Document:

EX-10.3

 

Exhibit 10.3

PREPAYMENT, COVENANT TERMINATION AND RELEASE AGREEMENT

     PREPAYMENT, COVENANT TERMINATION AND RELEASE AGREEMENT, dated as of August 16, 2006, by and
among Value City Department Stores LLC, an Ohio limited liability company (“Value City” or
“Borrower”), Gramex Retail Stores, Inc., a Delaware corporation (“Gramex”),
Filene’s Basement, Inc., a Delaware corporation (“Filene’s”), GB Retailers, Inc. a Delaware
corporation (“GB”), Value City of Michigan, Inc., a Michigan corporation (“VC
Michigan”), J.S. Overland Delivery, Inc. (“Overland”), Value City Department Stores
Services, Inc. (“Services”), Retail Ventures, Inc., an Ohio corporation (the
“Parent”), Retail Ventures Jewelry, Inc., an Ohio corporation (“RV Jewelry”),
Retail Ventures Services, Inc., an Ohio corporation (“RV Services”), Retail Ventures
Licensing, Inc., a Delaware corporation (“RV Licensing”), and Retail Ventures Imports, Inc.
(formerly known as VC Acquisition, Inc.), an Ohio corporation (“Imports”, and together with
Gramex, Filene’s, GB, VC Michigan, Overland, Services, the Parent, RV Jewelry, RV Licensing and RV
Services, each a “Guarantor” and collectively, the “Guarantors”, and together with
the Borrower, each a “Loan Party”, and collectively, the “Loan Parties”), the
lenders currently party to the Financing Agreement referred to below (each a “Lender” and
collectively, the “Lenders”) and Cerberus Partners, L.P., a limited partnership formed
under the laws of the State of Delaware (“CPLP”), as agent for the Lenders (in such
capacity, together with its successors and assigns in such capacity, the “Agent”).

WITNESSETH:

     WHEREAS, the Borrower, the Guarantors, the Agent and the Lenders are parties to a Second
Amended and Restated Senior Loan Agreement dated as of July 5, 2005 (as amended through the date
hereof, the “Financing Agreement”), pursuant to which the Lenders have made loans to the
Borrower (the “Loans”);

     WHEREAS, the obligations of the Loan Parties to the Agent and Lenders in respect of the
Financing Agreement and the Loan Documents (as defined in the Financing Agreement) are guaranteed
and secured pursuant to the terms of the Financing Agreement and the other Loan Documents;

     WHEREAS, simultaneously with the execution and delivery of this Agreement, the Borrower is
prepaying $49,500,000 of the Loans under the Financing Agreement (such payment the
“Prepayment” and the Loans prepaid, the “Prepaid Loans”)) and satisfying all of the
other obligations of the Borrower and the Guarantors to the Lenders and the Agent under the other
Loan Documents (other than the Restated Financing Agreements (as hereinafter defined, the
Convertible Warrants and the Warrants (collectively, the “Outstanding Warrants”), the
Registration Rights Agreement and the DSW Registration Rights Agreement (each as defined in the
Financing Agreement);

     NOW, THEREFORE, in consideration of the premises and agreements herein and the Prepayment and
the satisfaction of the other obligations, the Borrower, the Guarantors, the Agent and the Lenders
hereby agree as follows:

 

 

     1. Capitalized terms used and not otherwise defined herein have the respective meanings
assigned to them in the Financing Agreement.

     2. As of the date hereof, (i) the accrued and unpaid interest on the Prepaid Loans is
$206,250; (ii) the amount of accrued and unpaid fees and expenses (other than fees and expenses of
Schulte Roth & Zabel LLP) is $0.00. Assuming no changes in applicable interest rates and no
changes in the outstanding principal amount of the Prepaid Loans, the aggregate per diem accrual of
such interest and fees is $13,750.00; and (iii) the prepayment premium that the Borrower has agreed
to pay with respect to the Prepaid Loans is $3,930,113.49.

     3. The Borrower is obligated to pay to Schulte Roth & Zabel LLP $185,000.00 representing fees
and disbursements of counsel to the Agent, which amount shall be paid by wire transfer of
immediately available funds pursuant to the wire instructions set forth on Schedule B
attached hereto.

