Document:

EX-10.1

 

Exhibit 10.1

 

AMENDMENT NUMBER TEN TO CREDIT AGREEMENT

dated as of April 23, 2008

between

ULTRALIFE BATTERIES, INC.

and

THE LENDERS PARTY THERETO

and

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

 

 

AMENDMENT NUMBER TEN TO CREDIT AGREEMENT

     This Amendment, dated as of April 23, 2008 (“Amendment”), is made by and between ULTRALIFE
BATTERIES, INC. (the “Borrower”) and the Lenders party to the Credit Agreement and JPMORGAN
CHASE BANK, N.A. (formerly known as JPMorgan Chase Bank) as Administrative Agent for the Lenders
(in such capacity, the “Agent”).

Statement of the Premises

     The Borrower, the Lenders and the Agent have previously entered into, among other agreements,
a Credit Agreement, dated as of June 30, 2004, which was amended by Amendment Number One dated as
of September 24, 2004, Amendment Number Two dated as of May 4, 2005, Amendment Number Three dated
as of August 5, 2005 and Amendment Number Four dated as of November 1, 2005 and that certain waiver
letter dated May 3, 2006, Amendment Number Five dated June 29, 2006, that certain waiver letter
dated October 20, 2006, that certain waiver letter dated November 30, 2006 as extended, that
certain Forbearance and Amendment Number Six to Credit Agreement dated February 14, 2007 and that
certain Extension of Forbearance and Amendment Number Seven to Credit Agreement dated as of March
23, 2007 and that certain Extension of Forbearance and Amendment Number Eight to Credit Agreement
dated as of May 18, 2007 and that certain Amendment Number Nine to Credit Agreement dated as of
August 15, 2007 (collectively, the “Credit Agreement’). The Borrower has advised the Agent
and the Lenders that the Borrower wishes to amend certain terms of the Credit Agreement as
contained therein. The Borrower, the Lenders and the Agent desire to amend the Credit Agreement to
increase the commitment amount with respect to the Revolving Loans and to amend the pricing under
the Credit Agreement.

Statement of Consideration

     Accordingly, in consideration of the premises and under the authority of Section 5-1103 of the
New York General Obligations Law, the parties agree as follows:

AGREEMENT

     1. Defined Terms. The terms “this Agreement”, “hereunder” and similar
references in the Credit Agreement shall be deemed to refer to the Credit Agreement as amended by
this Amendment. Capitalized terms used and not otherwise defined herein shall have the meanings
ascribed to such terms in the Credit Agreement.

     2. Amendment. Effective upon the satisfaction of all conditions specified in Section 4
hereof, the Credit Agreement is hereby amended as follows:

          A. The Definition “Applicable Revolving Rate” as set forth in Section 1.01 of the
Credit Agreement is hereby superseded and replaced in its entirety and amended to read:

 

 

2

“Applicable Revolving Rate” means, for any day, with respect to any ABR
Revolving Loan or Eurodollar Revolving Loan, or with respect to the facility fees
payable hereunder, as the case may be, the applicable rate per annum set forth below
under the caption “ABR Spread”, “Eurodollar Spread” or “Facility Fee Rate”, as the
case may be:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Facility Fee Rate	 	Eurodollar Spread	 	ABR Spread
	Applicable
Revolving Rate
	 	60 bps	 	250 bps	 	0 bps

          B. The Definition “Applicable Term Rate” as set forth in Section 1.01 of the Credit
Agreement is hereby superseded and replaced in its entirety and amended to read:

“Applicable Term Rate” means, for any day, with respect to any ABR Term Loan
or Eurodollar Term Loan, as the case may be, the applicable rate per annum set forth
below under the caption “ABR Spread” or “Eurodollar Spread”, as the case may be.

	 	 	 	 	 	 	 	 	 
	 	 	Eurodollar Spread	 	ABR Spread
	Applicable Term Rate
	 	250 bps	 	0 bps

          C. The Definition “Commitment” as set forth in Section 1.01 of the Credit Agreement is
hereby amended so that the last sentence thereof is superseded and replaced in its entirety with
the following: “As of the effective date of the Amendment No. 10 to this Agreement, the aggregate
amounts of the Lenders’ Commitments is 22,500,000”.

          D. Schedule 2.01 of the Credit Agreement is hereby superseded and replaced in its
entirety with the Schedule 2.01 attached to this Amendment.

     3. Representations. The Borrower hereby represents and warrants to the Lenders and the
Agent that: (i) the covenants, representations and warranties set forth in the Credit Agreement are
true and correct on and as of the date of execution hereof as if made on and as of said date and as
if each reference therein to the Credit Agreement were a reference to the Credit Agreement as
amended by this Amendment; (ii) no Default or Event of Default specified in the Credit Agreement
has occurred and is continuing, (iii) since the date of the Credit Agreement, there has been no
material adverse change in the financial condition or business operations of the Borrower which has
not been disclosed to Lenders; (iv) the making and performance by the Borrower of this Amendment
have been duly authorized by all necessary corporate action, and do not, and will not, (a)
contravene the Borrower’s certificate of incorporation or by-laws, (b) violate any law, including
without limitation the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, or any rule, regulation (including Regulations T, U or X of the Board of Governors of
the Federal Reserve System) order, writ, judgment, injunction, decree, determination or award, and
(c) conflict with or result in the breach of, or constitute a default under, any material contract,
loan agreement, indenture, note, mortgage, deed of trust or any other material instrument or
agreement binding on the Borrower or any Subsidiary or any of their properties or result in or
require the creation or imposition of any lien upon or with respect to any of their properties; (v)
this Amendment has been duly executed and delivered by the Borrower and is the legal, valid and
binding obligation of the Borrower enforceable against the Borrower in accordance with its terms;
(vi) no authorization or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or any other third party is required for (a) the due
execution, delivery or performance by the Borrower of this Amendment or
any other agreement or document related

 

 

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hereto or contemplated hereby to which the Borrower is or
is to be a party or otherwise bound except for required filings and approvals under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations thereunder, or
(b) the exercise by the Agent or any Lender of its rights under the Credit Agreement as modified by
this Amendment; and (vii) the security interests and charges granted by the Borrower and its
Subsidiaries pursuant to the Security Agreements continue to constitute valid, binding and
enforceable, first in priority Liens on the Collateral, subject only to Liens permitted under the
terms of the Security Agreements and Credit Agreement.

     4. Conditions of Effectiveness of Amendments. The effectiveness of each and all of the
modifications contained in the Amendment is subject to the satisfaction, in form and substance
satisfactory to the Agent, of each of the following conditions precedent:

          A. Agent shall have received four (4) duplicate original counterparts of this Amendment
executed by Borrower, Lenders and Agent.

          B. Agent shall have received a secretarial certificate of the Borrower in a form reasonably
acceptable to Agent, certifying that the organizational documents and the incumbency of officers of
the Borrower previously delivered to Agent are true and correct as of the date of execution hereof.

          C. As of the effective date of this Amendment, no Default or Event of Default shall have
occurred and be continuing.

          D. The representations and warranties contained in Section 3 hereof and in the Credit
Agreement shall be true, correct and complete as of the effective date of this Amendment as though
made on such date.

          E. The Agent shall have received all fees for the benefit of the Lenders and itself as agent
as set forth in that certain fee letter dated April 23, 2008 by the Agent.

     5. Covenants.

          A. Borrower hereby covenants and agrees to cooperate with the Agent in any manner reasonably
necessary in order to promptly continue, or in the case of after-acquired property, create a first
lien in favor of the Agent, on behalf of the Lenders, in all personal property assets acquired by
Borrower or its subsidiaries.

