EXHIBIT 10.14.4
$50,000,000
SECOND AMENDED AND RESTATED
SENIOR LOAN AGREEMENT
DATED AS OF JUNE __, 2005
BY AND AMONG
VALUE CITY DEPARTMENT STORES LLC
AS BORROWER,
RETAIL VENTURES, INC.
GRAMEX RETAIL STORES, INC.,
FILENE'S BASEMENT, INC.,
GB RETAILERS, INC.,
VALUE CITY OF MICHIGAN, INC.,
▇.▇. ▇▇▇▇▇▇▇▇ DELIVERY, INC.
VALUE CITY DEPARTMENT STORES SERVICES, INC.
RETAIL VENTURES JEWELRY, INC.,
RETAIL VENTURES SERVICES, INC., AND
RETAIL VENTURES IMPORTS, INC.
AS GUARANTORS,
THE LENDERS FROM TIME TO TIME PARTY HERETO,
AS LENDERS,
AND
CERBERUS PARTNERS, L.P.
AS AGENT
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS; CERTAIN TERMS........................................................................... 1
SECTION 1.01 DEFINITIONS..................................................................... 2
SECTION 1.02 TERMS GENERALLY................................................................. 25
SECTION 1.03 ACCOUNTING AND OTHER TERMS...................................................... 25
SECTION 1.04 TIME REFERENCES................................................................. 25
ARTICLE II THE LOAN............................................................................................ 26
SECTION 2.01 THE LOAN........................................................................ 26
SECTION 2.02 NOTES; REPAYMENT OF LOAN........................................................ 26
SECTION 2.03 INTEREST........................................................................ 27
SECTION 2.04 PREPAYMENT OF LOAN.............................................................. 27
SECTION 2.05 TAXES........................................................................... 28
ARTICLE III FEES, PAYMENTS AND OTHER COMPENSATION.............................................................. 30
SECTION 3.01 AUDIT AND COLLATERAL MONITORING FEES............................................ 30
SECTION 3.02 PAYMENTS; COMPUTATIONS AND STATEMENTS........................................... 30
SECTION 3.03 SHARING OF PAYMENTS, ETC........................................................ 31
SECTION 3.04 APPORTIONMENT OF PAYMENTS....................................................... 31
SECTION 3.05 INCREASED COSTS AND REDUCED RETURN.............................................. 32
ARTICLE IV CONDITIONS TO EFFECTIVENESS; consent to ipo......................................................... 34
SECTION 4.01 CONDITIONS PRECEDENT TO EFFECTIVENESS........................................... 34
SECTION 4.02 CONSENT TO IPO.................................................................. 37
SECTION 4.03 RELEASE OF DSW AND DSWSW........................................................ 38
ARTICLE V REPRESENTATIONS AND WARRANTIES....................................................................... 38
SECTION 5.01 REPRESENTATIONS AND WARRANTIES.................................................. 38
ARTICLE VI COVENANTS OF THE LOAN PARTIES....................................................................... 49
SECTION 6.01 AFFIRMATIVE COVENANTS........................................................... 49
SECTION 6.02 NEGATIVE COVENANTS.............................................................. 54
ARTICLE VII REPORTING REQUIREMENTS............................................................................. 64
SECTION 7.01 MAINTAIN RECORDS................................................................ 64
SECTION 7.02 ACCESS TO RECORDS............................................................... 65
SECTION 7.03 PROMPT NOTICE TO ADMINISTRATIVE AGENT........................................... 65
SECTION 7.04 WEEKLY REPORTS.................................................................. 66
SECTION 7.05 MONTHLY REPORTS................................................................. 66
SECTION 7.06 QUARTERLY REPORTS............................................................... 66
SECTION 7.07 ANNUAL REPORTS.................................................................. 67
SECTION 7.08 OFFICER'S CERTIFICATES.......................................................... 67
SECTION 7.09 INVENTORY, APPRAISALS AND AUDITS................................................ 68
SECTION 7.10 ADDITIONAL FINANCIAL INFORMATION................................................ 68
SECTION 7.11 FORMAT OF INFORMATION........................................................... 69
ARTICLE VIII USE OF COLLATERAL................................................................................. 69
SECTION 8.01 USE OF INVENTORY CONTROL........................................................ 69
SECTION 8.02 INVENTORY QUALITY............................................................... 70
SECTION 8.03 ADJUSTMENTS AND ALLOWANCES...................................................... 70
SECTION 8.04 VALIDITY OF ACCOUNTS............................................................ 70
SECTION 8.05 NOTIFICATION TO ACCOUNT DEBTORS................................................. 70
SECTION 8.06 APPOINTMENT AS ATTORNEY-IN-FACT................................................. 70
SECTION 8.07 NO OBLIGATION TO ACT............................................................ 71
ARTICLE IX EVENTS OF DEFAULT................................................................................... 72
SECTION 9.01 EVENTS OF DEFAULT............................................................... 72
ARTICLE X AGENT................................................................................................ 76
SECTION 10.01 APPOINTMENT..................................................................... 76
SECTION 10.02 NATURE OF DUTIES................................................................ 77
SECTION 10.03 RIGHTS; EXCULPATION, ETC........................................................ 77
SECTION 10.04 RELIANCE........................................................................ 78
SECTION 10.05 INDEMNIFICATION................................................................. 78
SECTION 10.06 AGENT INDIVIDUALLY.............................................................. 78
SECTION 10.07 SUCCESSOR AGENT................................................................. 79
SECTION 10.08 COLLATERAL MATTERS.............................................................. 79
SECTION 10.09 AGENCY FOR PERFECTION........................................................... 80
ARTICLE XI GUARANTY............................................................................................ 81
SECTION 11.01 GUARANTY........................................................................ 81
SECTION 11.02 GUARANTY ABSOLUTE............................................................... 81
SECTION 11.03 WAIVER.......................................................................... 82
SECTION 11.04 CONTINUING GUARANTY; ASSIGNMENTS................................................ 82
SECTION 11.05 SUBROGATION..................................................................... 82
ARTICLE XII MISCELLANEOUS...................................................................................... 83
SECTION 12.01 NOTICES, ETC.................................................................... 83
SECTION 12.02 AMENDMENTS, ETC................................................................. 84
SECTION 12.03 NO WAIVER; REMEDIES, ETC........................................................ 84
SECTION 12.04 EXPENSES; TAXES; ATTORNEYS' FEES................................................ 85
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SECTION 12.05 RIGHT OF SET-OFF................................................................ 86
SECTION 12.06 SEVERABILITY.................................................................... 86
SECTION 12.07 ASSIGNMENTS AND PARTICIPATIONS.................................................. 86
SECTION 12.08 COUNTERPARTS.................................................................... 89
SECTION 12.09 GOVERNING LAW................................................................... 89
SECTION 12.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE........................... 89
SECTION 12.11 WAIVER OF JURY TRIAL, ETC....................................................... 90
SECTION 12.12 CONSENT BY THE AGENT AND LENDERS................................................ 90
SECTION 12.13 NO PARTY DEEMED DRAFTER......................................................... 90
SECTION 12.14 REINSTATEMENT; CERTAIN PAYMENTS................................................. 90
SECTION 12.15 INDEMNIFICATION................................................................. 91
SECTION 12.16 [INTENTIONALLY OMITTED.]........................................................ 92
SECTION 12.17 RECORDS......................................................................... 92
SECTION 12.18 BINDING EFFECT.................................................................. 92
SECTION 12.19 MAXIMUM INTEREST................................................................ 92
SECTION 12.20 CONFIDENTIALITY................................................................. 93
SECTION 12.21 INTEGRATION..................................................................... 94
ARTICLE XIII ISSUANCE OF EQUITY INTERESTS TO LENDERS........................................................... 94
SECTION 13.01 AUTHORIZATION AND ISSUANCE OF WARRANTS.......................................... 94
SECTION 13.02 SECURITIES ACT MATTERS.......................................................... 94
SECTION 13.03 CERTAIN TAXES................................................................... 96
SECTION 13.04 CANCELLATION AND ISSUANCE....................................................... 96
ARTICLE XIV TRANSACTIONS WITH AFFILIATES....................................................................... 96
SECTION 14.01 TRANSACTION APPROVAL............................................................ 96
SECTION 14.02 BUYOUT OPTION................................................................... 97
SECTION 14.03 CPLP TRANSACTION................................................................ 98
ARTICLE XV REAFFIRMATION AND CONSENT........................................................................... 98
SECTION 15.01 REAFFIRMATION AND CONFIRMATION.................................................. 98
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SECOND AMENDED AND RESTATED SENIOR
LOAN AGREEMENT
Second Amended and Restated Senior Loan Agreement, dated as of June
__, 2005 (the "Agreement"), among Value City Department Stores LLC, an Ohio
limited liability company (the "Borrower"), Retail Ventures, Inc., an Ohio
corporation (the "Parent"), 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"), ▇.▇. ▇▇▇▇▇▇▇▇ Delivery, Inc., a Delaware
corporation ("Overland"), Value City Department Stores Services, Inc.
("Services"), Retail Ventures Jewelry, Inc., an Ohio corporation ("RV Jewelry"),
Retail Ventures Services, Inc., a Delaware corporation ("RV Services"), Retail
Ventures Imports, Inc. (formerly known as VC Acquisition, Inc.), an Ohio
corporation ("Imports", and together with Parent, Gramex, Filene's, GB, VC
Michigan, Overland, Services, RV Jewelry and RV Services, each a "Guarantor",
and collectively, the "Guarantors"), the lenders from time to time party hereto
(each a "Lender" and collectively, the "Lenders"), and Cerberus Partners, L.P.,
a Delaware limited partnership ("CPLP"), as agent for itself and the other
Lenders (in such capacity, together with its successors, if any, the "Agent").
RECITALS
WHEREAS, the Borrower, the Guarantors and certain of their
affiliates, the Lenders and the Agent are parties to the Amended and Restated
Senior Convertible Loan Agreement, dated as of June 11, 2002 (as amended by (a)
Amendment No. 1 to Amended and Restated Senior Convertible Loan Agreement, dated
June 11, 2002, (b) Amendment No. 2 to Amended and Restated Senior Convertible
Loan Agreement, dated October 7, 2003, and (c) Amendment No. 3 to the Amended
and Restated Senior Convertible Loan Agreement, dated December 29, 2004, the
"Original Agreement");
WHEREAS, the Borrower, the Guarantors and certain of their
affiliates have undergone certain corporation reorganizations;
WHEREAS, the parties hereto have agreed to remove the conversion
feature contained under the Original Agreement and issue to the Lenders
warrants, the exercise price of which may be paid with the Loan (as hereinafter
defined) on all the same terms as if the Loan (as defined in the Original
Agreement) were converted;
WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent
desire to amend and restate the Original Agreement, effective upon the Effective
Date (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the covenants
and agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
Section 1.01 Definitions. As used in this Agreement, the following
terms shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such terms:
"Account Debtor" means each debtor, customer or obligor in any way
obligated on or in connection with any Accounts Receivable.
"Accounts Receivable" means, with respect to any Person, any and all
rights of such Person to payment for goods sold and/or services rendered,
including accounts, general intangibles and any and all such rights evidenced by
chattel paper, instruments or documents, whether due or to become due and
whether or not earned by performance, and whether now or hereafter acquired or
arising in the future, and any proceeds arising therefrom or relating thereto.
"Action" has the meaning specified therefor in Section 12.12.
"Acquisition" means the purchase or acquisition of all or
substantially all of the assets of any Person, the purchase of a controlling
equity interest in any Person, or the merger or consolidation of any Person with
any other Person, in any transaction or group of transactions which are part of
a common plan.
"Affiliate" means (i) with respect to any Person, any other Person
that directly or, alone or with a group of related Persons whose interests taken
as a whole, indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, such Person; (ii) any Person
which is a parent, brother-sister or Subsidiary of a Key Loan Party, whose
enterprise's tax returns or financial statements are consolidated with those of
a Key Loan Party, which is a member of the same controlled group of corporations
(within the meaning of Section 1563(a)(1), (2) and (3) of the Internal Revenue
Code or 1986, as amended from time to time) of which any Key Loan Party is a
member, or Controls or is Controlled by any Key Loan Party; and (iii) with
respect to the Loan Parties, without limiting the provisions of clauses (i) and
(ii) hereof, "Affiliate" includes SSC, DSW and DSWSW. Notwithstanding anything
to the contrary contained herein, in no event shall the Agent or any Lender be
considered an "Affiliate" of a Loan Party as a result of being party to this
Agreement or the transactions contemplated hereby
"Agent" has the meaning specified therefor in the preamble hereto.
"Agent Advances" has the meaning specified therefor in section
10.08(a).
"Agent's Account" means an account at a bank designated by the Agent
from time to time as the account into which the Loan Parties shall make certain
payments to the Agent for the benefit of the Agent and the Lenders under this
Agreement and the other Loan Documents.
"Agreement" means this Second Amended and Restated Senior Loan
Agreement, including all amendments, modifications and supplements and any
exhibits or schedules to any of the foregoing, and shall refer to the Agreement
as the same may be in effect at the time such reference becomes operative.
"Applicable Law" means, as to any Person, (i) all statutes, rules,
regulations, orders or other requirements having the force of law, and (ii) all
court orders and injunctions, arbitrator's
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decisions and/or similar rulings, in each instance ((i) and (ii)) of or by any
Federal, state, municipal or other governmental authority, or court, tribunal,
panel or other body which has or claims jurisdiction over such Person, or any
property of such Person, or of any other Person for whose conduct such Person
would be responsible.
"Approved Existing Transaction" has the meaning specified therefor
in Section 14.01.
"Assignment and Acceptance" means an assignment and acceptance
entered into by an assigning Lender and an assignee, and accepted by the Agent,
in accordance with Section 12.07 hereof and substantially in the form of Exhibit
I to the Original Agreement or such other form acceptable to the Agent.
"Authorized Officer" means, with respect to any Person, the chief
executive officer, chief financial officer, president, executive vice president,
controller or treasurer of such Person.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.
Section 101, et seq.), as amended from time to time, and any successor statute.
"Board" means the Board of Governors of the Federal Reserve System
of the United States.
"Board of Directors" means the board of directors of the Parent.
"Borrower" has the meaning specified therefor in the preamble
hereto.
"Borrowing Base Certificate" has the meaning set forth in the
Revolving Credit Facility as in effect from time to time.
"Business Day" means any day other than (i) a Saturday or Sunday,
(ii) any day on which banks in New York City generally are not open to the
general public for the purpose of conducting commercial banking business, or
(iii) a day on which the principal office of the Agent is not open to the
general public to conduct business.
"Business Plan" means the business plan for the Loan Parties for the
fiscal years 2005 through and including 2006, in form and substance reasonably
satisfactory to the Agent and the Lenders and delivered to the Agent prior to
the Effective Date.
"Buyout Exercise Notice" has the meaning specified therefor in
Section 14.02(a).
"Buyout Option" has the meaning specified therefor in Section
14.02(a).
"Buyout Securities" has the meaning specified therefor in Section
14.02(c).
"Capital Guideline" means any law, rule, regulation, policy,
guideline or directive (whether or not having the force of law and whether or
not the failure to comply therewith would be unlawful) of any central bank or
Governmental Authority (i) regarding capital adequacy, capital ratios, capital
requirements, the calculation of a bank's capital or similar matters, or (ii)
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affecting the amount of capital required to be obtained or maintained by any
Lender, any Person controlling any Lender or the manner in which any Lender, any
Person controlling any Lender, allocates capital to any of its contingent
liabilities (including letters of credit), advances, acceptances, commitments,
assets or liabilities.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock; and (ii) with
respect to any Person that is not a corporation, any and all partnership,
membership or other equity interests of such Person.
"Capitalized Lease" means, with respect to any Person, any lease of
real or personal property by such Person as lessee which is (i) required under
GAAP to be capitalized on the balance sheet of such Person; or (ii) a
transaction of a type commonly known as a "synthetic lease" (i.e. a lease
transaction that is treated as an operating lease for accounting purposes but
with respect to which payments of rent are intended to be treated as payments of
principal and interest on a loan for Federal income tax purposes).
"Capitalized Lease Obligations" means, with respect to any Person,
obligations of such Person and its Subsidiaries under Capitalized Leases, and,
for purposes hereof, the amount of any such obligation shall be the capitalized
amount thereof determined in accordance with GAAP.
"Change in Control" means the occurrence of any of the following:
(i) the acquisition, by any person or group (other than (A) a Person controlled
by SSC or (B) one or more Family Trusts) (within the meaning of Section 13(d)(3)
of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
of the Exchange Act) of 25% or more of the issued and outstanding capital stock
of the Parent having the right, under ordinary circumstances, to vote for the
election of directors of the Parent, excluding from the foregoing any
acquisition pursuant to the issuance of the Warrants or the Conversion Warrants
or the exercise of such Warrants or Conversion Warrants by the holder thereof to
acquire Warrant Stock; (ii) more than thirty percent (30%) of the Persons who
were directors of the Parent on the first day of any period consisting of twelve
(12) consecutive calendar months (the first of which twelve (12) month periods
commencing with the first day of August 2003), cease to be directors of the
Parent, for any reason other than death, disability, or replacement (in the
ordinary course of business and not as a result of any change in the equity
ownership of the Parent) by other Persons nominated by a nominating committee of
the Board of Directors of the Parent; (iii) the failure of the Parent to own,
directly or indirectly, 95% of the capital stock of each of the other Loan
Parties; or (iv) the failure of SSC to possess or one or more Family Trusts to
possess, directly or indirectly, the power to cause the direction of the
management and policies of the Parent.
"Class A Common Shares" has the meaning set forth for such term in
the Articles of Organization of DSW as in effect on the Effective Date.
"Class B Common Shares" has the meaning set forth for such term in
the Articles of Organization of DSW as in effect on the Effective Date.
"Collateral" means all of the property and assets and all interests
therein and proceeds thereof now owned or hereafter acquired by any Loan Party
upon which a Lien is
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granted or purported to be granted by such Loan Party as security for all or any
part of the Obligations.
"Common Stock" means the common stock, no par value, of the Parent.
"Competitive Business" means any business or enterprise consisting
of (i) operation of off-price discount department stores; (ii) operation of
retail furniture stores and related accessories; (iii) operation of designer and
name-brand shoe stores; (iv) operation of licensed shoe departments; (v)
furniture manufacturing; or (vi) bedding manufacturing.
"Contingent Obligation" means, with respect to any Person, any
obligation of such Person guaranteeing or intended to guarantee any Indebtedness
("primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, (i) the
direct or indirect guaranty, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of the obligation of a primary obligor; (ii)
the obligation to make take-or-pay or similar payments, if required, regardless
of nonperformance by any other party or parties to an agreement (other than such
agreements to purchase goods in the ordinary course of business); (iii) any
obligation of such Person, whether or not contingent, (A) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (B) (other than such agreements to purchase goods in the ordinary
course of business) to advance or supply funds (1) for the purchase or payment
of any such primary obligation or (2) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (C) to purchase property, assets, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (D) otherwise to assure or hold harmless the holder of such
primary obligation against loss in respect thereof (other than such agreements
to purchase goods in the ordinary course of business); provided, however, that
the term "Contingent Obligation" shall not include (1) any product warranties or
(2) obligations, warranties and indemnities not relating to Indebtedness which
have been made or undertaken, in each case, extended in the ordinary course of
business.
"Control", "Controls", "Controlled by", or "under common Control
with" means the possession, direct or indirect of the power to cause the
direction of the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise. A Person shall be
deemed to have control of another Person if it is a "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13-d-5 under the Exchange Act) or a
member of a "group" that is the beneficial owner, directly or indirectly, of 20%
or more of the voting stock of or equity interest in such Person.
"Control Agreement" means the Collection Account Agreements (as
defined in the Revolving Credit Facility) made by a Loan Party and the financial
institutions maintaining Collection Accounts (as defined in the Revolving Credit
Facility) in favor of the Revolving Credit Facility Agent for the benefit of the
Lenders (among others) securing the Obligations (and the obligations owing to
certain other lenders).
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"Conversion Warrantholders" means the Lenders party hereto on the
Effective Date, and any subsequent holders of the Conversion Warrants.
"Conversion Warrants" means any of the warrants issued to the
Conversion Warrantholders on the Effective Date pursuant to the terms hereof,
substantially in the form of Exhibit A-1 hereto.
"CPLP" has the meaning specified therefore in the preamble hereto.
"Current Market Price" means, on any date specified herein, the
average of the daily Market Price during the ten consecutive trading days before
such date, except that, if on any such date the shares of Common Stock or Class
A Common Shares, as applicable, 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.
"Default" means an event which, with the giving of notice or the
lapse of time or both, would constitute an Event of Default.
"Disposition" means any transaction, or series of related
transactions, pursuant to which any Person or any of its Subsidiaries sells,
assigns, transfers or otherwise disposes of any property or assets (whether now
owned or hereafter acquired) to any other Person, in each case, whether or not
the consideration therefor consists of cash, securities or other assets owned by
the acquiring Person, excluding any sales of Inventory in the ordinary course of
business on ordinary business terms.
"Division(s)" means the various business segments of the Key Loan
Parties, being the Filene's Business and the Value City Business.
"Dollar," "Dollars" and the symbol "$" each means lawful money of
the United States of America.
"DSW" means DSW Inc. (formerly known as Shonac Corporation), an Ohio
corporation.
"DSW Common Stock" means the Capital Stock of DSW consisting of
Class A Common Shares and Class B Common Shares.
"DSW Note" means (a) the promissory note dated March 10, 2005, made
by DSW to the order of the Parent, in the original principal amount of
$165,000,000 and (b) the promissory note dated May 27, 2005, made by DSW to the
order of the Parent in the original principal amount of $25,000,000.
"DSW Registration Rights Agreement" means the registration rights
agreement, substantially in the form of Exhibit E-2 hereto, by and among DSW,
the Warrantholders and the Conversion Warrantholders with respect to the matters
covered thereby.
"DSWSW" means DSW Shoe Warehouse, Inc. (formerly known as DSW,
Inc.), an Ohio corporation.
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"DSWSW Guarantee" means the guarantee, dated as of March 10, 2005,
made by DSWSW in favor of the Parent, guaranteeing the obligations of DSW under
the DSW Note.
"Effective Date" means the date, on or before December 31, 2005, on
which all of the conditions precedent set forth in Section 4.01 are satisfied or
waived.
"Eligible Assignee" means any Federal, state or foreign banking
institution, or any private entity or commercial institution primarily engaged
in the business of making commercial loans, and shall in no event include a
Person that is engaged in a Competitive Business with any Loan Party, and as
long as SSC remains in Control of the Key Loan Parties, an "Eligible Assignee"
shall in no event include a Person which is engaged in a Competitive Business or
a Related Business with SSC.
"Employee Benefit Plan" means an employee benefit pension benefit
plan that is covered by Title IV of ERISA or is subject to the minimum funding
standards under Section 412 of the Internal Revenue Code of 1986, as amended
from time to time, and as to which a Key Loan Party or any ERISA Affiliate may
have any liability.
"Environmental Actions" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Person or Governmental Authority involving violations of Environmental Laws or
Releases of Hazardous Materials (i) from any assets, properties or businesses
owned or operated by any Loan Party or any of its Subsidiaries or any
predecessor in interest; or (ii) onto any facilities which received Hazardous
Materials generated by any Loan Party or any of its Subsidiaries or any
predecessor in interest.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601, et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801, et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.), the Federal
Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.) and the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.), as such laws may be amended or otherwise modified from time to time, and
any other present or future Federal, state, local or foreign statute, ordinance,
rule, regulation, order, judgment, decree, permit, license or other binding
determination of any Governmental Authority imposing liability or establishing
standards of conduct for protection of the environment or other government
restrictions relating to the protection of the environment or the Release,
deposit, or migration of any Hazardous Materials into the environment.
"Environmental Liabilities and Costs" means all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, reasonable costs, and expenses (including
all reasonable fees, disbursements and expenses of counsel, experts, and
consultants and costs of investigations and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand by
any Governmental Authority or any third party, and which relate to any
environmental condition or a Release of Hazardous Materials from or onto (i) any
property presently or formerly owned by
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any Loan Party or any of its Subsidiaries; or (ii) any facility which received
Hazardous Materials generated by any Loan Party or any of its Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"Equipment" means, without limitation, "equipment" as defined in the
UCC, and also all furniture, store fixtures, motor vehicles, rolling stock,
machinery, office equipment, plant equipment, tools, dies, molds, and other
goods, property, and assets which are used and/or were purchased for use in the
operation or furtherance of a Loan Party's business, and any and all accessions
or additions thereto, and substitutions therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" means any Person which is under common control
with a Key Loan Party within the meaning of Section 4001 of ERISA or is part of
a group which includes any Key Loan Party and which would be treated as a single
employer under Section 414 of the Internal Revenue Code of 1986, as amended from
time to time.
"Event of Default" means any of the events set forth in Section
9.01. An "Event of Default" shall be deemed to have occurred and to be
continuing unless and until that Event of Default has been duly waived by the
Agent or cured to the satisfaction of the Agent.
"Excess Availability" has the meaning specified in the Revolving
Credit Facility.
"Excess Availability Reserve" has the meaning specified in the
Revolving Credit Facility.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as amended,
modified, succeeded or replaced from time to time.
"Fairness Committee" has the meaning specified therefor in Section
14.02(b).