     4. The Borrower hereby agrees that the Prepaid Loans, the interest thereon and the fees in
connection therewith set forth in paragraph 2 hereof, the prepayment premium set forth in paragraph
2 hereof, the accrued fees and disbursements of counsel to the Agent set forth in paragraph 3
hereof and the accrued fees and disbursements of counsel to Schottenstein Stores Corporation
(collectively, the “Prepaid Obligations”) are payable without any deduction, offset,
defenses or counterclaim, provided that the prepayment premium is only payable if, and to
the extent, that the Borrower actually repays the Prepaid Loans as contemplated herein.

     5. Without recourse and without any representation or warranty of any kind, and subject to the
satisfaction of the conditions set forth in paragraph 9 hereof: (a) the Agent and the Lenders
hereby acknowledge payment in full of the Prepaid Obligations and hereby terminate all covenants
set forth in Article VI and Article VII of the Financing Agreement, (b) each Lender shall execute
and deliver a Third Amended and Restated Senior Loan Agreement restating the terms of the Loan
remaining outstanding to each Lender, on the terms set forth in Exhibit A (as amended and restated
as set forth herein, collectively, the “Restated Financing Agreements”), (c) the Agent and
the Lenders hereby terminate each Loan Document (other than the Restated Financing Agreements, the
Outstanding Warrants, the Registration Rights Agreement and the DSW Registration Rights Agreement),
(d) the Agent and the Lenders hereby acknowledge and agree that any and all liens, security
interests or other charges or encumbrances in favor of the Agent and the Lenders arising under the
Financing Agreement, any Loan Documents or any other documents securing the Financing Agreement
(collectively, the “Financing Agreement Liens”) are hereby automatically released and
terminated without any further action on the part of the Agent and Lenders, (e) the Agent and the
Lenders hereby acknowledge and agree that each Guarantor is hereby irrevocably released and
discharged from its Guaranty and from its liability for any Guaranteed Obligations, (f) (i) the
Borrower and Guarantors hereby release and discharge the Agent, the Lenders, and their respective
participants, if any, and their successors and assigns, from all claims, demands, accounts and
actions that they at any time had or have or that they or their successors and assigns hereinafter
may have against the Agent or the Lenders by reason of any account, cause or matter (the
“Claims”) arising out of the Financing Agreement and the other Loan Documents (other than
the Restated Financing Agreements, the Outstanding Warrants, the Registration Rights Agreement and
the DSW Registration Rights Agreement) and except to the extent arising out of this

-2-

 

Agreement; and (ii) as to each and every claim released hereunder, the Borrower and each
Guarantor hereby represents that it has received the advice of legal counsel with regard to the
releases contained herein, and (g) the Agent and Lenders hereby release the Borrower and the
Guarantors from all Claims arising out of the Financing Agreement and the other Loan Documents
(other than the Restated Financing Agreements, the Outstanding Warrants, the Registration Rights
Agreement and DSW Registration Rights Agreement) except to the extent arising out of this Agreement
and any provision in any of the aforementioned documents which by its terms expressly survives the
termination thereof. Nothing contained herein shall be deemed to be a termination of, or a release
of any claims or obligations under this Agreement, any Restated Financing Agreement, any
Outstanding Warrant, the Registration Rights Agreement or the DSW Registration Rights Agreement.
For the avoidance of doubt, the parties hereby acknowledge and agree that neither the Stock Pledge
Agreement entered into in accordance with Section 9(d) hereof nor the Account Control agreement
entered into in accordance with Section 9(e) hereof, are Loan Documents and all parties agree that
such documents are not terminated by this Agreement.

