidating Trustee, their respective assets,
propert and estates, and ceitain other parties, as set fOlth in greater detail in (among other things) Aiticle
11 of
the confirmed Plan and pages 37-41 of
the Confirmation Order, respectively.
6. Bar Daté fo.' Professional Fee Claims. On or prior to May 21, 2010 at 4:00 P.M. (ET) (i.e.
fOlty-five (45) days following the Effective Date) (the "Administrative Expense Claims Bar Date"),
each Professional shall File with the Bankruptcy COUlt its final fee application seeking final approval of
all fees and expenses from the Petition Date through the Effective Date. Within ten (10) days after entry
of a Final Order with respect to its final fee application, the Liquidating Trustee shall pay the Allowed
Claims of each Professional solely from the Cash in the Carve-Out Escrow or from Other As sets
Proceeds.
7. Bar Date for Certain Administrative Expenses. Other than with respect to (i) Administrative
Expense Claims for which the Bankruptcy CoUit previously has established a bar date, and (ii) Tax
Claims addressed in section 8 below, any and all requests for payment or proofs of Administrative
Expense Claims, including Claims of all Professionals or other Entities requesting compensation or
reimbursement of expenses pursuant to Bankruptcy Code sections 327, 328, 330, 331, 503(b) or 11 03 for
services rendered on or before the Effective Date (including any compensation requested by any
or any other Entity for making a substantial contribution in the Chapter 11 Cases), must be
Filed and served on the Liquidating Trustee and its counsel no later than the Administrative Expense
Claims Bar Date. Objections to any such Administrative Expense Claims must be Filed and served on the
claimant no later than ninety (90) days after the Administrative Expense Claims Bar Date, which date
may be extended by application to the Bankruptcy COUlt. The Liquidating Trustee shall use reasonable
efforts to promptly and diligently pursue resolution of any and all disputed Administrative Expense
Claims.
Professional
Holders of Administrative Expense Claims, including all Professionals or other Entities
requesting compensation or reimbursement of expenses pursuant to Bankruptcy Code sections 327, 328,
330, 331, 503(b) or 1103 for services rendered on or before the Effective Date (including any
compensation requested by any Professional or any other Entity for making
a substantial contribution in
the Chapter II Cases), that are required to File a request for payment or proof of such Claims and that do
not File such requests or proofs of Claim on or before the Administrative Expense Claims Bar Date shall
be forever barred from asseiting such Claims against the any ofthe Debtors, their Estates, the Liquidating
Trust, the Liquidating Trustee, any other Person or Entity, or any oftheir respective propeity.
8. Tax Claims. All requests for payment of
Claims by a Governmental Unit (as defined in
Bankruptcy Code section 101(27)) for Taxes (and for interest and/or penalties or other amounts related to
such Taxes) for any tax year or period, all or any pOltion of
which occurs or falls within the period from
and including the Petition Date through and including the Effective Date, and for which no bar date has
2
DB02:9467176.1
068417.1001
'17
before the later of: (a) June 5,2010 at 4:00
otherwise been previously established, must be Filed on or
P.M. (ET) (i.e. sixty (60) days following the Effective Date); or (b) to the extent applicable, ninety (90)
days following the filing of a tax return for such Taxes (if such Taxes are assessed based on a tax return)
for such tax year or period with the applicable Governmental Unit. Any holder of a Claim for Taxes that
is required to File a request for payment of such Taxes and other amounts due related to such Taxes and
which does not File such a Claim by the applicable bar date shall be forever barred from asserting any
such Claim against any of
the Debtors or any non-Debtor member of
the Debtors' consolidated tax group,
the Estates, the Liquidating Trust, the Liquidating Trustee or any other Entity, or their respective
propert, whether any such Claim is deemed to arise prior to, on, or subsequent to the Effective Date, and
shall receive no distribution under the Plan or otherwise on account of such Claim.
the rejection of an executory contract or unexpired
9. Bar Date for Rejection Da mages Claims. If
the Plan gives rise to a Claim by the other party or paities to the executory
contract or unexpired lease, such Claim shall receive no distribution under the Plan or otherwise on
account of such Claim unless a proof of Claim is fied on or before April
18, 2010 at 4:00 P.M. (ET)
notice of
the entry of
the Confirmation Order).
(i.e. thiity (30) days after the mailing of
lease pursuant to Section 6.5 of
10. Copies of Plan and Confirmation Order. Copies of the Confirmation Order may be obtained
by written request to KUltzman Carson Consultants LLC, 2335 Alaska Avenue, El Segundo, California
90245, and may be examined by any paity in interest during normal business hours at the Offce of the
Clerk of the COUlt, United States Bankruptcy Court, 824 Market Street, Wilmington, Delaware 19801.
You may also obtain copies of the Confirmation Order or of any pleadings fied in these Chapter 11
Cases for a fee via PACER at: http://www.deb.uscouts.gov or free of chai-ge at
http://www.kccllc.net/eddie bau er.
Dated: April 6, 2010
LATHAM & WATKINS LLP
David S. Heller
Josef S. Athanas
Caroline A. Reckler
Suite 5800
223 South Wacker Drive
Chicago, Ilinois 60606
Telephone: (312) 876-7700
Facsimile: (312) 993-9767
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Michael R. Nestor (No. 3526)
Kara Hammond Coyle (No. 4410)
The Brandywine Building
I 000 West Street, 17th Floor
P.O. Box 391
Wilmington, Delaware 19801
Telephone: (302) 571-6600
Facsimile: (302) 571-1253
Attorneys for the Debtors and Debtors-in-Possession
3
DB02:9467 176,1
068417.1001
\5742018
OF CANADA, INC. AND EDDIE BAUER CUSTOMER SERVICES INC.