"Family Trust" means one or more trusts established for the benefit
of any of ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇, any of their respective spouses,
children or lineal descendants, or any Person controlled by any such trust or
trusts.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal to, for each day during such period, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it.
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"Filene's Business" means the businesses operated by Filene's.
"Final Maturity Date" means June 10, 2009, or such earlier date on
which the Loan shall become due and payable in accordance with the terms of this
Agreement and the other Loan Documents.
"Financial Statements" means (i) the audited consolidated balance
sheet of the Parent and its Subsidiaries for the Fiscal Year ended January 29,
2005, and the related consolidated statement of operations, shareholders' equity
and cash flows for the Fiscal Year then ended; and (ii) the unaudited
consolidated balance sheet of the Parent and its Subsidiaries for the three
months ended April 30, 2005, and the related consolidated statement of
operations, shareholder's equity and cash flows for the three months then ended.
"Fiscal Year" means the fiscal year of the Parent and its
Subsidiaries ending on the Saturday nearest January 31st of each year.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States, applied on a consistent basis; provided, that
for the purpose of Article VII hereof and the definitions used therein, "GAAP"
shall mean generally accepted accounting principles in effect on the date hereof
and consistent with those used in the preparation of the Financial Statements;
provided, further, that if there occurs after the date of this Agreement any
change in GAAP that affects in any respect the calculation of any covenant
contained in Article VII hereof, the Agent and the Borrower shall negotiate in
good faith amendments to the provisions of this Agreement that relate to the
calculation of such covenant with the intent of having the respective positions
of the Lenders and the Borrower after such change in GAAP conform as nearly as
possible to their respective positions as of the date of this Agreement.
"Governmental Authority" means any nation or government, any
Federal, state, city, town, municipality, county, local or other political
subdivision thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guaranteed Obligations" has the meaning specified therefor in
Section 11.01.
"Guarantor" means the Parent and each Subsidiary of the Parent, now
existing or hereafter created or acquired (other than the Borrower and the
Unrestricted Subsidiaries). For the avoidance of doubt, it is hereby agreed that
none of DSW, DSWSW or any of their respective Subsidiaries shall be a
"Guarantor" hereunder.
"Guaranty" means (i) the Guaranty of each Guarantor party hereto
contained in Article XI hereof; and (ii) each Guaranty, made by any other
Guarantor in favor of the Agent for the benefit of the Lenders, pursuant to
Section 6.01(a) or otherwise, which Guaranty shall be reasonably satisfactory,
in form and substance to the Agent and the Lenders.
"Hazardous Material" means (i) any element, compound or chemical
that is defined, listed or otherwise classified as a contaminant, pollutant,
toxic pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, special
-9-
waste, or solid waste under Environmental Laws or that is reasonably likely to
cause immediately, or at some reasonably foreseeable future time, harm to or
have an adverse effect on, the environment or risk to human health or safety,
including, without limitation, any pollutant, contaminant, waste, hazardous
waste, toxic substance or dangerous good which is defined or identified in any
Environmental Law and which is present in the environment in such quantity or
state that it contravenes any Environmental Law; (ii) petroleum and its refined
products; (iii) polychlorinated biphenyls; (iv) any substance exhibiting a
hazardous waste characteristic, including, without limitation, corrosivity,
ignitability, toxicity or reactivity as well as any radioactive or explosive
materials; and (v) any raw materials, building components (including, without
limitation, asbestos-containing materials) and manufactured products containing
hazardous substances listed or classified as such under Environmental Laws.
"Hedging Agreement" means any interest rate, foreign currency,
commodity or equity swap, collar, cap, floor or forward rate agreement, or other
agreement or arrangement designed to protect against fluctuations in interest
rates or currency, commodity or equity values (including, without limitation,
any option with respect to any of the foregoing and any combination of the
foregoing agreements or arrangements), and any confirmation executed in
connection with any such agreement or arrangement.
"Highest Lawful Rate" means, with respect to the Agent or any
Lender, the maximum non-usurious interest rate, if any, that at any time or from
time to time may be contracted for, taken, reserved, charged or received on the
Obligations under laws applicable to the Agent or such Lender which are
currently in effect or, to the extent allowed by law, under such Applicable Laws
which may hereafter be in effect and which allow a higher maximum non-usurious
interest rate than Applicable Laws now allow.
"Indebtedness" means, without duplication, all obligations,
including Contingent Obligations, that in accordance with GAAP should be
classified upon the balance sheet of any Key Loan Party and/or the consolidated
balance sheet of the Parent as liabilities, other than trade payables, deferred
rent, or accrued expenses incurred in the ordinary course of business or to
which reference should be made by footnotes thereto, including, in any event and
whether or not so classified, (i) all obligations in respect of money borrowed
(including any indebtedness which is non-recourse to the credit of such Person
but which is secured by a Lien on any asset of such Person) whether or not
evidenced by a promissory note, bond, debenture or other written obligation to
pay money; (ii) all obligations evidenced by bonds, notes, debentures or other
similar instruments; (iii) all obligations in connection with Hedging
Agreements; (iv) all obligations in connection with any letter of credit or
acceptance transaction (including, without limitation, the face amount of all
letters of credit and acceptances issued for the account of such Person or
reimbursement on account of which such Person would be obligated); (v) all
obligations in connection with the sale or discount of accounts receivable or
chattel paper of such Person; (vi) all obligations on account of deposits or
advances other than deferred rent incurred in the ordinary course of business;
(vii) all obligations as lessee under Capitalized Leases; and (viii) all
obligations in connection with any sale and leaseback transaction.
"Indebtedness" also includes: (x) Indebtedness of others secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; (y) any guaranty, endorsement, suretyship or other undertaking pursuant
to which that Person may be liable in respect of Indebtedness of any
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third party; and (z) the Indebtedness of a partnership or joint venture for
which such Person is liable as a general partner or joint venturer.
"Indemnified Matters" has the meaning specified therefor in Section
12.15.
"Indemnitees" has the meaning specified therefor in Section 12.15.
"Initial DSW Stock Exercise Amount" means that number of Class A
Common Shares obtained by dividing the outstanding principal amount of the Loan
by the IPO Price.
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, or extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Intercreditor Agreement" means the Amended and Restated
Intercreditor and Lien Subordination Agreement, substantially in the form of
Exhibit B, as amended or otherwise modified from time to time in accordance with
its terms, by and between the Agent, on behalf of itself and the Lenders and the
Revolving Credit Facility Agent, on behalf of itself and the Revolving Facility
Lenders and acknowledged and agreed by the Borrower and the Guarantors.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, (or any successor statute thereto) and the
regulations thereunder.
"Inventory" means, with respect to any Person, all goods and
merchandise of such Person, including, without limitation, all raw materials,
work-in-process, packaging, supplies, materials and finished goods of every
nature used or usable in connection with the shipping, storing, advertising or
sale of such goods and merchandise, whether now owned or hereafter acquired, and
all such other property the sale or other disposition of which would give rise
to Accounts Receivable or cash.
"IPO" means the proposed initial public offering of Class A Common
Shares of DSW under the Securities Act, completed substantially as described in
DSW's Form S-1 Registration Statement, as filed with the SEC on June 15, 2005,
as amended from time to time, which offering shall be completed as a primary
offering by DSW.
"IPO Effective Date" means the date on which the IPO is consummated
in accordance with the terms set forth in (i) Section 4.02 hereof, and (ii) the
Form S-1 Registration Statement as filed with the SEC on June 15, 2005 as
amended from time to time.
"IPO Price" means the price at which each Class A Common Share is
offered to the public in a Qualifying IPO as set forth on the cover page to the
prospectus in such IPO.
"Key Loan Parties" means, collectively, the Borrower, the Parent,
Gramex, Filene's, GB, VC Michigan and RV Jewelry.
-11-
"Landlord's Agreement" means a landlord's agreement consenting to
the recording of the Mortgages, in form and substance satisfactory to the Agent,
made by the fee owner (or ground or prime lessee with the consent of the fee
owner) of the real property secured by a Mortgage in favor of the Agent (or the
Agent's representative) for the benefit of the Lenders (among others) and
delivered to the Agent pursuant to Sections 4.01(d) and 6.01(a) and (i) or
pursuant to the Original Agreement.
"Lease" means any lease of real property to which any Loan Party or
any of its Subsidiaries is a party as lessor or lessee.
"Leasehold Mortgage Status Report" means a monthly report that
reflects the Loan Parties' efforts to obtain leasehold Mortgages on
substantially all Leases of the Loan Parties, such report to contain sufficient
detail to enable the Agent to evaluate the status of the Loan Parties' efforts
on a property-by-property basis.
"Lenders" means the financial institutions listed on the signature
pages hereof, and each assignee that shall become a party hereto pursuant to
Section 12.07.
"Lender's Account" means, with respect to each Lender, an account at
a bank designated by each Lender from time to time into which the Loan Parties
shall make certain payments to such Lender under this Agreement.
"Lien" means any mortgage, deed of trust, pledge, lien (statutory or
otherwise), security interest, charge or other encumbrance or security or
preferential arrangement of any nature, including, without limitation, any
conditional sale or title retention arrangement, any Capitalized Lease and any
assignment, deposit arrangement or financing lease intended as, or having the
effect of, security.
"Loan" means the loan made by Lenders to the Borrower pursuant to
Article II hereof.
"Loan Document" means this Agreement, any Guaranty, any Security
Agreement, any Pledge Agreement, any Mortgage, any Landlord's Agreement, any
Control Agreement, the Intercreditor Agreement and any other agreement,
instrument or other document executed and delivered pursuant hereto or thereto
or otherwise evidencing or securing any Loan or any other Obligation and at any
time a Lender is a holder of (i) the Warrants, the Warrants, the Registration
Rights Agreement, and the DSW Registration Rights Agreement, and/or (ii), the
Convertible Warrants, the Convertible Warrants, the Registration Rights
Agreement and the DSW Registration Rights Agreement.
"Loan Party" means the Borrower or any Guarantor.
"Market Price" means, on any date specified herein, the amount per
share of the Common Stock or Class A Common Shares, as applicable, equal to (i)
the last reported sale price of such Common Stock or Class A Common Shares, as
applicable, 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 Common Stock or Class A Common Shares, as
applicable, is
-12-
then listed or admitted for trading, (ii) if such Common Stock or Class A Common
Shares, as applicable, is not then listed or admitted for trading on any
national securities exchange but is designated as a national market system
security by the NASD, the last reported trading price of the Common Stock or
Class A Common Shares, as applicable, on such date, (iii) if there shall have
been no trading on such date or if the Common Stock or Class A Common Shares, as
applicable, is not so designated, the average of the closing bid and asked
prices of the Common Stock or Class A Common Shares, as applicable, on such date
as shown by the NASD automated quotation system, (iv) if trading in such Common
Stock or Class A Common Shares, as applicable, is quoted in the over-the-counter
market, the average of the closing bid and asked prices of the Common Stock or
Class A Common Shares, as applicable, on such date as shown on the OTC Bulletin
Board, or (v) if such Common Stock or Class A Common Shares, as applicable, 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 20 days of the date as of which the determination is to be made)
determined in good faith by a committee of the Parent's Board of Directors
consisting of directors who are not Affiliates of the Parent or SSC; provided,
however, that at the request of CPLP, the Market Price shall be determined in
good faith by an independent investment banking firm selected by the Parent, SSC
and CPLP or, if that selection cannot be made within 10 days, by an independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules, and provided, further, that the Borrower shall pay
all of the reasonable fees and expenses of any third parties incurred in
connection with determining the Market Price.
"Material Accounting Change" means any change in GAAP applicable to
accounting periods subsequent to the Parent's fiscal year most recently
completed prior to the execution of this Agreement, which change has a material
effect on the Parent's Consolidated financial condition or operating results, as
reflected on financial statements and reports prepared by or for the Parent and
its Subsidiaries, when compared with such condition or results as if such change
had not taken place.
"Material Adverse Effect" means a material adverse effect on (i) the
business, operations, property, assets or financial condition of (x) the Loan
Parties taken as a whole or (y) the Value City Business taken as a whole or (ii)
the validity or enforceability of this Agreement or any of the other Loan
Documents or any of the material rights or remedies of the Agent or the Lenders
hereunder or thereunder.
"Material Contract" means, with respect to any Person, (i) each
contract or agreement (other than Leases, intercompany agreements benefit and
pension plans, stock option plans and labor and employment contracts) to which
such Person or any of its Subsidiaries is a party involving aggregate
consideration payable to or by such Person or such Subsidiary of $1,000,000 or
more annually (other than purchase orders in the ordinary course of the business
of such Person or such Subsidiary and other than contracts that by their terms
may be terminated by such Person or Subsidiary in the ordinary course of its
business upon less than 60 days' notice without penalty or premium) and (ii) all
other contracts or agreements material to the business, operations, condition
(financial or otherwise), performance, prospects or properties of such Person or
such Subsidiary.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and any successor
thereto.
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"Mortgage" means a mortgage (including, without limitation, a
leasehold mortgage, deed of trust or deed to secure debt), in form and substance
satisfactory to the Agent, made by a Loan Party in favor of the Agent for the
benefit of the Lenders (among others), securing the Obligations and the
obligations owing to certain other lenders, and delivered to the Agent pursuant
to Section 4.01(d), Section 6.01(a), Section 6.01(i) or otherwise, including
under the Original Agreement.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which any Loan Party or any of its ERISA
Affiliates has contributed to, or has been obligated to contribute, at any time
during the preceding six (6) years.
"Note" means a promissory note of the Borrower, substantially in the
form of Exhibit A to the Original Agreement, made payable to the order of each
Lender requesting a Note, and evidencing the Indebtedness resulting from the
making by such Lender of its Pro Rata Share of the Loan.
"Notice of Election" has the meaning specified therefore in Section
2.03(c).
"Notification Date" has the meaning specified therefor in Section
14.01.
"Objection Date" has the meaning specified therefor in Section
14.01.
"Objection Notice" has the meaning specified therefor in Section
14.01.
"Obligations" means all present and future indebtedness,
obligations, and liabilities of each Loan Party to the Agent and the Lenders
under the Loan Documents, whether or not the right of payment in respect of such
claim is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured, unsecured, and whether
or not such claim is discharged, stayed or otherwise affected by any proceeding
referred to in Section 9.01. Without limiting the generality of the foregoing,
the Obligations of each Loan Party under the Loan Documents include (i) the
obligation to pay principal, interest, including any PIK Interest, charges,
expenses, fees, attorneys' fees and disbursements, indemnities and other amounts
payable by such Person under the Loan Documents; and (ii) the obligation of such
Person to reimburse any amount in respect of any of the foregoing that the Agent
may elect in accordance with the terms thereof to pay or advance on behalf of
such Person.
"Old Notes" has the meaning specified in Section 2.01.
"Original Agreement" has the meaning specified therefore in the
preamble.
"Other Taxes" has the meaning specified therefor in Section 2.05.
"Parent" has the meaning specified therefor in the preamble.
"Participant Register" has the meaning specified therefor in Section
12.07(b)(v).
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"Payment Office" means the Agent's office located at ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, or at such other office or offices of the
Agent as may be designated in writing from time to time by the Agent to the
Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Acquisition" means (i) any Acquisition the cash
consideration for which is less than $3,000,000 in the aggregate in any fiscal
year of the Parent and its Subsidiaries and which satisfies the conditions set
forth in clauses (f), (g), (h) and (i) below; (ii) an Acquisition in which each
of the following conditions are satisfied: (a) no Default or Event of Default
then exists or would arise from the consummation of such Acquisition; (b) such
Acquisition shall have been approved by the Board of Directors of the Person (or
similar governing body if such Person is not a corporation) which is the subject
of such Acquisition and such Person shall not have announced that it will oppose
such Acquisition or shall not have commenced any action which alleges that such
Acquisition will violate Applicable Law; (c) the Borrower shall have furnished
the Agent with ten (10) days' prior notice of such intended Acquisition and
shall have furnished the Agent with a current draft of the Acquisition agreement
and other Acquisition documents, a summary of any due diligence undertaken by
the Parent and/or the Key Loan Parties in connection with such Acquisition,
appropriate financial statements of the Person which is the subject of such
Acquisition, pro forma projected financial statements for the twelve (12) month
period following such Acquisition after giving effect to such Acquisition
(including balance sheets, cash flows and income statements by month for the
acquired Person, individually, and on a consolidated basis with all Loan
Parties), and such other information as the Agent may reasonably require, each
of which shall be reasonably satisfactory to the Agent; (d) the structure of the
Acquisition shall be acceptable to the Agent in its reasonable judgment; if an
Acquisition of capital stock or other equity interests, after consummation of
such Acquisition, a Key Loan Party shall own directly or indirectly a majority
of the equity interests in the Person being acquired and shall Control a
majority of any voting interests, and/or shall otherwise Control the governance
of the Person being acquired; (e) the Agent shall have received (i) the results
of appraisals of the assets (or the assets of the Person) to be acquired in such
Acquisition and of a commercial finance examination of the Person that is (or
whose assets are) being acquired, and (ii) such other due diligence as the Agent
may reasonably require, all of the results of the foregoing to be reasonably
satisfactory to the Agent; (f) any assets acquired shall be utilized only in,
and if the Acquisition involves a merger, consolidation or stock acquisition,
the Person which is the subject of such Acquisition shall be engaged only in, a
Permitted Business; (g) if the Person which is the subject of such Acquisition
will be maintained as a Subsidiary of a Key Loan Party, such Subsidiary shall
have executed such documents as may be necessary to be joined as a "Guarantor"
hereunder, and the Agent shall have received subject to the terms of the
Intercreditor Agreement a first priority security and mortgage interest (subject
to Permitted Liens) in such Subsidiary's capital stock, inventory, accounts,
equipment, real estate, leaseholds, and other property of the same nature as
constitutes Collateral under this Agreement in order to secure the Obligations;
(h) the total consideration paid for all Acquisitions (whether in cash, tangible
property, notes or other property (other than capital stock of the Parent))
after June 11, 2002, shall not exceed in the aggregate the sum of $20,000,000;
and (i) Excess Availability immediately prior to such Acquisition, immediately
after giving effect thereto, and projected Excess Availability on a pro forma
projected basis for
-15-
the twelve (12) months immediately following such Acquisition, shall not be less
than $70,000,000.
"Permitted Business" means the business of owning and operating a
chain of retail department stores selling clothing apparel, housewares, home
furnishings, toys, sporting goods, jewelry, shoes, health and beauty care items
or any of the foregoing, and engaging in certain related licensing and other
retail and wholesale businesses reasonably related thereto, including, but not
limited to, any retail lease department operation.
"Permitted Disposition" means any of the following: (i) licenses of
intellectual property or licensed or leased departments of a Loan Party or any
of its Subsidiaries in the ordinary course of business or to any other Loan
Party (other than the Parent); (ii) Leases or subleases of Leases, to the extent
at any point in time such Leases or subleases have, in the aggregate,
anticipated minimum fixed annual rental payments of not more than $3,000,000;
(iii) sales, assignments, transfers, conveyances or other dispositions of any or
all of the Property specified in Schedule 6.02(c) hereof; provided that in
connection with a sale or similar disposition of any such Property, if a Loan
Party receives a note or similar obligation as all or part of the consideration
therefor, such Loan Party shall secure such note or obligation with a Mortgage
or similar Lien on such Property and pledge such note or other obligation to the
Agent as security for the Obligations pursuant to the terms of the Loan
Documents; (iv) sales of Inventory and Equipment in connection with store
closures permitted in accordance with the provisions of Section 6.02(c)(vii)
hereof, provided that all sales of Inventory in connection with store closings
(x) after the occurrence and during the continuance of an Event of Default or
(y) consisting of more than fifteen (15) retail stores at the same time, shall
be in accordance with liquidation agreements and with liquidators reasonably
acceptable to the Agent; and (v) (x) the sale of any property, land or building
(including any related receivables or other intangible assets) to any Person
which is not a Subsidiary of the Parent, DSW or DSWSW, or (y) the sale of the
entire Capital Stock (or other equity interests) and Indebtedness of any
Subsidiary owned by a Loan Party to any Person which is not a Subsidiary of the
Parent, DSW or DSWSW, or (z) the consummation of any other asset sale with a
Person who is not a Subsidiary of the Parent, provided that: (A) the
consideration for such transaction represents fair value, and at least 90% of
such consideration consists of cash, provided that in connection with a sale or
similar disposition of any such Property, if a Loan Party receives a note or
similar obligations as all or part of the consideration therefor, such Loan
Party shall secure such note or obligation with a Mortgage or similar Lien on
such property and pledge such note or other obligation to the Agent as security
for the Obligations pursuant to the terms of the Loan Documents; (B) the
aggregate consideration for all such transactions completed in any fiscal year
does not exceed $500,000; (C) the aggregate consideration for all such
transactions completed after June 11, 2002 does not exceed $1,500,000; and (D)
other than in connection with a transaction, the aggregate consideration for
which is equal to an amount less than $500,000, at least five (5) Business Days
prior to the date of completion of such transaction such Loan Party shall have
delivered to the Agent an officer's certificate executed on behalf of such Loan
Party by an Authorized Officer of such Loan Party, which certificate shall
contain a description of the proposed transaction, the date such transaction is
scheduled to be consummated, the estimated purchase price or other consideration
for such transaction, financial information pertaining to compliance with the
preceding clause (A), and which shall (if requested by the Agent) include a
certified copy of the draft or definitive documentation pertaining thereto.
-16-
"Permitted DSW Stock Sale" means a sale by the Parent of Capital
Stock of DSW generating Net Cash Proceeds at the time of such sale in an amount
sufficient to pay all Obligations hereunder in full.
"Permitted Indebtedness" means any of the following: (i)
Indebtedness incurred under this Agreement and the other Loan Documents; (ii)
any Indebtedness incurred under the Revolving Credit Facility; (iii)
Indebtedness on account of Equipment or improvements to real property acquired
in compliance with the requirements of subparagraph (xiii) of the definition of
Permitted Liens, the incurrence of which would not otherwise be prohibited by
this Agreement; provided, that such Indebtedness shall not exceed $10,000,000 in
the aggregate principal amount at any time outstanding for all Loan Parties and,
with respect to the Parent only, shall not exceed $5,000,000 in the aggregate
principal amount outstanding at any time; (iv) (a) Indebtedness consisting of
all obligations of a Loan Party or any Subsidiary as lessee under Capitalized
Leases, and (b) Indebtedness consisting of all obligations of a Loan Party or
any Subsidiary under any lease (x) that is accounted for by the lessee as an
operating lease and (y) under which the lessee is intended to be the "owner" of
the leased property for Federal income tax purposes; provided, that (A) at the
time of any incurrence thereof after the date hereof, and after giving effect
thereto, no Event of Default shall have occurred and be continuing or would
result therefrom, and (B) the aggregate outstanding principal amount (using the
obligations in lieu of principal amount, in the case of any Capitalized Lease,
or present value, based on the implicit interest rate, in lieu of principal
amount, in the case of any lease described above in part (b)) of Indebtedness
permitted by this clause (iv) shall not exceed $10,000,000 in the aggregate at
any time outstanding for all Loan Parties and, with respect to the Parent only,
shall not exceed $5,000,000 in the aggregate outstanding at any time; (v)
Indebtedness of the Loan Parties and any Subsidiary under the Hedging Agreements
with any Revolving Credit Lender or an Affiliate of a Revolving Credit Lender;
provided that (1) such agreement is non-speculative in nature, and (2) the Loan
Parties have received the written consent of the Agent (which consent shall not
be unreasonably withheld) prior to entering into such agreement; (vi) the
Indebtedness listed on Schedule 6.02(b), annexed hereto; (vii) Indebtedness to
sellers in connection with Permitted Acquisitions; (viii) intercompany
Indebtedness between and among the Loan Parties (other than the Parent) pursuant
to loans and advances permitted in accordance with Subsection 6.02(e)(F), below,
and intercompany Indebtedness due to the Parent by any other Loan Party to the
extent permitted hereunder; (ix) Indebtedness to creditors of the former
Filene's incurred in connection with the acquisition of Filene's, such
Indebtedness not to exceed $6,000,000; (x) Indebtedness with respect to
indemnities, warranties, statutory obligations, and surety, appeal and
supersedeas bonds incurred in the ordinary course of business; (xi) Indebtedness
in respect of overdraft protections and otherwise in connection with deposit
accounts; (xii) Indebtedness arising out of the refinancing, extension, renewal
or refunding of any Indebtedness permitted under this Agreement, provided that
the principal amount of such Indebtedness is not increased from the amount
outstanding at the time of such refinancing; (xiii) Indebtedness owed by the
Parent to any of the other Loan Parties in an amount not to exceed $5,000,000
(less amounts paid under Section 6.02(g) hereof) in the aggregate at any time
outstanding; and (xiv) Indebtedness owing by the Parent to the Borrower pursuant
to the RVI Note, provided that such Indebtedness is subject to the subordination
provisions contained therein as in effect on the Effective Date.