     6. Following the satisfaction of the conditions set forth in paragraph 9 hereof, the Agent and
Lenders, as appropriate (a) hereby authorize the Borrower and its counsel to file or cause to be
filed, UCC termination statements (the “Termination Statements”) to terminate those UCC
financing statements listed in Schedule C attached hereto, together with any others
hereafter identified to the Agent by the Borrower as securing the Obligations under the Financing
Agreement, (b) will promptly (i) cause to be delivered to the Borrower (or to another Person
designated by the Borrower), the stock certificate(s) representing the shares of stock of DSW
pledged to the Agent and the Lenders pursuant to the Pledge Agreement and the executed stock
power(s) related thereto, and (ii) deliver to the Revolving Credit Facility Agent, the stock
certificates representing the shares of the other Loan Parties pledged to the Agent and the Lenders
pursuant to the Pledge Agreement and the executed stock powers related thereto as set forth in
Schedule D attached hereto (collectively, the “Pledged Collateral”), together with
any others hereafter identified to the Agent by the Borrower as securing the Obligations under the
Financing Agreement, (c) promptly execute and deliver to the Borrower (or to another Person
designated by the Borrower) the Releases (Trademark) and the Release (Patent) in the form of
Exhibit B hereto (the “Intellectual Property Releases”), terminating the Agent’s
and the Lenders’ interests in each Loan Party’s trademarks and patents, and (d) promptly execute
and deliver to the Revolving Credit Facility Agent, the mortgage assignments in the form of
Exhibit C hereto (the “Mortgage Assignments”) assigning the Agent’s and the
Lenders’ interests in the Facilities owned by any Loan Party to the Revolving Credit Facility Agent
or amendments to such mortgages to designate the Revolving Credit Facility Agent as agent
thereunder, which Pledged Collateral, Termination Statements, Intellectual Property Releases and
Mortgage Assignments shall be made without representation, warranty or recourse of any kind.

     7. The Agent and the Lenders will, at the request of the Borrower execute such additional
instruments and other writings, and take such other actions, as the Borrower may from time to time
reasonably request to effect or evidence the satisfaction of the Obligations and the termination of
the Financing Agreement Liens and each Loan Document (other than the Restated Financing Agreements,
the Outstanding Warrants, the Registration Rights Agreement and the DSW Registration Rights
Agreement) and any instruments executed pursuant thereto, but at the sole cost and expense of the
Borrower; provided that this paragraph 7 shall not apply to

-3-

 

(i) the Restated Financing Agreement, the Outstanding Warrants, the Registration Rights
Agreement or the DSW Registration Rights Agreement, and (ii) any provisions in the Loan Documents
not expressly terminated hereby and which expressly provide for the survival thereof.

     8. This Agreement shall (a) be binding on the Agent, the Lenders, the Borrower, the Guarantors
and their respective successors and assigns and (b) inure to the benefit of the Agent, the Lenders,
the Borrower, the Guarantors and their respective successors and assigns.

     9. The effectiveness of this Agreement is subject to the conditions precedent that the Agent
shall have received (a) full payment in respect of all of the Prepaid Obligations by wire transfer
of immediately available funds pursuant to the instructions set forth in Schedule A and
Schedule B attached hereto, (b) counterparts of this Agreement, duly executed by the
Borrower, the Guarantors, the Agent and the Lenders, (c) a copy of the Third Amended and Restated
Senior Loan Agreement — Cerberus, and the Third Amended and Restated Senior Loan Agreement — SSC,
in each case in the form of Exhibit A hereto and executed by the Borrower and the relevant Lender,
(d) the stock pledge by RVI, in favor of Cerberus and the stock pledge in favor of SSC,
respectively, as a holder of Outstanding Warrants, pledging as collateral for the obligation of RVI
to deliver shares of stock of DSW upon exercise of the Outstanding Warrants for shares of stock of
DSW, the number of shares of stock of DSW into which the Outstanding Warrants may be exercised,
substantially in the form of Exhibit D hereto, duly executed by RVI, accompanied by stock
certificates representing such pledged shares and corresponding stock powers executed in blank, and
(e) an Account Control Agreement with National City Bank and each Lender, in each case reasonably
acceptable to such Lender, with respect to the account of the Borrower at National City Bank into
which it has placed the cash deposit in an amount equal to the remaining balance of the Loan owing
to each Lender securing the Loan outstanding under the Restated Financing Agreements, as required
pursuant thereto, duly executed by the Borrower, the Bank and such Lender.