          B. With respect to Innovative Solutions Consulting, Inc.’s name change to RedBlack
Communications, Inc. (the “Company”), Borrower hereby covenants and agrees to deliver to
the Agent the following on or before May 1, 2008: (i) UCC-3 name change amendment for the
Company’s existing filing filed with the Maryland Secretary of State’s Office, (ii) the filed
amendment to the Company’s Charter reflecting the name change, (iii) a current good standing
certificate for the Company, and (iv) UCC search results acceptable to the Agent.

          C. Borrower agrees to pay all out-of-pocket expenses and fees of the Agent and Lenders in
connection with the negotiation, preparation and execution of this Amendment and any related
document, including the reasonable fees and disbursements of counsel to the Agent.

     6. Reaffirmation. The Borrower acknowledges, reaffirms and agrees that the Security Agreements secure repayment of
all existing and future indebtedness, liabilities and obligations of the Borrower to the Lenders
and Agent, including without limitation, all indebtedness of the Borrower under the Credit
Agreement, as modified by this Amendment. By signing below, each of McDowell Research Co., Inc.
(formerly known as MR Acquisition Corporation), RedBlack Communications, Inc. (formerly known as
Innovative Solutions Consulting, Inc.), Reserve Power Systems, Inc. and Stationary Power Services,
Inc. hereby acknowledges and reaffirms the execution and delivery of certain guaranty and

 

 

4

security
documents in connection with the Credit Agreement (the “Guarantor Documents”) and the guaranty of
indebtedness and the grant of the security thereunder and acknowledges, reaffirms and agrees that
the Guarantor Documents guarantee and secure repayment of all existing and future indebtedness,
liabilities and obligations of the Borrower to the Lenders and Agent, including without limitation,
all indebtedness of the Borrower under the Credit Agreement as modified by this Amendment.

     7. Reference to and Effect on Loan Documents.

          A. Upon the effectiveness hereof, each reference in the Credit Agreement to “this Agreement,”
“hereunder,’ “hereof,” “herein,” or words of like import, and each reference in the other Loan
Documents to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended
hereby.

          B. Except as specifically amended above, the Credit Agreement, and all other Loan Documents
shall remain in full force and effect and are hereby ratified and confirmed.

          C. The amendments set forth in Section 2 hereof are only applicable and shall only be
effective in the specific instance and for the specific purpose for which made, are expressly
limited to the facts and circumstances referred to herein, and shall not operate as (i) a waiver
of, or consent to non-compliance with any other provision of the Credit Agreement or any other Loan
Document, (ii) a waiver or modification of any right, power or remedy of either the Agent or any
Lender under the Credit Agreement or any Loan Document, or (iii) a waiver or modification of, or
consent to, any Event of Default or Default under the Credit Agreement or any Loan Document.

     8. Governing Law. This Amendment shall be governed and construed in accordance with the
laws of the State of New York without regard to any conflicts-of-laws rules which would require the
application of the laws of any other jurisdiction.

     9. Headings. Section headings in this Amendment are included herein for convenience of
reference only and shall not constitute a part of this Amendment for any other purpose.

     10. Execution in Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all or which taken together shall
constitute but one and the same instrument.

[Signature Page Follows]

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their
respective representatives thereunto duly authorized as of the date first above written.

	 	 	 	 	 
	 	ULTRALIFE BATTERIES, INC.

 	 
	 	By:  	/s/ Robert W. Fishback
 	 
	 	 	Robert W. Fishback 	 
	 	 	Vice President Finance and
Chief Financial Officer 	 
	 
	ADMINISTRATIVE AGENT:       	JPMORGAN CHASE BANK, N.A., as Agent

 	 
	 	By:  	/s/ Thomas C. Strasenburgh
 	 
	 	 	Thomas C. Strasenburgh, Vice President 	 
	 	 	 	 
	 
	LENDERS:                    	JPMORGAN CHASE BANK, N.A.

 	 
	 	By:  	/s/ Thomas C. Strasenburgh
 	 
	 	 	Thomas C. Strasenburgh, Vice President 	 
	 	 	 	 
	 
	 	MANUFACTURERS AND TRADERS TRUST COMPANY

 	 
	 	By:  	/s/ John Fogle
 	 
	 	 	Jon Fogle, Vice President 	 
	 	 	 	 
	 

 

 

Acknowledged and Agreed to as of this 23rd day of April, 2008

McDowell Research Co., Inc.

	 	 	 	 	 
	By:

	 	/s/ Robert W. Fishback	 	 
	 

	 	 

Name: Robert W. Fishback
	 	 
	 

	 	Title: Treasurer	 	 
	 
	 	 	 	 
	RedBlack Communications, Inc.
	 
	 	 	 	 
	By:

	 	/s/ Robert W. Fishback	 	 
	 

	 	 

Name: Robert W. Fishback
	 	 
	 

	 	Title: Treasurer	 	 
	 
	 	 	 	 
	Reserve Power Systems, Inc.
	 
	 	 	 	 
	By:

	 	/s/ Robert W. Fishback	 	 
	 

	 	 

Name: Robert W. Fishback
	 	 
	 

	 	Title: Treasurer	 	 
	 
	 	 	 	 
	Stationary Power Services, Inc.
	 
	 	 	 	 
	By:

	 	/s/ Robert W. Fishback	 	 
	 

	 	 

Name: Robert W. Fishback
	 	 
	 

	 	Title: Treasurer	 	 

 

 

Schedule 2.01

Commitments pursuant to Amendment No. 10 to Credit Agreement

dated as of April 23, 2008

	 	 	 	 	 	 	 	 	 
	 	 	Amount	 	Percentage
	Commitments to Make Revolving Loans — $22,500,000
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	JPMorgan Chase Bank, N.A.
	 	$	13,500,000.00	 	 	 	60	%
	Manufacturers and Traders Trust Company
	 	$	9,000,000.00	 	 	 	40	%
	 
	 	 	 	 	 	 	 	 
	Term Loan Commitments — $2,500,000
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	JPMorgan Chase Bank, N.A.
	 	$	1,500,000	 	 	 	60	%
	Manufacturers and Traders Trust Company
	 	$	1,000,000	 	 	 	40	%EX-4.13

 

Exhibit 4.13

THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE, AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS
SPECIFIED IN THIS WARRANT.

RETAIL VENTURES, INC.

COMMON STOCK PURCHASE WARRANT No. W-10            January 23, 2008

Warrant to Purchase

150,000 Shares of RVI Common Stock

(subject to adjustment as set forth herein)

RETAIL VENTURES, INC., an Ohio corporation (the “Company”), for value received, hereby
certifies that VCHI Acquisition Co., a Delaware corporation (the “Holder”), is entitled to
purchase from the Company that number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, no par value per share, of the Company (the “Common
Stock”) equal to the Common Stock Exercise Amount (as defined below), at a purchase price equal
to the Common Stock Purchase Price (as defined below), at any time or from time to time but prior
to 5:00 P.M., New York City time, on July 23, 2009 (the “Expiration Date”), all subject to
the terms, conditions and adjustments set forth below in this Warrant (this “Warrant”);
provided, that the purchase price per share of Common Stock hereunder shall not in any
event be less than the par value of such Common Stock.

1. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms shall
have the meanings indicated:

     “Additional Shares of Common Stock” shall mean all shares (including treasury shares)
of Common Stock issued or sold (or, pursuant to Section 3.2(b) or 3.5(b), deemed to be issued) by
the Company after January 23, 2008, whether or not subsequently reacquired or retired by the
Company, other than (a) up to 5,000,000 shares of Common Stock that are issued to Persons other
than affiliates of the Company, including (i) shares of Common Stock or options exercisable
therefor, issued or to be issued under the Company’s 2000 Stock Option Plan as in effect on January
23, 2008 or under any other employee stock option or purchase plan or plans, or pursuant to
compensatory or incentive agreements, for officers, employees or consultants of the Company or any
of its subsidiaries, in each case adopted or assumed after such date by the Company’s Board of
Directors; provided in each case that the exercise or purchase price for any such share shall not
be less than 95% of the fair market value (determined in good faith by the Company’s Board of
Directors) of the Common Stock on the date of the grant, and such
additional number of shares as may become issuable pursuant to the terms of any such plans by

 

 

reason of adjustments required pursuant to antidilution provisions applicable to such securities in
order to reflect any subdivision or combination of Common Stock, by reclassification or otherwise,
or any dividend on Common Stock payable in Common Stock, (ii) shares of restricted stock issued by
the Company to executive officers of the Company, and (iii) shares of Common Stock issued by the
Company as charitable gifts; and provided, however, that all options that are issued and expire
unexercised because the vesting requirements thereof are not satisfied shall not be included in the
issued shares pursuant to this clause (a);

     (b)(i) shares of Common Stock issued upon the exercise of the Term Loan Warrants and (ii) such
additional number of shares of Common Stock as may become issuable upon the exercise of the Term
Loan Warrants by reason of adjustments required pursuant to the anti-dilution provisions applicable
to the Term Loan Warrants as in effect on the date hereof or on the date of original issuance; and

     (c)(i) shares of Common Stock issued upon exercise of the Conversion Warrants and (ii) such
additional number of shares of Common Stock as may become issuable upon the exercise of the
Conversion Warrants by reason of adjustments required pursuant to anti-dilution provisions
applicable to the Conversion Warrants as in effect on the date hereof or on the date of original
issuance.

     “Aggregate Purchase Price” shall have the meaning assigned to it in Section 2.1(a).

     “Business Day” shall mean any day other than a Saturday or a Sunday or any day on
which national banks are authorized or required by law to close. Any reference to “days” (unless
Business Days are specified) shall mean calendar days.

     “Code” shall mean the Internal Revenue Code of 1986, as amended.

     “Commission” shall mean the Securities and Exchange Commission or any successor agency
having jurisdiction to enforce the Securities Act.

     “Common Stock” shall have the meaning assigned to it in the introduction to this
Warrant, such term to include any stock into which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right, without limitation
as to amount, either to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares entitled to preference.

     “Common Stock Exercise Amount” shall initially mean the Initial Common Stock Exercise
Amount, as the same may be adjusted and readjusted pursuant to Section 3 hereof; and

2

 

shall be reduced upon each exercise of this Warrant by such number of shares of Common Stock for which this
Warrant is then being exercised.

     “Common Stock Purchase Price” shall mean initially $10.00 per share, subject to
adjustment and readjustment from time to time as provided in Section 3, and, as so adjusted or
readjusted, shall remain in effect until a further adjustment or readjustment thereof is required
by Section 3.

     “Company” shall have the meaning assigned to it in the introduction to this Warrant,
such term to include any corporation or other entity which shall succeed to or assume the
obligations of the Company hereunder in compliance with Section 4.

     “Conversion Warrants” means those certain warrants issued as of July 5, 2005 to SSC
and CPLP pursuant to the Second Amended and Restated Senior Loan Agreement, dated as of July 5,
2005, by and among the Company, CPLP and SSC.

     “Convertible Securities” shall mean any evidences of indebtedness, shares of stock
(other than Common Stock) or other securities directly or indirectly convertible into or
exchangeable for Additional Shares of Common Stock.

     “CPLP” shall mean Cerberus Partners, L.P., or its assignees.

     “Current Market Price” shall mean, with respect to a security, on any date specified
herein, the average of the daily Market Price of such security during the ten (10) consecutive
trading days before such date, except that, if on any such date the shares of such security are not
listed or admitted for trading on any national securities exchange or quoted in the
over-the-counter market, the Current Market Price shall be the Market Price on such date.

     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time, and the rules and regulations thereunder, or any successor statute.

     “Expiration Date” shall have the meaning assigned to it in the introduction to this
Warrant.

     “Fair Value” shall mean, on any date specified herein (i) in the case of cash, the
dollar amount thereof, (ii) in the case of a security, the Current Market Price, and (iii) in all
other cases, the fair value thereof (as of a date which is within twenty (20) days of the date as
of which the determination is to be made) determined in good faith by a committee of the Company’s
Board of Directors consisting of directors who are not affiliates of the Company, Schottenstein
Stores Corporation or the Holder; provided, however, that at the reasonable request of the Holder,
the

3

 

Fair Value shall be determined in good faith by an independent investment banking firm selected
jointly by the Company and the Holder or, if that selection cannot be made within ten (10) days, by
an independent investment banking firm selected by the American Arbitration Association in
accordance with its rules, and provided, further, that the Company shall pay all of the reasonable
fees and expenses of any third parties incurred in connection with determining the Fair Value.

     “Financing Agreement” shall mean that certain Financing Agreement, dated as of June
11, 2002, among the Company, certain Affiliates of the Company, CPLP and SSC, as subsequently
amended and modified through the date hereof.

     “FINRA” shall mean the Financial Industry Regulatory Authority, Inc.

     “Holder” shall have the meaning assigned to it in the introduction to this Warrant.

     “Initial Common Stock Exercise Amount” means 150,000 shares.

     “Market Price” shall mean, on any date specified herein, with respect to any security,
the amount per share of such security equal to (i) the last reported sale price of such security,
regular way, on such date or, in case no such sale takes place on such date, the average of the
closing bid and asked prices thereof regular way on such date, in either case as officially
reported on the principal national securities exchange on which such security is then listed or
admitted for trading, (ii) if such security is not then listed or admitted for trading on any
national securities exchange but is designated as a national market system security by FINRA, the
last reported trading price of such security on such date, (iii) if there shall have been no
trading on such date or if such security is not so designated, the average of the closing bid and
asked prices of such security on such date as shown by FINRA’s automated quotation system, (iv) if
trading in such security is quoted in the over-the-counter market, the average of the closing bid
and asked prices of the security on such date as shown on the OTC Bulletin Board, or (v) if such
security is not then listed or admitted for trading on any national exchange or quoted in the
over-the-counter market, the fair value thereof (as of a date which is within twenty (20) days of
the date as of which the determination is to be made) determined in good faith by a committee of
the Company’s Board of Directors consisting of directors who are not affiliates of the Company,
Schottenstein Stores Corporation or the Holder; provided, however, that at the
request of the Holder, the Market Price shall be determined in good faith by an independent
investment banking firm selected jointly by the Company and the Holder or, if that selection cannot
be made within ten (10) days, by an independent investment banking firm selected by the American
Arbitration Association in accordance with its rules, and provided, further, that
the Holder shall pay all of the fees and expenses of any third parties incurred in connection with
determining the Market Price.

     “New Issuance Price” shall have the meaning assigned to it in Section 3.2(a).

4

 

     “Options” shall mean any rights, options or warrants to subscribe for, purchase or
otherwise acquire Additional Shares of Common Stock or Convertible Securities of the Company.

     “Other Securities” shall mean any stock (other than Common Stock) and other securities
of the Company or any other Person which the holders of shares of Common Stock of the Company at
any time shall be entitled to receive, or shall have received, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4.

     “Person” shall mean any individual, firm, partnership, corporation, trust, joint
venture, association, joint stock company, limited liability company, unincorporated organization
or any other entity or organization, including a government or agency or political subdivision
thereof, and shall include any successor (by merger or otherwise) of such entity.

     “Restricted Securities” shall mean (i) any shares of Common Stock (or Other
Securities) issued or issuable upon the exercise of this Warrant, which shares are (or, upon
issuance, will be) evidenced by a certificate or certificates bearing the applicable legend set
forth in Section 10.1, and (ii) any shares of Common Stock (or Other Securities) issued subsequent
to the exercise of this Warrant as a dividend or other distribution with respect to, or resulting
from a subdivision of the outstanding shares of Common Stock (or Other Securities) into a greater
number of shares by reclassification, stock splits or otherwise, or in exchange for or in
replacement of the Common Stock (or Other Securities) issued upon such exercise, which are
evidenced by a certificate or certificates bearing the applicable legend set forth in Section 10.1.