"Permitted Investments" means each of the following: (i) direct
obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United
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States of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in each
case maturing not more than one year from the date of acquisition thereof; (ii)
investments in commercial paper maturing not more than one year from the date of
acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from Standard & Poor's or from ▇▇▇▇▇'▇; (iii) investments in
certificates of deposit, banker's acceptances and time deposits maturing not
more than one year from the date of acquisition thereof issued or guaranteed by
or placed with, and money market deposit accounts issued or offered by, any
domestic office of any financial institution organized under the laws of the
United States of America or any State thereof that has a combined capital and
surplus and undivided profits of not less than $500,000,000; (iv) fully
collateralized repurchase agreements with a term of not more than 30 days for
securities described in clause (i) above (without regard to the limitation on
maturity contained in such clause) and entered into with a financial institution
satisfying the criteria described in clause (iii) above; (v) marketable direct
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's or from ▇▇▇▇▇'▇; (vi) investments in money market funds,
substantially all the assets of which are comprised of securities of the types
described in clauses (i) through (vi) above; (vii) investments acquired by a
Loan Party or any of its Subsidiaries (x) in exchange for any other investment
held by such Loan Party or any such Subsidiary in connection with or as a result
of a bankruptcy, workout, reorganization or recapitalization of the issuer of
such other investment, or (y) as a result of a foreclosure by such Loan Party or
any of its Subsidiaries with respect to any secured investment or other transfer
of title with respect to any secured investment in default; (viii) investments
by a Loan Party in the capital of any wholly-owned Subsidiary of such Loan
Party, including without limitation, any Permitted Acquisitions, provided that
the provisions of Section 6.01(a) hereof have been complied with respect to such
Subsidiary; (ix) investments by the Parent in the Capital Stock of DSW; (x) to
the extent not permitted by the foregoing clauses, existing investments in any
Subsidiaries (and any increases thereof attributable to increases in retained
earnings); (xi) to the extent not permitted by the foregoing clauses, the
existing investments described on Schedule 6.02(e) hereto; (xii) investments of
a Loan Party and any Subsidiary in Hedging Agreements permitted by clause (v) of
the definition of Permitted Indebtedness; (xiii) investments of any Person which
are outstanding at the time such Person becomes a Subsidiary of a Loan Party as
a result of a Permitted Acquisition, but not any increase in the amount thereof
unless otherwise permitted by this Agreement; (xiv) investments by Value City in
the Parent pursuant to the RVI Note, and investments by the Borrower pursuant to
the DSW Note and the DSWSW Guarantee, provided, that in each case, such
investment is subject to the subordination terms contained therein as in effect
on the Effective Date; and (xv) any other investments (whether in the form of
cash or contribution of property, and if in the form of a contribution of
property, such property shall be valued for purposes of this clause at the fair
value thereof) in any corporation, partnership, limited liability company, joint
venture or other business entity, which is not itself a Subsidiary of a Key Loan
Party or owned or Controlled by any director, officer or employee of a Key Loan
Party or any of its Subsidiaries, not otherwise permitted by the foregoing
clauses, made after June 11, 2002, shall be permitted to be incurred if (a) no
Event of Default shall have occurred and be continuing, or would result
therefrom, and (b) the aggregate cumulative amount of such investments (together
with any loans and advances permitted under Sections
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6.02(e)(vi)(D) and (E)) does not exceed $6,000,000, provided, that except for
loans to officers and directors, all such Permitted Investments are subject to a
perfected first priority Lien in favor of the Agent (subject to the terms of the
Intercreditor Agreement).
"Permitted Liens" means any of the following: (i) Liens for taxes
not yet delinquent or which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto are maintained
on the books of a Loan Party in accordance with GAAP, and provided further that,
no notice of tax lien has been filed with respect thereto; (ii) Liens in respect
of property or assets imposed by law in the ordinary course of business, such as
carrier's, warehousemen's, mechanics', materialmen's, repairmen's, landlord's or
similar Liens arising in the ordinary course of business which (x) are not
overdue in accordance with customary business practices and consistent with the
applicable Loan Party's prior practices, and do not in the aggregate materially
detract from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Loan Parties, or (y) are being
contested in good faith by a Loan Party, by appropriate proceedings diligently
instituted and conducted and without danger of any material risk to the
Collateral and adequate reserves or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor; (iii)
Liens, pledges or deposits in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) deposits to
secure the performance of tenders, bids, sales, trade and government contracts,
leases, statutory obligations, surety, appeal, and supersedeas bonds, warranty,
advance payment, customs, performance and return-of-money bonds and other
obligations of a like nature in the ordinary course of business (exclusive of
obligations in respect of the payment of borrowed money) whether pursuant to
statutory requirements, common law or consensual arrangements; (v) easements,
rights of way, leases, zoning or deed restrictions, licenses, covenants,
building restrictions, minor defects or irregularities in title and other
similar real estate encumbrances incurred in the ordinary course of business
that in the aggregate do not materially interfere with the conduct of the
business of the Loan Parties; defects and irregularities in titles, survey
exceptions, encumbrances, easements or reservations of others for rights-of-way,
roads, pipelines, railroad crossings, services, utilities or other similar
purposes; outstanding mineral rights or reservations (including rights with
respect to the removal of material resource) which do not materially diminish
the value of the surface estate, assuming usage of such surface estate similar
to that being carried on by any Loan Party as of the Effective Date; (vi) any
interest or title of a lessor under any lease entered into by any Loan Party in
the ordinary course of business not in violation of the Loan Documents; (vii)
any interest or title of any lessee under any leases or subleases of real
property of a Loan Party not in violation of the requirements of the Loan
Documents, provided that all such Liens do not in the aggregate materially
detract from the value of such Loan Party's property or materially impair the
use thereof in the operation of such Loan Party's business; (viii) Liens arising
from financing statements regarding property subject to Capitalized Leases not
in violation of the requirements of the Loan Documents, provided that such Liens
are only in respect of the property subject to, and secure only, the respective
lease; (ix) rights of consignors of goods to a Loan Party as consignee; (x)
Liens arising from judgments, decrees or attachments in existence less than 30
days after the entry thereof, with respect to which execution has been stayed
and with respect to which payment in full above any applicable deductible is
covered by insurance or a bond, or in circumstances not constituting an Event of
Default under Section 9.01(j)(i); (xi) Liens created by this Agreement or the
other Loan Documents; (xii) Liens (x) listed on Schedule 6.02(a), annexed
hereto, or (y) arising out of the refinancing, extension, renewal or refunding
of any Indebtedness
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secured by any such Lien, provided that the principal amount of such
Indebtedness is not increased and such Indebtedness is not secured by any
additional assets; (xiii) Liens which are placed upon Equipment or improvements
to real property (including the associated real property) used in the ordinary
course of business of a Loan Party or any Subsidiary (x) at the time of (or
within 90 days after) the acquisition of such Equipment or the completion of
such improvements by such Loan Party or any such Subsidiary to secure
Indebtedness incurred to pay or finance all or a portion of the purchase price
or other cost thereof, provided that the Lien on the Equipment so acquired or
the real property so improved does not encumber any other asset of such Loan
Party or any such Subsidiary; or (y) are existing on Equipment or real property
at the time acquired by a Loan Party or any Subsidiary or on assets of a Person
at the time such Person first becomes a Subsidiary of a Loan Party; provided,
that (A) any such Lien was not created at the time of or in contemplation of the
acquisition of such assets or Person by a Loan Party or any Subsidiaries, (B) in
the case of any such acquisition of a Person, any such Lien attaches only to the
Equipment or real estate, as applicable, of such Person, and (C) in the case of
any such acquisition of Equipment or real estate by a Loan Party or any
Subsidiary, any such Lien attaches only to the property and assets so acquired
and not to any other property or assets of such Loan Party or any such
Subsidiary; provided, that the Liens outstanding from time to time under this
clause (xiii) shall not secure any Indebtedness other than Permitted
Indebtedness described in clause (iii) of such definition; (xiv) Liens securing
Indebtedness assumed in connection with, or continuing to exist after, but not
incurred in connection with, or contemplation of, a Permitted Acquisition, which
Liens were in effect prior to the consummation of the Permitted Acquisition;
provided, that such Liens may not extend to any Collateral of the Loan Parties,
or the Inventory, Accounts Receivable or General Intangibles of the Person so
acquired; (xv) a Lien granted by any Loan Party in connection with the Revolving
Credit Facility; (xvi) Liens granted by the Parent in favor of the Borrower
solely with respect to the DSW Common Stock owned by the Parent to secure the
Parent's obligations to the Borrower under the RVI Note, subject to the terms of
the RVI Note and the RVI Pledge as in effect on the Effective Date.
Notwithstanding anything to the contrary contained herein, no Lien shall be
permitted to exist on the DSW Common Stock held by the Parent, other than Liens
in favor of the Agent and Liens in favor of the Borrower to the extent permitted
by clause (xvi) of the definition of Permitted Liens.
"Person" shall have the meaning given to such term as defined in
Section 13(d)(3) of the Securities Exchange Act.
"PIK Interest" means, as at any date of determination, the amount of
all interest accrued with respect to the Loan that has been paid-in-kind by
being added to the outstanding principal balance thereof on a monthly basis in
accordance with Section 2.03.
"Pledge Agreement" means a Pledge and Security Agreement (including
any amendments or joinders thereto) made by a Loan Party in favor of the Agent
for the benefit of the Lenders, whether delivered pursuant to the Original
Agreement and reaffirmed pursuant to Section 15.01(b) of this Agreement or
delivered pursuant to Section 6.01(a) of this Agreement, and, in each case,
securing the Obligations and delivered to the Agent.
"Post-Default Rate" means a rate of interest per annum equal to the
rate of interest otherwise in effect from time to time pursuant to the terms of
this Agreement plus 3%.
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"Pro Rata Share" means the percentage obtained by dividing (i) the
aggregate unpaid principal amount of such Lender's portion of the Loan, by (ii)
the aggregate unpaid principal amount of the Loan.
"Property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Qualifying IPO" means an IPO that satisfies each of the following
conditions:
(a) Not more than 45% of the value (as of the IPO Effective
Date calculated by reference to the IPO Price) of all issued and outstanding DSW
Common Stock shall be sold in connection with the IPO;
(b) Immediately following the IPO and the application of the
Net Cash Proceeds thereof, DSW Common Stock having not less than 55% of the
value (as of the IPO Effective Date calculated by reference to the IPO Price) of
all issued and outstanding DSW Common Stock shall be held (directly or
indirectly) by Parent, free and clear of all Liens, other than (i) Liens in
favor of the Agent, and (ii) Liens permitted by clause (xvi) of the definition
of Permitted Liens;
(c) The sale price of the Class A Common Shares sold in the
IPO shall reflect the fair market value of such Class A Common Shares on the IPO
Effective Date;
(d) The Net Cash Proceeds from the IPO shall be sufficient to
repay (i) in full in cash all obligations outstanding under the Term Loan
Agreement and (ii) in cash, $25,000,000 of the principal amount of the Old Notes
under the Original Agreement; and
(e) The IPO Effective Date shall be on or prior to December
31, 2005.
"Reference Bank" means JPMorgan Chase Bank, its successors or any
other commercial bank designated by the Agent to the Borrower from time to time.
"Reference Rate" means the rate of interest publicly announced by
the Reference Bank in New York, New York from time to time as its reference
rate, base rate or prime rate. The reference rate, base rate or prime rate is
determined from time to time by the Reference Bank as a means of pricing some
loans to its borrowers and neither is tied to any external rate of interest or
index nor necessarily reflects the lowest rate of interest actually charged by
the Reference Bank to any particular class or category of customers. Each change
in the Reference Rate shall be effective from and including the date such change
is publicly announced as being effective.
"Referral Notice" has the meaning specified therefor in Section
14.02(b).
"Referred SSC Transaction" has the meaning specified therefor in
Section 14.02(b).
"Register" has the meaning specified therefor in Section
12.07(b)(ii).
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"Registered Loan" has the meaning specified therefor in Section
12.07(b)(ii).
"Registered Note" has the meaning specified therefor in Section
2.02(c).
"Registration Rights Agreement" means the Second Amended and
Restated Registration Rights Agreement, substantially in the form of Exhibit E-1
hereto, by and between the Parent, the Conversion Warrantholders and the
Warrantholders with respect to the matters covered thereby.
"Regulation T", "Regulation U" and "Regulation X" mean,
respectively, Regulations T, U and X of the Board or any successor, as the same
may be amended or supplemented from time to time.
"Related Business" means any business or enterprise consisting of
asset maximization services or asset valuation services.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, seeping, migrating,
dumping or disposing of any Hazardous Material (including the abandonment or
discarding of barrels, containers and other closed receptacles containing any
Hazardous Material) into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through or in the ambient air,
soil, surface or ground water, or property which is in violation of any
Environmental Laws.
"Remedial Action" means all actions taken to (i) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate or in any other way address
Hazardous Materials in the indoor or outdoor environment; (ii) prevent or
minimize a Release or threatened Release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; (iii) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities; or (iv)
perform any other actions authorized by 42 U.S.C. Section 9601.
"Reportable Event" means an event described in Section 4043 of ERISA
(other than an event not subject to the provision for 30-day notice to the PBGC
under the regulations promulgated under such Section).
"Required Lenders" means CPLP and any of its affiliates to whom it
assigns all or any portion of its rights and obligations under this Agreement or
any of the Loan Documents.
"Revolving Credit Facility" means the $275,000,000 working capital
facility, dated as of June __, 2005, as amended, restated, supplemented or
otherwise modified from time to time, among the Loan Parties, the Revolving
Credit Facility Agent and the Revolving Credit Facility Lenders.
"Revolving Credit Facility Agent" means National City Business
Credit, Inc. ("NCBC"), as Administrative Agent and as Collateral Agent for the
Revolving Credit Facility Lenders, and each of its respective successors and
assigns.
-22-
"Revolving Credit Facility Documents" means any agreement,
instrument or other document executed and delivered pursuant to the Revolving
Credit Facility or otherwise securing or evidencing any loan or obligation
thereunder.
"Revolving Credit Facility Lenders" means the financial institutions
party to the Revolving Credit Facility.
"RVI Note" means the promissory note, dated January 1, 2005, as
amended by the First Amendment to Promissory Note and First Amendment to Stock
Pledge Agreement dated as of the Effective Date, substantially in the form of
Exhibit C-1 hereto, made by the Parent to the order of the Borrower, in the
original principal amount of $240,000,000.
"RVI Pledge" means the pledge agreement, dated as of January 1,
2005, as amended by the First Amendment to Promissory Note and First Amendment
to Stock Pledge Agreement dated as of the Effective Date, substantially in the
form of Exhibit C-2 hereto, securing the obligations under the RVI Note.
"SEC" means the Securities and Exchange Commission or any other
similar or successor agency of the Federal government administering the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect from time to time.
"Security Agreement" means a Security Agreement (including any
amendments or joinders thereto) made by a Loan Party in favor of the Agent for
the benefit of the Lenders, whether delivered pursuant to the Original Agreement
and reaffirmed pursuant to Section 15.01(b) of this Agreement, or delivered
pursuant to Section 6.01(a) of this Agreement, in each case, securing the
Obligations and delivered to the Agent.
"Solvent" means, with respect to any Person on a particular date,
that on such date (i) the fair value of the property of such Person is not less
than the total amount of the liabilities of such Person; (ii) the present fair
saleable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its existing
debts as they become absolute and matured; (iii) such Person is able to realize
upon its assets and pay its debts and other liabilities, Contingent Obligations
and other commitments as they mature in the normal course of business; (iv) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital. The determination of
whether a Person is Solvent shall take into account all such Person's properties
and liabilities regardless of whether, or the amount at which, any such property
or liability is included on a balance sheet of such Person prepared in
accordance with GAAP, including properties such as contingent contribution or
subrogation rights, business prospects, distribution channels and goodwill. The
determination of the sum of a Person's properties at a fair valuation or the
present fair saleable value of a Person's properties shall be made on a going
concern basis unless, at the time of such determination, the liquidation of the
-23-
business in which such properties are used or useful is in process or is
demonstrably imminent. In computing the amount of contingent or unrealized
properties or contingent or unliquidated liabilities at any time, such
properties and liabilities will be computed at the amounts which, in light of
all the facts and circumstances existing at such time, represent the amount that
reasonably can be expected to become realized properties or matured liabilities,
as the case may be. In computing the amount that would be required to pay a
person's probable liability on its existing debts as they become absolute and
matured, reasonable valuation techniques, including a present value analysis,
shall be applied using such rates over such periods as are appropriate under the
circumstances, and it is understood that, in appropriate circumstances, the
present value of Contingent Liabilities may be zero.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. and any successor thereto.
"SSC" means Schottenstein Stores Corporation.
"SSC Transaction" has the meaning specified therefor in Section
14.01.
"Subsidiary" means, with respect to any Person at any date, any
corporation, limited or general partnership, limited liability company, trust,
estate, association, joint venture or other business entity (i) the accounts of
which would be consolidated with those of such Person in such Person's
consolidated financial statements if such financial statements were prepared in
accordance with GAAP or (ii) of which more than 50% of (A) the outstanding
Capital Stock having (in the absence of contingencies) ordinary voting power to
elect a majority of the board of directors or other managing body of such
Person, (B) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability
company or (C) in the case of a trust, estate, association, joint venture or
other entity, the beneficial interest in such trust, estate, association or
other entity business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such Person;
provided, however, that notwithstanding anything to the contrary contained
herein, following the Effective Date, none of DSW, DSWSW or any of their
respective Subsidiaries shall be, or be deemed to be "Subsidiaries" of any Loan
Party for purposes of this Agreement or any other Loan Document.
"Taxes" has the meaning set forth in Section 2.05.
"Term Loan Agreement" means the Financing Agreement dated as of June
11, 2002, as amended, restated, supplemented or otherwise modified from time to
time, among the Loan Parties, the lenders party thereto and CPLP as agent for
the lenders, which Financing Agreement shall be paid in full and terminated on
the Effective Date.
"Uniform Commercial Code" has the meaning specified therefor in
Section 1.03.
"Unrestricted Subsidiary" has the meaning specified therefor in
Section 5.01(kk).
"Value City Business" means the Key Loan Parties' business other
than the Filene's Business.
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"Warrantholders" means the holders of the Warrants.
"Warrants" means the warrants dated as of September 26, 2002, and
amended and restated as of the Effective Date, substantially in the form of
Exhibit A-1 hereto, issued by the Parent in favor of the Warrantholders.
"Warrant Stock" means the shares of Common Stock of the Parent
and/or the Class A Common Shares of DSW issuable upon the exercise of the
Warrants and/or the Conversion Warrants.
Section 1.02 Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise, (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights. References in this
Agreement to "determination" by the Agent include good faith estimates by the
Agent (in the case of quantitative determinations) and good faith beliefs by the
Agent (in the case of qualitative determinations).
Section 1.03 Accounting and Other Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under GAAP applied on a basis consistent with those used in preparing the
Financial Statements.
Section 1.04 Time References. Unless otherwise indicated herein, all
references to time of day refer to Eastern Standard Time or Eastern daylight
saving time, as in effect in New York City on such day. For purposes of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding"; provided, however, that with respect to a computation
of fees or interest payable to the Agent or any Lender, such period shall in any
event consist of at least one full day.
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ARTICLE II
THE LOAN
Section 2.01 The Loan. (a) The Lenders have made a Loan (as defined
in the Original Agreement) to the Borrower under the Original Agreement, of
which $50,000,000 of the original principal amount remains outstanding on the
Effective Date (immediately prior to the effectiveness of this Agreement but
after giving effect to the payment described in clause (d)(ii) of the definition
of the term "Qualifying IPO"). The Borrower acknowledges and agrees that upon
the effectiveness of this Agreement, the aggregate principal amount of such Loan
shall automatically and immediately be deemed to constitute the "Loan" to the
Borrower by the Lenders under this Agreement. It is the intention of the parties
hereto that this Agreement and the consolidation and substitution of the Notes
for the existing "Notes" referred to in the Original Agreement (the "Old Notes")
shall not in any way constitute (i) a forgiveness of the indebtedness of the
Borrower under the Old Note, (ii) a release of the Borrower from such
obligations, or (iii) a novation of the Old Notes.
(b) Any principal amount of the Loan which is prepaid or
repaid may not be reborrowed.
Section 2.02 Notes; Repayment of Loan.
(a) The obligations of the Borrower to repay the Loan and
interest thereon shall, upon the request of any Lender, be evidenced by Notes,
duly executed on behalf of the Borrower, and delivered to and made payable to
the order of each such Lender requesting a Note in a principal amount equal to
such Lender's Pro Rata Share of the Loan as set forth on Schedule 1.01A.
(b) The Borrower shall repay the principal amount of the Loan
(including all PIK Interest added thereto) on the Final Maturity Date together
with all such other amounts as may be necessary to pay in full, in cash, all
Obligations to the Lenders.
(c) The Loan may not be evidenced by promissory notes other
than a Note which is a Registered Note. Upon the registration of the Loan, any
promissory note (other than a Registered Note) evidencing the same shall be null
and void and shall be returned to the Borrower. The Borrower agrees, at the
request of the Agent, to execute and deliver to each Lender, a promissory note
in registered form (a "Registered Note") to evidence such Registered Loan and
registered as provided in Section 12.07. Once recorded in the Register, the Loan
evidenced by such Note may not be removed from the Register so long as it
remains outstanding and a Registered Note may not be exchanged for a promissory
note that is not a Registered Note.
(d) Upon the delivery by a Conversion Warrantholder to the
Borrower of a Note or a portion of a Note as payment of the Purchase Price (as
such term is defined in the Conversion Warrant) under the Conversion Warrant, in
addition to satisfying each of its obligations under the Conversion Warrant with
respect to the exercise thereof, the Borrower shall pay to such Conversion
Warrantholder all accrued and unpaid interest (including all accrued and unpaid
PIK interest thereon) and fees (if any) on the principal amount of the Note so
delivered as
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payment of such Purchase Price.
Section 2.03 Interest. (a) Rate. Pursuant to the Original Agreement,
the Loan has borne interest on the principal amount thereof from time to time
outstanding, from July 11, 2002, and, pursuant to this Agreement, shall continue
to bear interest on the principal amount thereof from time to time outstanding,
until such principal amount becomes due, at an interest rate per annum equal to
10%.
(b) Default Interest. To the extent permitted by law, upon the
occurrence and during the continuance of an Event of Default, the principal of,
and all accrued and unpaid interest on, the Loan and all fees, indemnities or
any other Obligations of the Loan Parties under this Agreement and the other
Loan Documents, shall bear interest, from the date such Event of Default
occurred until the date such Event of Default is cured or waived in writing in
accordance herewith, at a rate per annum equal at all times to the Post-Default
Rate.
(c) Interest Payment. Interest on the Loan shall be payable
quarterly in arrears, on the last day of January, April, July and October in
each year (commencing, as to this Agreement, on July 31, 2005, which payment
shall include unpaid interest accrued under the Original Agreement through the
Effective Date) and on the Final Maturity Date (whether upon demand, by
acceleration or otherwise), at the option of the Borrower, either (i) entirely
in cash, or (ii) in a combination of cash and PIK Interest (the amount of any
such PIK Interest shall be accrued and added to the outstanding principal amount
of the Loan quarterly in arrears and shall be payable at Final Maturity),
provided, however, that at least 50% of the interest payable at any time shall
be paid in cash. The Borrower shall give the Agent and each of the Lenders prior
telephonic notice (immediately confirmed in writing in substantially the form of
Exhibit C to the Original Agreement (a "Notice of Election")) not later than two
(2) Business Days prior to any date on which a payment of interest is required
pursuant to this Section 2.03(c), specifying the amount of interest to be paid
in cash and the amount to be paid in PIK Interest. Such Notice of Election shall
be irrevocable. Notwithstanding anything to the contrary contained herein,
interest at the Post-Default Rate shall be payable in cash on demand.
(d) General. All interest shall be computed on the basis of a
year of 360 days for the actual number of days, including the first day but
excluding the last day, elapsed.
Section 2.04 Prepayment of Loan.
(a) (i) Optional Prepayment. Prior to June 10, 2007, the
Borrower shall not have any right to prepay the Loan. After June 10, 2007, and
subject in all respects to the limitations contained in the Revolving Credit
Facility and the Intercreditor Agreement as in effect on the Effective Date, the
Borrower may, upon at least 30, but not more than 60 Business Days' written
notice to the Agent (such notice being irrevocable), stating the proposed date
and aggregate principal amount of the prepayment, and if such notice is given,
the Borrower shall, prepay the Loan, in whole or in part, together with accrued
interest to the date of such prepayment on the principal amount prepaid and any
amounts owing in connection therewith; provided, however, that each partial
prepayment shall be in an aggregate principal amount not less than $5,000,000 or
an integral multiple of $1,000,000 in excess thereof. Any portion of the
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Loan that is prepaid may not be reborrowed, in whole or in part.
(ii) Mandatory Prepayment. Immediately upon the
occurrence of a Permitted DSW Stock Sale pursuant to Section 6.02(c), the
Borrower shall prepay the outstanding principal amount of the Loan and all other
Obligations then outstanding hereunder in full in cash. Nothing contained in
this subsection (ii) shall permit the Parent to dispose of any DSW Common Stock
or shall permit any Loan Party or any of its Subsidiaries to make a Disposition
of any property other than in accordance with Section 6.02(c).
(b) Interest and Fees. Any prepayment made pursuant to this
Section 2.04 shall be accompanied by accrued interest on the principal amount
being prepaid to the date of prepayment, and if such prepayment would reduce the
amount of the outstanding Loan to zero, such prepayment shall be accompanied by
the payment of all fees accrued to such date pursuant to the terms of this
Agreement.