     10. The Loan Parties hereby jointly and severally agree to pay all costs and expenses in
connection with the preparation, execution, delivery, filing and recording of this Agreement, the
notification and release documents executed in furtherance hereof, and the performance of any other
acts and the execution of any other documents required to effect the release of any Financing
Agreement Liens, including, without limitation, the reasonable fees and disbursements of counsel to
the Agent.

     11. This Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement. Delivery of an executed counterpart of
this Agreement by telefacsimile or electronic mail shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed counterpart of this
Agreement, but the failure to deliver an original executed counterpart shall not affect the
validity, enforceability and binding effect of this Agreement.

-4-

 

     12. This Agreement shall be governed by and construed in accordance with the law of the State
of New York.

     13. THE AGENT, THE LENDERS, THE BORROWER AND THE GUARANTORS HEREBY WAIVE ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR
UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN
THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING IN CONNECTION WITH THIS AGREEMENT,
AND AGREE THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.

-5-

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered
by their duly authorized officers as of the date first written above.

	 	 	 	 	 
	 	VALUE CITY DEPARTMENT STORES LLC,

an Ohio limited liability company

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	GRAMEX RETAIL STORES, INC.,

a Delaware corporation

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	FILENE’S BASEMENT, INC.,

a Delaware corporation

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Chief Financial Officer 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	VALUE CITY OF MICHIGAN, INC.,

a Michigan corporation

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	GB RETAILERS, INC.,

a Delaware corporation

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	J.S. OVERLAND DELIVERY, INC.

a Delaware corporation

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	VALUE CITY DEPARTMENT STORES SERVICES, INC.

a Delaware corporation

 	 
	 	By:  	                      /s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	RETAIL VENTURES, INC.

an Ohio corporation

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	RETAIL VENTURES JEWELRY, INC.

an Ohio corporation

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

 

 

	 	 	 	 	 
	 	RETAIL VENTURES SERVICES, INC. 

an Ohio corporation

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 
	 	RETAIL VENTURES IMPORTS, INC.

(formerly known as VC Acquisition, Inc.),

an Ohio corporation

 	 
	 	By:  	               /s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 
	 	RETAIL VENTURES LICENSING, INC.

a Delaware corporation

 	 
	 	By:  	                 /s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Chief Financial Officer 	 

 

 

	 	 	 	 	 
	 	AGENT AND LENDER:

CERBERUS PARTNERS, L.P.,

a Delaware limited partnership, on behalf of itself

and its affiliate assigns

By: CERBERUS ASSOCIATES, L.L.C.

 	 
	 	By:  	
/s/ Lenard Tessler
 	 
	 	 	Name:  	Lenard Tessler 	 
	 	 	Title:  	 	 
	 
	 
	 	LENDER:

SCHOTTENSTEIN STORES CORPORATION,

a Delaware corporation

 	 
	 	By:  	/s/ Irwin A. Bain
 	 
	 	 	Name:  	Irwin A. Bain 	 
	 	 	Title:  	Senior Vice President and
General Counsel 	 

 

 

	 	 	 	 	 

Schedule A

Wire Instructions

Cerberus Partners, L.P.

	 	 	 
	 	 	 

	Bank:
	 	Citibank, N.A., New York, New York

	 	 	 

	ABA# :
	 	021000089

	 	 	 

	Account Name:
	 	Cerberus Partners, L.P.

	 	 	 

	Account #:
	 	37839889

	 	 	 

	Attention:
	 	Robert Gadigan

	 	 	 

	Reference:
	 	Value City

 

 

Schedule B

Wire Instructions

Schulte Roth & Zabel LLP

	 	 	 
	 	 	 

	Name of Bank:
	 	Citibank N.A.

111 Wall Street

New York, New York 10043

	 	 	 

	ABA No.:
	 	021000089

	 	 	 

	Account Name:
	 	Schulte Roth & Zabel LLP

Attorney Business Account

	 	 	 

	Account No.:
	 	37242839

	 	 	 

	Reference:
	 	014951.0296

 

 

Schedule C

UCC Financing Statements to be terminated — Attached

 

 

Schedule D

Stock Certificates

Copies Attached

 

 

Exhibit A

Form of Third Amended and Restated Senior Loan Agreement

 

 

Exhibit B

Intellectual Property Releases

Attached

 

 

Exhibit C

Mortgage Assignments

As determined among SRZ and counsel to National City

 

 

Exhibit D

Form of Pledge AgreementEX-10.4

 

Exhibit 10.4

PLEDGE AGREEMENT

     PLEDGE AGREEMENT, dated as of August 16, 2006 made by Retail Ventures, Inc., an Ohio
corporation (the “Company”), with and in favor of Cerberus Partners, L.P., a Delaware
limited partnership (the “Warrant Holder”).