     “Securities Act” shall mean the Securities Act of 1933, as amended from time to time,
and the rules and regulations thereunder, or any successor statute.

     “SSC” shall mean Schottenstein Stores Corporation.

     “Term Loan Warrants” shall mean all warrants initially issued pursuant to the
Financing Agreement.

     “Warrant” shall have the meaning assigned to it in the introduction to this Warrant.

     “Warrant Shares” means (a) the shares of Common Stock issued or issuable upon exercise
of this Warrant in accordance with Section 2, (b) all other securities or other property issued or
issuable upon any such exercise or exchange in accordance with this Warrant and (c)
any securities of the Company distributed with respect to the securities referred to in the
preceding clauses (a) and (b).

5

 

2. EXERCISE OF WARRANT.

2.1 Manner of Exercise; Payment of the Purchase Price.

     (a) This Warrant may be exercised by the Holder, in whole or in part, at any time or from time
to time prior to the Expiration Date, by surrendering to the Company at its principal office this
Warrant, with the form of Election to Purchase Shares attached hereto as Exhibit A (or a
reasonable facsimile thereof) duly executed by the Holder and accompanied by payment of the Common
Stock Purchase Price for the number of shares of Common Stock specified in such form (the
“Aggregate Purchase Price”). Any partial exercise of this Warrant shall be for a whole
number of Warrant Shares only.

     (b) Payment of the Aggregate Purchase Price may be made as follows (or by any combination of
the following): (i) in United States currency by cash or delivery of a certified check or bank
draft payable to the order of the Company or by wire transfer to the Company, (ii) by cancellation
of such number of Warrant Shares otherwise issuable to the Holder upon such exercise as shall be
specified for cancellation in such Election to Purchase Shares, such that the excess of the
aggregate Current Market Price of such specified number and type of shares on the date of exercise
over the portion of the Aggregate Purchase Price attributable to such shares shall equal the
Aggregate Purchase Price attributable to the shares of Common Stock to be issued upon such
exercise, in which case such excess amount shall be deemed to have been paid to the Company and the
number of shares issuable upon such exercise shall be reduced by such number specified for
cancellation, or (iii) by surrender to the Company for cancellation certificates representing
shares of Common Stock owned of record by the Holder having a Current Market Price on the date of
Warrant exercise equal to the Aggregate Purchase Price.

2.2 When Exercise Effective. Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the Business Day on which this Warrant shall
have been surrendered to, and the Aggregate Purchase Price shall have been received by, the Company
as provided in Section 2.1, and, to the extent permitted by law, at such time the Person or Persons
in whose name or names any certificate or certificates for shares of Common Stock (or Other
Securities of the Company) is or are issuable pursuant hereto shall be deemed to have become the
holder or holders of record thereof for all purposes.

2.3 Delivery of Stock Certificates, etc.; Charges, Taxes and Expenses.

     (a) As soon as practicable after each exercise of this Warrant, in whole or in part, and in
any event within two (2) Business Days thereafter, the Company shall cause to be issued, in the
name of and delivered to the Holder hereof or, subject to Section 10, as the Holder may direct:

6

 

	 	(i)	 	a certificate or certificates for the number and type of
Warrant Shares (or Other Securities) to which the Holder shall be entitled upon
such exercise, and any cash payment in lieu of any fractional shares, as
provided in Section 12.5 hereof, and
	 
	 	(ii)	 	in case such exercise is for less than all of the Warrant
Shares purchasable under this Warrant, a new Warrant or Warrants of like tenor,
for the balance of the Warrant Shares purchasable hereunder.

     (b) Issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be
made without charge to the Holder hereof for any issue or transfer tax or other incidental expense,
in respect of the issuance or transfer of such certificates, all of which such taxes and expenses
shall be paid by the Company; provided, however, that the Company shall not be required to pay any
tax that may be payable in respect of any issuance of any Warrant or any certificate for, or any
other evidence of ownership of, Warrant Shares in a name other than that of the Holder of this
Warrant being exercised or exchanged.

3. ADJUSTMENT OF COMMON STOCK PURCHASE PRICE AND WARRANT SHARES ISSUABLE UPON EXERCISE.

3.1 Adjustment of Number of Shares. Upon each adjustment of the Common Stock Purchase
Price as a result of the calculations made in this Section 3, this Warrant shall thereafter
evidence the right to receive, at the adjusted Common Stock Purchase Price, that number of shares
of Common Stock (calculated to the nearest one-hundredth (.01) of a share) obtained by dividing (i)
the product of the aggregate number of such shares covered by this Warrant immediately prior to
such adjustment and the Common Stock Purchase Price in effect immediately prior to such adjustment
of the Common Stock Purchase Price by (ii) the Common Stock Purchase Price in effect immediately
after such adjustment of the Common Stock Purchase Price.

3.2 Adjustment of Purchase Price for New Issuances.

     (a) Issuance of Additional Shares. If at any time or from time to time after the date
hereof, the Company shall issue or sell Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 3.2(b) and excluding shares issued
pursuant to Section 3.3 and 3.4) without consideration or for a consideration per share less than
the Common Stock Purchase Price in effect immediately prior to such issue or sale (the “New
Issuance Price”), then, and in each such case, subject to Section
3.8, the Common Stock Purchase Price shall be reduced concurrently with such issue or sale, to
the applicable New Issuance Price.

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     (b) Treatment of Options and Convertible Securities. Shares of Additional Shares of
Common Stock shall be deemed issued if the Company at any time or from time to time after the date
hereof shall issue, sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities of the Company entitled to receive, any Options or Convertible
Securities (other than those excluded from the definition of Additional Shares of Common Stock)
(whether or not the rights thereunder are immediately exercisable) for a consideration per share
(determined pursuant to Section 3.6) that is less than the Common Stock Purchase Price in effect on
the date of and immediately prior to such issue, sale, grant or assumption or immediately prior to
the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis,
on the date prior to the commencement of ex-dividend trading). Such issuance shall be deemed to
occur (i) as of the time of such issue, sale, grant or assumption of the Convertible Securities or
Options or (ii) in case such a record date shall have been fixed, as of the close of business on
such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading). No further adjustment of the Common Stock Purchase Price
shall be made upon the subsequent issuance of shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.

3.3 Extraordinary Dividends and Distributions. If the Company at any time or from time to
time after the date hereof shall declare, order, pay or make a dividend or other distribution
(including, without limitation, any distribution of other or additional stock or other securities
or property or Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock other than (a) a dividend payable in shares of
Common Stock subject to Section 3.4, or (b) a regularly scheduled cash dividend payable out of
consolidated earnings or earned surplus, determined in accordance with generally accepted
accounting principles or (c) a deemed issuance of Additional Shares of Common Stock pursuant to
Section 3.2(b), in each such case, subject to Section 3.8, adequate provision shall be made so that
the Holder shall receive, upon Warrant exercise, a pro rata share of such dividend or other
distribution based upon the maximum number of shares of Common Stock at the time issuable to the
Holder (determined without regard to whether the Warrant is exercisable at such time). For the
avoidance of doubt, dividends and distributions pursuant to this Section 3.3 with respect to Common
Stock shall only be receivable upon exercise by a Holder of this Warrant for Common Stock (and only
with respect to the number of shares of Common Stock for which this Warrant is exercised).

