Exhibit 10.4
Eddie Bauer Holdings, Inc.
Convertible Senior Notes due 2014
Placement Agency Agreement
New York, New York
March 28, 2007
J.P. Morgan Securities Inc.
277 Park Avenue
New York, New York 10172
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
     Eddie Bauer Holdings, Inc., a corporation organized under the laws of the
State of Delaware (the “Company”), proposes to issue and sell to certain
investors (collectively, the “Investors”) an aggregate of $75,000,000 of its
Convertible Senior Notes due 2014 (the “Securities”) to be issued pursuant to
the provisions of an Indenture to be dated as of the Closing Date (as defined
below) (the “Indenture”) among the Company, the subsidiaries of the Company
listed on the signature page hereto (the “Guarantors”) and The Bank of New York,
as Trustee (the “Trustee”). Subject to the provisions of the Indenture, the
Securities will initially be guaranteed (the “Guarantees”) by the Guarantors on
an unsecured senior basis. The Securities will be convertible into shares of the
Company’s common stock, par value $0.01 per share (the “Common Stock”). As used
herein, “Conversion Shares” means the shares of Common Stock issuable upon
conversion of the Securities.
     The Securities and the Guarantees will be offered and sold to the Investors
who are qualified institutional buyers (“QIBs”) as defined in Rule 144A under
the Securities Act of 1933, as amended (the “Securities Act”), in compliance
with exemptions from registration under the Securities Act.
     In connection with the sale of the Securities, the Company has prepared a
preliminary private placement memorandum (the “Preliminary Private Placement
Memorandum”) and will prepare a final private placement memorandum (the “Final
Private Placement Memorandum”) including a description of the terms of the
Securities and the terms of the offering of the Securities. References in this
Agreement to the

 

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Preliminary Private Placement Memorandum and the Final Private Placement
Memorandum include and will include the documents incorporated by reference
therein.
     The Investors and each of their direct and indirect transferees of the
Securities will be entitled to the benefits of the Registration Rights Agreement
(the “Registration Rights Agreement”), pursuant to which the Company will agree,
among other things, to file a registration statement (the “Registration
Statement”) with the Securities and Exchange Commission (“Commission”)
registering the Securities under the Securities Act.
     1. Agreement to Act as Placement Agents; Placement of Securities.
     (a) Subject to the terms and conditions, and in reliance upon the
representations, warranties and agreements, herein set forth, J.P. Morgan
Securities Inc. and Goldman, Sachs & Co. shall be the Company’s exclusive
placement agents (in such capacity, the “Placement Agents”), on a “best efforts”
basis, in connection with the issuance and sale by the Company of the Securities
to the Investors.
     (b) This Placement Agency Agreement (this “Agreement”) is not a commitment,
express or implied, on the part of the Placement Agents to commit any capital.
Under no circumstances will either Placement Agent be obligated to purchase any
Securities for its own account. In soliciting purchases of Securities, the
Placement Agents shall act solely as the Company’s agents and not as principal
and therefore the Placement Agents shall have no authority to bind the Company.
     (c) The purchases of the Securities by the Investors shall be evidenced by
the execution of purchase agreements substantially in the form of Exhibit A (the
“Purchase Agreements”).
     (d) Concurrently with the execution and delivery of this Agreement, the
Company and The Bank of New York, as escrow agent (“Escrow Agent”), shall enter
into an Escrow Agreement (the “Escrow Agreement”), pursuant to which an escrow
account will be established, at the Company’s expense, for the benefit of the
Company and the Investors (the “Escrow Account”). Prior to the Closing Date,
each Investor will deposit in the Escrow Account the full amount of the purchase
price for the Securities being purchased by such Investor (the “Escrow Funds”).
     (e) As compensation for services rendered hereunder, the Company shall pay
to the Placement Agents a placement fee (the “Placement Fee”) equal to an amount
in cash that is 4% of the aggregate principal amount of Securities sold by the
Company. The Placement Fee shall be payable by Federal Funds wire transfer to an
account or accounts designated by the Placement Agents. J.P. Morgan Securities
Inc. shall be entitled to receive 67% of the Placement Fee and Goldman, Sachs &
Co. shall be entitled to receive 33% of the Placement Fee.
     (f) No Securities that the Company has agreed to sell pursuant to this
Agreement or the Purchase Agreements shall be deemed to have been purchased and
paid for, or sold by the Company, until such Securities shall have been
delivered to the

 

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Investor thereof against payment by such Investor. If the Company shall default
in its obligations to deliver Securities to an Investor whose offer it has
accepted, and from which it has received payment for such Securities, the
Company agrees to indemnify and hold harmless the Placement Agent Entities (as
defined herein) against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject which arise
out of or are based upon such default of the Company.
     2. Representations and Warranties of the Company and the Guarantors. The
Company and each Guarantor jointly and severally represent and warrant to, and
agree with, each Placement Agent that:
     (a) The Preliminary Private Placement Memorandum, as of its date, did not,
and at the Closing Date, will not, and the Final Private Placement Memorandum,
as of its date and as of the Closing Date, will not, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. Neither the Company nor the Guarantors
(including their agents and representatives, other than the Placement Agents in
their capacity as such) has made, used, prepared, authorized, approved or
referred to and will not prepare, make, use, authorize, approve or refer to any
written communication that constitutes an offer to sell or solicitation of an
offer to buy the Securities except for the Preliminary Private Placement
Memorandum and the Final Private Placement Memorandum.
     (b) The documents incorporated by reference in the Preliminary Private
Placement Memorandum and the Final Private Placement Memorandum, when such
documents were filed with the Commission, conformed in all material respects to
the requirements of the Securities Exchange Act of 1934, as amended and the
applicable rules and regulations of the Commission thereunder (the “Exchange
Act”), and none of such documents contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and any further documents so filed and incorporated by reference in
the Preliminary Private Placement Memorandum and the Final Private Placement
Memorandum, when such documents are filed with the Commission, will conform in
all material respects to the requirements of the Exchange Act, and will not
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
     (c) The consolidated financial statements of the Company and its
subsidiaries and the related notes thereto included or incorporated by reference
in each of the Preliminary Private Placement Memorandum and the Final Private
Placement Memorandum have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby and present fairly, in all material
respects, the consolidated financial position of the Company and its
subsidiaries as of the dates indicated and the consolidated results of their
operations and the consolidated changes in their cash flows for the periods
specified. The consolidated financial information included or incorporated by
reference in each of the Preliminary Private Placement Memorandum and the Final
Private Placement

 