WITNESSETH:

     WHEREAS, pursuant to the terms of the Warrants, upon the exercise of a Warrant into DSW Stock
by the Warrant Holder, the Company has agreed to deliver to the Warrant Holder the DSW Stock into
which the relevant Warrant has been exercised, upon the terms and subject to the conditions set
forth therein;

     NOW, THEREFORE, in consideration of the premises the parties hereto hereby agree as follows:

     1. Defined Terms. (a) Unless otherwise defined herein, each term defined in the
Warrants and used herein shall have the meaning given to such term in the Warrants.

     (b) The following terms shall have the following meanings:

     “Agreement”: this Pledge Agreement, as the same may be amended, modified or otherwise
supplemented from time to time.

     “Collateral”: the collective reference to the Pledged Stock, the certificates (if
any) representing the Pledged Stock, all options and other rights contractual or otherwise in
respect thereof and all, documents, instruments, investment property and other property (including
but not limited to any stock dividend or distribution in connection with a stock split) from time
to time received, receivable or otherwise distributed, issued or delivered in respect of or in
exchange for any or all of the Pledged Stock, and all proceeds of any of the foregoing, in each
case whether now owned or hereafter acquired by the Company and howsoever its interest therein may
arise or appear.

     “Event of Default”: the failure by the Company to perform the Obligations in
accordance with the terms of the Warrants.

     “Obligations”: the obligation of the Company under a Warrant, upon notification that
a Warrant is to be exercised into DSW Stock and upon payment of the Aggregate Purchase Price, to
issue to the Warrant Holder DSW Stock on the terms set forth in the Warrant.

     “Pledged Stock”: 644,705 shares of DSW Stock, as the same may be increased pursuant
to the provisions contained in the definition of the term “Collateral” and the final sentence of
Section 5(a) hereof.

     “UCC”: the Uniform Commercial Code as in effect from time to time in the State of New
York.

 

 
2

     “Warrants”: the collective reference to Warrant number C1, and Warrant number W6
issued by the Company to the Warrant Holder (i) on September 26, 2002 and amended and restated on
July 5, 2005, in the case of Warrant number C1, and (ii) on July 5, 2005 in the case of Warrant
number W6, in each case, as the same may be amended, supplemented or modified after the date
hereof.

     (c) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this Agreement unless otherwise specified.

     (d) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.

     2. Delivery and Pledge.

     (a) The Company hereby delivers, transfers, assigns, pledges and issues to the Warrant Holder
a continuing first priority Lien on, and security interest in, all of the Company’s right, title
and interest in and to the Collateral, in each case as collateral security for the prompt and
complete performance by the Company when due of the Obligations. The Company hereby agrees that
(i) subject to the terms hereof, the Warrant Holder may exercise its rights set forth herein or
under applicable law, and realize on the Collateral to satisfy, in whole or in part, the
Obligations, in accordance with, and subject to, the terms hereof and the terms of the Warrants.

     (b) The Company agrees promptly to deliver or cause to be delivered to the Warrant Holder any
and all certificated Pledged Stock and any and all certificates or other instruments or documents
representing the Collateral. Upon delivery to the Warrant Holder, (i) any certificates evidencing
Pledged Stock shall be accompanied by transfer powers, duly executed in blank or other instruments
of transfer satisfactory to the Warrant Holder and by such other instruments and documents as the
Warrant Holder may reasonably request and (ii) all other property comprising part of the Collateral
shall be accompanied by proper instruments of assignment duly executed by the Company and such
other instruments or documents as the Warrant Holder may reasonably request.