3.4 Treatment of Stock Dividends, Stock Splits, etc. In case the Company at any time or
from time to time after the date hereof shall declare or pay any dividend on the Common Stock
payable in Common Stock, or shall effect a subdivision of the outstanding shares of Common Stock
into a greater number of such shares (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, the number of shares of Common Stock obtainable upon exercise of
this Warrant shall be proportionately increased and the Common Stock Purchase Price shall be
proportionately decreased. In case the Company at any time or from time to time
after the date hereof shall effect any combination or consolidation of the outstanding shares of
Common Stock into a lesser number of such shares, then, the number of shares of Common Stock
obtainable upon exercise of this Warrant shall be proportionately decreased and the Common Stock
Purchase Price shall be proportionately increased. Any adjustment made under

8

 

this Section 3.4 shall become effective (a) in the case of any such dividend, immediately after the close of
business on the record date for the determination of holders of Common Stock entitled to receive
such dividend, or (b) in the case of any such subdivision, at the close of business on the day
immediately prior to the day upon which such corporate action becomes effective. Comparable
adjustments shall be made as nearly as possible upon such events in the manner so provided and
applied to determine the amount of Other Securities from time to time receivable upon the exercise
of the Warrants, to the extent applicable.

3.5 Adjustment of Purchase Price for Other Issuances.

     (a) Issuance of Additional Shares. If at any time or from time to time after the date
hereof, the Company shall issue or sell Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 3.5(b)) for a consideration per
share less than the Current Market Price thereof but greater than the Common Stock Purchase Price
in effect immediately prior to such issue or sale, then, and in each such case, subject to Section
3.8, the Common Stock Purchase Price shall be reduced concurrently with such issue or sale, to a
price (calculated to the nearest one-hundredth (.01) of a cent) determined by multiplying such
Common Stock Purchase Price by a fraction (x) the numerator of which shall be the sum of (i) the
number of shares of Common Stock outstanding immediately prior to such issue or sale and (ii) the
number of shares of Common Stock which the aggregate consideration received by the Company for the
total number of such Additional Shares of Common Stock so issued or sold would purchase at the
Current Market Price thereof, and (y) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale; provided that, for the purposes of
this Section 3.5, (I) immediately after any Additional Shares of Common Stock are deemed to have
been issued pursuant to Section 3.5(b), such additional shares shall be deemed to be outstanding,
and (II) treasury shares shall not be deemed to be outstanding.

     (b) Treatment of Options and Convertible Securities. In case the Company at any time
or from time to time after the date hereof, shall issue, sell, grant or assume, or shall fix a
record date for the determination of holders of any class of securities of the Company entitled to
receive, any Options or Convertible Securities (other than those excluded from the definition of
Additional Shares of Common Stock) (whether or not the rights thereunder are immediately
exercisable) and the consideration per share (determined pursuant to Section 3.6) of the shares
issuable upon the exercise of such Options or, in the case of Convertible Securities and the
Options therefor, the conversion or exchange of such Convertible Securities would be less than the
Current Market Price thereof but greater than the applicable Common Stock Purchase Price in effect
on the date of and immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-dividend trading), then
the maximum number of Additional Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of Convertible Securities
and Options therefor, the conversion or exchange of such Convertible Securities, shall

9

 

be deemed to be Additional Shares of Common Stock issued for the purposes of this Section 3.5 as of the time of
such issue, sale, grant or assumption or, in case such a record date shall have been fixed, as of
the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis,
on the date prior to the commencement of ex-dividend trading), provided, that in any such case in
which Additional Shares of Common Stock are deemed to be issued:

	 	(i)	 	whether or not the Additional Shares of Common Stock underlying
such Options or Convertible Securities are deemed to be issued, no further
adjustment of the applicable Purchase Price shall be made upon the subsequent
issue or sale of Convertible Securities or shares of Common Stock upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities, except in the case of any such Options or Convertible Securities
which contain provisions requiring an adjustment, subsequent to the date of the
issue or sale thereof, of the number of Additional Shares of Common Stock as
issuable upon the exercise of such Options or the conversion or exchange of
such Convertible Securities by reason of (x) a change of control of the
Company, (y) the acquisition by any Person or group of Persons of any specified
number or percentage of the voting securities of the Company or (z) any similar
event or occurrence, each such case to be deemed hereunder to involve a
separate issuance of Additional Shares of Common Stock Options or Convertible
Securities, as the case may be;
	 
	 	(ii)	 	if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of Additional
Shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof (by change of rate or otherwise), the Common Stock Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or upon
the occurrence of the record date, or date prior to the commencement of
ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options, or the rights of conversion or exchange under such
Convertible Securities, which are outstanding at such time;
	 
	 	(iii)	 	upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall not have been
exercised or the expiration of any rights of conversion or exchange under any
such Convertible Securities which (or purchase by the Company and cancellation or
retirement of any such Convertible Securities the rights of conversion or
exchange under which) shall not have been exercised, the Common Stock
Purchase Price computed upon the original issue, sale,

10

 

	 	 	 	grant or assumption
thereof (or upon the occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration (or such cancellation or retirement, as the case may be), be
recomputed as if: (x) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold were
the Additional Shares of Common Stock, if any, actually issued or sold upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor was the
consideration actually received by the Company for the issue, sale, grant or
assumption of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, or for
the issue or sale of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and (y) in the
case of Options for Convertible Securities, only the Convertible Securities,
if any, actually issued or sold upon the exercise of such Options were
issued at the time of the issue or sale, grant or assumption of such
Options, and the consideration received by the Company for the Additional
Shares of Common Stock or deemed to have then been issued was the
consideration actually received by the Company for the issue, sale, grant or
assumption of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Company (pursuant to
Section 3.6) upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised; and
	 
	 	(iv)	 	no readjustment pursuant to clause (ii) or (iii) above shall
have the effect of decreasing the Common Stock Purchase Price by an amount in
excess of the amount of the adjustment thereof originally made in respect of
the issue, sale, grant or assumption of such Options or Convertible Securities.

3.6 Computation of Consideration. For the purposes of this Section 3,

     (a) The consideration for the issue or sale of any Additional Shares of Common Stock shall,
irrespective of the accounting treatment of such consideration,

	 	(i)	 	insofar as it consists of cash, be computed at the gross cash
proceeds to the Company without deducting any expenses paid or incurred by such
company, or any commissions or compensations paid or concessions or
discounts allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale,

11

 

	 	(ii)	 	insofar as it consists of property (including securities) other
than cash, be computed at the Fair Value thereof at the time of such issue or
sale, and
	 
	 	(iii)	 	in case Additional Shares of Common Stock are issued or sold
together with other stock or securities or other assets of the Company for a
consideration which covers both, be the portion of such consideration so
received, computed as provided in clauses (i) and (ii) above, allocable to such
Additional Shares of Common Stock, such allocation to be determined in the same
manner that the Fair Value of property not consisting of cash or securities is
to be determined as provided in the definition of “Fair Value” herein; and

     (b) Additional Shares of Common Stock deemed to have been issued pursuant to Sections 3.2(b)
and 3.5(b), relating to Options and Convertible Securities, shall be deemed to have been issued for
a consideration per share determined by dividing

	 	(i)	 	the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of the
Options or Convertible Securities in question, plus the minimum aggregate
amount of additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such consideration to protect against dilution) payable to the
Company upon the exercise in full of such Options or the conversion or exchange
of such Convertible Securities or, in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, in each case computing
such consideration as provided in the foregoing subclause (a), by
	 
	 	(ii)	 	the maximum number of shares of Common Stock (as set forth in
the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number to protect against dilution)
issuable upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.

3.7 Dilution in Case of Other Securities. In case any Other Securities shall be issued or
sold or shall become subject to issue or sale upon the conversion or exchange of any stock (or
Other Securities) of the Company (or any issuer of Other Securities or any other Person referred to
in Section 4) or to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration such as to dilute,
on a basis consistent with the standards established in the other provisions of this Section 3, the
purchase rights, if any, with respect to such Other Securities, granted by this Warrant, then, and
in each such case, the computations, adjustments and readjustments provided for in this Section 3

12

 

with respect to the applicable Common Stock Purchase Price shall be made as nearly as possible in
the manner so provided and applied to determine the amount of Other Securities from time to time
receivable upon the exercise of the Warrants, so as to protect the holders of the Warrants against
the effect of such dilution.