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Memorandum has been accurately presented and prepared, in all material respects,
on a basis consistent with the financial statements and the books and records of
the Company. The as adjusted financial information contained in each of the
Preliminary Private Placement Memorandum and the Final Private Placement
Memorandum has been prepared on a basis consistent with the historical
consolidated financial statements included in or incorporated by reference in
each of the Preliminary Private Placement Memorandum and the Final Private
Placement Memorandum (except for the adjustments specified therein).
     (d) Since the date of the most recent consolidated financial statements of
the Company and its subsidiaries included or incorporated by reference in each
of the Preliminary Private Placement Memorandum and the Final Private Placement
Memorandum, except in each case as otherwise disclosed in the Preliminary
Private Placement Memorandum and the Final Private Placement Memorandum (i)
there has been no material adverse change, or any development involving a
prospective material adverse change, in or affecting the business, properties,
management, financial position or results of operations of the Company and its
subsidiaries taken as a whole; (ii) neither the Company nor any of its
subsidiaries has incurred any liability or obligation, direct or contingent,
that is material to the Company and its subsidiaries taken as a whole;
(iii) neither the Company nor any of its subsidiaries has entered into any
transaction or agreement that is material to the Company and its subsidiaries
taken as a whole; (iv) there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries, or any dividend or
distribution of any kind declared, set aside for payment, paid or made by the
Company or any of its subsidiaries on any class of capital stock, or any
redemption in respect thereof; and (v) neither the Company nor any of its
subsidiaries has sustained any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor disturbance or dispute or from any action, order or
decree of any court or arbitrator or governmental or regulatory authority.
     (e) The Company and each of its subsidiaries have been duly incorporated or
formed, as the case may be, and are validly existing corporations or limited
liability companies, as the case may be, in good standing under the laws of
their respective jurisdictions of incorporation or formation, as the case may
be, are duly qualified to do business and are in good standing as foreign
corporations or foreign limited liability companies, as the case may be, in each
jurisdiction in which their respective ownership or lease of property or the
conduct of their respective businesses requires such qualification, and have all
power and authority necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged, except where the failure to be
so qualified, in good standing or have such power or authority would not,
individually or in the aggregate, have a material adverse effect on the
business, properties, management, financial position or results of operations of
the Company and its subsidiaries taken as a whole or on the performance by the
Company and the Guarantors of their obligations under the Securities, the
Guarantees and the Conversion Shares (a “Material Adverse Effect”).
     (f) All the outstanding shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and non-assessable;
except as

 

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disclosed in each of the Preliminary Private Placement Memorandum and the Final
Private Placement Memorandum, there are no outstanding subscriptions, rights,
warrants, calls or options to acquire, or instruments convertible into or
exchangeable for, or agreements or understandings with respect to the sale and
issuance of, any shares of capital stock or other equity interest in the
Company; the holders of the outstanding shares of capital stock of the Company
are not entitled to any preemptive or other rights to subscribe for the
Securities or the Conversion Shares; and the capital stock of the Company
conforms in all material respects to the description thereof contained in each
of the Preliminary Private Placement Memorandum and the Final Private Placement
Memorandum.
     (g) All the outstanding shares of capital stock or membership interests, as
the case may be, of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and, except as
otherwise described in each of the Preliminary Private Placement Memorandum and
the Final Private Placement Memorandum, are owned directly or indirectly by the
Company, free and clear of any lien, charge, encumbrance, security interest,
restriction on voting or transfer or any other claim of any third party; and
there are no outstanding subscriptions, rights, warrants, calls or options to
acquire, or instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale and issuance of, any shares of capital
stock or other equity interest in any of the subsidiaries of the Company.
     (h) The Company and each of the Guarantors have full right, power and
authority to execute and deliver this Agreement, the Securities (in the case of
the Company only), the Purchase Agreements (in the case of the Company only),
the Indenture (including the Guarantees set forth therein) and the Registration
Rights Agreement (collectively, the “Transaction Documents”), and the Company
and each of the Guarantors have full right, power and authority to perform their
respective obligations hereunder and thereunder; and, as of the Closing Date,
all corporate or limited liability company action required to be taken for the
due and proper authorization, execution, issuance and delivery of each of the
Transaction Documents and the consummation of the transactions contemplated
thereby has been or will have been duly and validly taken. The Company has the
full corporate power and authority to issue and deliver the Conversion Shares.
     (i) The Indenture has been duly authorized by the Company and each of the
Guarantors and, when duly executed and delivered in accordance with its terms by
each of the parties thereto, will constitute a valid and legally binding
agreement of the Company and each of the Guarantors enforceable against the
Company and each of the Guarantors in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting the enforcement
of creditors’ rights generally or by equitable principles relating to
enforceability (whether considered in a proceeding in equity or at law)
(collectively, the “Enforceability Exceptions”); and on the Closing Date, the
Indenture will conform in all material respects to the requirements of the Trust
Indenture Act of 1939, as amended (the “Trust Indenture Act”), and the rules and
regulations of the Commission applicable to an indenture that is qualified
thereunder.

 

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     (j) The Securities have been duly authorized by the Company and, when duly
executed, authenticated, issued and delivered as provided in the Indenture
(assuming the Indenture is the valid and legally binding obligation of the
Trustee and assuming due authentication of the Securities by the Trustee) and
paid for as provided herein, will be duly and validly issued and outstanding and
will constitute valid and legally binding obligations of the Company enforceable
against the Company in accordance with their terms, subject to the
Enforceability Exceptions, and will be entitled to the benefits of the
Indenture; and the Guarantees have been duly authorized by each of the
Guarantors and, when the Securities have been duly executed, authenticated,
issued and delivered as provided in the Indenture and paid for as provided
herein, will be valid and legally binding obligations of each of the Guarantors,
enforceable against each of the Guarantors in accordance with their terms,
subject to the Enforceability Exceptions, and will be entitled to the benefits
of the Indenture. The Securities will be convertible into the Conversion Shares
in accordance with their terms and the terms of the Indenture.
     (k) The Conversion Shares issuable upon conversion of the Securities have
been duly and validly authorized and are free of preemptive rights and, when
issued and delivered upon such conversion in accordance with the terms of the
Indenture, will be duly and validly authorized and issued, fully paid and
non-assessable and free and clear of all liens, encumbrances, equities or
claims; the Board of Directors of the Company has duly and validly adopted
resolutions reserving such Conversion Shares for issuance upon conversion.
     (l) The Purchase Agreements have been duly authorized, executed and
delivered by the Company. This Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors.
     (m) The Registration Rights Agreement has been duly authorized by the
Company and each of the Guarantors and, when duly executed and delivered on the
Closing Date in accordance with its terms by each of the parties thereto, will
constitute a valid and legally binding agreement of the Company and each of the
Guarantors enforceable against the Company and each of the Guarantors in
accordance with its terms, subject to the Enforceability Exceptions, and except
that rights to indemnity and contribution thereunder may be limited by
applicable law and public policy considerations.
     (n) Each Transaction Document conforms in all material respects to the
description thereof contained in each of the Preliminary Private Placement
Memorandum and the Final Private Placement Memorandum.
     (o) Neither the Company nor any of its subsidiaries is (i) in violation of
its charter or by-laws or similar organizational documents; (ii) except as
described in each of the Preliminary Private Placement Memorandum and the Final
Private Placement Memorandum, in default, and no event has occurred that, with
notice or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
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which any of the property or assets of the Company or any of its subsidiaries is
subject; or (iii) in violation of any law or statute or any judgment, order,
rule or regulation of any court or arbitrator or governmental or regulatory
authority having jurisdiction over the Company or any of its subsidiaries or any
of their respective properties or assets, except, in the case of clauses
(ii) and (iii) above, for any such defaults or violations that would not,
individually or in the aggregate, have a Material Adverse Effect.
     (p) The execution, delivery and performance by the Company and each of the
Guarantors of each of the Transaction Documents to which each is a party, the
issuance, authentication, sale and delivery of the Securities and the Guarantees
and the Common Stock upon conversion of the Securities in accordance with the
terms and conditions of the Indenture and compliance by the Company and each of
the Guarantors with the terms thereof and the consummation of the transactions
contemplated by the Transaction Documents, including the use of proceeds
therewith as described in the Preliminary Private Placement Memorandum and the
Final Private Placement Memorandum, will not (i) conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its subsidiaries is
subject, (ii) result in any violation of the provisions of the charter or
by-laws or similar organizational documents of the Company or any of its
subsidiaries or (iii) result in the violation of any law or statute or any
judgment, order, decree, rule or regulation of any court or arbitrator or
governmental or regulatory authority or body having jurisdiction over the
Company or any of its subsidiaries or any of their respective properties or
assets, except, in the case of clauses (i) and (iii) above, for any such
conflict, breach, violation or default that would not, individually or in the
aggregate, have a Material Adverse Effect.
     (q) No consent, approval, authorization, order, registration or
qualification of or with any court or arbitrator or governmental or regulatory
authority is required for the execution, delivery and performance by the Company
and each of the Guarantors of each of the Transaction Documents to which each is
a party, the issuance, authentication, sale and delivery of the Securities and
the Guarantees and the Common Stock issuable upon conversion of the Securities
in accordance with the terms and conditions of the Indenture and compliance by
the Company and each of the Guarantors with the terms thereof and the
consummation of the transactions contemplated by the Transaction Documents,
including the use of proceeds therewith as described in the Preliminary Private
Placement Memorandum and the Final Private Placement Memorandum, except for such
consents, approvals, authorizations, orders and registrations or qualifications
which shall have been obtained or made prior to the Closing Date or as may be
required to be obtained or made under the Trust Indenture Act, the Securities
Act and applicable state securities laws as contemplated in the Registration
Rights Agreement.
     (r) To the knowledge of the Company, no action has been taken and no
statute, rule, regulation or order has been enacted, adopted or issued by any
governmental agency or body which prevents the issuance of the Securities, the
issuance of the