     3. Restrictions on Transfer of Pledged Stock; Voting of Pledged Stock.

     (a) Unless an Event of Default shall have occurred and be continuing and the Warrant Holder
shall have exercised its remedies under Section 6 hereof, the Warrant Holder shall not sell, assign
or transfer the Pledged Stock.

     (b) Unless an Event of Default shall have occurred and be continuing the Warrant Holder shall
not vote or exercise any rights whatsoever with respect to the Pledged Stock. Notwithstanding the
foregoing, if an Event of Default shall have occurred and be continuing, the Warrant Holder may
vote the Pledged Stock as contemplated by Section 5 of this Agreement.

     4. Representations, Warranties and Covenants. The Company represents, warrants and
covenants that:

 

3

     (a) it (i) is and will at all times continue to be the direct owner, beneficially and of
record, of the Collateral (ii) holds the same free and clear of all Liens, except for the security
interest granted hereunder, and (iii) will make no assignment, pledge, hypothecation or transfer
of, or create or permit to exist any security interest in, or other Lien on, the Collateral, other
than pursuant hereto;

     (b) it (i) has the power and authority to execute this Agreement and to pledge the Collateral
in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or
therein against any and all Liens (other than the Lien created by this Agreement), however arising,
of all Persons whomsoever;

     (c) no consent of any other Person (including stockholders, trustees, partners, members or
creditors of the Company) and no consent or approval of any governmental authority or any
securities exchange was or is necessary to the execution and delivery of this Agreement, validity
of the pledge effected hereby; and the exercise of remedies by the Lender hereunder; and (ii)
neither the execution and delivery of this Agreement by the Company, the granting of the security
interest hereunder, nor the exercise of remedies by the Lender hereunder contravene any law or any
contractual restriction binding on or affecting the Company or any of its properties and will not
result in or require the creation of any Lien upon the Collateral other than pursuant to this
Agreement;

     (d) upon delivery of the certificates representing the Pledged Stock to the Warrant Holder,
the Warrant Holder shall have a valid and perfected first Lien upon and security interest in such
Pledged Stock, and (ii) filing of a UCC financing statement in the office of the Secretary of State
of Ohio, the Warrant Holder shall have a valid and perfected first Lien upon and security interest
in the other Collateral, in each case, as security for the performance of the Obligations;

     (e) the pledge effected hereby is effective to vest in the Warrant Holder the rights in the
Collateral as set forth herein and there are no restrictions upon the transfer (other than pursuant
to state and federal securities laws and compliance by the Warrant Holder with the terms of the
Warrant) of, or the right to vote in respect of, any of the Collateral and that the Company has the
right to vote, pledge and grant a security interest in or otherwise transfer such Collateral free
of any Lien;

     (f) it will not make or consent to any amendment or other modification or waiver with respect
to any Collateral or enter into any agreement restricting its right to pledge the Collateral
hereunder without the consent of the Lender (whose consent shall not be unreasonably withheld); and

     (g) at any time and from time to time, upon the written request of the Lender, it will
promptly and duly execute and deliver, such further instruments and documents and take such further
actions as the Lender may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted.

     5. Voting Rights; Dividends and Interest, etc.

 

4

     (a) Unless and until an Event of Default shall have occurred and be continuing: (i) the
Company shall be entitled to exercise any and all voting and/or other consensual rights and powers
inuring to an owner of Pledged Stock or any part thereof for any purpose consistent with the terms
of this Agreement, (ii) the Warrant Holder shall execute and deliver to the Company, or cause to be
executed and delivered to the Company, all such proxies, powers of attorney and other instruments
as the Company may reasonably request for the purpose of enabling the Company to exercise the
voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i)
above and to receive the dividends, distributions and payments it is entitled to receive pursuant
to subparagraph (iii) below, (iii) the Company shall be entitled to receive and retain any and all
dividends, interest, principal and other distributions and payments paid in cash on the Pledged
Stock. All dividends, interest, principal and other distributions and payments made on or in
respect of the Collateral other than in cash, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of DSW or received in exchange for the Collateral
or any part thereof, or in redemption thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which DSW may be a party or otherwise, shall be and
become part of the Collateral, and, if received by the Company, shall not be commingled by the
Company with any of its other funds or property but shall be held separate and apart therefrom,
shall be held in trust for the benefit of the Warrant Holder and shall be forthwith delivered to
the Warrant Holder in the same form as so received (with any necessary endorsement).