3.8 De Minimis Adjustments. If the amount of any adjustment of the Common Stock Purchase
Price required pursuant to Section 3.5 would be less than one-tenth (.10) of one percent (1%) of
such Common Stock Purchase Price in effect at the time such adjustment is otherwise so required to
be made, such amount shall be carried forward and adjustment with respect thereto made at the time
of and together with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate a change in such Common Stock Purchase Price
of at least one-tenth (.10) of one percent (1%) of such Common Stock Purchase Price. All
calculations under this Warrant shall be made to the nearest one-hundredth (.01) of a share.

3.9 Abandoned Dividend or Distribution. If the Company shall take a record of the holders
of Common Stock for the purpose of entitling them to receive a dividend or other distribution
(which results in an adjustment to the Common Stock Purchase Price under the terms of this Warrant)
and shall thereafter, and before such dividend or distribution is paid or delivered to shareholders
entitled thereto, legally abandon its plan to pay or deliver such dividend or distribution, then
any adjustment made to the Common Stock Purchase Price by reason of the taking of such record shall
be reversed, and any subsequent adjustments, based thereon, shall be recomputed; provided,
however, that no additional Common Stock Purchase Price or any other adjustment shall be
required with regard to Warrant Shares that have been issued upon exercise of the Warrant prior to
such abandonment.

4. CONSOLIDATION, MERGER, ETC.

4.1 By the Company. In case the Company after the date hereof (a) shall consolidate with
or merge into any other Person and shall not be the continuing or surviving corporation of such
consolidation or merger, or (b) shall permit any other Person to consolidate with or merge into the
Company and the Company shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities of the Company shall be changed into
or exchanged for stock or other securities of any other Person or cash or any other property, or
(c) shall effect a capital reorganization or reclassification of the Common Stock or Other
Securities of the Company (other than a capital reorganization or reclassification for which
adjustment in the Common Stock Purchase Price and the number of shares of Common Stock obtainable
upon exercise of this Warrant is provided in Section 3.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the Holder of this Warrant, upon the exercise
hereof for Common Stock at any time after the consummation of such transaction, shall be entitled
to receive (at the aggregate Common Stock Purchase Price in effect at the time of such consummation
for all Common Stock or Other Securities

13

 

issuable upon such exercise immediately prior to such
consummation), in lieu of the Common Stock or Other Securities issuable upon such exercise prior to
such consummation, the highest amount of securities, cash or other property to which such Holder
would actually have been entitled as a shareholder upon such consummation if such Holder had
exercised this Warrant for Common Stock immediately prior thereto, subject to adjustments
(subsequent to such consummation) as nearly equivalent as possible to the adjustments provided for
in Sections 3 and 4, provided that if a purchase, tender or exchange offer shall have been
made to and accepted by the holders of more than fifty percent (50%) of the outstanding shares of
Common Stock, and if the Holder so designates in a notice given to the Company on or before the
date immediately preceding the date of the consummation of such transaction, the Holder of this
Warrant shall be entitled to receive the highest amount of securities, cash or other property to
which it would actually have been entitled as a shareholder if the Holder of this Warrant had
exercised this Warrant, including the payment of the Common Stock Purchase Price in accordance with
Section 2.1(b) hereof, prior to the expiration of such purchase, tender or exchange offer and
accepted such offer, subject to adjustments (from and after the consummation of such purchase,
tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in
Sections 3 and 4.

4.2 Assumption of Obligations. Notwithstanding anything contained in this Warrant to the
contrary, the Company shall not effect any of the transactions described in clauses (a) through (c)
of Section 4.1 unless, prior to the consummation thereof, each Person (other than the Company),
which may be required to deliver any stock, securities, cash or property upon the exercise of this
Warrant as provided herein shall agree to assume, by written instrument, (a) the obligations of the
Company under this Warrant (and if the Company shall survive the consummation of such transaction,
such assumption shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company, under this Warrant), and (b) the obligation of the Company to deliver
to the Holder such shares of stock, securities, cash or property as, in accordance with the
foregoing provisions of this Section 4, the Holder may be entitled to receive.

5. OTHER DILUTIVE EVENTS.

     In case any event shall occur as to which the provisions of Section 3 or Section 4 hereof are
not strictly applicable or if strictly applicable would not fairly protect the purchase rights of
the Holder in accordance with the essential intent and principles of such Sections, then in each
such case, the Company’s Board of Directors shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to preserve, without
dilution, the purchase rights represented by this Warrant.

6. NO DILUTION OR IMPAIRMENT.

     The Company shall not, by amendment of its articles of incorporation or through any
consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such action as may be necessary or appropriate in order to protect

14

 

the rights of the Holder of this Warrant against dilution or other impairment. Without limiting
the generality of the foregoing, the Company (a) shall not permit the par value of any shares of
stock receivable upon the exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (b) shall take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of stock, in the case of
Common Stock, free from all liens, security interests, encumbrances (in each of the foregoing
cases, other than those imposed by the Holder), taxes, preemptive rights and charges on the
exercise of the Warrants from time to time outstanding, and (c) shall not take any action which
results in any adjustment of the Common Stock Purchase Price if the total number of Warrant Shares
issuable after the action upon the exercise of all of the Warrants would exceed the total number of
shares of Common Stock then authorized by the Company’s articles of organization and available for
the purpose of issue upon such exercise.

7. ACCOUNTANTS’ REPORT.

     In each case of any adjustment or readjustment in the number of the Warrant Shares issuable
upon the exercise of this Warrant or in the Common Stock Purchase Price, including pursuant to
Section 3, the Company at its sole expense shall promptly compute such adjustment or readjustment
in accordance with the terms of this Warrant and prepare a report setting forth such adjustment or
readjustment and showing in reasonable detail the method of calculation thereof and the facts upon
which such adjustment or readjustment is based, including a statement of (a) the number of shares
of Common Stock outstanding or deemed to be outstanding, and (b) the Common Stock Purchase Price in
effect immediately prior to such issue or sale and as adjusted and readjusted (if required by
Section 3) on account thereof. The Company shall forthwith mail a copy of each such report to the
Holder. In the event that the Holder disagrees with such report, the Company shall cause
independent certified public accountants of recognized national standing (which may be the regular
auditors of the Company) selected by the Company to review and verify or revise such computation
(other than any computation of the fair value of property) and report. The Company shall also keep
copies of all such reports at its principal office and shall cause the same to be available for
inspection at such office during normal business hours by the Holder.

8. NOTICES OF CORPORATE ACTION.

     In the event of:

     (a) any taking by the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock
of any class or any other securities or property, or to receive any other right, or

     (b) any reorganization, reclassification or recapitalization of the capital stock of the
Company, or any consolidation or merger involving the Company, or any transaction or series of
transactions in which more than fifty percent (50%) of the voting securities of the Company are
transferred to another Person,

15

 

the Company shall mail to the Holder a notice specifying (i) the date or expected date on which any
such record is to be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right, and (ii) the date or expected date on which
any such reorganization, reclassification, recapitalization, consolidation, or merger is to take
place and the time, if any such time is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for the securities or other
property deliverable upon such reorganization, reclassification, recapitalization, consolidation,
or merger.

9. REGISTRATION OF STOCK.

If any shares of Common Stock required to be reserved for purposes of exercise of this Warrant
require registration with or approval of any governmental authority under any federal or state law
(other than the Securities Act) before such shares may be issued or transferred upon exercise to
the Holder, the Company shall, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may be. At any such
time as Common Stock is listed on any national securities exchange, the Company shall, at its
expense, obtain promptly and maintain the approval for listing on each such exchange, upon official
notice of issuance, the shares of Common Stock issuable upon exercise of the then outstanding
Warrants; and the Company shall also list on such national securities exchange, register under the
Exchange Act and maintain such listing of, any Other Securities of the Company that at any time are
issuable upon exercise of the Warrants, if and at the time that any securities of the same class
shall be listed on such national securities exchange by the Company.