 

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Guarantees or the issuance of Common Stock issuable upon conversion of the
Securities in accordance with the terms and conditions of the Indenture or
suspends the sale of the Securities and Guarantees in any jurisdiction; no
injunction, restraining order or order of any nature by any federal or state
court of competent jurisdiction has been issued with respect to the Company or
any of its subsidiaries which would prevent or suspend the issuance,
authentication, sale or delivery of the Securities and Guarantees or the use of
the Preliminary Private Placement Memorandum or the Final Private Placement
Memorandum in any jurisdiction; no action, suit or proceeding is pending against
or, to the best knowledge of the Company, threatened against or affecting the
Company or any of its subsidiaries before any court or arbitrator or any
governmental agency, body or official, domestic or foreign, which could
reasonably be expected to interfere with or adversely affect the issuance of the
Securities or the issuance of the Guarantees or in any manner reasonably draws
into question the validity or enforceability of any of the Transaction Documents
or any action taken or to be taken pursuant thereto; and the Company has
complied with any and all requests by any securities authority in any
jurisdiction for additional information to be included in the Preliminary
Private Placement Memorandum and the Final Private Placement Memorandum.
     (s) Except as disclosed in each of the Preliminary Private Placement
Memorandum and the Final Private Placement Memorandum, there are no legal,
governmental or regulatory investigations, actions, suits or proceedings pending
to which the Company or any of its subsidiaries is or may be a party or to which
any property or assets of the Company or any of its subsidiaries is or may be
the subject that, individually or in the aggregate, if determined adversely to
the Company or any of its subsidiaries, could reasonably be expected to have a
Material Adverse Effect; and to the best knowledge of the Company and each of
the Guarantor, no such investigations, actions, suits or proceedings are
threatened or contemplated by any governmental or regulatory authority or by
others.
     (t) BDO Seidman, LLP, who have audited certain historical consolidated
financial statements of the Company and its subsidiaries, are independent
registered public accountants with respect to the Company and its subsidiaries
within the applicable rules and regulations adopted by the Commission and the
Public Accounting Oversight Board (United States) and as required by the
Securities Act.
     (u) The Company and its subsidiaries have good and marketable title in fee
simple to, or have valid rights to lease or otherwise use, all items of real and
personal property that are material to the respective businesses of the Company
and its subsidiaries, in each case, except with respect to secured debt
described in each of the Preliminary Private Placement Memorandum and the Final
Private Placement Memorandum, free and clear of all liens, encumbrances, claims
and defects and imperfections of title except those that (i) do not materially
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries or (ii) could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
     (v) Except as described in each of the Preliminary Private Placement
Memorandum and the Final Private Placement Memorandum, (i) the Company and its

 

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subsidiaries own or possess adequate rights to use all material patents, patent
applications, trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights, licenses and know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) presently employed by them in connection
with the respective businesses now operated by them, except to the extent that
the failure to own or possess the right to use such intellectual property could
not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect; (ii) the use of such rights in connection with their respective
businesses will not conflict in any material respect with any such rights of
others, except for such conflicts as could not, singly or in the aggregate
reasonably be expected to have a Material Adverse Effect; and (iii) the Company
and its subsidiaries have not received any notice of any claim of infringement
of or conflict with any such rights of others, except notices the content of
which if accurate, could not, singly or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
     (w) No relationship, direct or indirect, exists between or among the
Company or any of its subsidiaries, on the one hand, and the directors,
officers, stockholders or other affiliates of the Company or any of its
subsidiaries, on the other, that would be required by the Securities Act to be
described in a registration statement filed with the Commission and that is not
so described in each of the Preliminary Private Placement Memorandum and the
Final Private Placement Memorandum.
     (x) Neither the Company nor any of its subsidiaries is, and after giving
effect to the offering and sale of the Securities and the application of the
proceeds thereof as described in each of the Preliminary Private Placement
Memorandum and the Final Private Placement Memorandum none of them will be, an
“investment company” or an entity “controlled” by an “investment company” within
the meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder (collectively, the “Investment Company
Act”).
     (y) The Company and its subsidiaries have paid all federal, state, local
and foreign taxes and filed all tax returns required to be paid or filed through
the date hereof, in each case other than those being contested in good faith
with adequate reserves provided; and except as otherwise disclosed in each of
the Preliminary Private Placement Memorandum and the Final Private Placement
Memorandum, there is no tax deficiency that has been, or could reasonably be
expected to be, asserted against the Company or any of its subsidiaries or any
of their respective properties or assets which has had (nor do the Company or
any of the Guarantors have any knowledge of any tax deficiency which, if
determined adversely to the Company or any of its subsidiaries, could reasonably
be expected to have) a Material Adverse Effect.
     (z) The Company and its subsidiaries possess all licenses, certificates,
permits and other authorizations issued by, and have made all declarations and
filings with, the appropriate federal, state, local or foreign governmental or
regulatory authorities that are necessary for the ownership or lease of their
respective properties or the conduct of their respective businesses as described
in each of the Preliminary Private Placement Memorandum and the Final Private
Placement Memorandum, except where the failure to possess or make the same would
not, individually or in the aggregate, have a Material