     (b) Upon the occurrence and during the continuance of an Event of Default, all rights of the
Company to dividends, interest, principal or other distributions or payments that such Company is
authorized to receive, (with respect only to the DSW Stock that is the subject of the Event of
Default) pursuant to paragraph (a)(iii) above shall cease, and all such rights shall thereupon
become vested in the Warrant Holder, which shall have the sole and exclusive right and authority to
receive and retain such dividends, interest, principal or other distributions or payments. All
dividends, interest, principal or other distributions or payments received by the Company contrary
to the provisions of this Section 5 shall be held in trust for the benefit of the Warrant Holder,
shall be segregated from other property or funds of such Company and shall be forthwith delivered
to the Warrant Holder upon demand in the same form as so received (with any necessary endorsement).

     (c) Upon the occurrence and during the continuance of an Event of Default, all rights of any
Company to exercise the voting and consensual rights and powers it is entitled to exercise pursuant
to paragraph (a)(i) of this Section 5, and the obligations of the Warrant Holder under paragraph
(a)(ii) of this Section 5, shall cease, and all such rights shall thereupon become vested in the
Warrant Holder, which shall have the sole and exclusive right and authority to exercise such voting
and consensual rights and powers. After all Events of Default have been cured or waived, such
Company will have the right to exercise the voting and consensual rights and powers that it would
otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above.

     6. Remedies.

          If an Event of Default shall have occurred and be continuing, and upon 10 days’ notice by the
Warrant Holder to the Company, the pledge set forth in Section 2 hereof shall be

 

5

deemed (effective upon the expiry of the such 10 day period and payment in full of the Aggregate
Purchase Price in accordance with the terms of the applicable Warrant) to be an irrevocable
transfer and delivery, in accordance with the terms of the applicable Warrant, by the Company to
the Warrant Holder of that number of shares of the Pledged Stock then deliverable under the terms
of the relevant Warrant and legal title such shares shall be transferred to the Warrant Holder
without need for further actions on its behalf. Notwithstanding any other provision of this
Agreement, if an Event of Default shall have occurred and be continuing, the Warrant Holder shall
have the rights and remedies available to it as a secured party under the provisions of the UCC.

     7. Warrant Holder’s Appointment as Attorney-in-Fact. At any time after the occurrence
and during the continuance of an Event of Default, the Company hereby irrevocably constitutes and
appoints the Warrant Holder and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority in the place and
stead of the Company and in the name of the Company or in its own name, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the purposes of this
Agreement. All powers, authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security interests created
hereby are released.

     8. Execution of Financing Statements. Pursuant to any applicable law, the Company
authorizes the Warrant Holder to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of the Company in
such form and in such offices as the Warrant Holder reasonably determines appropriate to perfect
the security interests of the Warrant Holder under this Agreement. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement or other filing or
recording document or instrument for filing or recording for filing in any jurisdiction.

     9. Notices. All notices, requests and demands to or upon the Company or the Warrant
Holder to be effective shall be in writing (or by telex, fax or similar electronic transfer
confirmed in writing) and shall be deemed to have been duly given or made (i) when delivered by
hand or (ii) if given by mail, three Business Days after being deposited in the mails by certified
mail, return receipt requested, or (iii) if by telex, fax or similar electronic transfer, when sent
and receipt has been confirmed, addressed to the Company or the Warrant Holder at the following:

(x) if to the Company:

Retail Ventures, Inc

3241 Westerville Road

Columbus, OH 43224

Attn: General Counsel (Ph: 614-478-3424, Fax: 614-473-4682)

and

 

6

(y) if to the Warrant Holder:

Cerberus Partners, L.P.

299 Park Avenue

New York, NY 10171

Attn: Lenard Tessler (Ph: 212-909-1464, Fax: 212-755-3009)

     10. Termination and Release.

     (a) Subject to paragraph (b) below, this Agreement shall terminate and the Liens and security
interests granted hereby shall be released, upon the earlier to occur of (i) the transfer or
assignment to any Person (other than an affiliate of the Warrant Holder) by the Warrant Holder of
any of the Warrants, (ii) the exercise by the Warrant Holder of any of the Warrants into Common
Stock instead of DSW Stock, or (iii) the performance by the Company of the Obligations in
accordance with the terms of the Warrants.