ONTARIO
Court File No: CV -09-8240-CL
20, 2010)
Lawyers for the Monitor
Tel: 416.863.0900
Fax: 416.863.0871
Jay Swarz
Mathew Gottlieb
1 First Canadian Place
44th Floor
Toronto ON M5X 1B1
~-O
~.:
Co
DAVIES WAR PHILLIPS & VINEBERG LLP
(dated April
EIGHTH REPORT OF THE MONITOR
Proceeding commenced at Toronto
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARNGEMENT OF EDDIE BAUER
AS
IN THE MATTER OF THE COMPANIES' CREDITORS ARRGEMENT ACT, R.S.c. 1985, c. C.36,
AMENDED
TAB
4
DRAFT: 1- April
For Discussion Purposes Only
20, 2010 at 10:17 AM
Court File No.: 09-8240-CL
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE HONOURABLE MR.
JUSTICE MORA WETZ
) THURSDA Y, THE 29th
)
) DAY OF APRIL, 2010
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT,
R.S.C. 1985, c. C-36, AS AMENDED
AND IN TilE MATTER OF A PLAN OF COMPROMISE OR ARRNGEMENT OF
EDDIE BAUER OF CANADA, INC. AND EDDIE BAUER CUSTOMER SERVICES INC.
ORDER
THIS MOTION, made by Tenere of Canada, Inc. (formerly Eddie Bauer of Canada,
Inc.) ("Tenere") and Yuma Customer Services Inc. (formerly Eddie Bauer Customer Services
Inc.) (collectively, the "Applicants") for the relief set out in the Applicants' notice of motion
dated April
20, 2010, was heard this day at 330 University
Avenue, Toronto, Ontario.
ON READING the Affdavit of Kelly Green sworn April 20, 2010, and the exhibits
thereto (the "Green Affdavit") and the Eighth Report of RSM Richter Inc. dated April 20, 2010
(the "Eighth Report"), in its capacity as monitor (the "MonitQr") of the Applicants, and on
hearing submissions of counsel for the Applicants and the Monitor, no one appearing for any
other person on the service list, although duly served as appears from the Affidavit of Service of
· sworn April ., 2010, fied.
11 9
For Discussion Purposes Only
DRAFT: 1- April
20, 2010 at 10:17 AM
-2-
Ji"
1. THIS COURT ORDERS that the time for the service of the Applicants' motion record
and the Eighth Report is hereby abridged so that this Motion is properly retui:able today and
hereby dispenses with further service thereof.
2. THIS COURT ORDERS that, unless otherwise specified, capitalized terms used herein
shall have the meaning ascribed to them in the Initial Order (as defined below).
3. THIS COURT ORDERS that the Stay Period referred to in the Initial Order of the
Honourable My. Justice Morawetz dated June 17, 2009, as amended and restated (the "Initial
Order"), is extended until September 30,2010, or such later date as this Cour may order.
4. THIS COURT ORDERS that the Sale Proceeds Allocation (as defined in the Green
Affdavit) be and is hereby approved.
5. THIS COURT ORDERS the Monitor be and is hereby authorized and directed to
the Sale Proceeds (as defined in the Green Affdavit) as follows:
distribute a portion of
(a) US$7,800,000 to Amargosa, Inc.; and
(b) an aggregate of $1,200 to the holders of three admitted unsecured claims against
Tenere.
6. THIS COURT ORDERS that, pending further Order of this Court, the Monitor be and
is hereby authorized and directed to establish a holdback of the Sale Proceeds in the amount of
$2,500,000.
7. THIS COURT ORDERS that the Intercompany Charge on the Property provided for in
the Initial Order be and is hereby released, expunged and discharged as against the Property.
L: y
For Discussion Purposes Only
DRAFT: 1 - April 20, 2010 at 10:17 AM
-38.
THIS COURT ORDERS that the Administration Charge on the Property provided for in
the Initial Order be and is hereby amended such that it shall not exceed an aggregate amount of
$500,000.
9. THIS COURT ORDERS that the conduct and activities of the Monitor as set out and
described in the Eighth Report be and are hereby approved.
\5837473
1 2 1
EDDIE BAUER OF CANADA, INC. AND EDDIE BAUER CUSTOMER SERVICES INC.
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRNGEMENT OF
IN THE MATTER OF THE COMPANIES' CREDITORS ARRNGEMENT ACT, R.S.c.
1985, c. C.36, AS AMENDED
For Discussion Purposes Only
Lawyers for the Applicants
Tel: 416.979.2211
Fax: 416.979.1234
:N'
,il".,.J
L. Joseph Latham LSUC#: 32326A
Christopher G. Armstrong LSUC #: 55148B
Baristers & Solicitors
Bay Adelaide
Centre
333 Bay Street, Suite 3400
Toronto, Ontario M5H 2S7
GOODMANS LLP
ORDER
Proceeding commenced at Toronto
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
ONTARIO
DRAFT: 1 - ApdlifFtiWcfÐ~~!4cM
\5838242
OF CANADA, INC. AND EDDIE BAUER CUSTOMER SERVICES INC.
ONTARIO
Court File No: CV -09-8240-CL
Lawyers for the Applicants
Tel: 416.979.2211
Fax: 416.979.1234
L Joseph Latham LSUC#: 32326A
Christopher G. Armstrong LSUC #: 55148B
Toronto, ON M5H 2S7
Baristers & Solicitors
Bay Adelaide Centre
333 Bay Street, Suite 3400
GOODMANS LLP
(returnable April 29, 2010)
MOTION RECORD
Proceeding commenced at Toronto
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRNGEMENT OF EDDIE BAUER
IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENTACT, R.S.C. 1985, c. C.36,
AS
AMENDED