 

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Adverse Effect; and except as disclosed in each of the Preliminary Private
Placement Memorandum and the Final Private Placement Memorandum, neither the
Company nor any of its subsidiaries has received notice of any revocation or
modification of any such license, certificate, permit or authorization or has
any reason to believe that any such license, certificate, permit or
authorization will not be renewed in the ordinary course.
     (aa) No labor disturbance by or dispute with employees of the Company or
any of its subsidiaries exists which is likely to have a Material Adverse Effect
or, to the best knowledge of the Company and each of the Guarantors, is
contemplated or threatened, and neither the Company nor any Guarantor is aware
of any existing or imminent labor disturbance by, or dispute with, the employees
of any of the Company’s or any of the Company’s subsidiaries’ principal
suppliers or contractors, except where any such labor disturbance or dispute
would not have a Material Adverse Effect.
     (bb) (i) The Company and its subsidiaries (x) are, and at all prior times
were, in compliance with any and all applicable federal, state, local and
foreign laws, rules, regulations, requirements, decisions and orders relating to
the protection of human health or safety, the environment, natural resources,
hazardous or toxic substances or wastes, pollutants or contaminants
(collectively, “Environmental Laws”), (y) have received and are in compliance
with all permits, licenses, certificates or other authorizations or approvals
required of them under applicable Environmental Laws to conduct their respective
businesses, and (z) have not received notice of any actual or potential
liability under or relating to any Environmental Laws, including for the
investigation or remediation of any disposal or release of hazardous or toxic
substances or wastes, pollutants or contaminants, and have no knowledge of any
event or condition that would reasonably be expected to result in any such
notice, except in the case of each of (x) and (y) above, for any such failure to
comply, or failure to receive required permits, licenses or approvals, or cost
or liability, as would not, individually or in the aggregate, have a Material
Adverse Effect; and (ii) except as disclosed in each of the Preliminary Private
Placement Memorandum and the Final Private Placement Memorandum, (x) there are
no proceedings that are pending, or that are known by the Company to be
contemplated, against the Company or any of its subsidiaries under any
Environmental Laws in which a governmental entity is also a party, other than
such proceedings regarding which it is reasonably believed no monetary sanctions
of $100,000 or more will be imposed, (y) the Company and its subsidiaries are
not aware of any material issues regarding compliance with Environmental Laws,
or material liabilities or other material obligations under Environmental Laws
or concerning hazardous or toxic substances or wastes, pollutants or
contaminants, that could reasonably be expected to have a Material Adverse
Effect.
     (cc) (i) Each employee benefit plan, within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), for
which the Company or any member of its “Controlled Group” (defined as any
organization which is a member of a controlled group of corporations within the
meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the
“Code”)) would have any liability (each, a “Plan”) has been maintained, in all
material respects, in compliance with its terms and the requirements of any
applicable statutes, orders, rules and regulations, including but not limited to
ERISA and the Code; (ii) no prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has occurred with

 

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respect to any Plan excluding transactions effected pursuant to a statutory or
administrative exemption; (iii) except as disclosed in each of the Preliminary
Private Placement Memorandum and the Final Private Placement Memorandum, for
each Plan that is subject to the funding rules of Section 412 of the Code or
Section 302 of ERISA, no “accumulated funding deficiency” as defined in
Section 412 of the Code, whether or not waived, has occurred or is reasonably
expected to occur; (iv) except as disclosed in each of the Preliminary Private
Placement Memorandum and the Final Private Placement Memorandum, the fair market
value of the assets of each Plan exceeds the present value of all benefits
accrued under such Plan (determined based on those assumptions used to fund such
Plan); (v) no “reportable event” (within the meaning of Section 4043(c) of
ERISA) has occurred or is reasonably expected to occur which could be reasonably
expected to have a Material Adverse Effect; (vi) neither the Company nor any
member of the Controlled Group has incurred, nor reasonably expects to incur,
any liability under Title IV of ERISA (other than contributions to the Plan or
premiums to the Pension Benefit Guaranty Corporation in the ordinary course and
without default) with respect to the termination of, or withdrawal from, any
pension plan for which the Company or any member of the Controlled Group would
have any liability in respect of a Plan (including a “multiemployer plan,”
within the meaning of Section 4001(a)(3) of ERISA); and (vii) and each such
pension plan that is intended to be qualified under Section 401(a) of the Code
is so qualified and nothing has occurred, whether by action or by failure to
act, which could cause the loss of such qualification.
     (dd) The Company and its subsidiaries have insurance covering their
respective properties, operations, personnel and businesses, including business
interruption insurance, which insurance is in amounts and insures against such
losses and risks as the Company reasonably believes is adequate, and consistent
with industry practice, to protect the Company and its subsidiaries and their
respective businesses; and neither the Company nor any of its subsidiaries has
(i) received notice from any insurer or agent of such insurer that capital
improvements or other expenditures are required or necessary to be made in order
to continue such insurance or (ii) any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage at reasonable cost from similar insurers as may be
necessary to continue its business.
     (ee) On the Closing Date and immediately after giving effect to the
issuance of the Securities and the consummation of the other transactions
related thereto as described in each of the Preliminary Private Placement
Memorandum and the Final Private Placement Memorandum, including the amendment
and restatement of the Credit Agreement, the Company and each of the Guarantors
will be Solvent. As used in this paragraph, the term “Solvent” means, with
respect to a particular date, that on such date (i) the present fair market
value (or present fair saleable value) of the assets of the Company or such
Guarantor, as the case may be, is not less than the total amount required to pay
the probable liabilities of the Company or such Guarantor, as the case may be,
on its total existing debts and other liabilities (including contingent
liabilities, computed at the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability) as they become absolute
and matured; (ii) the Company or such

 