10. RESTRICTIONS ON TRANSFER.

10.1 Restrictive Legends. Except as otherwise permitted by this Section 10, each Warrant
(including each Warrant issued upon the transfer of any Warrant) shall be stamped or otherwise
imprinted with a legend in substantially the following form:

“THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS SPECIFIED IN THIS WARRANT.”

     Except as otherwise permitted by this Section 10, each certificate for Common Stock issued (or
Other Securities) upon the exercise of any Warrant, and each certificate issued upon the transfer
of any such Common Stock (or Other Securities), shall be stamped or otherwise imprinted with a
legend in substantially the following form:

16

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS.”

10.2 Transfer to Comply with the Securities Act. The Holder hereby acknowledges to the
Company that each Warrant and each share of Common Stock (or Other Securities) issued upon exercise
of any Warrant may not be sold, assigned, pledged, hypothecated, encumbered or in any manner
transferred or disposed of (a “Transfer”), in whole or in part, except in compliance with
the provisions of the Securities Act and state securities or blue sky laws and the terms and
conditions hereof.

10.3 Notice of Transfer. The Holder shall, prior to any Transfer of any Restricted
Securities, give written notice to the Company of such Holder’s intention to Transfer.

10.4 Termination of Restrictions. The restrictions imposed by this Section 10 on the
transferability of Restricted Securities shall cease and terminate as to any particular Restricted
Securities (a) when a registration statement with respect to the sale of such securities shall have
been declared effective under the Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (b) when such securities are sold pursuant to Rule 144
(or any similar provision then in force) under the Securities Act, or (c) when, in the reasonable
opinion of both counsel for the Holder and counsel for the Company, such restrictions are no longer
required or necessary in order to protect the Company against a violation of the Securities Act
upon any sale or other disposition of such securities without registration thereunder. Whenever
such restrictions shall cease and terminate as to any Restricted Securities of the Company, the
Holder shall be entitled to receive from the Company, without expense, new securities of like tenor
not bearing the applicable legends required by Section 10.1.

10.5 Exempt Transfers. The restrictions on the transfer of this Warrant or the Warrant
Shares set forth in this Section 10 shall not apply to any transfer to an affiliate of the Holder,
provided that such transfer is made in compliance with the provisions of the Securities Act and
state securities laws.

11. RESERVATION OF STOCK, ETC.

     The Company shall at all times reserve and keep available, solely for issuance upon exercise
of this Warrant, the number of shares of Common Stock or Other Securities from time to time
issuable or transferable upon exercise of this Warrant. The Company shall cause all shares of
Common Stock, or Other Securities of the Company, issuable upon exercise of any Warrants to be duly
authorized and, when issued or transferred upon such exercise, to be validly issued and, in the
case of shares, fully paid and nonassessable, with no liability on the part of the

17

 

holders thereof, and, in the case of all securities, shall be free from all liens, security interests, encumbrances
(in each of the foregoing cases, other than those imposed by the Holder), taxes, preemptive rights
and charges. The transfer agent for the Common Stock, and every subsequent transfer agent for any
shares of the Company’s capital stock issuable upon the exercise of any of the purchase rights
represented by this Warrant, are hereby irrevocably authorized and directed at all times until the
Expiration Date to reserve such number of authorized and unissued shares as shall be requisite for
such purpose. The Company shall keep copies of this Warrant on file with the transfer agent for
the Common Stock and with every subsequent transfer agent for any shares of the Company’s capital
stock issuable upon the exercise of the rights of purchase represented by this Warrant. The
Company shall supply such transfer agent with duly executed stock certificates for such purpose.
All Warrants surrendered upon the exercise of the rights thereby evidenced shall be cancelled, and
such cancelled Warrants shall constitute sufficient evidence of the number of shares of Common
Stock, if exercised for Common Stock, which have been issued upon the exercise of such Warrants.
Subsequent to the Expiration Date, no shares of Common Stock need be reserved in respect of any
unexercised Warrant.

12. REGISTRATION AND TRANSFER OF WARRANTS, ETC.

12.1 Warrant Register; Ownership of Warrants. Each Warrant issued by the Company shall be
numbered and shall be registered in a warrant register (the “Warrant Register”) as it is
issued and transferred, which Warrant Register shall be maintained by the Company at its principal
office or, at the Company’s election and expense, by a Warrant agent or the transfer agent. The
Company shall be entitled to treat the registered Holder of any Warrant on the Warrant Register as
the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other Person, and shall not be
affected by any notice to the contrary, except that, if and when any Warrant is properly assigned
in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of
such Warrant for all purposes. Subject to Section 10, a Warrant, if properly assigned, may be
exercised by a new holder without a new Warrant first having been issued.

12.2 Transfer of Warrants. Subject to compliance with Section 10, if applicable, this
Warrant and all rights hereunder are transferable in whole or in part, without charge to the Holder
hereof, upon surrender of this Warrant with a properly executed Form of Assignment attached hereto
as Exhibit B at the principal office of the Company. Upon any partial transfer, the
Company shall at its expense issue and deliver to the new holder a new Warrant of like tenor, in
the name of the new holder, which shall be exercisable for such number of shares of Common Stock
with respect to which rights under this Warrant were not so transferred.

12.3 Replacement of Warrants. On receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office and

18

 

cancellation thereof, the Company at its expense shall execute and deliver, in lieu thereof, a new Warrant of
like tenor.

12.4 Adjustments to Purchase Price and Number of Shares. Notwithstanding any adjustment in
the Common Stock Purchase Price or in the number or kind of Warrant Shares purchasable upon
exercise of this Warrant, any Warrant theretofore or thereafter issued may continue to express the
same number and kind of Warrant Shares as are stated in this Warrant, as initially issued.

12.5 Fractional Shares. Notwithstanding any adjustment pursuant to Section 3 in the number
of Warrant Shares covered by this Warrant or any other provision of this Warrant, the Company shall
not be required to issue or transfer fractions of shares upon exercise of this Warrant or to
distribute certificates which evidence fractional shares. In lieu of fractional shares, the
Company shall make payment to the Holder, at the time of exercise of this Warrant as herein
provided, in an amount in cash equal to such fraction multiplied by the Current Market Price of a
share of Common Stock on the date of Warrant exercise.

13. SECURITIES ACT MATTERS.

     The Holder represents and warrants to the Company as of the date hereof that:

     (a) The Holder is acquiring this Warrant for its own account, without a view to, or sale in
connection with, the distribution thereof. The Holder has no present agreement, undertaking,
arrangement, commitment or obligation providing for the disposition of the Warrant or the Warrant
Shares, all without prejudice, however, to the right of the Holder at any time, in accordance with
this Warrant, lawfully to sell or otherwise to dispose of all or any part of the Warrant or Warrant
Shares held by it;

     (b) The Holder is an “accredited investor” within the meaning of Regulation D under the
Securities Act. The Holder has not retained, utilized or been represented by any broker or finder
in connection with the transactions contemplated by this Warrant;

     (c) The Holder acknowledges that (A) the Warrants and the Warrant Shares have not been
registered under the Securities Act, in reliance on the non-public offering exemption contained in
Section 4(2) of the Securities Act and Regulation D thereunder; (B) because the Warrants and the
Warrant Shares are not so registered, the Holder must bear the economic risk of holding this
Warrant and the Warrant Shares for an indefinite period of time unless the Warrants and the Warrant
Shares are subsequently registered under the Securities Act or an exemption
from such registration is available with respect thereto; (C) Rule 144 under the Securities
Act may or may not be available for resales of the Warrants or the Warrant Shares in the future
and, if so, may only be available for sales in limited amounts; (D) there is presently no trading
market for the Warrants and there is no assurance that such market will exist in the future; and
(E) while

19

 

there is presently a trading market for the Warrant Shares, there is no assurance that
such market will be in existence in the future; and

     (d) If the Holder decides to dispose of this Warrant or the Warrant Shares, which it does not
now contemplate, the Holder can do so only in accordance and in compliance with the Securities Act
and Rule 144 or another exemption from the registration requirements of the Securities Act, as then
in effect or through an effective registration statement under the Securities Act.