(c) Cumulative Prepayments. Except as otherwise expressly
provided in this Section 2.04, payments with respect to any subsection of this
Section 2.04 are in addition to payments made or required to be made under any
other provision of this Agreement.
Section 2.05 Taxes. (a) All payments made by any Loan Party
hereunder or under any other Loan Document shall be made without set-off,
counterclaim, deduction or other defense. All such payments shall be made free
and clear of and without deduction for any present or future income, franchise,
sales, use, excise, stamp or other taxes, levies, imposts, deductions, charges,
fees, withholdings, restrictions or conditions of any nature now or hereafter
imposed, levied, collected, withheld or assessed by any jurisdiction (whether
pursuant to Federal, state, local or foreign law) or by any political
subdivision or taxing authority thereof or therein, and all interest, penalties
or additional amounts, excluding taxes on the net income of any Lender or the
Agent imposed by the jurisdiction in which such Lender or such Agent is
organized or any political subdivision thereof or taxing authority thereof or
any jurisdiction in which such Person's principal office is located or any
political subdivision thereof or taxing authority thereof (such nonexcluded
taxes, levies, imposts, deductions, charges, fees, withholdings, restrictions,
conditions, interest, penalties and additional amounts being hereinafter
collectively referred to as "Taxes"). If any Loan Party shall be required to
deduct or to withhold any Taxes from or in respect of any amount payable
hereunder or under any other Loan Document:
(i) the amount so payable shall be increased so that
after making all required deductions and withholdings (including Taxes on
amounts payable pursuant to this sentence) the Lenders or the Agent, as the case
may be, receive an amount equal to the sum they would have received had no such
deduction or withholding been made;
(ii) such Loan Party shall make such deduction or
withholding;
(iii) such Loan Party shall pay the full amount deducted
or withheld to the relevant taxation authority in accordance with Applicable
Law; and
(iv) whenever any Taxes are payable by any Loan Party,
as promptly as possible thereafter, such Loan Party shall send the Lenders and
the Agent an official receipt (or, if an official receipt is not available, such
other documentation as shall be satisfactory
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to the Lenders or the Agent, as the case may be) evidencing payment of the
amount or amounts so deducted or withheld. In addition, each Loan Party agrees
to pay any present or future taxes, charges or similar levies which arise from
any payment made hereunder or from the execution, delivery, performance,
recordation or filing of, or otherwise with respect to, this Agreement or any
other Loan Document other than the foregoing excluded taxes (hereinafter
referred to as "Other Taxes").
(b) The Loan Parties hereby jointly and severally agree to
indemnify and hold the Lenders and the Agent harmless from and against Taxes or
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 2.05) paid by any Lender
or the Agent and any liability (including penalties, interest and expenses for
nonpayment, late payment or otherwise) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Such indemnification shall be paid within 10 days from the date on
which any the Agent, on behalf of the Lenders, makes written demand therefor,
which demand shall identify in reasonable detail the nature and amount of such
Taxes or Other Taxes.
(c) Each Lender that is organized in a jurisdiction outside
the United States hereby agrees that it shall, no later than the Effective Date
or, in the case of a Lender which becomes a party hereto pursuant to Section
12.07 hereof after the Effective Date, the date upon which such Lender becomes a
party hereto (and from time to time thereafter upon the reasonable request of
the Borrower or the Agent, but only if such Lender is legally able to do so),
deliver to the Borrower and the Agent either (i) two accurate, complete and
signed copies of either (x) U.S. Internal Revenue Service Form W-8ECI or
successor form, or (y) U.S. Internal Revenue Service Form W-8BEN or successor
form, in each case, indicating that such Lender is on the date of delivery
thereof entitled to receive payments of interest hereunder free from, or subject
to a reduced rate of, withholding of United States Federal income tax or (ii) in
the case of such a Lender that is entitled to claim exemption from withholding
of United States Federal income tax under Section 871(h) or Section 881(c) of
the Internal Revenue Code, (x) a certificate to the effect that such Lender is
(A) not a "bank" within the meaning of Section 881(c)(3)(A) of the Internal
Revenue Code, (B) not a "10 percent shareholder" of the Borrower within the
meaning of Section 881(c)(3)(B) of the Internal Revenue Code and (C) not a
controller foreign corporation receiving interest from a related person within
the meaning of Section 881(c)(3)(C) of the Internal Revenue Code and (y) two
accurate, complete and signed copies of U.S. Internal Revenue Service Form
W-8BEN or successor form.
(d) If any Loan Party fails to perform any of its obligations
under this Section 2.05, the Loan Parties shall indemnify the Lenders and the
Agent for any taxes, interest or penalties that may become payable as a result
of any such failure. The obligations of the Loan Parties under this Section 2.05
shall survive the termination of this Agreement and the payment of the Loan and
all other amounts payable hereunder.
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ARTICLE III
FEES, PAYMENTS AND OTHER COMPENSATION
Section 3.01 Audit and Collateral Monitoring Fees. The Key Loan
Parties acknowledge that representatives of the Agent may visit any or all of
the Loan Parties and/or conduct audits, inspections and valuations of any or all
of the Loan Parties in accordance with the terms and conditions set forth in
Sections 7.02 and 7.09. The Borrower agrees to pay the costs and expenses of
such visits, audits, inspections and valuations, whether conducted by the Agent
itself or by third-party representatives of the Agent.
Section 3.02 Payments; Computations and Statements. (a) The Borrower
will make each payment under this Agreement not later than 12:00 noon (New York
City time) on the day when due, in lawful money of the United States of America
and in immediately available funds, in the manner set forth in clause (b) below.
All payments received after 12:00 noon (New York City time) on any Business Day
will be credited on the next succeeding Business Day. All payments shall be made
by the Borrower without set-off, counterclaim, deduction or other defense to the
Agent and the Lenders. Whenever any payment to be made under any such Loan
Document shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be. All computations of fees shall be made by the Agent on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such fees are
payable. Each determination by the Agent of an interest payment amount or fees
hereunder shall be rebuttably presumed to be accurate, in the absence of
manifest error.
(b) (i) Other than during the continuance of an Event of
Default, the Borrower shall make each payment relating to the payment of
principal and interest in respect of the Loan directly to the Lender's Account
of each Lender to whom payment is required to be made, in like funds and in
accordance with each Lender's Pro Rata Share of such payment. The Borrower shall
make all other payments under this Agreement to the Agent's Account for
distribution to the Lenders in accordance with clause (iii) below.
(ii) Upon the occurrence and during the continuance of
an Event of Default, the Borrower shall make all payments under this Agreement
to the Agent's Account for distribution to the Lenders in accordance with clause
(iii) below.
(iii) Upon the receipt of any payment under this
Agreement, the Agent will promptly (and in any case, not later than five (5)
Business Days) thereafter, cause to be distributed to the Lenders to whom
payment is required to be made, (A) in the case of payments relating to
principal and interest, in like funds in accordance with their Pro Rata Shares,
and (B) in the case of the payment of any other amount payable to any Lender, in
like funds; provided, however, that this clause shall not apply to any payment
made under this Agreement that is solely for the account of the Agent.
(c) The Agent shall provide the Borrower, promptly after the
end of each calendar month, a summary statement (in the form from time to time
used by the Agent) of
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the amounts and dates of all payments on account of the Loan to the Borrower
during such month, the amount of interest accrued on the Loan to the Borrower
during such month, the amount of PIK Interest added to the principal of the Loan
during such month, and the amount and nature of any other fees, commissions,
expenses and other Obligations incurred during such month. All entries on any
such statement shall be presumed to be correct and, thirty (30) days after the
same is sent, shall be rebuttably presumed to be accurate, absent manifest
error. For purposes of such statement, the Agent shall have the right to
conclude, absent evidence to the contrary (i) that no payments have been made by
the Borrower and no requests for payments have been made to the Borrower by any
Lender other than in accordance with this Agreement, and (ii) all payments of
principal and interest required to be made directly to any Lender's Account have
been made pursuant to the terms of this Agreement.
Section 3.03 Sharing of Payments, Etc. Except as provided in
Sections 2.02 and 3.02(b) hereof, if any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of any Obligation in excess of its ratable share of
payments on account of similar obligations obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
such similar obligations held by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender of any interest or other amount paid by the purchasing Lender
in respect of the total amount so recovered). The Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this
Section 3.03 may, to the fullest extent permitted by law, exercise all of its
rights (including the Lender's right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
Section 3.04 Apportionment of Payments. Subject to Section 2.02
hereof and to any written agreement among the Agent and/or the Lenders:
(a) All payments of principal, interest and PIK Interest in
respect of the outstanding portion of the Loan, all payments of fees and all
other payments in respect of any other Obligations, shall be allocated by the
Agent among such of the Lenders as are entitled thereto, in proportion to their
respective Pro Rata Shares or otherwise as provided herein or, in respect of
payments not made on account of the Loan, as designated by the Person making
payment when the payment is made.
(b) After the occurrence and during the continuance of an
Event of Default, the Agent may apply all payments in respect of any Obligations
and all proceeds of the Collateral, subject to the provisions of this Agreement,
(i) first, ratably to pay the Obligations in respect of any fees, expense
reimbursements, indemnities and other amounts then due to the Agent until paid
in full; (ii) second, ratably to pay the Obligations in respect of any fees and
indemnities then due to the Lenders until paid in full; (iii) third, ratably to
pay interest due in respect of the Loan until paid in full; (iv) fourth, ratably
to pay PIK Interest due in respect of the
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Loan until paid in full; (v) fifth, ratably to pay the principal of the Loan
until paid in full; and (viii) sixth, to the ratable payment of all other
Obligations then due and payable.
(c) In each instance, so long as no Event of Default has
occurred and is continuing, Section 3.04(b) shall not be deemed to apply to any
payment by the Borrower specified by the Borrower to the Agent to be for the
prepayment of all or part of the principal of the Loan in accordance with the
terms and conditions of Section 2.04.
(d) For purposes of Section 3.04(b), "paid in full" with
respect to interest shall include interest accrued after the commencement of any
Insolvency Proceeding irrespective of whether a claim for such interest is
allowable in such Insolvency Proceeding.
(e) In the event of a direct conflict between the priority
provisions of this Section 3.04 and other provisions contained in any other Loan
Document, it is the intention of the parties hereto that both such priority
provisions in such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of any
actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms
and provisions of this Section 3.04 shall control and govern.
Section 3.05 Increased Costs and Reduced Return. (a) If any Lender
or the Agent shall have determined that the adoption or implementation of, or
any change in, any law, rule, treaty or regulation, or any policy, guideline or
directive of, or any change in, the interpretation or administration thereof by,
any court, central bank or other administrative or Governmental Authority, or
compliance by any Lender or the Agent or any Person controlling any such Lender
or the Agent with any directive of, or guideline from, any central bank or other
Governmental Authority or the introduction of, or change in, any accounting
principles applicable to any Lender or the Agent or any Person controlling any
such Lender or the Agent (in each case, whether or not having the force of law),
shall (i) subject any Lender or the Agent, or any Person controlling any such
Lender or the Agent to any tax, duty or other charge with respect to this
Agreement or any Loan made by such Lender or the Agent, or change the basis of
taxation of payments to any Lender or the Agent or any Person controlling any
such Lender or the Agent of any amounts payable hereunder (except for taxes on
the overall net income of any Lender or the Agent or any Person controlling any
such Lender or the Agent), (ii) impose, modify or deem applicable any reserve,
special deposit or similar requirement against any Loan, or against assets of or
held by, or deposits with or for the account of, or credit extended by, any
Lender or the Agent or any Person controlling any such Lender or the Agent or
(iii) impose on any Lender or the Agent or any Person controlling any such
Lender or the Agent or any other condition regarding this Agreement or any Loan,
and the result of any event referred to in clauses (i), (ii) or (iii) above
shall be to increase the cost to any Lender or the Agent of making any Loan, or
agreeing to make any Loan, or to reduce any amount received or receivable by any
Lender or the Agent hereunder, then, within ten (10) days after demand and
receipt of a detailed calculation and statement of cause by the Agent, on behalf
of the affected Lenders, the Borrower shall pay to the Agent, for the benefit of
the affected Lenders, such additional amounts as will compensate such Lenders
for such increased costs or reductions in amount.
(b) If any Lender or the Agent shall have determined that any
Capital Guideline or the adoption or implementation of, or any change in, any
Capital Guideline by the
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Governmental Authority charged with the interpretation or administration
thereof, or compliance by any Lender or the Agent or any Person controlling such
Lender or the Agent with any Capital Guideline or with any request or directive
of any such Governmental Authority with respect to any Capital Guideline, or the
implementation of, or any change in, any applicable accounting principles (in
each case, whether or not having the force of law), either (i) affects or would
affect the amount of capital required or expected to be maintained by any Lender
or the Agent or any Person controlling such Lender or the Agent, and any Lender
or the Agent determines that the amount of such capital is increased as a direct
or indirect consequence of any Loan made or maintained, or any guaranty or
participation with respect thereto, any Lender's or the Agent's or any such
other controlling Person's other obligations hereunder; or (ii) has or would
have the effect of reducing the rate of return on any Lender's or the Agent's
any such other controlling Person's capital to a level below that which such
Lender or the Agent or such controlling Person could have achieved but for such
circumstances as a consequence of any Loan made or maintained, or any guaranty
or participation with respect thereto or any agreement to make Loan, or such
Lender's or the Agent's or such other controlling Person's other obligations
hereunder (in each case, taking into consideration, such Lender's, Agent's or
other controlling Person's policies with respect to capital adequacy), then,
within ten (10) days after demand and receipt of a detailed calculation and
statement of cause by the Agent, on behalf of the affected Lenders, the Borrower
shall pay to the Agent, for the benefit of such affected Lenders, from time to
time such additional amounts as will compensate such Lenders for such cost of
maintaining such increased capital or such reduction in the rate of return on
such Lender's or the Agent's or such other controlling Person's capital.
(c) All amounts payable under this Section 3.05 shall bear
interest from the date that is ten (10) days after the date of demand by any
Lender or the Agent until payment in full to such Lender or the Agent at the
Reference Rate. A certificate of the Agent, on behalf of the affected Lenders,
claiming compensation under this Section 3.05, specifying the event herein above
described and the nature of such event shall be submitted by the Agent, on
behalf of the affected Lenders, to the Borrower, setting forth the additional
amount due and an explanation of the calculation thereof, and the Agent's
reasons for invoking the provisions of this Section 3.05, and shall be
rebuttably presumed to be correct, absent manifest error.
(d) If any Lender incurs increased costs and requests
compensation under this Section 3.05, then the Borrower may (i) request such
Lender use reasonable efforts to designate a different lending office for
booking its loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches, or Affiliates, if in the judgment of such
Lender, such designation or assignment (A) would eliminate or reduce amounts
payable pursuant to Section 3.05 hereof, and (B) would not subject such Lender
to any unreimbursed cost or expense, and would not otherwise be disadvantageous
to such Lender. The Borrower shall pay all reasonable costs and expenses
incurred by such Lender in connection with any such designation of assignment;
and (ii) at its sole expense and effort, upon notice to such Lender and the
Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in Section 12.07), all
its interests, rights and obligations under this Agreement to an assignee that
shall assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment), provided that (A) if such assignee is not an existing
Lender, the Borrower shall have received the prior written consent of the Agent,
which consent shall not unreasonably be withheld, (B) such Lender shall have
received payment of an
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amount equal to the outstanding principal of its Pro Rata Share of the Loan,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts,
which shall be paid to the Agent for distribution to such Lender) and (C) such
assignment will result in a reduction in such compensation, payments or costs. A
Lender shall not be required to make any such assignment and delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrower to require such assignment and delegation
cease to apply.
ARTICLE IV
CONDITIONS TO EFFECTIVENESS; CONSENT TO IPO
Section 4.01 Conditions Precedent to Effectiveness. This Agreement
shall become effective as of the Business Day (the "Effective Date") when each
of the following conditions precedent shall have been satisfied (or waived) in a
manner satisfactory to the Agent:
(a) Payment of Fees, Etc. The Borrower shall have paid to the
Agent and the Lenders on or before the date of this Agreement, in immediately
available funds, all fees, costs, expenses and taxes (including, without
limitation, fees, costs, expenses and taxes incurred in connection with the IPO)
then payable pursuant to the Original Agreement and pursuant to this Agreement.
(b) Representations and Warranties; No Event of Default. The
following statements shall be true and correct: (i) the representations and
warranties contained in Article V and in each other Loan Document, certificate
or other writing delivered to the Agent or any Lender pursuant hereto or thereto
on or prior to the Effective Date are true and correct on and as of the
Effective Date as though made on and as of such date; and (ii) no Default or
Event of Default shall have occurred and be continuing on the Effective Date or
would result from this Agreement or the other Loan Documents becoming effective
in accordance with its or their respective terms.
(c) Legality. Amending and restating this Agreement and
maintaining of the Loan shall not contravene any law, rule or regulation
applicable to the Agent or any Lender.
(d) Delivery of Documents. The Agent shall have received on or
before the Effective Date, the following, each in form and substance reasonably
satisfactory to the Agent and the Lenders, and, unless indicated otherwise,
dated the Effective Date, and all conditions precedent to the effectiveness of
such documents (where applicable) shall have been satisfied or waived:
(i) the Warrants, issued in favor of each Warrantholder
and duly executed by the Parent (which shall be exchanged for the existing
Warrants held by each such Warrantholder);
(ii) the Conversion Warrants, issued in favor of each
Conversion Warrantholder and duly executed by the Parent;
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(iii) the Registration Rights Agreement, duly executed
by the Parent, the Warrantholders and the Conversion Warrantholders;
(iv) the DSW Registration Rights Agreement, duly
executed by DSW, the Warrantholders and the Conversion Warrantholders;
(v) to the extent not already held by the Agent, the
original stock certificates or other certificated securities or instruments
representing all of the Capital Stock of such Loan Parties' Subsidiaries, the
Capital Stock of DSW held by the Parent following the IPO and all intercompany
promissory notes of such Loan Parties (including the RVI Note and the DSW Note),
accompanied by undated stock powers executed in blank and other proper
instruments of transfer;
(vi) to the extent required, amendments to Control
Agreements, duly executed by each of the parties thereto;
(vii) Intercreditor Agreement, duly executed by the
Agent and the Revolving Credit Agent, and acknowledged by the Loan Parties;
(viii) opinions of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP and
the General Counsel of the Loan Parties and DSW, dated as of the Effective Date,
substantially in the form of Exhibit E-1 and Exhibit E-2 respectively;
(ix) copies of the Revolving Credit Facility Documents,
the RVI Note and the RVI Pledge, in each case, duly executed by each of the
parties thereto, reasonably satisfactory in form and substance to the Agent, and
certified as true and correct copies thereof by an Authorized Officer of the
Parent;
(x) a copy of the resolutions of each Loan Party and
DSW, certified by an Authorized Officer thereof, authorizing (A) the
transactions contemplated by the Loan Documents to which such Person is or will
be a party, (B) the execution, delivery and performance by such Person of each
Loan Document to which such Person is or will be a party and the execution and
delivery of the other documents to be delivered by such Person in connection
herewith and therewith, and (C) the IPO and the transactions contemplated
thereby;
(xi) a certificate of the appropriate official(s) of the
state of organization and each state of foreign qualification of each Loan
Party, DSW and DSWSW, certifying as to the subsistence in good standing of, and
the payment of taxes by, such Person in such states;
(xii) a true and complete copy of the charter,
certificate of formation, certificate of limited partnership or other publicly
filed organizational document of each Loan Party, DSW and DSWSW, certified as of
a recent date not more than thirty (30) days prior to the Effective Date (except
as otherwise agreed by the Agent) by an appropriate official of the state of
organization of such Person, which shall set forth the same complete name of
such Person as is set forth herein and the organizational number, if an
organizational number is issued in such jurisdiction, and Federal employee
identification number as of the Effective Date of such Person;
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(xiii) a copy of the by-laws, limited liability company
agreement, operating agreement, agreement of limited partnership or other
organizational document of each Loan Party, DSW and DSWSW, together with all
amendments thereto, certified as of the Effective Date by an Authorized Officer
of such Person;
(xiv) a certificate of an Authorized Officer of each
Loan Party and DSW, certifying the names and true signatures of the
representatives of such Person authorized to sign each Loan Document to which
such Person is or will be a party and the other documents to be executed and
delivered by such Person in connection herewith and therewith, together with
evidence of the incumbency of such Authorized Officers;
(xv) a certificate of an Authorized Officer of the
Parent certifying that each of the Material Contracts remains in full force and
effect in all material respects and that none of the Loan Parties has breached
or defaulted on, or is reasonably likely to breach or default on, any of its
obligations under such agreements in any material respect, as a result of the
IPO or otherwise;
(xvi) certificate of the chief financial officer of each
Loan Party, certifying as to the Solvency of the Loan Parties taken as a whole,
both before and after giving effect to the IPO and the transactions contemplated
hereby and thereby, which certificate shall be satisfactory in form and
substance to the Agent;
(xvii) a certificate of an Authorized Officer of each
Loan Party, certifying as to the matters set forth in subsection (b) of this
Section 4.01 and the satisfaction of each of the conditions set forth in Section
4.02 hereof;
(xviii) evidence of the insurance coverage required by
Section 6.01 and the terms of each Security Agreement and each Mortgage and such
other insurance coverage with respect to the business and operations of the Loan
Parties as the Agent may reasonably request, in each case, where requested by
the Agent, with such endorsements as to the named insureds or loss payees
thereunder as the Agent may reasonably request and providing that such policy
may be terminated or canceled (by the insurer or the insured thereunder) only
upon thirty (30) days' prior written notice to the Agent and each such named
insured or loss payee, together with evidence of the payment of all premiums due
in respect thereof for such period as the Agent may request;
(xix) release documents, duly executed by the Revolving
Credit Agents, accompanied by appropriate UCC financing statement amendments, in
form and substance satisfactory to the Agent, evidencing the release of the Lien
granted in favor of the Revolving Credit Agents with respect to the Capital
Stock of DSW;
(xx) a copy of the Business Plan, certified as true and
correct by an Authorized Officer of the Borrower; and
(xxi) such other agreements, instruments, approvals,
opinions and other documents, each satisfactory to the Agent in form and
substance, as the Agent deems, in its reasonable business judgment, to be
necessary hereunder.
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(e) Material Adverse Effect. The Agent shall have determined,
in its sole judgment (acting reasonably), that no event or development shall
have occurred since January 29, 2005 which could reasonably be expected to have
a Material Adverse Effect.
(f) Approvals. All consents, authorizations and approvals of,
and filings and registrations with, and all other actions in respect of, any
Governmental Authority or other Person (i) required in connection with amending
this Agreement or the maintaining of the Loan, or (ii) materially required in
connection with the conduct of the Loan Parties' business, shall have been
obtained and shall be in full force and effect.
(g) Warrant Stock. DSW shall have reserved, out of its
authorized and unissued Class A Shares, solely for the purpose of permitting the
Parent to comply with its obligations under the Warrants and the Conversion
Warrants, _____ Class A Shares issuable upon the exercise of the Warrants or the
Conversion Warrants to provide for the issuance of the Warrant Stock in
accordance with the terms of the Warrants and the Conversion Warrants. The
Common Stock and, following, the IPO, the Class A Common Shares shall have been
listed on the New York Stock Exchange.
(h) Senior Indebtedness. The Obligations under this Agreement
and the other Loan Documents rank at least pari passu in right of payment to all
existing and future senior Indebtedness and senior to all other Indebtedness of
each Loan Party.
(i) Consummation of IPO. The IPO shall have been consummated
in accordance with each of the conditions set forth in Section 4.02 below, as
determined by the Agent in its sole discretion, exercised reasonably.
Section 4.02 Consent to IPO. The Agent and the Lenders hereby
consent to the consummation of the IPO; provided that each of the following
conditions has been satisfied or waived:
(a) The IPO shall constitute a Qualifying IPO;
(b) On the IPO Effective Date, the Net Cash Proceeds of the
IPO shall be immediately applied (i) by DSW to repay to Parent in full the
obligations outstanding under the DSW Note, (ii) by Parent to repay to the
Borrower a portion of the obligations outstanding under the RVI Note, and (iii)
by the Borrower to repay in full (x) all Obligations (as defined in the Term
Loan Agreement) outstanding under the Term Loan Agreement and (y) $25,000,000 of
the principal amount of the Old Notes under the Original Agreement, in each
case, in immediately available funds;
(c) Following prepayment by the Borrower in full of all of the
Obligations (as defined in the Term Loan Agreement) outstanding under the Term
Loan Agreement, the Term Loan Agreement shall be terminated (other than with
respect to the provisions thereof that expressly survive the termination
thereof);
(d) Each of the conditions precedent to the effectiveness of
(i) this Agreement set forth in Section 4.01 hereof shall be satisfied or
waived, as determined by the Agent in its sole discretion, exercised reasonably,
and (ii) the amendment of the Revolving Loan
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Documents shall be satisfied to the satisfaction of the Agent and the agents and
the lenders thereunder;
(e) The IPO shall be consummated in accordance with all
requirements of Applicable Law and on terms and conditions reasonably
satisfactory to Agent, (it being acknowledged that the terms of the IPO set
forth in the Form S-1 filed with the SEC on June 15, 2005 (without giving effect
to any subsequent amendments thereto), are satisfactory to the Agent) and all
consents, authorizations and approvals of, and filings and registrations with,
and all other actions in respect of, any Governmental Authority or other Person
required in connection with the IPO shall have been obtained and shall be in
full force and effect; and
(f) The Agent shall have received, immediately prior to the
consummation of the IPO, a certificate of an Authorized Officer of each Loan
Party, in form and substance satisfactory to the Agent, certifying that each of
the conditions set forth in this Section 4.02 has been, or concurrently with the
consummation of the IPO will be, satisfied.