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Guarantor, as the case may be, is able to realize upon its assets and pay its
debts and other liabilities (including such contingent liabilities) as they
mature and become due in the normal course of business; (iii) assuming
consummation of the issuance of the Securities as contemplated by this
Agreement, the Preliminary Private Placement Memorandum and the Final Private
Placement Memorandum and the amendment and restatement of the Credit Agreement,
the Company has not incurred, and does not propose to incur, debts that would be
beyond its ability to pay as such debts and other liabilities mature; (iv) the
Company or such Guarantor, as the case may be, is not engaged in any business or
transaction, and does not propose to engage in any business or transaction, for
which its property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which the Company or
such Guarantor, as the case may be, is engaged; and (v) the Company or such
Guarantor, as the case may be, is not a defendant in any civil action that would
result in a judgment that the Company or such Guarantor, as the case may be, is
or would become unable to satisfy.
     (ff) Except as described in the Preliminary Private Placement Memorandum or
the Final Private Placement Memorandum, no subsidiary of the Company is
currently prohibited, directly or indirectly, under any agreement or other
instrument to which it is a party or is subject, from paying any dividends to
the Company, from making any other distribution on such subsidiary’s capital
stock, from repaying to the Company any loans or advances to such subsidiary
from the Company or from transferring any of such subsidiary’s properties or
assets to the Company or any other subsidiary of the Company.
     (gg) On the Closing Date, the Securities will not be of the same class as
securities listed on a national securities exchange registered under Section 6
of the Exchange Act or quoted in an automated inter-dealer quotation system; and
each of the Preliminary Offering Memorandum and the Final Private Placement
Memorandum, as of its respective date, contains all the information that, if
requested by a prospective purchaser of the Securities, would be required to be
provided to such prospective purchaser pursuant to Rule 144A(d)(4) under the
Securities Act.
     (hh) Neither the Company nor any of its affiliates (as defined in Rule
501(b) of Regulation D) has, directly or through any agent, sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act), that is or will be integrated with
the sale of the Securities in a manner that would require registration of the
Securities under the Securities Act. None of the Company or any of its
affiliates or any other person acting on its or their behalf (other than the
Placement Agents, as to which no representation is made) has solicited offers
for, or offered or sold, the Securities and the Guarantees by means of any form
of general solicitation or general advertising within the meaning of Rule 502(c)
of Regulation D.
     (ii) Assuming the accuracy of the representations and warranties of the
Placement Agents contained herein, it is not necessary, in connection with the
issuance and sale of the Securities and Guarantees to the Investors and the
offer, resale and delivery of the Securities and Guarantees by the Investors in
the manner contemplated by this Agreement, the Preliminary Private Placement
Memorandum and the Final Private Placement Memorandum, to register the
Securities and Guarantees under the Securities Act or to qualify the Indenture
under the Trust Indenture Act.

 

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     (jj) Neither the Company nor any of the Guarantors has taken, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Securities.
     Any certificate signed by any officer of the Company or any of its
subsidiaries and delivered to the Placement Agents shall be deemed a joint and
several representation and warranty by the Company and each of its subsidiaries
to the Placement Agents as to the matters covered thereby.
     3. Representations and Warranties of the Placement Agents. Each Placement
Agent, severally and not jointly, represents and warrants to, and agrees with,
the Company that it has not and will not solicit offers for the Securities by
any form of general solicitation or general advertising (as those terms are used
in Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act; and (ii) it
has and will solicit offers for the Securities only from persons whom it
reasonably believes to be QIBs or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to them that each such account is a QIB,
to whom notice has been given that such sale or delivery is being made in
reliance on Section 4(2) of the Securities Act, and, in each case, in
transactions pursuant to Section 4(2) of the Securities Act.
     4. The Closing. The time and date of closing and delivery of the documents
required to be delivered to the Placement Agents pursuant to Section 6 hereof
shall be at 10:00 a.m, New York City time on April 3, 2007 (the “Closing Date”)
at the offices of Akin Gump Strauss Hauer & Feld LLP, 590 Madison Avenue, New
York, NY 10022-2524. At the closing, the Escrow Agent will (i) disburse the
Escrow Funds from the Escrow Account to the Company as provided in the Escrow
Agreement and (ii) deliver the Securities to the Investors, which delivery may
be made through the facilities of The Depository Trust Company.
     5. Agreements. The Company agrees with each Placement Agent that:
     (a) Prior to the completion of the sale of the Securities by the Company,
before making or distributing any amendment or supplement to either the
Preliminary Private Placement Memorandum or the Final Private Placement
Memorandum, the Company will furnish to each Placement Agent a copy of any
proposed amendment or supplement to such Memorandum for review and will not
distribute any such proposed amendment or supplement to which either Placement
Agent reasonably objects within a reasonable period of time after having been
furnished such proposed amendment or supplement.
     (b) The Company will cooperate with the Placement Agents in arranging for
the qualification of the Securities for offering and sale under the securities
or “Blue Sky” laws of such jurisdictions as the Placement Agents may reasonably
have designated in writing and will continue such qualifications in effect for
as long as may be necessary to complete the sale of the Securities; provided,
however, that in connection therewith, the Company shall not be required to
qualify as a foreign corporation or to execute a general

 

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consent to service of process in any jurisdiction or subject itself to taxation
in excess of a nominal dollar amount in any such jurisdiction where it is not
then so subject.
     (c) Without the prior written consent of the Placement Agents, for a period
of 90 days from the date of the Final Private Placement Memorandum, the Company
agrees not to (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any of its equity securities or any securities
convertible into or exercisable or exchangeable for its equity securities,
(ii) enter into any swap or other agreement that transfers to another, in whole
or in part, any of the economic consequences of ownership of notes, Common Stock
or any similar securities or any security convertible or exercisable or
exchangeable for common stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of its equity securities or such
other securities, in cash or otherwise, (iii) file with the Commission a
registration statement under the Securities Act relating to any additional
Common Stock or securities convertible into, or exchangeable for, any Common
Stock or (iv) publicly disclose the intention to effect any transaction
described in clauses (i) through (iii), without the prior written consent of the
Placement Agents other than (a) the Securities offered hereby, (b) the shares of
Common Stock issuable upon conversion of the Securities, (c) the grant to any
employee or director stock options or restricted stock units to purchase Common
Stock (including the issuance of Common Stock upon the exercise of options or
settlement of restricted stock units currently outstanding or granted after the
date hereof) pursuant to any of the Company’s employee or director stock option
or similar plans as in effect on the date of the Final Private Placement
Memorandum or such similar plans as are subsequently approved by the Company’s
stockholders, and (d) the filing of any registration statement in respect of the
Securities offered hereby and the Common Stock issuable upon conversion of the
Securities, pursuant to the Registration Rights Agreement, or any registration
statement with respect to Common Stock or other securities pursuant to the
Company’s employee or director stock option or similar plans as in effect on the
date of the Final Private Placement Memorandum or such similar plans as are
subsequently approved by the Company’s stockholders.
     (d) The Company will provide to each Placement Agent and to counsel for
each Placement Agent, without charge, prior to the date on which the Securities
shall have been sold by the Company, as many copies of the Preliminary Private
Placement Memorandum and the Final Private Placement Memorandum or any amendment
or supplement thereto as each Placement Agent may reasonably request.
     (e) The Company will apply the net proceeds from the sale of the Securities
as set forth under “Use of proceeds” in the Final Private Placement Memorandum.
     (f) If not otherwise available on the Commission’s Electronic Data
Gathering, Analysis and Retrieval system (“EDGAR”), prior to the date that the
Securities are no longer outstanding, the Company will furnish to the holders of
the Securities as soon as practicable, but in no case sooner than as required to
file with the Commission pursuant to the Exchange Act, after the end of each
fiscal year an annual report (including a

 