14. REMEDIES; SPECIFIC PERFORMANCE.

     The Company stipulates that there would be no adequate remedy at law to the Holder in the
event of any default or threatened default by the Company in the performance of or compliance with
any of the terms of this Warrant and, accordingly, the Company agrees that, in addition to any
other remedy to which the Holder may be entitled at law or in equity, the Holder shall be entitled
to seek to compel specific performance of the obligations of the Company under this Warrant,
without the posting of any bond, in accordance with the terms and conditions of this Warrant in any
court of the United States or any State thereof having jurisdiction, and if any action should be
brought in equity to enforce any of the provisions of this Warrant, the Company shall not raise the
defense that there is an adequate remedy at law. Except as otherwise provided by law, a delay or
omission by the Holder hereto in exercising any right or remedy accruing upon any such breach shall
not impair the right or remedy or constitute a waiver of or acquiescence in any such breach. No
remedy shall be exclusive of any other remedy. All available remedies shall be cumulative.

15. NO RIGHTS OR LIABILITIES AS SHAREHOLDER.

     Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a shareholder of the Company or as imposing any obligation on the Holder to purchase any
securities or as imposing any liabilities on the Holder as a shareholder of the Company, whether
such obligation or liabilities are asserted by the Company or by creditors of the Company.

16. NOTICES.

     All notices and other communications (and deliveries) provided for or permitted hereunder
shall be made in writing by hand delivery, telecopier, any nationally-recognized courier
guaranteeing overnight delivery or first class registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

If to the Company:

Retail Ventures, Inc.

3241 Westerville Road

Columbus, OH 43224

Attn: James McGrady, Chief Financial Officer

Fax No. (614) 473-2721

20

 

with a copy to:

Retail Ventures, Inc.

3241 Westerville Road

Columbus, OH 43224

Attn: General Counsel

Fax No. (614) 337-4682

If to Holder:

VCHI Acquisition Co.

3241 Westerville Road

Columbus, Ohio 43224

Attention: President

Fax No. (614) 473-2721

with a copy to:

Dewey & LeBoeuf LLP

1301 Avenue of the Americas

New York, NY 10019

Attn: Martin Bienenstock

Fax No. (212) 259-6333

     All such notices and communications (and deliveries) shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; when receipt is acknowledged, if
telecopied; on the next Business Day, if timely delivered to a courier guaranteeing overnight
delivery; and five (5) days after being deposited in the mail, if sent first class or certified
mail, return receipt requested, postage prepaid; provided, that the exercise of any Warrant
shall be effective in the manner provided in Section 2.

17. AMENDMENTS.

     This Warrant and any term hereof may not be amended, modified, supplemented or terminated, and
waivers or consents to departures from the provisions hereof may not be given, except by written
instrument duly executed by the Company and the Holder.

18. DESCRIPTIVE HEADINGS, ETC.

     The headings in this Warrant are for convenience of reference only and shall not limit or
otherwise affect the meaning of terms contained herein. Unless the context of this Warrant
otherwise requires: (1) words of any gender shall be deemed to include each other gender; (2) words
using the singular or plural number shall also include the plural or singular number,
respectively; (3) the words “hereof,” “herein” and “hereunder” and words of similar import when
used in this Warrant shall refer to this Warrant as a whole and not to any particular provision of
this Warrant, and Section and paragraph references are to the Sections and paragraphs of this
Warrant unless otherwise specified; (4) the word “including” and words of similar import when

21

 

used in this Warrant shall mean “including, without limitation,” unless otherwise specified; (5) “or” is
not exclusive; and (6) provisions apply to successive events and transactions.

19. GOVERNING LAW.

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

20. EXPIRATION.

     The right to exercise this Warrant shall expire at 5:00 p.m., New York City time, on the
Expiration Date.

21. COSTS AND ATTORNEYS’ FEES.

     In the event that any action, suit or other proceeding is instituted concerning or arising out
of this Warrant, each of the Company and the Holder agrees that the prevailing party shall recover
from the non-prevailing party all of such prevailing party’s costs and reasonable attorneys’ fees
incurred in each and every such action, suit or other proceeding, including any and all appeals or
petitions therefrom.

[Remainder of this page intentionally left blank]

22

 

IN WITNESS WHEREOF, each of the Company and the Holder has executed and delivered this Warrant
as of the date first above written.

	 	 	 	 	 
	 	RETAIL VENTURES, INC.

 	 
	 	By:  	/s/
James A. McGrady	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Executive Vice President,
Chief Financial Officer, Treasurer and Secretary 	 
	 
	 	VCHI ACQUISITION CO.

 	 
	 	By:  	/s/
Robert DeAngelis	 
	 	 	Name:  	Robert DeAngelis 	 
	 	 	Title:  	President 	 
	 

 

 

EXHIBIT A

FORM OF ELECTION TO PURCHASE SHARES OF COMMON STOCK

     The undersigned hereby irrevocably elects to exercise the Warrant to purchase                     
Common Shares, no par value per share (“Common Stock”), of RETAIL VENTURES, INC. and hereby
makes payment of $                     therefor [or] makes payment by reduction pursuant to Section
2.1(b)(ii) of the Warrant of the number of shares of Common Stock otherwise issuable to the Holder
upon Warrant exercise by
                     shares [or] makes payment therefor by delivery of the
following Common Stock Certificates of the Company (properly endorsed for transfer in blank) for
cancellation by the Company pursuant to Section 2.1(b)(iii) of the Warrant, certificates of which
are attached hereto for cancellation                      [list certificates by number and amount]. The
undersigned hereby requests that certificates for such shares be issued and delivered as follows:

ISSUE TO:

(NAME)

(ADDRESS, INCLUDING ZIP CODE)

(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)

DELIVER TO:

(NAME)

(ADDRESS, INCLUDING ZIP CODE)

     If the number of shares of Common Stock purchased (and/or reduced) hereby is less than the
number of shares of Common Stock covered by the Warrant, the undersigned requests that a new
Warrant representing the number of shares of Common Stock not so purchased (or reduced) be issued
and delivered as follows:

ISSUE TO:

(NAME OF HOLDER)

(ADDRESS, INCLUDING ZIP CODE)

DELIVER TO:

(NAME OF HOLDER)

(ADDRESS, INCLUDING ZIP CODE)

	 	 	 	 	 	 	 	 	 
	Dated: 	 	 	 	 	 	(NAME OF HOLDER)
	 

	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 
	 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: 	 	 
	 

	 	 	 	 	 	Title:	 	 

 

 

EXHIBIT B

FORM OF ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the Assignee
named below all of the rights of the undersigned to purchase Common Shares, no par value per share
(“Common Stock”), of RETAIL VENTURES, INC. (the “Company”) represented by the
Warrant, with respect to the number of shares of Common Stock set forth below:

	 	 	 	 	 	 	 	 	 
	Name of Assignee	 	Address	 	 	No. of Shares of Common Stock	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 

and does hereby irrevocably constitute and appoint                      as attorney-in-fact to make such
transfer on the books of the Company maintained for that purpose, with full power of substitution
in the premises.

	 	 	 	 	 	 	 	 	 
	Dated: 	 	 	 	 	 	(NAME OF HOLDER)
	 

	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 
	 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name: 	 	 
	 

	 	 	 	 	 	Title:

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