Section 4.03 Release of DSW and DSWSW. Following the satisfaction
(or waiver) of each of the conditions set forth in Sections 4.01 and 4.02
hereof, DSW and DSWSW shall be released and discharged from any liability under
the Original Agreement and each of the other Loan Documents to which it is a
party pursuant to the Original Agreement, other than liabilities under such Loan
Documents that expressly survive the termination thereof and all liens and
security interests granted by DSW and DSWSW to secure the Obligations shall be
released and discharged and the Parent, DSW and DSWSW are hereby authorized, in
the Agent's name, to file UCC-3 termination statements and such other documents,
instruments and releases with respect to any mortgages, liens, encumbrances or
other security interests on any property of DSW and DSWSW to evidence the
release provided by this Section 4.03. Upon satisfaction of each of the
conditions set forth in Sections 4.01 and 4.02 hereof, the Agent (at the expense
of the Parent) hereby agrees (A) to execute and deliver to the Parent, DSW and
DSWSW such instruments and documents in form and substance reasonably
satisfactory to the Parent and the Agent, which are reasonably requested by the
Parent, for the purpose of effecting the intent of this Section 4.03 including,
without limitation, to release of record any and all liens and security
interests and collateral and to terminate with respect to DSW and DSWSW any and
all control agreements, lockbox agreements, landlord's or similar waivers and
like documents (B) to return to DSW and DSWSW all certificates of and stock
powers with respect to DSWSW, pledged promissory notes of DSW and DSWSW and
other physical collateral provided by DSW and DSWSW to, and held by, the Agent
pursuant to the Loan Documents, and (C) to return to the Parent any certificate
representing the Capital Stock of DSW permitted to be sold pursuant to the IPO
(together with any applicable stock power). This release does not and shall not
affect (a) any of the obligations or liabilities of the other Loan Parties under
this Agreement, the Original Agreement or any other Loan Document, or (b) any of
the obligations of DSW under any of the Loan Documents to which it is a party
under this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01 Representations and Warranties. Each Loan Party hereby
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represents and warrants to the Agent and the Lenders as follows:
(a) Organization; Good Standing, Etc. Each of the Loan
Parties, DSW and DSWSW (i) is a corporation, limited liability company or
limited partnership duly organized, validly existing and in good standing under
the laws of the state or jurisdiction of its organization; (ii) has all
requisite power and authority to conduct its business as now conducted and as
presently contemplated and, to execute and deliver each Loan Document to which
it is a party, and to consummate the transactions contemplated thereby; and
(iii) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary,
except where the failure to so qualify is not reasonably likely to have a
Material Adverse Effect.
(b) Authorization, Etc. The execution, delivery and
performance by each Loan Party and DSW of each Loan Document to which it is or
will be a party (i) have been duly authorized by all necessary action; (ii) do
not and will not contravene in any material respect its charter or by-laws, its
limited liability company or operating agreement or its certificate of
partnership or partnership agreement, as applicable, or any Applicable Law or
any contractual restriction binding on or otherwise affecting it or any of its
properties; (iii) do not and will not result in or require the creation of any
Lien upon or with respect to any of its properties; and (iv) do not and will not
result in any default, noncompliance, suspension, revocation, impairment,
forfeiture or nonrenewal of any material permit, license, authorization or
approval applicable to its operations or any of its properties.
(c) Governmental Approvals. No authorization or approval or
other action by, and no notice to or filing with, any Governmental Authority is
required in connection with (i) the due execution, delivery and performance by
any Loan Party or DSW of any Loan Document to which it is or will be a party, or
(ii) in connection with the IPO.
(d) Enforceability of Loan Documents. This Agreement is, and
each other Loan Document to which any Loan Party or DSW is or will be a party,
when delivered hereunder, will be, a legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
(e) Capitalization; Subsidiaries. On the Effective Date, after
giving effect to the transactions contemplated hereby to occur on the Effective
Date, the authorized Capital Stock of the Parent and DSW and the issued and
outstanding Capital Stock of the Parent and DSW are as set forth on Schedule
5.01(e)(i). All of the issued and outstanding shares of Capital Stock of the
Parent and DSW have been validly issued and are fully paid and nonassessable,
and the holders thereof are not entitled to any preemptive, first refusal or
other similar rights. With respect to the Parent, there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Warrant Stock, except for anti-dilution
provisions which have been validly waived on or prior to the date hereof in
respect of the issuance of the Warrant Stock. The Warrant Stock has been duly
authorized and reserved (or in the case of the DSW Common Stock, has been
issued) for issuance upon the
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exercise of the Warrants and the Conversion Warrants, and upon such exercise,
will be validly issued, fully paid and non-assessable, free from all taxes,
liens and charges with respect to the issue thereof, and will not be subject to
preemptive rights or other similar rights of stockholders of the Parent, DSW or
any other Person.
(i) Except as described on Schedule 5.01(e)(i), as of
the Effective Date, there are no outstanding debt or equity securities of the
Parent, DSW or any of their respective Subsidiaries and no outstanding
obligations of the Parent, DSW or any of their respective Subsidiaries
convertible into or exchangeable for, or warrants, options or other rights for
the purchase or acquisition from the Parent, DSW or any of their respective
Subsidiaries, or other obligations of the Parent, DSW or any of their respective
Subsidiaries to issue, directly or indirectly, any shares of Capital Stock of
the Parent, DSW or any of their respective Subsidiaries.
(ii) Schedule 5.01(e)(ii) is a complete and correct
description of the name, jurisdiction of incorporation and ownership of the
outstanding Capital Stock of each of the Subsidiaries of the Parent and DSW in
existence on the Effective Date. All of the issued and outstanding shares of
Capital Stock of the Subsidiaries of the Parent have been validly issued and are
fully paid and nonassessable, and the holders thereof are not entitled to any
preemptive, first refusal or other similar rights. Except as indicated on such
Schedule, all such Capital Stock is owned by the Parent, DSW or one or more of
their respective wholly-owned Subsidiaries, free and clear of all Liens other
than in the case of the DSW Common Stock held by the Parent, Liens permitted
pursuant to clause (xvi) of the definition of Permitted Liens, and in the case
of the Capital Stock of Subsidiaries of DSW, such Liens as may exist from time
to time.
(f) Litigation; Commercial Tort Claims. Except as set forth in
Schedule 5.01(f), (i) there is no pending or, to the best knowledge of any Loan
Party, threatened action, suit or proceeding affecting any Loan Party, DSW or
DSWSW before any court or other Governmental Authority or any arbitrator that
(A) if adversely determined, could have a Material Adverse Effect, (B) relates
to this Agreement or any other Loan Document or any transaction contemplated
hereby or thereby and (ii) as of the Effective Date, none of the Loan Parties
holds any commercial tort claims in respect of which a claim has been filed in a
court of law or a written notice by an attorney has been given to a potential
defendant, or (C) relates to the IPO or any transaction contemplated thereby.
(g) Financial Condition.
(i) All financial statements furnished to the Agent and
to each Lender by the Loan Parties on a consolidated basis have been prepared in
accordance with GAAP consistently applied (provided, however, that unaudited
financial statements are subject to normal year-end adjustments and to the
absence of footnotes). All financial statements furnished to the Agent and to
each Lender by the Loan Parties present fairly the condition of the Loan Parties
at the date(s) thereof and the results of operations and cash flows (to the
extent cash flows are required to be prepared) for the period(s) covered
(provided, however, that unaudited financial statements are subject to normal
year end adjustments and to the absence of footnotes). There has been no change
in the consolidated financial condition, results of operations, or cash flows of
the Loan Parties since the date(s) of such financial statements, other than
changes in the
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ordinary course of business, which changes have not been materially adverse,
either singularly or in the aggregate.
(ii) No Loan Party has any material Contingent
Obligations or material obligation under any Lease or Capitalized Lease which is
not noted in the Loan Parties' Consolidated financial statements furnished to
the Agent and to each Lender prior to the execution of this Agreement.
(iii) The prospectus and the registration statement
filed with the SEC in connection with the IPO (A) conform in all material
respects to the requirements of the Securities Act and (B) do not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(h) Compliance with Law, Etc. None of DSW, DSWSW or any Loan
Party is, or as a result of the consummation of the transactions contemplated by
the IPO, will be, in violation or has received notice of any violation of its
organizational documents, any law, rule, regulation, judgment or order of any
Governmental Authority applicable to it or any of its property or assets, or any
material term of any agreement or instrument (including, without limitation, any
Material Contract) binding on or otherwise affecting it or any of its
properties, except where such violation is not reasonably likely to have a
Material Adverse Effect and no default or event of default has occurred and is
continuing.
(i) ERISA. Except to the extent that such action is not
reasonably likely to have a Material Adverse Effect, none of DSW, DSWSW, any
Loan Party or any of their respective ERISA Affiliates has within the past three
(3) years, or as a result of the consummation of the transactions contemplated
by the IPO, will have:
(i) violated or failed to be in full compliance with any
Loan Party's Employee Benefit Plan;
(ii) failed timely to file all reports and filings
required by ERISA to be filed by any Loan Party;
(iii) engaged in any nonexempt "prohibited transactions"
or "reportable events" (respectively as described in ERISA);
(iv) engaged in, or committed, any act such that a tax
or penalty reasonably could be imposed upon any Loan Party on account thereof
pursuant to ERISA;
(v) incurred any material accumulated funding deficiency
within the meaning of ERISA;
(vi) terminated any Employee Benefit Plan such that a
Lien could be asserted against any assets of any Loan Party on account thereof
pursuant to ERISA; or
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(vii) failed to make any required contribution or
payment to, or made a complete or partial withdrawal from, any Employee Benefit
Plan which is a multiemployer plan within the meaning of Section 4001(a) of
ERISA.
(j) Taxes, Etc.
(i) To the best knowledge of the Loan Parties, all
Federal and all material state and local tax returns and other reports required
by Applicable Law to be filed by any Loan Party have been filed, or extensions
have been obtained, and all taxes, assessments and other governmental charges
imposed upon any Loan Party or any property of any Loan Party and which have
become due and payable on or prior to the date hereof have been paid, except to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof on the Financial Statements in accordance with GAAP.
(ii) Except as described on Schedule 5.01(j):
(A) currently no Loan Party has received from any
taxing authority any request to perform any examination of or with respect to
any Loan Party nor any other written or verbal notice in any way relating to any
claimed failure by any Loan Party to comply with all Applicable Law concerning
payment of any taxes or other amounts in the nature of taxes in excess of
$500,000 in any one instance;
(B) no agreement exists which waives or extends
any statute of limitations applicable to the right of any taxing authority to
assert a deficiency or make any other claim for or in respect to Federal income
taxes; and
(C) no issue has been raised in any tax
examination of any Loan Party which reasonably could be expected to result in
the assertion of a deficiency for any fiscal year open for examination,
assessment, or claim by any taxing authority in excess of $500,000 in the
aggregate for all Loan Parties.
(iii) No material Federal, state or local tax liability
will be imposed upon any Loan Party as a result of the IPO, or the transactions
contemplated thereby.
(k) Regulations T, U and X. No Loan Party is or will be
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation T, U or X), and no
proceeds of the Loan have been or will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock.
(l) Nature of Business. No Loan Party is engaged in any
business other than a Permitted Business.
(m) Adverse Agreements, Etc. To the best of such Loan Party's
knowledge, no Loan Party is a party to any agreement or instrument, or subject
to any charter, limited liability company agreement, partnership agreement or
other corporate, partnership or
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limited liability company restriction or any judgment, order, regulation, ruling
or other requirement of a court or other Governmental Authority, which is
reasonably likely to have a Material Adverse Effect.
(n) Permits, Etc. Each Loan Party has, and is in compliance
with, all permits, licenses, authorizations, approvals, entitlements and
accreditations required for such Person lawfully to own, lease, manage or
operate, or to acquire, each business currently owned, leased, managed or
operated, or to be acquired, by such Person except where failure to so have or
to so comply is not reasonably likely to have a Material Adverse Effect. No
condition exists or event has occurred or as a result of the IPO, will occur,
which, in itself or with the giving of notice or lapse of time or both, would
result in the suspension, revocation, impairment, forfeiture or non-renewal of
any such permit, license, authorization, approval, entitlement or accreditation,
and there is no claim that any of the foregoing are not in full force and
effect.
(o) Properties. (i) Each Loan Party has, and following the
IPO, will have, good and marketable title to, valid leasehold interests in, or
valid licenses to use, all property and assets material to its business, free
and clear of all Liens, except Permitted Liens. All such properties and assets
are in good working order and condition, ordinary wear and tear excepted. No
Loan Party has possession of any property on consignment to that Loan Party from
a third party that is not a Loan Party, except as listed on Schedule 5.01(o)(i),
and those as to which the Loan Parties notify the Agent in accordance with the
provisions of Section 7.03.
(ii) Schedule 5.01(o)(ii) sets forth a complete and
accurate list, as of the Effective Date, of the location, by state and street
address, of all real property owned or leased by each Loan Party and the name
and address of the landlord with respect thereto. As of the Effective Date, each
Loan Party has valid leasehold interests in the Leases described on Schedule
5.01(o)(ii) to which it is a party. Except as otherwise indicated on Schedule
5.01(o)(ii), there are no Leases for which any Affiliate of any Loan Party is
the lessor. Each such Lease is and following the IPO will be, valid and
enforceable in accordance with its terms in all material respects and is in full
force and effect. No consent or approval of any landlord or other third party in
connection with any material Lease is necessary for any Loan Party to enter into
and execute the Loan Documents to which it is a party, except as set forth on
Schedule 5.01(o)(ii) or to consummate the transactions contemplated by the IPO.
No Loan Party and to the best knowledge of any Loan Party, no other party to any
material Lease is or will be, as a result of the transactions contemplated by
the IPO, in material default of its obligations thereunder, and no Loan Party
(or any other party to any such Lease) has at any time delivered or received any
notice of default which remains uncured under any material Lease and, as of the
Effective Date, no event has occurred or will occur as a result of the IPO
which, with the giving of notice or the passage of time or both, would
constitute a material default under any material Lease.
(p) Full Disclosure. Each Loan Party has disclosed to the
Agent all agreements, instruments and corporate or other restrictions to which
it is subject, and all other matters known to it, that, individually or in the
aggregate, is reasonably likely to result in a Material Adverse Effect. None of
the documents, instruments, agreements, other reports, financial statements,
certificates or other information furnished by or on behalf of any Loan Party to
the Agent in connection with the negotiation of this Agreement or delivered
hereunder (as modified or supplemented by other information so furnished)
contains any material misstatement
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of fact or omits to state any material fact necessary to make the statements
therein, in the light of the circumstances under which it was made, not
misleading; provided, that, with respect to projected financial information,
each Loan Party represents only that such information was prepared in good faith
based upon assumptions believed to be reasonable at the time. There is no
contingent liability or fact that is reasonably likely to have a Material
Adverse Effect which has not been set forth in a footnote included in the
Financial Statements or a Schedule hereto.
(q) Leases. Schedule 5.01(q), annexed hereto, sets forth as of
the Effective Date a schedule of all presently effective Capitalized Leases.
(Schedule 5.01(o)(ii) includes a list of all other presently effective Leases).
Each of such Leases and Capitalized Leases is or will be, as a result of the
consummation of the IPO, in full force and effect. No Loan Party, to the best of
its knowledge, is or will be, as a result of the consummation of the IPO, in
default or violation of any such Leases or Capitalized Leases, except where such
violation is not reasonably likely to have a Material Adverse Effect. No Loan
Party has received any notice or threat of cancellation of any such Lease or
Capitalized Lease, which cancellation (together with all other similar
cancellations) is reasonably likely to have a Material Adverse Effect. Without
limiting the foregoing, no default or violation shall arise under any Lease
solely as a result of the assignment and transfer of such Lease in connection
with the IPO, except where such default or violation is not reasonably likely to
have a Material Adverse Effect.
(r) Environmental Matters. Except as set forth on Schedule
5.01(r), (i) the operations of each Loan Party are in material compliance with
all Environmental Laws; (ii) to the best of each Loan Party's knowledge, there
has been no Release at any of the properties owned or operated by any Loan Party
or a predecessor in interest, or at any disposal or treatment facility which
received Hazardous Materials generated by any Loan Party or any predecessor in
interest which is reasonably likely to have a Material Adverse Effect; (iii) no
Environmental Action has been asserted against any Loan Party or any predecessor
in interest nor does any Loan Party have knowledge or notice of any threatened
or pending Environmental Action against any Loan Party or any predecessor in
interest which is reasonably likely to have a Material Adverse Effect; (iv) no
Loan Party has knowledge of any Environmental Actions that have been asserted
against any facilities that may have received Hazardous Materials generated by
any Loan Party or any predecessor in interest which are reasonably likely to
have a Material Adverse Effect; (v) to the best of each Loan Party's knowledge,
no property now or formerly owned or operated by a Loan Party has been used as a
treatment or disposal site for any Hazardous Material; (vi) no Loan Party has
failed to report to the proper Governmental Authority any Release which is
required to be so reported by any Environmental Laws which is reasonably likely
to have a Material Adverse Effect; (vii) each Loan Party holds all licenses,
permits and approvals required under any Environmental Laws in connection with
the operation of the business carried on by it, except for such licenses,
permits and approvals as to which a Loan Party's failure to maintain or comply
with is not reasonably likely to have a Material Adverse Effect; and (viii) no
Loan Party has received any notification pursuant to any Environmental Laws that
(A) any work, repairs, construction or capital expenditures are required to be
made as a condition of continued compliance with any Environmental Laws, or any
license, permit or approval issued pursuant thereto or (B) any license, permit
or approval referred to above is about to be reviewed, made, subject to
limitations or conditions, revoked, withdrawn or terminated, in each case,
except as is not reasonably likely to have a Material Adverse Effect.
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(s) Insurance. Schedule 5.01(s) sets forth a list of all
insurance maintained by each Loan Party or under which any Loan Party is the
named insured on the Effective Date. Each of such policies is in full force and
effect and meets each of the requirements set forth in Section 6.01(e). To the
best of such Loan Party's knowledge, neither the issuer of any such policy nor
any Loan Party is in default or violation of such policy.
(t) [Intentionally Omitted]
(u) Solvency. After giving effect to the transactions
contemplated by this Agreement and the IPO and before and after giving effect to
each Loan and the IPO, each Loan Party is, and the Loan Parties on a
consolidated basis are, Solvent.
(v) Location of Bank Accounts. Schedule 5.01(v) sets forth a
complete and accurate list as of the Effective Date of all deposit, checking and
other bank accounts, all securities and other accounts maintained with any
broker dealer and all other similar accounts maintained by each Loan Party,
together with a description thereof (i.e., the bank or broker dealer at which
such deposit or other account is maintained, the account number and a contact
person at such bank or broker dealer).
(w) Intellectual Property. Except as set forth on Schedule
5.01(w), each Loan Party both before and after giving effect to the IPO owns or
licenses or otherwise has the right to use all material licenses, permits,
patents, patent applications, trademarks, trademark applications, service marks,
tradenames, copyrights, copyright applications, franchises, authorizations,
non-governmental licenses and permits and other intellectual property rights
that are necessary for the operation of its business, without infringement upon
or conflict with the rights of any other Person with respect thereto, except for
such infringements and conflicts which, individually or in the aggregate, are
not reasonably likely to have a Material Adverse Effect. Set forth on Schedule
5.01(w) is a complete and accurate list as of the Effective Date of all such
material licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, tradenames, copyrights, copyright applications,
franchises, authorizations, non-governmental licenses and permits and other
intellectual property rights of each Loan Party. To the best knowledge of each
Loan Party, both before and after giving effect to the IPO, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by any Loan Party infringes
upon or conflicts with any rights owned by any other Person, and no claim or
litigation regarding any of the foregoing is pending or threatened, except for
such infringements and conflicts which are not reasonably likely to have a
Material Adverse Effect. To the best knowledge of each Loan Party, both before
and after giving effect to the IPO, no patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or code is pending or
proposed, which is reasonably likely to have a Material Adverse Effect.
(x) Material Contracts and Licenses. Schedule 5.01(x) sets
forth a complete and accurate list as of the Effective Date of all Material
Contracts and all material licenses of each Loan Party, showing the parties and
subject matter thereof. Each such Material Contract and license both before and
after giving effect to the IPO (i) is in full force and effect and is binding
upon and enforceable against each Loan Party that is a party thereto and, to the
best knowledge of such Loan Party, all other parties thereto in accordance with
its terms, and (ii)
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is not in default due to or has not been violated by, the action of any Loan
Party or, to the best knowledge of any Loan Party, any other party thereto,
except where such default is not reasonably likely to have a Material Adverse
Effect. Without limiting the foregoing, no default or violation shall arise
under any such license or agreement solely as a result of the assignment and
transfer of such license or agreement in connection with the IPO. No Loan Party
has received any notice or threat of cancellation of any such Material Contract
or license which cancellation (together with all similar cancellations) is
reasonably likely to have a Material Adverse Effect.
(y) Holding Company and Investment Company Acts. None of the
Loan Parties is (i) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company", as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended; or (ii) an
"investment company" or an "affiliated person" or "promoter" of, or "principal
underwriter" of or for, an "investment company", as such terms are defined in
the Investment Company Act of 1940, as amended.
(z) Labor Relations.
(i) As of the Effective Date, no Loan Party has been,
and none is presently a party to any collective bargaining or other labor
contract except as listed on Schedule 5.01(z), annexed hereto.
(ii) There is not presently pending and, to any Loan
Party's knowledge, there is not threatened any of the following, except to the
extent any of the following is not reasonably likely to have a Material Adverse
Effect:
(A) any strike, slowdown, picketing, work
stoppage, or employee grievance process;
(B) any proceeding against or affecting any Loan
Party relating to the alleged violation of any Applicable Law pertaining to
labor relations or before the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable governmental body,
organizational activity, or other labor or employment dispute against or
affecting any Loan Party, which, if determined adversely to that Loan Party, is
reasonably likely to have a Material Adverse Effect on that Loan Party;
(C) any lockout of any employees by any Loan Party
(and no such action is contemplated by any Loan Party); or
(D) any application for the certification of a
collective bargaining agent.
(iii) No event has occurred or circumstance exists which
could provide the basis for any work stoppage or other labor dispute that would
be reasonably likely to have a Material Adverse Effect.
(iv) Each Loan Party:
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(A) has complied in all material respects with all
Applicable Law relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing; and
(B) is not liable for the payment of compensation,
damages, taxes, fines, penalties, or other amounts, however designated, for that
Loan Party's failure to comply with any Applicable Law referenced in Section
5.01(z)(iv)(A) which is reasonably likely to have a Material Adverse Effect.
(aa) No Bankruptcy Filing. No Loan Party is contemplating
either an Insolvency Proceeding or the liquidation of all or a major portion of
such Loan Party's assets or property, and no Loan Party has any knowledge of any
Person contemplating an Insolvency Proceeding against it.
(bb) Separate Existence. Except where the failure to observe,
maintain or perform the following is not reasonably likely to have a Material
Adverse Effect, all customary formalities regarding the corporate existence of
each Loan Party will be observed.
(cc) Name; Jurisdiction of Organization; Organizational ID
Number; Chief Place of Business; Chief Executive Office; FEIN. Schedule 5.01(cc)
sets forth a complete and accurate list as of the Effective Date of (i) the
exact legal name of each Loan Party; (ii) the jurisdiction of organization of
each Loan Party; (iii) the organizational identification number of each Loan
Party as of the Effective Date (or indicates that such Loan Party has no
organizational identification number); (iv) each place of business of each Loan
Party; (v) the chief executive office of each Loan Party; and (vi) the Federal
employer identification number of each Loan Party as of the Effective Date.
(dd) Tradenames. Schedule 5.01(dd) hereto sets forth a
complete and accurate list as of the Effective Date of (i) all names under
which, to the knowledge of the Borrower, any Loan Party has conducted its
business in the past five (5) years; and (ii) all Persons with whom any Loan
Party has consolidated or merged, or from whom any Loan Party has acquired in a
single transaction or in a series of related transactions substantially all of
such Person's assets in the past five (5) years.
(ee) Location of Collateral. Except as permitted by Section
6.02(r), there is no location at which any Loan Party has any Collateral or the
books, records and papers of the Loan Parties pertaining thereto other than (i)
those locations listed on Schedule 5.01(ee) and (ii) at such other locations as
to which the Borrower has provided ten (10) days prior written notice to the
Agent of the intended location of the Collateral, books, records and papers
thereat. Schedule 5.01(ee) hereto contains a true, correct and complete list, as
of the Effective Date, of the legal names and addresses of each warehouse at
which Collateral of each Loan Party is stored and/or the name and address of the
landlord on the Lease which covers such location and of all service bureaus with
which such records are maintained. None of the receipts received by any Loan
Party from any warehouse states that the goods covered thereby are to be
delivered to bearer or to the order of a named Person or to a named Person and
such named Person's assigns. No tangible personal property of any Loan Party is
in the care or custody of any third party or
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stored or entrusted with a bailee or other third party, except (x) as otherwise
disclosed pursuant to, or permitted by this Section, or (y) for Inventory in an
amount not to exceed $1,000,000 at Cost (as defined in the Revolving Credit
Facility) in the aggregate at any time in the ordinary course of business.