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15

balance sheet and statements of income, stockholders’ equity and cash flows of
the Company and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable, but in no case sooner than as required
to file with the Commission pursuant to the Exchange Act, after the end of each
of the first three quarters of each fiscal year (beginning with the fiscal
quarter ending after the date of the Final Private Placement Memorandum), will
make available to its securityholders consolidated summary financial information
of the Company and its subsidiaries for such quarter in reasonable detail.
     (g) None of the Company or any of its “affiliates” (as defined in Rule 144
under the Securities Act) will sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any “security” (as defined in the Securities
Act) that could be integrated with the sale of the Securities in a manner that
would require the registration under the Securities Act of the Securities.
     (h) The Company will not, and will not permit any of its affiliates to,
engage in any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) in connection with the
offering of the Securities or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act.
     (i) For so long as any of the Securities remain outstanding and are
“restricted securities” within the meaning of Rule 144(a)(3) under the
Securities Act, the Company will make available at its expense, upon request, to
any holder of such Securities and any prospective purchasers thereof the
information specified in Rule 144A(d)(4) under the Securities Act, unless the
Company is then subject to Section 13 or 15(d) of the Exchange Act.
     (j) Prior to any registration of the Securities pursuant to the
Registration Rights Agreement, or at such earlier time as may be so required, to
qualify the Indenture under the Trust Indenture Act of 1939, as amended (the
“TIA”), and to enter into any necessary supplemental indentures in connection
therewith.
     (k) The Company will use all commercially reasonable efforts to (i) permit
the Securities to be designated as PORTAL-eligible securities in accordance with
the rules and regulations adopted by the NASD relating to trading in the NASD’s
PORTAL Market (the “PORTAL Market”) and (ii) permit the Securities to be
eligible for clearance and settlement through The Depository Trust Company.
     (l) The Company shall reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligations to issue shares of its Common Stock upon
conversion of the Securities.
     (m) The Company will take such steps as shall be necessary to ensure that
neither the Company nor any of the its subsidiaries become an “investment
company”

 

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within the meaning of such term under the Investment Company Act of 1940, as
amended.
     (n) The Company will not take, directly or indirectly, any action designed
to or that would constitute or that might reasonably be expected to cause or
result in, under the Exchange Act or otherwise, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Securities.
     (o) For a period of two years (calculated in accordance with paragraph
(d) of Rule 144 under the Securities Act) following the date any Securities are
acquired from the Company or any of its “affiliates” (as defined in Rule 144A
under the Securities Act), none of the Company or any of its “affiliates” will
sell any such Securities.
     6. Conditions to the Obligations of the Placement Agents. The several
obligations of the Placement Agents hereunder and the closing of the sale of the
Securities pursuant to the Purchase Agreements shall be subject to the
performance by the Company of its obligations hereunder and to the following
additional conditions:
     (a) The Placement Agents shall have received the opinion, dated the Closing
Date and addressed to the Placement Agents, of Akin Gump Strauss Hauer & Feld
LLP, counsel for the Company, covering the matters set forth in Exhibit B-1 to
this Agreement. The Placement Agents shall have received the opinion, dated the
Closing Date and addressed to the Placement Agents, of Ohio counsel for the
Company, covering the matters set forth in Exhibit B-2 to this Agreement.
     (b) The “lockup” agreements, each substantially in the form of Exhibit C
hereto, between the Placement Agents and certain officers and directors of the
Company as listed in Schedule I hereto relating to sales and certain other
dispositions of shares of the equity securities or certain other securities,
delivered to the Placement Agents on or before the date hereof, shall be in full
force and effect on the Closing Date.
     (c) The Placement Agents shall have received from each Investor an executed
investor letter each substantially in the form set forth in Exhibit D to this
Agreement.
     (d) Representations and warranties of the Company contained in this
Agreement shall be true and correct on and as of the date hereof, on and as of
the Closing Date as if made on and as of the Closing Date; the statements of the
Company’s officers made pursuant to any certificate delivered in accordance with
the provisions hereof shall be true and correct on and as of the date made and
on and as of the Closing Date; the Company shall have performed all covenants
and agreements and satisfied all conditions on their part to be performed or
satisfied hereunder at or prior to the Closing Date; and, except as described in
the Company’s filings pursuant to the requirements the Exchange Act (the
“Exchange Act Filings”) (exclusive of any such filings after the date hereof),
subsequent to the date of the most recent financial statements in such Exchange
Act Filings of the Company, there shall have been no event or development, and
no information shall have become known, that, individually or in the aggregate,
has or would be reasonably likely to have a Material Adverse Effect.

 

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     (e) The Placement Agents shall have received a certificate of the Company,
dated the Closing Date, signed on behalf of the Company by either its interim
chief executive officer or its interim chief financial officer or both to the
effect that
     (1) the representations and warranties of the Company contained in this
Agreement are true and correct on and as of the date hereof and on and as of the
Closing Date and the Company has performed all covenants and agreements and
satisfied all conditions on its part to be performed or satisfied hereunder at
or prior to the Closing Date;
     (2) at the Closing Date, since the date hereof or since the date of the
most recent financial statements in the Company’s Exchange Act Filings
(exclusive of any such filings after the date hereof), no event or development
has occurred, and no information has become known, that, individually or in the
aggregate, has or would be reasonably likely to have a Material Adverse Effect;
and
     (3) the sale of the Securities hereunder has not been enjoined (temporarily
or permanently).
     (f) On the Closing Date, the Placement Agents and the Investors shall have
received the Registration Rights Agreement executed by the Company and such
agreement shall be in full force and effect at all times from and after the
Closing Date.
     (g) The Conversion Shares shall have been duly listed, subject to notice of
issuance, on the NASDAQ Global Market and satisfactory evidence of such actions
shall have been provided to the Placement Agents, and the Company has taken no
action designed to, or likely to have the effect of delisting the Securities
from the NASDAQ Global Market, nor has the Company received any information that
the NASDAQ Global Market is contemplating the termination of such listing.
     On or before the Closing Date, the Placement Agents and counsel for the
Placement Agents shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and its subsidiaries as
they shall have heretofore reasonably requested from the Company.
     All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Placement Agents and counsel for the Placement Agents. The Company shall furnish
to the Placement Agents such conformed copies of such documents, opinions,
certificates, letters, schedules and instruments in such quantities as the
Placement Agents shall reasonably request.
     7. Payment of Company’s Expenses and Reimbursement of Placement Agents’
Expenses. The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions

 

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contemplated herein are consummated or this Agreement is terminated pursuant to
Section 9 hereof, including all costs and expenses incident to (i) the printing,
word processing or other production of documents with respect to the
transactions contemplated hereby, including any costs of printing the
Preliminary Private Placement Memorandum and the Final Private Placement
Memorandum and any amendment or supplement thereto, and any “Blue Sky”
memoranda, (ii) all arrangements relating to the delivery to the Placement
Agents and the Investors of copies of the foregoing documents, (iii) the fees
and disbursements of the counsel, the accountants and any other experts or
advisors retained by the Company, (iv) preparation (including printing),
issuance and delivery to the Investors of the Securities, (v) the qualification
of the Securities under state securities and “Blue Sky” laws, including
documented filing fees and $5,100 in respect of the fees and disbursements of
counsel for the Placement Agents relating thereto, (vi) the fees and expenses
(including, without limitation, fees and disbursements of legal counsel,
provided that the Placement Agents shall notify the Company and obtain its prior
consent, such consent not to be unreasonably withheld, if the documented fees
and disbursements of legal counsel to be reimbursed pursuant to this Section
exceed $400,000) incurred by the Placement Agents in connection with this
Agreement or any of the transactions contemplated hereby, (vii) expenses in
connection with the “roadshow” and any due diligence meetings with prospective
investors in the Securities, (viii) fees and expenses of any Trustee, registrar
or depositary, including the documented fees and expenses of counsel, and
(ix) all expenses and listing fees incurred in connection with the application
for quotation of the Securities on the PORTAL Market. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Placement Agents set forth in Section 6 hereof is not
satisfied, because this Agreement is terminated or because of any failure,
refusal or inability on the part of the Company to perform all obligations and
satisfy all conditions on their part to be performed or satisfied hereunder
(other than solely by reason of a default by the Placement Agents of their
obligations hereunder after all other conditions hereunder have been satisfied
in accordance herewith), the Company agrees to promptly reimburse the Placement
Agents, severally, upon demand for all out-of-pocket expenses (including fees,
disbursements and charges of Simpson Thacher & Bartlett LLP, counsel for the
Placement Agents, subject to requirement that the Placement Agents obtain the
Company’s prior consent, such consent not to be unreasonably withheld, if the
fees and disbursements of such legal counsel exceed $400,000) that shall have
been incurred by the Placement Agents in connection with the proposed purchase
and sale of the Securities.
     8. Indemnification and Contribution.
     (a) The Company agrees to indemnify and hold harmless each Placement Agent,
its affiliates and their respective officers, directors, employees, agents and
controlling persons (each a “Placement Agent Entity”) from and against any and
all losses, claims, damages, liabilities and expenses, joint or several, to
which any such Placement Agent Entity may become subject arising out of or in
connection with the transactions contemplated by this Agreement, or any claim,
litigation, investigation or proceedings relating to the foregoing
(“Proceedings”) regardless of whether any of such Placement Agent Entities is a