     (b) If the Warrant Holder (i) transfers or assigns to any Person (other than an affiliate of
the Warrant Holder) some but not all of the Warrants held by it; (ii) exercises some but not all of
the Warrants into Common Stock instead of DSW Stock; or (iii) has only exercised some but not all
of the Warrants held by it, this Agreement and the Liens and security interests created hereby will
be terminated and released only as to that number of shares of Pledged Stock relating to the
Warrants so transferred or assigned, so exercised, or in respect of which the Company has performed
the Obligations, as the case may be.

     (c) Upon termination of this Agreement, the Warrant Holder shall surrender the Pledged Stock
to the Company together with all other Collateral previously delivered to the Warrant Holder and
then held by it, in each case without recourse, representation or warranty, and execute and deliver
to the Company such documents of assignment as are reasonably necessary to terminate the Warrant
Holder’s security interest in the Collateral interest hereunder.

     11. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

     12. Amendments. This Agreement may be amended by the written agreement of the parties
hereto.

     13. Headings. The headings used in this Agreement are for convenience of reference
only and are not to affect the construction hereof or be taken into consideration in the
interpretation hereof.

     14. Successors and Assigns. This Agreement shall be binding upon the successors and
assigns of the Company and shall inure to the benefit of the Warrant Holder and its successors but
not its assigns.

 

7

     15. Governing Law. This Agreement shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York.

     16. WAIVER OF JURY TRIAL. THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

     17. Indemnity and Expenses. (a) The Company agrees to indemnify and hold harmless the
Lender (and all of its respective officers, directors, employees, attorneys, consultants and
agents) from and against any and all claims, damages, losses, liabilities, obligations, penalties,
costs and expenses (including, without limitation, reasonable legal fees and disbursements of
counsel) to the extent that they arise out of or otherwise result from an enforcement of this
Agreement by the Lender after an Event of Default under this Agreement, except, as to any such
indemnified Person, claims, losses or liabilities resulting solely and directly from such Person’s
gross negligence or willful misconduct as determined by a final judgment of a court of competent
jurisdiction.

     (b) The Company agrees to pay to the Lender upon demand the amount of any and all costs and
expenses, including the reasonable fees and disbursements of the Lender’s counsel, which the Lender
may incur in connection with (i) the preparation, negotiation, execution, delivery, amendment,
waiver or other modification of this Agreement, (ii) the exercise or enforcement of any of the
rights of the Lender hereunder, or (iii) the failure by the Company to perform or observe any of
the provisions hereof; provided that such costs and expenses shall not include those costs and
expenses that are determined, pursuant to a final judgment by a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of the Lender.

     18. Security Interest Absolute. All rights of the Lender, all Liens and all
obligations of each of the Company hereunder shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Warrants or any other agreement or instrument
relating thereto, (ii) any change in the time, manner or place of payment of, or in any other term
in respect of, all or any of the Obligations, or any other amendment or waiver of or consent to any
departure from the Warrants, (iii) any exchange or release of, or non-perfection of any Lien on any
Collateral, or any release or amendment or waiver of, or consent to departure from, any guaranty
for all or any of the Obligations, or (iv) any other circumstance which might otherwise constitute
a defense available to, or a discharge of, the Company in respect of the Obligations. All
authorizations and agencies contained herein with respect to any of the Collateral are irrevocable
and powers coupled with an interest.

 

     IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and
delivered as of the date first above written.

	 	 	 	 	 
	 	RETAIL VENTURES, INC.

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title :	 Chief Financial Officer 	 
	 
	 	CERBERUS PARTNERS, L.P. as Warrant Holder

 	 
	 	By: 	CERBERUS ASSOCIATES, L.L.C. 	 

	 	 	 	 	 
	 	By:  	/s/ Lenard Tessler
 	 
	 	 	Name:  	Lenard Tessler 	 
	 	 	Title :

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00109-of-00352.parquet"}]]