(ff) Security Interests. Each Security Agreement creates in
favor of the Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral secured thereby. Upon the filing
of the UCC financing statements described in the Original Agreement and the
amendments thereto, and the recording of the Collateral Assignments for Security
referred to in each Security Agreement entered into pursuant to the Original
Agreement in the United States Patent and Trademark Office and the United States
Copyright Office, as applicable, such security interests in and Liens on the
Collateral granted thereby were perfected security interests to the extent such
security interests may be perfected by such filings, and no further recordings
or filings were or will be required in connection with the creation of, the
continued perfection of or the enforcement of such security interests and Liens,
other than (i) the filing of continuation statements in accordance with
Applicable Law, (ii) the recording of the Collateral Assignments for Security
pursuant to each Security Agreement in the United States Patent and Trademark
Office and the United States Copyright Office, as applicable, with respect to
after-acquired U.S. patent and trademark applications and registrations and U.S.
copyrights, (iii) the recordation of appropriate evidence of the security
interest in the appropriate foreign registry with respect to all foreign
intellectual property, and (iv) control agreements for deposit accounts, liens
on titles and similar items. Subject to Permitted Liens, such security interests
in, and Liens on the Collateral are and shall continue to be first-priority
security interests; provided, however, that any security interest in and Lien on
Collateral that is Revolving Lender Primary Collateral (as defined in the
Intercreditor Agreement) are and shall continue to be perfected, second-priority
Liens and security interests (subject only to Permitted Liens and the prior Lien
on and security interest in favor of the Revolving Credit Facility Agent for the
benefit of the Revolving Credit Facility Lenders).
(gg) Liens in Favor of Agent. Other than the Excluded Property
(as defined in the Security Agreement), no Loan Party is the owner of, nor has
any interest in, any property or asset which is not subject to a Lien in favor
of the Agent (subject only to Permitted Liens) to secure the Obligations.
(hh) Schedules. All of the information which is required to be
scheduled to this Agreement is set forth on the Schedules attached hereto, is
correct and accurate in all material respects and does not omit to state any
information material thereto.
(ii) Representations and Warranties in Documents; No Default.
All representations and warranties set forth in this Agreement and the other
Loan Documents are true and correct in all material respects at the time as of
which such representations were made and on the Effective Date (except where
such representations and warranties relate to an earlier date in which case such
representations and warranties shall be true and correct as of such earlier
date). No Event of Default has occurred and is continuing or will occur as a
result of the IPO or otherwise, and no condition exists, or will exist as a
result of the IPO, which constitutes a Default or an Event of Default.
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(jj) Indebtedness. The Loan Parties do not have any
Indebtedness other than (i) Permitted Indebtedness, and (ii) a Loan Party's
guaranties of Permitted Indebtedness.
(kk) Unrestricted Subsidiaries. Each Subsidiary of the Parent
that is not a party to this Agreement is set forth on Schedule 5.01(kk) (each,
an "Unrestricted Subsidiary"). Each Unrestricted Subsidiary is inactive or in
the process of being liquidated or dissolved and the Unrestricted Subsidiaries
do not, in the aggregate, have assets in excess of $500,000.
(ll) Voting Requirements. No vote of the holders of any class
or series of the Parent's or DSW's Capital Stock or other securities of the
Parent or DSW is necessary under Applicable Law or stock exchange (or similar
self-regulatory organization) regulations to approve the issuance of the
Warrants, the Conversion Warrants or the Warrant Stock.
(mm) Consummation of IPO. On the IPO Effective Date, the IPO
will have been consummated in accordance with each of the conditions set forth
in Section 4.02 hereof.
ARTICLE VI
COVENANTS OF THE LOAN PARTIES
Section 6.01 Affirmative Covenants. So long as any principal or
interest on the Loan or any other Obligation (whether or not due) shall remain
unpaid, each Loan Party shall, from and after the Effective Date:
(a) Additional Guaranties and Collateral Security. Cause (i)
each Subsidiary of any Loan Party not in existence on the Effective Date, or any
Unrestricted Subsidiary that at any time fails to meet the requirements for an
Unrestricted Subsidiary, to execute and deliver to the Agent promptly and in any
event within three (3) Business Days after the formation, acquisition or change
in status thereof (A) a Guaranty guaranteeing the Obligations, (B) a Security
Agreement, (C) if such Subsidiary has any Subsidiaries, a Pledge Agreement
together with (x) certificates evidencing all of the Capital Stock of any Person
owned by such Subsidiary, (y) undated stock powers executed in blank with
signature guaranteed, and (z) such opinion of counsel and such approving
certificate of such Subsidiary as the Agent may reasonably request in respect of
complying with any legend on any such certificate or any other matter relating
to such shares, (D) one or more Mortgages creating on any real property having a
book value in excess of $1,000,000, or leased property having an annual minimum
fixed rent in excess of $750,000 (if the lease term (including extensions) is
less than five years) or $250,000 (if the lease term (including extensions) is
equal to or greater than five years) of such Subsidiary a perfected, Lien on
such real property subject only to Permitted Liens, a Title Insurance Policy
covering such owned real property, a current ALTA survey thereof and a
surveyor's certificate, each in form and substance satisfactory to the Agent,
together with such other agreements, instruments and documents as the Agent may
reasonably require whether comparable to the documents required under Section
6.01(i) or otherwise (it being understood that the Loan Parties shall use their
reasonable best efforts (which shall not include the payment of additional sums
(other than incidental expenses)) to obtain such Mortgage and other documents) ,
and (E) such
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other agreements, instruments, approvals, legal opinions or other documents
reasonably requested by the Agent in order to create, perfect, establish the
first priority of or otherwise protect any Lien purported to be covered by any
such Security Agreement, Pledge Agreement or Mortgage or otherwise to effect the
intent that such Subsidiary shall become bound by all of the terms, covenants
and agreements contained in the Loan Documents and that all property and assets
of such Subsidiary shall become Collateral for the Obligations; and (ii) each
owner of the Capital Stock of any such Subsidiary to execute and deliver
promptly and in any event within three (3) Business Days after the formation or
acquisition of such Subsidiary a Pledge Agreement, together with (A)
certificates evidencing all of the Capital Stock of such Subsidiary, (B) undated
stock powers or other appropriate instruments of assignment executed in blank
with signature guaranteed, (C) such opinion of counsel and such approving
certificate of such Subsidiary as the Agent may reasonably request in respect of
complying with any legend on any such certificate or any other matter relating
to such shares and (D) such other agreements, instruments, approvals, legal
opinions or other documents requested by the Agent; provided, however, that
nothing contained herein shall be deemed a modification of any other provisions
of this Agreement restricting the formation or Acquisition of Subsidiaries by
the Loan Parties, or the requirements applicable to Unrestricted Subsidiaries.
(b) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, and use its assets in compliance with all Applicable
Laws, rules, regulations and orders (including, without limitation, all
Environmental Laws) except where the failure of such compliance will not have a
Material Adverse Effect. Without limiting the foregoing such compliance shall
include (i) paying before the same become delinquent all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
upon any of its properties, and (ii) paying all lawful claims, making all
required withholdings, and filing all required reports and returns with
Governmental Authorities which if unpaid, not withheld or unfiled might become a
Lien or charge upon any of its properties, except (x) to the extent contested in
good faith by proper proceedings which stay the imposition of any penalty, fine
or Lien resulting from the non-payment thereof and with respect to which
adequate reserves have been set aside for the payment thereof in accordance with
GAAP, or (y) for the inadvertent failure of a Loan Party to pay such lawful
claims, make such withholdings or file such returns or reports so long as (A)
the aggregate amount thereof does not exceed $500,000, (B) no Lien has been
filed on account thereof and (C) promptly upon the date an Authorized Officer
obtains knowledge or should have obtained knowledge thereof, the Loan Parties
pay such claims, make such withholdings or file such returns or reports.
(c) Preservation of Existence, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, its existence, rights
and privileges, and become or remain, and cause each of its Subsidiaries to
become or remain, duly qualified and in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary except where the
failure to so qualify would not have a Material Adverse Effect.
(d) Maintenance of Properties and Leases, Etc. (i)Maintain and
preserve, and cause each of its Subsidiaries to maintain and preserve the
Collateral in good working order and condition (ordinary wear and tear and
insured casualty excepted); and
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(ii) comply, and cause each of its Subsidiaries to
comply, in all material respects, at all times with the provisions of all Leases
to which it is a party as lessee or under which it occupies property, so as to
prevent any loss or forfeiture thereof or thereunder.
(e) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance (including, without limitation,
comprehensive general liability, hazard, rent and business interruption
insurance) with responsible and reputable insurance companies or associations
(which shall include the companies presently providing such insurance, or such
other companies as may be selected by the Borrower with the consent of the
Agent, whose consent shall not be unreasonably withheld) with respect to its
properties (including all real properties leased or owned by it) and business,
in such amounts, in such form, for such periods and covering such risks as is
required by any Governmental Authority having jurisdiction with respect thereto
or as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated and in any event in amount,
adequacy and scope reasonably satisfactory to the Agent. All policies covering
the Collateral are to be made payable to the Agent for the benefit of the
Lenders, as its interests may appear, in case of loss, under a standard
non-contributory "lender" or "secured party" clause and shall provide that the
insurance, to the extent of the Agent's interest therein, shall not be impaired
or invalidated, in whole or in part, by reason of any act or neglect of any Loan
Party or by the failure of any Loan Party to comply with any warranty or
condition of the policy and are to contain such other provisions as the Agent
may reasonably require to fully protect the Lenders' interest in the Collateral
and to obtain any payments to be made under such policies. Such policy shall not
include an endorsement in favor of any other Person (other than the Revolving
Credit Agent, the holder of any Permitted Liens and those Persons intended as
beneficiaries of any builder's risk insurance). All certificates of insurance
are to be delivered to the Agent and the policies are to be premium prepaid or
with customary payment terms (which shall be complied with in a timely fashion
by such Loan Parties), with the loss payable and additional insured endorsement
in favor of the Agent and such other Persons as the Agent may designate from
time to time, and shall provide for not less than thirty (30) days' prior
written notice to the Agent of the exercise of any right of cancellation. The
Key Loan Parties shall furnish the Agent with certificates or other evidence
satisfactory to the Agent regarding compliance by the Loan Parties with the
foregoing requirements. If any Loan Party or any of its Subsidiaries fails to
maintain such insurance, the Agent may arrange for such insurance, but at the
Key Loan Parties' expense and without any responsibility on the Agent's part for
obtaining the insurance, the solvency of the insurance companies, the adequacy
of the coverage, or the collection of claims; provided, however, that the
Agent's obtaining such insurance shall not constitute a waiver of any Event of
Default occasioned by the Loan Parties' failure to have maintained such
insurance. Upon the occurrence and during the continuance of an Event of Default
and subject to the terms of the Intercreditor Agreement, the Agent shall have
the sole right, in the name of the Lenders, any Loan Party or any of its
Subsidiaries, to file claims under any insurance policies, to receive, receipt
and give acquittance for any payments that may be payable thereunder, and to
execute any and all endorsements, receipts, releases, assignments, reassignments
or other documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies. The Borrower shall
provide the Agent with prompt written notice of any change in the insurance
policies owned by the Loan Parties, or under which any Loan Party is the named
insured, from those in effect as of the Effective Date.
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(f) Obtaining of Permits, Etc. Obtain, maintain and preserve,
and cause each of its Subsidiaries to obtain, maintain and preserve, and take,
and cause each of its Subsidiaries to take, all necessary action to timely
renew, all permits, licenses, authorizations, approvals, entitlements and
accreditations which are necessary or useful in the proper conduct of its
business, except where the failure to do so is not reasonably likely to have a
Material Adverse Effect.
(g) Environmental. Except where a violation or failure is not
reasonably likely to have a Material Adverse Effect, (i) keep any material
property either owned or operated by it or any of its Subsidiaries free of any
Environmental Liens; (ii) comply, and cause each of its Subsidiaries to comply,
in all material respects with Environmental Laws and provide to the Agent any
documentation of such compliance which the Agent may reasonably request; (iii)
provide the Agent with written notice within five (5) days of any Release of a
Hazardous Material in excess of any reportable quantity from or onto property at
any time owned or operated by it or any of its Subsidiaries and take any
Remedial Actions required to ▇▇▇▇▇ said Release; (iv) provide the Agent with
written notice within ten (10) days of the receipt of any of the following: (A)
notice that a material Environmental Lien has been filed against any property of
any Loan Party or any of its Subsidiaries; (B) commencement of any Environmental
Action or notice that an Environmental Action will be filed against any Loan
Party or any of its Subsidiaries which is reasonably likely to have a Material
Adverse Effect; and (C) notice of a violation, citation or other administrative
order to the extent that any of the foregoing are reasonably likely to have a
Material Adverse Effect; and (v) defend, indemnify and hold harmless the Agent
and the Lenders and their transferees, and their respective employees, agents,
officers and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including, without
limitation, attorney and consultant fees, investigation and laboratory fees,
court costs and litigation expenses) arising out of (A) the generation,
presence, disposal, Release or threatened Release of any Hazardous Materials on,
under, in, originating or emanating from any property at any time owned or
operated by any Loan Party or any of its Subsidiaries (or its predecessors in
interest or title), (B) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to the presence or
Release of such Hazardous Materials, (C) any request for information,
investigation, lawsuit brought or threatened, settlement reached or order by a
Governmental Authority relating to the presence or Release of such Hazardous
Materials, (D) any violation of any Environmental Law and/or (E) any
Environmental Action filed against the Agent or any Lender to the extent that
any of the foregoing is reasonably likely to have a Material Adverse Effect.
(h) Further Assurances. Take such action and execute,
acknowledge and deliver, and cause each of its Subsidiaries to take such action
and execute, acknowledge and deliver, at its sole cost and expense, such
agreements, instruments or other documents as the Agent may reasonably require
from time to time in order (i) to carry out more effectively the purposes of
this Agreement and the other Loan Documents, (ii) to subject to valid and
perfected first priority Liens (subject to Permitted Liens) any of the
Collateral of any Loan Party and its Subsidiaries, (iii) to establish and
maintain the validity and effectiveness of any of the Loan Documents and the
validity, perfection and priority of the Liens intended to be created thereby,
and (iv) to better assure, convey, grant, assign, transfer and confirm unto the
Agent and each Lender the rights now or hereafter intended to be granted to it
under this Agreement or any other
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Loan Document. In furtherance of the foregoing, to the maximum extent permitted
by Applicable Law, each Loan Party (x) authorizes the Agent to execute any such
agreements, instruments or other documents deemed reasonably necessary by the
Agent in connection with this Agreement in such Loan Party's name and to file
such agreements, instruments or other documents in any appropriate filing
office, (y) authorizes the Agent to file any financing statement required
hereunder or under any other Loan Document, and any continuation statement or
amendment with respect thereto, in any appropriate filing office without the
signature of such Loan Party, and (z) ratifies the filing of any financing
statement, and any continuation statement or amendment with respect thereto,
filed without the signature of such Loan Party prior to the date hereof.
(i) After Acquired Real Property. Upon the acquisition by it
or any of its Subsidiaries after the date hereof of any interest (whether fee or
leasehold) in any real property (wherever located) (each such interest being an
"After Acquired Property") (x) with a Current Value (as defined below) in excess
of $1,000,000 in the case of a fee interest, or (y) requiring, in the case of a
leasehold interest, the payment of annual minimum fixed rent exceeding in the
aggregate $750,000 (if the Lease term (including extensions) is less than five
years) or $250,000 (if the Lease term (including extensions) is equal to or
greater than five years), immediately so notify the Agent, setting forth with
specificity a description of the interest acquired, the location of the real
property, any structures or improvements thereon and either an appraisal or such
Loan Party's good-faith estimate of the current value of such real property (for
purposes of this Section, the "Current Value"). The Agent shall notify such Loan
Party whether it intends to require a Mortgage and the other documents referred
to below or in the case of leasehold, a leasehold Mortgage or Landlord's
Agreement (pursuant to Section 6.01(i) hereof). Upon receipt of such notice
requesting a Mortgage, the Person which has acquired such After Acquired
Property shall promptly furnish to the Agent the following, each in form and
substance satisfactory to the Agent: (i) a Mortgage with respect to such real
property and related assets located at the After Acquired Property, each duly
executed by such Person and in recordable form; (ii) evidence of the recording
of the Mortgage referred to in clause (i) above in such office or offices as may
be necessary or, in the reasonable good faith opinion of the Agent, desirable to
create and perfect a valid and enforceable first priority lien on the property
purported to be covered thereby or to otherwise protect the rights of the Agent
and the Lenders thereunder; (iii) in the case of a fee interest, a title
insurance policy, a survey of such real property, certified to the Agent and to
the issuer of the Title Insurance Policy by a licensed professional surveyor
reasonably satisfactory to the Agent and a Phase I Environmental Site Assessment
with respect to such real property, certified to the Agent by a company
reasonably satisfactory to the Agent; (iv) in the case of a leasehold interest,
a certified copy of the lease between the landlord and such Person with respect
to such real property in which such Person has a leasehold interest, and the
certificate of occupancy with respect thereto; (v) in the case of a leasehold
interest, an attornment and nondisturbance agreement between the landlord (and
any fee mortgagee) with respect to such real property and the Agent; and (vi)
such other documents or instruments (including, without limitation, guarantees
and opinions of counsel) as the Agent may reasonably require, provided, however,
that nothing contained herein shall be deemed a modification of any other
provisions of this Agreement restricting Acquisitions or investments by the Loan
Parties. The Key Loan Parties shall pay all reasonable fees and expenses,
including reasonable attorneys' fees and expenses, and all title insurance
charges and premiums, in connection with each Loan Party's obligations under
this Section 6.01(i).
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(j) Conduct of Business. Conduct their business substantially
in accordance with the Business Plan, or as otherwise approved by the Agent
pursuant to Section 7.10 hereof. The foregoing shall not obligate the Loan
Parties to achieve any specific financial performance and no financial covenants
are intended to be imposed thereby.
(k) Maintenance of Listing. Maintain and cause to be quoted at
all times, the Common Stock of the Parent and the Class A Common Shares of DSW
on a national securities exchange registered under the Exchange Act (a "National
Securities Exchange") or the NASDAQ Stock Market;
(l) SEC. Maintain, at all times, the Parent's and DSW's status
as reporting company under the Exchange Act, and make timely filings thereunder;
(m) Leasehold Mortgages. Each of the Loan Parties shall use
their reasonable best efforts to obtain leasehold Mortgages on substantially all
Leases of the Loan Parties it being understood that reasonable best efforts
shall require a bona fide request be made in writing to the appropriate parties
with a copy to the Agent (or in lieu thereof, a short memorandum describing a
telephone request made in respect thereof, which memorandum shall include the
date of the conversation and the name of the person with whom the Loan Party
spoke) with appropriate follow-up as reasonably required by the Agent, which in
each case shall be included in the Leasehold Mortgage Status Report; provided,
that no Loan Parties shall be required to pay any money (other than incidental
expenses), agree to amended Lease terms (unless such amendments are immaterial
in the reasonable judgment of the Key Loan Parties), or commence any legal
action.
(n) Board of Director Observer Rights. At all times that CPLP
(and/or one or more of its Affiliates or related funds) is at such time a
Warrantholder holding not less than 50% of the Warrants and/or Conversion
Warrants held by CPLP on the Effective Date, the Parent shall allow two
representatives designated by CPLP to attend all meetings, including telephonic
meetings, of the Parent's Board of Directors in a non-voting capacity. The
Parent will give such representatives written notice of each meeting of its
Board of Directors in advance and at the same time and in the same manner as
notice is given to the directors. Such representatives shall also be provided
with all written materials and other information (including minutes of meetings)
given to directors in connection with such meetings at the same time such
materials and information are given to the directors. If the Parent proposes to
take any action by written consent in lieu of a meeting of its Board of
Directors, the Parent shall give written notice thereof to such representatives
promptly following the effective date of such consent describing in reasonable
detail the nature and substance of such action. In the event the Parent
establishes separate committees of the Board of Directors, the right to
representatives granted hereunder shall extend to meetings of such committees.
Section 6.02 Negative Covenants. So long as any principal of or
interest on the Loan, or any other Obligation (whether or not due) shall remain
unpaid, each Loan Party shall not:
(a) Liens, Etc. (i) Create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any Lien upon or with respect to
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any of its properties (including, without limitation, the Capital Stock of DSW
held by the Parent), whether now owned or hereafter acquired; file or suffer to
exist under the Uniform Commercial Code or any similar law or statute of any
jurisdiction, a financing statement (or the equivalent thereof) that names it or
any of its Subsidiaries as debtor; sign or suffer to exist any security
agreement authorizing any secured party thereunder to file such financing
statement (or the equivalent thereof); sell any of its property or assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets (including sales of accounts receivable) with recourse
to it or any of its Subsidiaries or assign or otherwise transfer, or permit any
of its Subsidiaries to assign or otherwise transfer, any account or other right
to receive income; other than, as to all of the above, Permitted Liens, or (ii)
have possession of any property on consignment to that Loan Party from a third
party that is not a Loan Party, except as of the Effective Date as set forth on
Schedule 5.01(o)(i), and after the Effective Date, those as to which the Loan
Parties have notified the Agent, in accordance with Section 7.03.
(b) Indebtedness. Create, incur, assume, guarantee or suffer
to exist, or otherwise become or remain liable with respect to, or permit any of
its Subsidiaries to create, incur, assume, guarantee or suffer to exist or
otherwise become or remain liable with respect to, any Indebtedness other than
(i) Permitted Indebtedness and (ii) guaranties of Permitted Indebtedness of
another Loan Party.
(c) Fundamental Changes; Dispositions. (i) Wind-up, liquidate
or dissolve, or permit any of its Subsidiaries to wind-up, liquidate or
dissolve; (ii) merge, consolidate or amalgamate with any Person, or permit any
of its Subsidiaries to merge, consolidate or amalgamate with any Person; (iii)
purchase or otherwise acquire, whether in one transaction or a series of related
transactions, all or substantially all of the assets of any Person (or any
division thereof), or permit any of its Subsidiaries to do any of the foregoing;
(iv) suffer or cause, or permit any of its Subsidiaries to suffer or cause the
waste or destruction of any material part of the Collateral; (v) use or permit
any of its Subsidiaries to use, any of the Collateral in violation of any policy
of insurance thereon; (vi) sell, lease, sublease, convey, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, sublease, convey,
transfer or otherwise dispose of any of the Collateral; and (vii) other than
leased departments and similar arrangements with third parties, commit to open
or close any location at which any Loan Party maintains, offers for sale, or
stores any of the Collateral, in any fiscal year such that the actual number of
stores of all Key Loan Parties in the aggregate (x) exceeds by ten (10) the
number of stores reflected on the Business Plan for such fiscal year, or (y) is
more than ten (10) fewer than the number of stores reflected on the Business
Plan for such fiscal year (without giving effect to any new stores which the
Business Plan projected to be opened or closed, but which have not in fact been
opened or closed); provided, however, that each of the following shall be
permitted:
(A) if no Default or Event of Default shall have
occurred and be continuing or would result therefrom, with the prior written
consent of the Agent (which consent shall not be unreasonably withheld) any
wholly-owned Subsidiary may merge, consolidate or amalgamate with or into the
Borrower or with or into another wholly-owned Subsidiary of the Parent, so long
as in any merger, consolidation or amalgamation involving the Borrower, the
Borrower is the surviving, continuing or resulting corporation. Notwithstanding
the foregoing, the Parent may not merge or consolidate or be merged or
consolidated with or into
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any other Person without the prior written consent of the Agent;
(B) if no Default or Event of Default shall have
occurred and be continuing or would result therefrom, any Loan Party may
liquidate or dissolve any Unrestricted Subsidiary;
(C) if no Default or Event of Default shall have
occurred and be continuing or would result therefrom, any Loan Party may engage
in any Acquisition which is a Permitted Acquisition, provided that all of the
conditions contained in the definition of the term Permitted Acquisition are
satisfied;
(D) any Loan Party may engage in (1) the use or sale of
Inventory (including, without limitation, in leased departments) in compliance
with this Agreement; (2) the disposal of Equipment which is obsolete, worn out,
or damaged beyond repair, or no longer useful in the Loan Parties' businesses;
(3) Permitted Dispositions; (4) the turning over to the Agent of certain
Collateral as provided herein, or to the Revolving Credit Agent of all Receipts
(as defined in the Revolving Credit Facility) as provided in the Revolving
Credit Facility; and (5) the use of the Collateral to pay obligations arising in
the ordinary course; and
(E) in the event of an exercise of the Conversion
Warrants or Warrants for Class A Common Shares of DSW (but not for Common Stock
of the Parent), the Parent may sell, in exchange for cash, up to that number of
Class A Common Shares of DSW as shall provide Net Cash Proceeds to the Parent
equal to the sum of (x) the Tax liability, if any, actually incurred by the
Parent as a result of the exercise of the Conversion Warrants or the Warrants,
less (y) the Net Cash Proceeds (if any) received by the Parent upon such
exercise of the Conversion Warrants or the Warrants; provided that (1) no
Default or Event of Default shall have occurred and be continuing at the time of
such sale, (2) the average closing sale price of the Class A Common Shares on
the New York Stock Exchange (or other exchange on which such shares are listed)
for the 30 days prior to such sale, times the number of Class A Common Shares
owned (or which could be received by the Parent in exchange for its Class B
Common Shares) by the Parent after giving effect to such sale would be equal to
at least two times the outstanding principal amount of the Loan (including all
PIK Interest added thereto) at such time, and (3) after giving effect to such
sale, the Parent shall own a number of Class A Common Shares (or Class B Common
Shares exchangeable into Class A Common Shares) sufficient to permit the
exercise in full, for Class A Common Shares, of the Conversion Warrants and
Warrants held by the Warrantholders and Conversion Warrantholders thereof at
such time.