 

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party thereto, and to reimburse such Placement Agent Entities for any legal or
other expenses as they are incurred in connection with investigating, responding
to or defending any of the foregoing; provided that the foregoing
indemnification will not, as to any Placement Agent Entity, apply to losses,
claims, damages, liabilities or expenses to the extent that they are finally
judicially determined to have resulted from the gross negligence or willful
misconduct of such Placement Agent Entity. The Company also agrees that no
Placement Agent Entity shall have any liability (whether direct or indirect, in
contract, tort or otherwise) to the Company for or in connection with this
Agreement, any transactions contemplated thereby or the Placement Agents’ role
or services in connection therewith, except to the extent that any liability for
losses, claims, demands, damages, liabilities or expenses incurred by the
Company are finally judicially determined to have resulted from the gross
negligence or willful misconduct of such Placement Agent Entity.
     (b) If for any reason the foregoing indemnification is unavailable to any
Placement Agent Entity or insufficient to hold it harmless, then the Company
shall contribute to the amount paid or payable by such Placement Agent Entity as
a result of such loss, claim, damage, liability or expense in such proportion as
is appropriate to reflect not only the relative benefits received by the Company
on the one hand and such Placement Agent Entity on the other hand but also the
relative fault of the Company and such Placement Agent Entity, as well as any
relevant equitable considerations. It is hereby agreed that the relative
benefits to the Company on the one hand and all Placement Agent Entities on the
other hand shall be deemed to be in the same proportion as (i) the total value
received or proposed to be received by the Company pursuant to any sale of the
Securities (whether or not consummated) bears to (ii) the fee paid or proposed
to be paid to each Placement Agent in connection with such sale. The indemnity,
reimbursement and contribution obligations of the Company under this Section 8
shall be in addition to any liability which the Company may otherwise have to a
Placement Agent Entity and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company and any
Placement Agent Entity.
     (c) Promptly after receipt by a Placement Agent Entity of notice of the
commencement of any Proceedings, such Placement Agent Entity will, if a claim is
to be made hereunder against the Company in respect thereof, notify the Company
in writing of the commencement thereof; provided that (i) the omission so to
notify the Company will not relieve it from any liability which it may have
hereunder except to the extent it has been materially prejudiced by such failure
and (ii) the omission so to notify the Company will not relieve it from any
liability which it may have to a Placement Agent Entity otherwise than on
account of this Section 8. In case any such Proceedings are brought against any
Placement Agent Entity and it notifies the Company of the commencement thereof,
the Company will be entitled to participate therein and, to the extent that it
may elect by written notice delivered to the Placement Agent Entity, to assume
the defense thereof with counsel reasonably satisfactory to such Placement Agent

 

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Entity; provided that if the defendants in any such Proceedings include both the
Placement Agent Entity and the Company and the Placement Agent Entity shall have
concluded that there may be legal defenses available to it which are different
from or additional to those available to the Company, the Placement Agent Entity
shall have the right to select separate counsel to assert such legal defenses
and to otherwise participate in the defense of such Proceedings on behalf of
such Placement Agent Entity. Upon receipt of notice from the Company to such
Placement Agent Entity of its election so to assume the defense of such
Proceedings and approval by the Placement Agent Entity of counsel, the Company
will not be liable to such Placement Agent Entity for expenses incurred by the
Placement Agent Entity in connection with the defense thereof (other than
reasonable costs of investigation) unless (i) the Placement Agent Entity shall
have employed separate counsel in connection with the assertion of legal
defenses in accordance with the proviso to the immediately preceding sentence
(it being understood, however, that the Company shall not be liable for the
expenses of more than one separate counsel (in addition to any local counsel),
approved by the Placement Agents, representing the Placement Agent Entities who
are parties to such Proceedings), (ii) the Company shall not have employed
counsel reasonably satisfactory to the Placement Agent Entity to represent the
Placement Agent Entity within a reasonable time after notice of commencement of
the Proceedings or (iii) the Company has authorized in writing the employment of
counsel for the Placement Agent Entity.
     (d) The Company shall not be liable for any settlement of any Proceedings
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such Proceedings, the Company agrees to
indemnify and hold harmless each Placement Agent Entity from and against any and
all losses, claims, damages, liabilities and expenses by reason of such
settlement or judgment to the extent provided herein. Notwithstanding the
immediately preceding sentence, if at any time a Placement Agent Entity shall
have requested the Company to reimburse such Placement Agent Entity for legal or
other expenses in connection with investigating, responding to or defending any
Proceedings as contemplated by this Section 8, the Company shall be liable for
any settlement of any Proceedings effected without its written consent if
(i) such settlement is entered into more than 30 days after receipt by the
Company of such request for reimbursement and (ii) the Company shall not have
reimbursed such Placement Agent Entity in accordance with this Agreement and
with such request prior to the date of such settlement. The Company shall not,
without the prior written consent of a Placement Agent Entity, effect any
settlement of any pending or threatened Proceedings in respect of which
indemnity could have been sought hereunder by such Placement Agent Entity unless
such settlement includes an unconditional release of such Placement Agent Entity
in form and substance satisfactory to such Placement Agent Entity from all
liability on claims that are the subject matter of such Proceedings and does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any Placement Agent Entity.