Notwithstanding anything to the contrary contained herein, no Loan
Party shall have any right to sell, lease, convey, transfer or otherwise dispose
of any of the Capital Stock of DSW, other than pursuant to (w) the IPO, subject
to the conditions set forth in Section 4.02 hereof, (x) Clause (E) of this
Section 6.02(c), (y) the transfer of Warrant Stock to the Warrantholders and the
Conversion Warrantholders upon the exercise of the Warrants and the Conversion
Warrants and (z) a Permitted DSW Stock Sale provided that the Net Cash Proceeds
thereof are sufficient to repay and are actually and immediately used to repay
the Obligations in full in cash in accordance with Section 2.04(a)(ii).
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(d) Line of Business. Engage in any business other than the
business in which it is currently engaged or a business reasonably related
thereto, or any retail lease department operation.
(e) Loans; Advances; Investments, Etc. (i) Make or commit or
agree to make any loan, advance guarantee of obligations, other extension of
credit or capital contributions to, or hold or invest in or commit or agree to
hold or invest in, or purchase or otherwise acquire any shares of the Capital
Stock, bonds, notes, debentures or other securities of, or make or commit or
agree to make any other investment in, any other Person; (ii) purchase or own
any futures contract or otherwise become liable for the purchase or sale of
currency or other commodities at a future date in the nature of a futures
contract; (iii) subordinate any debts or obligations owed to that Loan Party by
any third party (but not by another Loan Party) to any other debts owed by such
third party to any other Person; (iv) enter into leases of property or assets
not constituting Permitted Acquisitions, unless such leases are not otherwise in
violation of this Agreement; (v) organize or create any Affiliate other than in
connection with a Permitted Acquisition; or (vi) acquire any assets other than
in the ordinary course and conduct of that Loan Party's business as conducted at
the execution of this Agreement, other than in connection with a Permitted
Acquisition, or as otherwise permitted in this Agreement, or permit any of its
Subsidiaries to do any of the foregoing, except for:
(A) Permitted Investments and investments directly
related to Permitted Acquisitions;
(B) advance payments made to that Loan Party's
suppliers in the ordinary course;
(C) advances to that Loan Party's officers,
employees, and salespersons with respect to reasonable expenses to be incurred
by such officers, employees, and salespersons for the benefit of that Loan
Party, which expenses are properly substantiated by the Person seeking such
advance and properly reimbursable by that Loan Party;
(D) loans and advances to employees for
business-related moving expenses, costs of replacement homes, business machines
or supplies, automobiles and other similar expenses, in each case incurred in
the ordinary course of business not to exceed (together with loans and advances
under Section 6.02(e)(E) and investments permitted under clause (xiii) of the
definition of Permitted Investment) $6,000,000 in the aggregate outstanding to
all employees at any one time;
(E) loans and advances to that Loan Party's
officers, employees, and salespersons in connection with any employment
agreements or arrangements, or any stock options or option plans not to exceed
$6,000,000 (together with loans and advances under Section 6.02(e)(D) and
investments permitted under clause (xiii) of the definition of Permitted
Investments) in the aggregate outstanding to all employees at any one time;
(F) intercompany loans and advances (1) existing
on the date hereof and described on Schedule 6.02(e)(vi)(F) hereof, (2)
hereafter made amongst any Loan Parties pursuant to the terms of the Revolving
Credit Facility, (3) hereafter made to the
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Parent by any other Loan Party to the extent any of the same constitutes
Permitted Indebtedness under clause (viii) of the definition of Permitted
Indebtedness, and (4) to any Loan Party by the Parent;
(G) loans and advances of a Person outstanding at
the time such Person becomes a Subsidiary as a result of a Permitted
Acquisition, provided, that any such loans or advances were not made at the time
of or in contemplation of the acquisition of such Person by a Loan Party or any
Subsidiaries;
(H) to the extent not permitted by the foregoing
clauses, the existing loans and advances described on Schedule 6.02(e)(vi)(H)
hereto;
(I) any other loans and advances to or for the
benefit of any Person which (1) is not itself a Loan Party, (2) are not
otherwise permitted by the foregoing clauses, and (3) are made after the
Effective Date, which loans and advances have been approved in advance by the
Agent.
(f) Capitalized Lease Obligations. Create, incur or suffer to
exist, or permit any of its Subsidiaries to create, incur or suffer to exist,
any Capitalized Lease Obligations which would cause the aggregate amount of all
obligations under Capitalized Leases entered into after June 11, 2002 owing by
all Loan Parties and their Subsidiaries in any Fiscal Year to exceed the amount
set forth in clause (iv) of the definition of Permitted Indebtedness.
(g) Restricted Payments.
(i) Pay any cash dividend or other distribution, in
respect of any class of such Loan Party's or any of its Subsidiaries' Capital
Stock, other than dividends payable to another Loan Party or payable solely in
the Capital Stock of such paying Loan Party;
(ii) make any repurchase, redemption, retirement,
defeasance, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any Capital Stock of any Loan Party or any direct
or indirect parent of any Loan Party, now or hereafter outstanding; provided
that the Loan Parties may make cash payments for any such purposes if:
(A) no Default or Event of Default shall have
occurred and be continuing at the time of declaration or payment thereof;
(B) after giving effect to the making of any such
cash payment, the aggregate amount so expended for such purposes subsequent to
June 11, 2002 does not exceed $1,500,000; and
(C) after giving effect to the making of any such
cash payment, the aggregate amount so expended for such purposes in any Fiscal
Year of the Key Loan Parties does not exceed $500,000.
Notwithstanding anything to the contrary contained herein, dividends
(other than dividends payable solely in capital stock of another Loan Party)
shall be payable to the Parent by
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any other Loan Party only to the extent not otherwise in violation of the Loan
Documents and in any event, not to exceed $5,000,000 (less loans and advances to
the Parent made under clause (viii) of the definition of Permitted Indebtedness)
in the aggregate after June 11, 2002.
(h) Federal Reserve Regulations. Permit any Loan or the
proceeds of any Loan under this Agreement to be used for any purpose that would
cause such Loan to be a margin loan under the provisions of Regulation T, U or X
of the Board.
(i) Transactions with Affiliates. (i) Except as set forth in
that certain confidential side letter from the Borrower to the Agent and for
loans which may be made between Loan Parties permitted pursuant to Section
6.02(e) above, make any payment, nor give any value to any Affiliate except for
leases, goods and services with such Affiliate for a price and on terms which
shall be in the ordinary course of business at prices and on terms and
conditions no less favorable to that Loan Party than those which would have been
charged and imposed in an arm's-length transaction from unrelated third parties,
except (A) sales of goods to an Affiliate for use or distribution outside of the
United States of America which complies with the any applicable legal
requirements of the Internal Revenue Code of 1986 and the Treasury Regulations,
each as amended from time to time, provided, that such sales shall not exceed
$500,000 in the aggregate in any Fiscal Year of the Parent, (B) loans, advances
and other payments to officers and directors as part of their compensation which
are entered into in the ordinary course of business and which are not otherwise
prohibited under the Loan Documents, (C) other dividends and distributions to
officers, directors and shareholders otherwise permitted under this Agreement,
or (D) transactions between or among the Loan Parties not prohibited hereunder
and not involving any other Affiliate; (ii) (A) without prior written consent of
the Agent, amend, modify or waive any of the provisions of the instruments,
documents or agreements described in the confidential side letter referred to in
clause (i) above, the effect of which is to increase the payments or value to be
furnished by a Loan Party to any Affiliate (other than for ordinary increases
under such instruments, documents and agreements in the ordinary course of
business, for which the Loan Parties are presently obligated to make payment in
such instrument, document or agreement as in effect on the Effective Date) or
which would cause such instruments, documents or agreements to be at prices and
on terms and conditions no less favorable to that Loan Party than those which
would have been charged and imposed in an arm's-length transaction from
unrelated third parties, or (B) make any payments under such instruments,
documents or agreements in advance of the date when due other than payments made
to Affiliates to fund obligations or anticipated claims under medical claims,
employee benefit plans or agreements, and other similar plans, all in accordance
with current practice; and (iii) fail to use its best efforts to cause its
Affiliates to execute and deliver to the Agent and the Lenders such
documentation as the Agent may reasonably require to evidence the Affiliates'
agreement with the provisions of this Section 6.02(i), provided, however, that
notwithstanding anything to the contrary contained in this Section 6.02(i), no
Loan Party may (x) engage in any SSC Transaction or CPLP Transaction except in
accordance with the terms of Article XIV, or (y) make any payment to, provide
any value to, or enter into any transaction with, DSW or DSWSW, except (1) those
transactions set forth on Schedule 6.02(i) hereto, and (2) transactions for
leases, goods and services provided to or by DSW or DSWSW for a price and on
terms which shall be in the ordinary course of business at prices and on terms
and conditions no less favorable to that Loan Party than those which would have
been charged and imposed in an arm's-length transaction from unrelated third
parties.
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(j) Limitations on Dividends and Other Payment Restrictions
Affecting Subsidiaries and Restrictions on Obligations. Create or otherwise
cause, incur, assume, suffer or permit to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of (i) any Loan
Party to create or grant liens in favor of the Agent or to incur Obligations or
(ii) any Subsidiary of any Loan Party (A) to pay dividends or to make any other
distribution on any shares of Capital Stock of such Subsidiary owned by any Loan
Party or any of its Subsidiaries, (B) to pay or prepay or to subordinate any
Indebtedness owed to any Loan Party or any of its Subsidiaries, (C) to make
loans or advances to any Loan Party or any of its Subsidiaries or (D) to
transfer any of its property or assets to any Loan Party or any of its
Subsidiaries, or permit any of its Subsidiaries to do any of the foregoing;
provided, however, that nothing in any of clauses (A) through (D) of this
Section 6.02(j) shall prohibit or restrict compliance with:
(1) this Agreement and the other Loan Documents or
the Revolving Credit Facility Documents;
(2) any agreements in effect on the date of this
Agreement and described on Schedule 6.02(j);
(3) any Applicable Law, rule or regulation
(including, without limitation, applicable currency control laws and applicable
state corporate statutes restricting the payment of dividends in certain
circumstances);
(4) in the case of clause (D) any agreement
setting forth customary restrictions on the subletting, assignment or transfer
of any property or asset that is a lease, license, conveyance or contract of
similar property or assets; or
(5) in the case of clause (D), any agreement,
instrument or other document evidencing a Permitted Lien from restricting on
customary terms the transfer of any property or assets subject thereto.
(k) Limitation on Issuance of Capital Stock. Issue or sell or
enter into any agreement or arrangement for the issuance and sale of, or permit
any of its Subsidiaries to issue or sell or enter into any agreement or
arrangement for the issuance and sale of, any shares of its Capital Stock, any
securities convertible into or exchangeable for its Capital Stock or any
warrants, provided, that (i) Parent may issue since the Effective Date (as
defined in the Original Agreement) (A) the Warrant Stock, and (B) the Warrants
and the Conversion Warrants, and (ii) the Parent may issue (A) up to 5,000,000
shares of Common Stock (and following June 11, 2007, up to an additional
5,000,000 shares of Common Stock) that are issued to Persons other than
Affiliates of the Parent, including (1) shares of Common Stock or options
exercisable therefor, issued or to be issued under the Parent's 2000 Stock
Option Plan as in effect on June 11, 2002 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 Parent or any of its
Subsidiaries , in each case adopted or assumed after such date by the Parent'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 Parent's Board of Directors) of the Common
Stock on the date of the grant, and such additional number of shares as may
become
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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, (2) shares of restricted stock issued by the Parent to executive officers
of the Parent, and (3) shares of Common Stock issued by the Parent as charitable
gifts, and (B) up to an additional 2,153,000 shares of Common Stock issued
pursuant to options that are granted to executive officers of the Parent or its
Subsidiaries under the Parent's 2000 Stock Option Plan as in effect on June 11,
2002, at an exercise price of no less than $4.50 per share and such additional
number of shares as may become issuable pursuant to the terms of any such
options under the terms of such plan 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; and provided, 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 (B).
(l) Modifications of Indebtedness, Organizational Documents
and Certain Other Agreements, Etc. (i) Amend, modify or otherwise change (or
permit the amendment, modification or other change) in any manner of any of the
provisions of any of its or its Subsidiaries' Indebtedness or of any instrument
or agreement (including, without limitation, any purchase agreement, indenture,
loan agreement or security agreement) relating to any such Indebtedness if such
amendment, modification or change (A) would shorten the final maturity or
average life to maturity of, or require any payment to be made earlier than the
date originally scheduled on, such Indebtedness, or would increase the interest
rate applicable to such Indebtedness unless (x) Excess Availability, both
immediately prior to, immediately after giving effect to and on a pro forma
projected basis for the 12 months immediately following such amendment,
modification or change, is at least $100 million, or (y) the total amount of
such Indebtedness so amended, modified or changed since the Effective Date
(together with the amounts permitted under clause (ii) hereof), does not exceed
$500,000 in any Fiscal Year of the Borrower; (B) would change the subordination
provision, if any, of such Indebtedness, or (C) would otherwise be adverse to
the Lenders in any respect; (ii) except for the Obligations and except as
otherwise explicitly permitted herein, make any voluntary or optional payment,
prepayment, redemption, defeasance, sinking fund payment or other acquisition
for value of any of its or its Subsidiaries' Indebtedness (including, without
limitation, by way of depositing money or securities with the trustee therefor
before the date required for the purpose of paying any portion of such
Indebtedness when due), or refund, refinance, replace or exchange any other
Indebtedness for any such Indebtedness (except to the extent such Indebtedness
is otherwise expressly permitted by the definition of "Permitted Indebtedness"),
or make any payment, prepayment, redemption, defeasance, sinking fund payment or
repurchase of any outstanding Indebtedness as a result of any asset sale, change
of control, issuance and sale of debt or equity securities or similar event, or
give any notice with respect to any of the foregoing unless (x) Excess
Availability, both immediately prior to, immediately after giving effect to and
on a pro forma projected basis for the 12 months immediately following such
event is at least [$100] million, or (y) the total amount of such Indebtedness
so paid since June 11, 2002 (together with the amounts permitted under clause
(i)(A) hereof), does not exceed $500,000 in any Fiscal Year of the Parent; (iii)
except as permitted by Section 6.02(c), amend, modify or otherwise change its
name, jurisdiction of organization, organizational identification number or
FEIN; (iv) amend,
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modify or otherwise change its certificate of incorporation or bylaws (or other
similar organizational documents), including, without limitation, by the filing
or modification of any certificate of designation, or any agreement or
arrangement entered into by it, with respect to any of its Capital Stock
(including any shareholders' agreement), or enter into any new agreement with
respect to any of its Capital Stock, except any such amendments, modifications
or changes or any such new agreements or arrangements pursuant to this clause
(iv) that either individually or in the aggregate, could not have a Material
Adverse Effect; (v) amend, modify, waive or otherwise change (or permit the
amendment, modification, waiver or other change in any manner) of any provisions
in the Revolving Credit Facility Documents relating to (A) Availability, Excess
Availability, Excess Availability Reserve, Gross Availability or the Borrowing
Base (as each is defined in the Revolving Credit Facility) which amendment has
or could have the effect of increasing Availability, Excess Availability, Gross
Availability or the Borrowing Base or decreasing the Availability Reserve, (B)
the Credit Card Advance Rate, the Inventory Advance Rate, the Appraised
Inventory Percentage or the Appraised Inventory Liquidation Value (as each is
defined in the Revolving Credit Facility), in each case, to an amount in excess
of the rates set forth in the Revolving Credit Facility as in effect on the date
hereof, (C) the definition of Cash Control Event and the related provisions
contained in Article VII of the Revolving Credit Agreement or (D) any covenants
or Events of Default contained in the Revolving Credit Agreement, if such
amendments imposes any additional or more restrictive representations, covenants
(financial or otherwise) or events of default than is contained in the Revolving
Credit Agreements in effect on the date hereof, and, if, notwithstanding the
foregoing, such amendment is made, the Borrower shall promptly notify, and
furnish a copy thereof to the Agent; (vi) agree to any material amendment or
other material change to or waiver of any of its rights under any Material
Contract without the consent of the Agent (which consent shall not be
unreasonably withheld); or (vii) alter, modify or amend any Lease in a manner
which is reasonably likely to have a Material Adverse Effect.
(m) Investment Company Act of 1940. Engage in any business,
enter into any transaction, use any securities or take any other action or
permit any of its Subsidiaries to do any of the foregoing, that would cause it
or any of its Subsidiaries to become subject to the registration requirements of
the Investment Company Act of 1940, as amended, by virtue of being an
"investment company" or a company "controlled" by an "investment company" not
entitled to an exemption within the meaning of such Act.
(n) Properties. Other than in the ordinary course of business,
permit any property to become a fixture with respect to real property or to
become an accession with respect to other personal property with respect to
which real or personal property the Agent does not have a valid and perfected
first priority Lien.
(o) ERISA. Do or permit any ERISA Affiliate to do any of the
following, if as a result thereof, such Loan Party or ERISA Affiliate will, or
could reasonably be expected to, incur liability that is reasonably likely to
have a Material Adverse Effect:
(i) violate or fail to be in full compliance with any
Loan Party's Employee Benefit Plan;
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(ii) fail timely to file all reports and filings
required by ERISA to be filed by any Loan Party;
(iii) engage in any nonexempt "prohibited transactions"
or "reportable events" (respectively as described in ERISA);
(iv) engage in, or commit any act such that a tax or
penalty reasonably could be imposed upon any Loan Party on account thereof
pursuant to ERISA;
(v) incur any material accumulated funding deficiency
within the meaning of ERISA;
(vi) terminate any Employee Benefit Plan such that a
Lien could be asserted against any assets of any Loan Party on account thereof
pursuant to ERISA; or
(vii) fail to make any required contribution or payment
to, or make a complete or partial withdrawal from, any Employee Benefit Plan
which is a multiemployer plan within the meaning of Section 4001(a) of ERISA.
(p) Environmental. Knowingly or negligently permit the use,
handling, generation, storage, treatment, Release or disposal of Hazardous
Materials at any property owned or leased by it or any of its Subsidiaries,
except in compliance with Environmental Laws and so long as such use, handling,
generation, storage, treatment, Release or disposal of Hazardous Materials is
not reasonably likely to result in a Material Adverse Effect.
(q) Excess Availability Reserve. Permit the Excess
Availability Reserve at any time to be less than the sum of $27,500,000.
(r) Location of Collateral. (i) Remove any Collateral from
locations described in Schedule 5.01(ee) except for the following purposes:
(A) to accomplish sales of Inventory in the
ordinary course of business;
(B) to move Inventory or other Collateral from one
such location to another such location; or
(C) to utilize such of the Collateral as is
removed from such locations in the ordinary course of business.
(ii) place any tangible personal property of any Loan
Party in the care or custody of any third party, or store or entrust any such
personal property with a bailee or other third party, except (A) as otherwise
disclosed to the Agent pursuant to Section 5.01(ee), or permitted by this
Section 6.02(r), or (B) for Inventory in an amount not to exceed $1,000,000 at
[Cost (as defined in the Revolving Credit Facility)] in the aggregate at any
time in the ordinary course of business;
(s) Unrestricted Subsidiaries . Permit any Unrestricted
Subsidiary at
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any time to carry on any business activity or have any assets in excess of
$500,000 in the aggregate.
(t) Intellectual Property. Conduct its business so as to
infringe the patents, industrial designs, trademarks, trade names, trade styles,
brand names, service marks, logos, copyrights, trade secrets, know-how,
confidential information, or other intellectual or proprietary property of any
third Person, except where such infringement is not reasonably likely to have a
Material Adverse Effect.
(u) Parent's Line of Business. The Parent shall not engage in
any business, and shall not own any property or assets, other than acquiring and
owning (a) the capital stock of any other Loan Party, DSW or the Unrestricted
Subsidiaries, and (b) any investments permitted to be made by the Parent
hereunder, and (c) otherwise incidental to the operation of the business of a
holding company. In addition, notwithstanding anything to the contrary contained
herein, L/C's and Bankers Acceptances (each as defined in the Revolving Credit
Facility) issued for the account of the Parent shall be limited to those L/Cs
required to support the ▇▇▇▇▇▇▇'▇ compensation obligations of the Parent and its
Subsidiaries and for no other purpose.
ARTICLE VII
REPORTING REQUIREMENTS
Section 7.01 Maintain Records. The Loan Parties shall:
(a) At all times, keep proper books of account, in which full,
true, and accurate entries shall be made of all of the Loan Parties' financial
transactions, all in accordance with GAAP applied consistently with prior
periods to fairly reflect the consolidated financial condition of the Loan
Parties at the close of, and its results of operations for, the periods in
question.
(b) Timely provide the Agent with those financial reports,
statements, and schedules required by this Article VII or otherwise, each of
which reports, statements and schedules shall be prepared, to the extent
applicable, in accordance with GAAP applied consistently with prior periods to
fairly reflect the Consolidated financial condition of the Loan Parties at the
close of, and the results of operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the
Collateral including, without limitation, accurate current stock, cost, and
sales records of its Inventory for each Division, accurately and sufficiently
itemizing and describing the kinds, types, and quantities of Inventory and the
cost and selling prices thereof.
(d) At all times, retain (i) Deloitte and Touche, LLP, or such
other nationally recognized independent certified public accountants who are
reasonably satisfactory to SSC (as long as it remains in Control of the Key Loan
Parties) and the Agent, and instruct such accountants, subject to the terms of
such accountants' internal policies, and subject to the confidentiality
provisions of this Agreement, to fully cooperate with, and be available to, the
Agent to discuss the Loan Parties' financial performance, financial condition,
operating results,
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controls, and such other matters, within the scope of the retention of such
accountants, as may be raised by the Agent.
(e) Not change any Loan Party's Fiscal Year.
Section 7.02 Access to Records.
(a) Each Loan Party shall accord the Agent with reasonable
access during normal business hours from time to time as the Agent may require
to all properties owned by or over which any Loan Party has control. The Agent
shall have the right, and each Loan Party will permit the Agent from time to
time as the Agent may request, to examine, inspect, copy, and make extracts from
any and all of the Loan Parties' books, records, electronically stored data,
papers, and files. Each Loan Party shall make that Loan Party's copying
facilities available to the Agent.
(b) Each Loan Party hereby authorizes the Agent to (i)
inspect, copy, duplicate, review, cause to be reduced to hard copy, run off,
draw off, and otherwise use any and all computer or electronically stored
information or data which relates to any Loan Party. Each Loan Party shall
request full cooperation with the Agent from any service bureau, contractor,
accountant, or other Person; and (ii) verify at any time the Collateral or any
portion thereof, including verification with Account Debtors, and/or with each
Loan Party's computer billing companies, collection agencies, and accountants.
(c) The Agent from time to time may designate one or more
representatives to exercise the Agent's rights under this Section 7.02 as fully
as if the Agent were doing so; provided, that the Agent shall not designate a
Person which is in a Competitive Business.
Section 7.03 Prompt Notice to Administrative Agent.
(a) The Borrower shall provide the Agent with written notice
promptly upon the occurrence of any of the following events, which written
notice shall be with reasonable particularity as to the facts and circumstances
in respect of which such notice is being given (i) any change in any Loan
Party's president, chief executive officer, chief operating officer, and chief
financial officer (without regard to the title(s) actually given to the Persons
discharging the duties customarily discharged by officers with those titles);
(ii) any ceasing of any Loan Party's payment of the debts of that Loan Party
generally as they mature, in the ordinary course, to its creditors (other than
its ceasing of making of such payments on account of a dispute which, if
adversely determined to the Loan Parties is not reasonably likely to have
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a Material Adverse Effect); (iii) any failure by any Loan Party to pay rent at
any of that Loan Party's locations, which failure continues for more than three
(3) days following the last day on which such rent was payable unless such
failure is not reasonably likely to have a Material Adverse Effect; (iv) any
material adverse change in the business, operations, or financial affairs of the
Borrower; (v) the occurrence of any Default; (vi) any intention on the part of
any Loan Party to discharge that Loan Party's present independent accountants or
any withdrawal or resignation by such independent accountants from their acting
in such capacity (as to which, see Section 7.01(d)); (vii) any litigation which,
if determined adversely to any Loan Party, is reasonably likely to have a
Material Adverse Effect; (viii) any intention of a Key Loan Party to enter into
a consignment arrangement or licensing or other similar agreement (whether for
intellectual property, leased departments in stores or otherwise) with any other
Person (other than a Loan Party); (ix) any additional or amended collective
bargaining or other labor contract entered into after the Effective Date; (x)
any Material Accounting Changes; (xi) any material adverse change relating to
the type, quantity or quality of the Collateral or the Lien granted thereon;
(xii) any event, occurrence or circumstance not specifically described herein
that is reasonably likely to have a Material Adverse Effect; (xiii) any Loan
Party's entering into a license agreement after the Effective Date; (xiv) any
Loan Party's entering into a Capitalized Lease after the Effective Date; and
(xv) any Loan Party's entering into a Lease after the Effective Date.