 

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     9. Termination. Notwithstanding anything herein contained, this Agreement
may be terminated in the absolute discretion of the Placement Agents, by notice
given to the Company, if after the execution and delivery of this Agreement and
prior to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of or
guaranteed by the Company shall have been suspended on any exchange or in any
over the counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities, or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in the judgment of the Placement Agents, is material and adverse and
which, in the judgment of the Placement Agents, makes it impracticable to offer,
sell or deliver the Securities on the terms and in the manner contemplated in
the Final Private Placement Memorandum or to enforce contracts for the sale of
the Securities.
     Termination of this Agreement pursuant to this Section 9 shall be without
liability of any party to any other party except as provided in Section 8
hereof.
     10. Survival of Agreements, Representations, Warranties and Indemnities.
The respective agreements, representations, warranties, indemnities and other
statements of the Company or its officers and of the Placement Agents set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Placement Agents or
the Company or any of the officers, directors, employees, agents or controlling
persons referred to in Section 8 hereof, and will survive delivery of and
payment for the Securities. The provisions of Sections 7 and 8 hereof shall
survive the termination or cancellation of this Agreement.
     11. Notices. Notices in relation to this letter agreement may be sent to
the Company at 15010 N.E. 36th Street, Redmond, Washington 98052 or by facsimile
sent to the attention of Shelley Milano at 425-755-7671, confirmed by calling
425-755-6179 and to JPMorgan at 277 Park Avenue, New York, NY 10172, Attention:
Santosh Sreenivasan, or by facsimile sent to 212-622-6037, confirmed by calling
212-622-5604, and to Goldman Sachs at 85 Broad Street, New York, NY 10004,
Attention: John Kolz, or by facsimile sent to 212-346-3885, confirmed by calling
212-902-1735.
     12. No Fiduciary Relationships. The Company acknowledges that the Placement
Agents have been retained solely to provide the services set forth herein. In
rendering such services, each of the Placement Agents shall act as an
independent contractor and not as a financial advisor or a fiduciary to, or an
agent of, the Company or any other person. Additionally, the Placement Agents
are not advising the Company or any other person as to any legal, tax,
investment, accounting or regulatory matters in any jurisdiction. The Company
shall consult with its own advisors concerning such matters and shall be
responsible for making its own independent investigation and appraisal of the
transactions contemplated hereby, and the Placement Agents shall have no
responsibility or liability to the Company with respect thereto. Any review by
the Placement Agents of the Company, the transactions contemplated hereby or
other matters

 

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relating to such transactions will be performed solely for the benefit of the
Placement Agents and shall not be on behalf of the Company. Any duties of
Placement Agents arising out of this Agreement shall be owed solely to the
Company and nothing in this Agreement or the nature of the services of the
Placement Agents in connection with this Agreement shall be deemed to create a
fiduciary duty or fiduciary or agency relationship between the Placement Agents
and the Company and its stockholders, employees or creditors, and the Company
agrees that it shall not make, and hereby waives, any claim based on an
assertion of such a fiduciary duty or relationship in connection with the
transactions contemplated by this Agreement. In addition, the Company agrees
that each of the Placement Agents may perform the services contemplated hereby
in conjunction with its affiliates, and that any affiliates of the Placement
Agents performing services hereunder shall be entitled to the benefits and be
subject to the terms of this Agreement.
     The Company acknowledges that each of the Placement Agents is a securities
firm engaged in securities trading and brokerage activities and providing
investment banking and financial advisory services. In the ordinary course of
business, each of the Placement Agents and its affiliates may at any time hold
long or short positions, and may trade or otherwise effect transactions, for
their own account or the accounts of customers, in debt or equity securities of
the Company, its affiliates or other entities that may be involved in the
transactions contemplated hereby. In addition, each of the Placement Agents and
its affiliates may from time to time perform various investment banking,
commercial banking and financial advisory services for other clients and
customers who may have conflicting interests with respect to the Company or the
offering and sale of the Securities.
     Furthermore, the Company acknowledges that each of the Placement Agents and
its affiliates may have fiduciary or other relationships whereby such Placement
Agent and its affiliates may exercise voting power over securities of various
persons, which securities may from time to time include securities of the
Company or of potential purchasers of the Securities or others with interests in
respect of the offering and sale of the Securities. The Company acknowledges
that each Placement Agent and its affiliates may exercise such powers and
otherwise perform its functions in connection with such fiduciary or other
relationships without regard to the relationship of the Placement Agents to the
Company hereunder.
     13. APPLICABLE LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT WILL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE
COMPANY AND THE PLACEMENT AGENTS IRREVOCABLY AGREE TO WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF EITHER
PARTY RELATED TO OR ARISING OUT OF THIS AGREEMENT OR THE PERFORMANCE OF SERVICES
HEREUNDER.
     14. Counterparts. This Agreement may be signed in one or more counterparts,
each of which shall constitute an original and all of which together shall
constitute one and the same agreement.

 

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     15. Partial Unenforceability. The invalidity or unenforceability of any
Section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.
     16. Miscellaneous. This Agreement and the engagement letter dated March 6,
2007 among the Company and the Placement Agents contain the entire agreement
between the parties relating to the subject matter hereof and supersedes all
oral statements and prior writings with respect thereto. This Agreement may not
be amended or modified except by a writing executed by each of the parties
hereto. Section headings herein are for convenience only and are not a part of
this Agreement. This Agreement is solely for the benefit of the Company and the
Placement Agents, and no other person (except for indemnified persons to the
extent set forth in Section 8) shall acquire or have any rights under or by
virtue of this letter agreement. This Agreement may not be assigned by any party
hereto without the prior written consent of each other party hereto. No party
hereto shall be responsible or have any liability to any other party for any
indirect, special or consequential damages arising out of or in connection with
this Agreement or the transactions contemplated hereby, even if advised of the
possibility thereof.

 

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     If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and the Placement Agents.

                  Very truly yours,    
 
                EDDIE BAUER HOLDINGS, INC.    
 
           
 
  By:   /s/ David Taylor    
 
     
 
Name: David Taylor    
 
      Title: Interim Chief Financial Officer    
 
                EDDIE BAUER, INC.    
 
           
 
  By:   /s/ David Taylor    
 
     
 
Name: David Taylor    
 
      Title: Interim Chief Financial Officer    
 
                EDDIE BAUER FULFILLMENT SERVICES, INC.    
 
           
 
  By:   /s/ David Taylor    
 
     
 
Name: David Taylor    
 
      Title: Interim Chief Financial Officer    
 
                EDDIE BAUER DIVERSIFIED SALES, LLC    
 
           
 
  By:   /s/ David Taylor    
 
     
 
Name: David Taylor    
 
      Title: Interim Chief Financial Officer    
 
                EDDIE BAUER SERVICES, LLC    
 
           
 
  By:   /s/ David Taylor    
 
     
 
Name: David Taylor    
 
      Title: Interim Chief Financial Officer    

 

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                  EDDIE BAUER INTERNATIONAL
      DEVELOPMENT, LLC    
 
           
 
  By:   /s/ David Taylor    
 
     
 
Name: David Taylor    
 
      Title: Interim Chief Financial Officer    
 
                EDDIE BAUER INFORMATION
      TECHNOLOGY, LLC    
 
           
 
  By:   /s/ David Taylor    
 
     
 
Name: David Taylor    
 
      Title: Interim Chief Financial Officer    

The foregoing Placement Agency Agreement is
hereby confirmed and accepted
as of the date first above written.
J.P. MORGAN SECURITIES INC.

         
By:
       
 
 
 
Name:     
 
  Title:     
 
        GOLDMAN, SACHS & CO.    
 
       
By:
       
 
 
 
(Goldman, Sachs & Co.)