(b) The Borrower shall (i) provide the Agent, when so
distributed, with copies of any materials distributed to the shareholders of the
Borrower; (ii) provide the Agent (A) when filed, copies of all filings with the
SEC. Such copies may be provided in electronic format; (B) when received, copies
of all correspondence from the SEC, other than routine general communications
from the SEC; and (C) should any of the information on any of the Schedules
hereto become misleading in any material respect, promptly advise the Agent in
writing with such revisions or updates as may be necessary or appropriate to
update or correct the same; provided, however, that no such Schedule shall be
deemed to have been amended, modified or superseded by any such correction or
update, nor shall any breach of any representation or warranty resulting from
the inaccuracy or incompleteness of such Schedule be deemed to have been cured
or waived, unless and until the Agent, in its discretion shall have accepted in
writing such revisions; (iii) at the request of Agent, from time to time,
provide the Agent with copies of all advertising (including copies of all print
advertising and duplicate tapes of all video and radio advertising); and
(iv)provide the Agent, when received by and Loan Party, with a copy of any
management letter or similar communications from any independent accountant of
any Loan Party.
Section 7.04 Weekly Reports. Weekly, on Friday of each week (as of
the then immediately preceding Saturday) the Borrower shall provide the Agent
with Borrowing Base Certificates (in the form of Exhibit 6.4 to the Revolving
Credit Facility, as such form may be revised from time to time by the Revolving
Credit Agent) prepared separately for each Division and combined for all Key
Loan Parties, and sales audit reports and flash collateral reports (each in such
form as may be specified from time to time by the Collateral Agents) prepared
separately for each Division and combined for all Key Loan Parties. Such reports
may be sent to the Agent by facsimile transmission, provided that the original
thereof is forwarded to the Agent on the date of such transmission.
Section 7.05 Monthly Reports. Monthly, the Borrower shall provide
the Agent with those financial statements and reports described on Schedule
7.05, annexed hereto, at the times set forth in such Schedule and a Leasehold
Mortgage Status Report.
Section 7.06 Quarterly Reports. Quarterly, within forty-five (45)
days following the end of each of the Loan Parties' fiscal quarters, the
Borrower shall provide the Agent with the following:
(a) An original counterpart of a management prepared financial
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statement (which shall be prepared in the same manner and using the same
assumptions as set forth in the forecasts furnished to, and approved by, the
Agent pursuant to the provisions of Section 7.10(c) hereof) for (A) the Loan
Parties on a consolidated basis, (B) the Filene's Business, and (C) the Value
City Business, in each case for the fiscal quarter most recently ended, and for
the period from the beginning of the Loan Parties' then current fiscal year
through the end of the subject quarter, with comparative information for the
same period of the previous fiscal year, which statement shall include a balance
sheet, statement of operations and cash flows and comparisons for the
corresponding quarter of the then immediately previous year, as well as to the
Loan Party's forecast;
(b) A list of all leases entered into or terminated during
such quarter; and
(c) The officer's compliance certificate described in Section
7.08.
Section 7.07 Annual Reports.
(a) Annually, within ninety (90) days following the end of the
Parent's fiscal year, the Borrower shall furnish the Agent with the following:
(i) an original signed counterpart of the Parent's consolidated annual financial
statement, which statement shall have been prepared by, and bear the unqualified
opinion of, the Borrower's independent certified public accountants (i.e. said
statement shall be "certified" by such accountants) and shall include, at a
minimum (with comparative information for the then prior fiscal year) a balance
sheet, statement of operations, statement of changes in shareholders' equity,
and cash flows; (ii) a consolidating annual financial statement for (x) the
Filene's Business, and (y) the Value City Business which shall include (with
comparative information for the then prior fiscal year) a balance sheet,
statement of changes in shareholders' equity, and cash flows; and (iii) the
officer's compliance certificate described in Section 7.08.
(b) No later than fifteen (15) days prior to the end of the
Parent's fiscal years, the Borrower shall give written notice to such
independent certified accountants (with a copy of such notice, when sent, to the
Agent) that such annual financial statement will be delivered by the Borrower to
the Agent and that the Borrower has been advised that the Agent and each Lender
will rely thereon with respect to the administration of, and transactions under,
the credit facilities contemplated by this Agreement.
Section 7.08 Officer's Certificates.The Borrower shall cause either
the Parent's chief executive officer, president, executive vice president, chief
financial officer, controller, or treasurer (each, an "Authorized Officer"), in
each instance, to provide such Person's Certificate with those monthly financial
statements to be provided within thirty (30) days of the end of each month and
with those to be provided quarterly and annual statements to be furnished
pursuant to this Agreement, which Certificate shall:
(a) Indicate that (i) with respect to the Consolidated
financial statement, the subject statement was prepared in accordance with GAAP
consistently applied, and (ii) with respect to all financial statements,
presents fairly the financial condition of the applicable Loan Parties at the
close of, and the results of the applicable Loan Parties' operations
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and cash flows (where such cash flows are required to be provided) for, the
period(s) presented, subject, however, to the following: (x) usual year end
adjustments (this exception shall note be included in the Certificate which
accompanies such annual statement); and (y) Material Accounting Changes, in
which event, such Certificate shall include a schedule (in reasonable detail) of
the effect of each such Material Accounting Change.
(b) Indicate either that (i) no Default has occurred and is
continuing, or (ii) if such an event has occurred, its nature (in reasonable
detail) and the steps (if any) being taken or contemplated by the Loan Parties
to be taken on account thereof.
Section 7.09 Inventory, Appraisals and Audits.
(a) The Agent, at the reasonable expense of the Loan Parties,
may participate in and/or observe each scheduled physical count of Inventory
which is undertaken on behalf of any Loan Party.
(b) The Loan Parties, at their own expense, shall cause not
less than one (1) physical inventory of each of Division to be undertaken in
each twelve (12) month period during which this Agreement is in effect; (i) the
Borrower, within forty-five (45) days following the completion of such
inventory, shall provide the Agent with a reconciliation of the results of each
such inventory (as well as of any other physical inventory undertaken by any
Loan Party) and shall post such results to the Loan Parties' stock ledger and,
as applicable to the Loan Parties' other financial books and records; and (ii)
the Agent, in its reasonable, good faith discretion, if any Event of Default has
occurred and is continuing, may cause such additional inventories to be taken as
the Agent determines (each, at the expense of the Loan Parties).
(c) The Agent may require the Collateral Agents (as defined in
the Revolving Credit Facility) to obtain appraisals of the Collateral (copies of
which, subject to the approval of the appraiser, shall be provided to the
Borrower promptly upon receipt thereof), at any time (i) after the occurrence
and during the continuance of an Event of Default, (ii) that Excess Availability
(as defined in the Revolving Credit Facility) is equal to or less than
$48,000,000, or (iii) after an Inadvertent Overadvance (as defined in the
Intercreditor Agreement) has occurred (in all events, at the Loan Parties'
expenses) conducted by Hilco Appraisal Services, LLC or such appraisers as are
satisfactory to the Agent and the Revolving Credit Agent, in addition to those
appraisals permitted to be obtained by the Collateral Agents (as defined in the
Revolving Credit Facility) pursuant to Section 5.9 of the Revolving Credit
Facility. Following the termination of the Revolving Credit Facility, the Agent
shall be entitled to conduct appraisals independently on the same terms granted
to the Collateral Agents under the terms of the Revolving Credit Facility in
effect on the Effective Date.
(d) If made available to any Loan Party, the Agent shall
receive copies of the results of any commercial finance field examination of the
Loan Parties' books and records conducted during any period in which this
Agreement is in effect.
(e) The Agent from time to time may undertake "mystery
shopping" (so-called) visits to all or any of the Loan Parties' business
premises.
Section 7.10 Additional Financial Information.
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(a) In addition to all other information required to be
provided pursuant to this Article VII, the Loan Parties promptly shall provide
the Agent with such other and additional information concerning the Loan
Parties, the operation of the Loan Parties' business, and the Loan Parties'
financial condition, including original counterparts of financial reports and
statements, as the Agent may from time to time reasonably request from the
Borrower.
(b) The Parent and the Borrower shall, upon the Agent's
request, provide the Agent, from time to time hereafter, with updated forecasts
of the Loan Parties' anticipated performance and operating results for the
current fiscal year. Such forecasts shall be in a format consistent with the
format previously provided to the Agent.
(c) In all events, the Parent and the Borrower, no sooner than
ninety (90) nor later than sixty (60) days prior to the end of each of the Loan
Parties' fiscal years, shall provide the Agent with an updated and extended
forecast which shall go out at least through the end of the then next fiscal
year and shall include a statement of operations, balance sheet, and statement
of cash flow, by month, each consolidated (with consolidating schedules by
Division) and each prepared in conformity with GAAP and consistent with the Loan
Parties' then current accounting practices.
(d) When available the "Annual Budget", as approved by the
Parent's Board of Directors, shall be provided to the Agent. The Annual Budget
shall be subject to the approval of the Agent (whose approval shall not be
unreasonably withheld) only if the Annual Budget varies in a material way from
the Business Plan for such fiscal year.
(e) Each Loan Party recognizes that all commercial finance
examinations, inventories, analysis, financial information, and other materials
which the Agent may obtain, develop, or receive with respect to the Loan Parties
(other than appraisals and inventories received from third parties) are
confidential to the Agent and that, except as otherwise provided herein, no Loan
Party is entitled to receipt of any of such commercial finance examinations,
inventories, analysis, financial information, and other materials, nor copies or
extracts thereof or therefrom.
Section 7.11 Format of Information. All information required to be
delivered pursuant to this Article VII may be delivered by and in electronic
format.
ARTICLE VIII
USE OF COLLATERAL
Section 8.01 Use of Inventory Control.
(a) No Loan Party shall engage in any of the following with
respect to its Inventory: (i) any sale, other than for fair consideration in the
conduct of the Loan Parties' business in the ordinary course; (ii) sales or
other dispositions to creditors, except returns in the ordinary course of
business; (iii) sales or other dispositions in bulk, except in the ordinary
course of business consistent with past practices; (iv) sales in breach of any
provision of this Agreement; and (v) sales other than sales in connection with
Permitted Dispositions.
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(b) Without the prior consent of the Agent, no sale of
Inventory shall be on consignment (other than between Loan Parties), approval,
or under any other circumstances such that, with the exception of the Loan
Parties' customary return policy applicable to the return of inventory purchased
by the Loan Parties' retail customers in the ordinary course, such Inventory may
be returned to a Loan Party without the consent of the Agent.
Section 8.02 Inventory Quality. All Inventory now owned or hereafter
acquired by each Loan Party is and will be of good and merchantable quality,
consistent with past practices.
Section 8.03 Adjustments and Allowances. Each Loan Party may grant
such allowances or other adjustments to that Loan Party's Account Debtors as
that Loan Party may reasonably deem to accord with sound business practice and
which are normal and customary extensions and adjustments in the ordinary course
of business, provided, however, the authority granted the Loan Parties pursuant
to this Section 8.03 may be limited or terminated by the Agent at any time in
the Agent's reasonable, good faith discretion after the occurrence and during
the continuance of an Event of Default.
Section 8.04 Validity of Accounts.
(a) Except for adjustments and disputes in the ordinary course
of business, the amount of each of the Accounts Receivable shown on the books,
records, and invoices of the Loan Parties represented as owing by each Account
Debtor is the correct amount actually owing by such Account Debtor and shall
have been fully earned by performance by the Loan Parties.
(b) No Loan Party has any knowledge of any impairment of the
validity or collectibility of any of the Accounts Receivable, other than
returns, reserves, unauthorized use of credit cards, bad checks, adjustments and
disputes which occur in the ordinary course of business. The Borrower shall
notify the Agent of any such impairment immediately after any Loan Party becomes
aware of any such impairment.
(c) No Loan Party shall post any bond to secure any Loan
Party's performance under any agreement to which any Loan Party is a party nor
cause any surety, guarantor, or other third party obligee to become liable to
perform any obligation of any Loan Party (other than to the Agent) in the event
of any Loan Party's failure so to perform, if, as a result of the surety,
guarantor or third party obligee's performance, such Person would obtain a Lien
on any Collateral having priority to the Lien of the Agent.
Section 8.05 Notification to Account Debtors. The Agent shall have
the right (after the occurrence of a Cash Control Event (as defined in the
Revolving Credit Facility)) to notify any of the Loan Parties' Account Debtors
to make payment directly to the Agent and to collect all amounts due on account
of the Collateral, in each case, subject to the terms of the Intercreditor
Agreement.
Section 8.06 Appointment as Attorney-In-Fact. Each Loan Party hereby
irrevocably constitutes and appoints the Agent (acting through any officer of
the Agent) as that
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Loan Party's true and lawful attorney, with full power of
substitution, following the occurrence and during the continuance of an Event of
Default and subject to the terms of the Intercreditor Agreement, to convert the
Collateral into cash at the sole risk, cost, and expense of that Loan Party, but
for the sole benefit of the Agent and the Lenders. The rights and powers granted
the Agent by this appointment include but are not limited to the right and power
to:
(a) Prosecute, defend, compromise, or release any action
relating to the Collateral;
(b) Sign change of address forms to change the address to
which each Loan Parties' mail is to be sent to such address as the Agent shall
designate (after which copies of all such mail shall be promptly furnished to
the Borrower); receive and open each Loan Parties' mail; remove any Collateral
and proceeds of Collateral therefrom and turn over the balance of such mail
either to the Loan Party or to any trustee in bankruptcy or receiver of the
Borrower, or other legal representative of the Borrower whom the Agent
determines to be the appropriate Person to whom to so turn over such mail;
(c) Endorse the name of the relevant Loan Party in favor of
the Agent upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the name of the relevant Loan Party on, and
receive as secured party, any of the Collateral, any invoices, schedules of
Collateral, freight or express receipts, or bills of lading, storage receipts,
warehouse receipts, or other documents of title respectively relating to the
Collateral;
(d) Sign the name of the relevant Loan Party on any notice to
that Loan Parties' Account Debtors or verification of the Collateral; sign the
relevant Loan Parties' name on any proof of claim in bankruptcy against Account
Debtors, and on notices of lien, claims of mechanic's liens, or assignments or
releases of mechanic's liens securing the Accounts Receivable;
(e) Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which any Loan
Party is a beneficiary;
(f) Repair, manufacture, assemble, complete, package, deliver,
alter or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of each Loan Party; and
(g) Use, license or transfer any or all General Intangibles of
each Loan Party.
Section 8.07 No Obligation To Act. The Agent shall not be obligated
to do any of the acts or to exercise any of the powers authorized by Section
8.06 herein, but if the Agent elects to do any such act or to exercise any of
such powers, it shall not be accountable for more than it actually receives as a
result of such exercise of power, and shall not be responsible to any Loan Party
or any other Person for any act or omission to act except for any act or
omission to act as to which there is a final determination made in a judicial
proceeding (in which proceeding the Agent has had an opportunity to be heard)
which determination includes a specific finding that the subject act or omission
to act had been grossly negligent or in actual bad faith, or willful
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misconduct.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01 Events of Default. The occurrence of any event
described in this Article IX respectively shall constitute an Event of Default
herein. The occurrence of any Event of Default shall also constitute, without
notice or demand, a default under all other agreements between the Agent or any
Lender and any Loan Party and instruments and papers heretofore, now, or
hereafter given the Agent or any Lender by any Loan Party in connection with any
of the Loan Documents. An Event of Default shall occur upon:
(a) The failure by any Loan Party to pay when due any
principal of, interest on, or fees in respect of, the Loan;
(b) The failure by any Loan Party or so long as any Lender
holds any Warrants or Conversion Warrants, DSW to pay when due (or upon demand,
if payable on demand) any payment Obligation other than any payment Obligation
on account of the principal of, or interest on, or fees in respect of the Loan;
(c) The failure by (i) any Loan Party to promptly, punctually,
faithfully and timely perform, discharge, or comply with any covenant or
Obligation included in any of the following provisions hereof:
SECTION RELATES TO
6.02(b) Indebtedness
6.01(b) Pay Taxes
6.02(g) Dividends. Investments. Other
Corporate Actions
6.02(e) Loans and Advances
6.02(i) Affiliate Transactions
6.02(q) Excess Availability Reserve
6.02(u) Parent's Line of Business
Article VII Reporting Requirements (except as
set forth in Section 9.01(d))
5(k) of the Security Cash Management
Agreement
or (ii) if at such time any Warrants or Conversion Warrants are held by a
Lender, DSW to promptly, punctually, faithfully and timely perform, discharge or
comply with any covenant or obligation contained in the Loan Documents to which
it is a party;
(d) the failure by the Key Loan Parties to promptly,
punctually, faithfully and timely perform, discharge, or comply with the
financial reporting requirements included in Section 7.04, subject, however, to
the following limited number of grace periods applicable to certain of those
requirements:
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NUMBER OF
REPORT/STATEMENT REQUIRED BY SECTION GRACE PERIOD GRACE PERIODS
---------------- ------------------- --------------- ------------------
Weekly Report 7.04 2 Business Days Twice any 12
consecutive months
(e) the failure by any Loan Party, within twenty (20) days
following the earlier of any Authorized Officer's knowledge of a breach of any
covenant or Obligation not described in any of clauses (a) through (d) above, or
of its receipt of written notice from the Agent of the breach of any of such
covenants or Obligations, provided that if such failure cannot be reasonably
cured within such twenty (20) day period and the Loan Parties have diligently
proceeded, and continue to diligently proceed, to effectuate a cure of such
failure, such failure shall not be an Event of Default hereunder unless (i) such
failure is not cured within twenty (20) days after the expiration of such
initial twenty (20) day period, or (b) such failure, in the reasonable judgment
of the Agent, is reasonably likely to have a Material Adverse Effect;
(f) the determination by the Agent that any representation or
warranty at any time made by any Loan Party or DSW to the Agent or any Lender
was not true or complete in all material respects when given;
(g) the occurrence and continuance of any Event of Default or
other event, which with the giving of notice, the passage of time or both, would
be an Event of Default under (i) the Revolving Credit Facility, or (ii) any
other Indebtedness of any Loan Party equal to or in excess of One Million
Dollars ($1,000,000.00) to any creditor other than the Agent or any Lender,
(whether or not such Indebtedness has been accelerated), or, Leases aggregating
more than five percent (5%) of all Leases of the Loan Parties existing from time
to time could be terminated due to a default by a Loan Party thereunder (whether
or not the subject creditor or lessor takes any action on account of such
occurrence);
(h) the occurrence of any breach of any covenant or Obligation
imposed by, or of any default under, any agreement between the Agent or any
Lender and any Loan Party or instrument given by any Loan Party to any Agent or
any Lender relating to Indebtedness of any Loan Party in excess of $1,000,000 in
the aggregate and the expiration, without cure, of any applicable grace period
(notwithstanding that the Agent or Lender may not have exercised all or any of
its rights on account of such breach or default);
(i) the occurrence of any uninsured loss, theft, damage, or
destruction of or to any material portion of the Collateral;
(j) (i) the entry of any judgment in excess of Two Million
Five Hundred Thousand Dollars ($2,500,000.00) against any Loan Party, which
judgment (A) is not covered by insurance (as to which the insurer has not
notified the applicable Loan Party of the insurer's reservation of rights) or
(B) is not satisfied, stayed (if a money judgment) or appealed from (with
execution or similar process stayed) within thirty (30) days of its entry;
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(ii) the entry of any order or the imposition of any
other process having the force of law, the effect of which is to restrain the
conduct by any Key Loan Party of its business in the ordinary course and which
is reasonably likely to have a Material Adverse Effect;
(k) any act by, against, or relating to any Loan Party, DSW or
DSWSW, or their respective properties or assets, which act constitutes the
determination, by such Person, to initiate a program of substantial or total
self-liquidation; application for, consent to, or sufferance of the appointment
of a receiver, trustee, or other Person, pursuant to court action or otherwise,
over all, or any part of any Loan Party's, DSW's or DSWSW's property; the
granting of any trust mortgage or execution of an assignment for the benefit of
the creditors of any Loan Party, DSW or DSWSW, or the occurrence of any other
voluntary or involuntary liquidation or extension of debt agreement for such
Person; the offering by or entering into by any Loan Party, DSW or DSWSW of any
composition, extension, or any other arrangement seeking relief generally from
or extension of the debts of such Person; or the initiation of any judicial or
non-judicial proceeding or agreement by, against, or including any Loan Party,
DSW or DSWSW which seeks or intends to accomplish a reorganization or
arrangement with creditors; and/or the initiation by or on behalf of any Loan
Party, DSW or DSWSW of the liquidation or winding up of all or any part of such
Person's business or operations except that any of the foregoing actions which
are commenced against a Loan Party, DSW or DSWSW shall not be deemed an Event of
Default hereunder as long as such action is timely contested in good faith by
such Person by appropriate proceedings and is dismissed within 60 days of the
institution of the foregoing;
(l) the failure by any Loan Party, DSW or DSWSW to generally
pay its debts as they mature; adjudication of bankruptcy or insolvency relative
to any Loan Party, DSW or DSWSW; the entry of an order for relief or similar
order with respect to any Loan Party, DSW or DSWSW in any proceeding pursuant to
the Bankruptcy Code or any other Federal bankruptcy law; the filing of any
complaint, application, or petition by any Loan Party, DSW or DSWSW initiating
any matter in which such Person is or may be granted any relief from its debts
pursuant to the Bankruptcy Code or any other insolvency statute or procedure;
the filing of any complaint, application, or petition against any Loan Party,
DSW or DSWSW initiating any matter in which such Person is or may be granted any
relief from its debts pursuant to the Bankruptcy Code or any other insolvency
statute or procedure, which complaint, application, or petition is not timely
contested in good faith by such Person by appropriate proceedings or, if so
contested, is not dismissed within 60 days of when filed;
(m) the termination or attempted termination of any Guaranty
by any Guarantor;
(n) (i) any challenge by or on behalf of any Loan Party or DSW
to the validity of any Loan Document or the applicability or enforceability of
any Loan Document strictly in accordance with the subject Loan Document's terms
or which seeks to void, avoid, limit, or otherwise adversely affect any security
interest created by or in any Loan Document or any payment made pursuant
thereto;
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(ii) any determination by any court or any other
judicial or Government Authority that any Loan Document is not enforceable
strictly in accordance with the subject Loan Document's terms or which voids,
avoids, limits, or otherwise adversely affects any security interest created by
any Loan Document or any payment made pursuant thereto;
(o) the occurrence of any Change in Control;
(p) an event or development occurs which, as determined by the
Agent in its discretion, has, or could reasonably be expected to have, a
Material Adverse Effect;
(q) (i) the failure of the Parent to own, directly or
indirectly, DSW Common Stock having at least 55% (except to the extent permitted
by clauses (x) and (y) of the last sentence of Section 6.02(c)) of the value
(calculated by reference to the Market Price) of all issued and outstanding DSW
Common Stock (except to the extent permitted by clauses (x) and (y) of the last
sentence of Section 6.02(c)), free and clear of all Liens (except Liens in favor
of the Agent and to the extent permitted by the last sentence of the definition
of the term "Permitted Liens"), (ii) the failure of the Agent to have a valid,
perfected, first priority Lien on DSW Common Stock having at least 55% of the
value (calculated by reference to the Market Price) of all issued and
outstanding DSW Common Stock, except to the extent such failure results solely
from the willful or intentional misconduct of the Agent, as determined by a
final judgment of a court of competent jurisdiction) or (iii) the failure of DSW
to own 100% of the Capital Stock of DSWSW;
(r) the failure of the holder of the DSW Note, the DSWSW
Guarantee, the RVI Note or the RVI Pledge to comply in any respect with any
subordination provision or any other intercreditor provision contained therein
or in any pledge agreement related thereto; or
(s) (i) the failure of the Borrower to release its Lien on the
Capital Stock of DSW upon exercise by the Warrantholders or the Conversion
Warrantholders of the Warrants or the Conversion Warrants, as the case may be,
to the extent necessary to permit such exercise (whether or not a default or
event of default has then occurred under the RVI Note), (ii) the exercise by the
Borrower of any right or remedy with respect to its Lien on the Capital Stock of
DSW (A) at any time prior to the date on which the Parent has received written
notice from the Senior Lenders that the Senior Obligations have been Paid in
Full (each as defined in the RVI Note as in effect on the Effective Date), and
(B) thereafter, without 90 days' prior written notice to the Warrantholders and
the Conversion Warrantholders, and (iii) the consent by the Borrower or RVI to
any modification of the terms of the RVI Note (except for Non Adverse Changes
(as such term is defined therein as in effect on the Effective Date)) or any of
the related documentation without the consent of the Lenders;
then, and in any such event, the Agent may, with the consent or at
the direction of the Required Lenders, by notice to the Borrower, (i) declare
all or any portion of the Loan and other Obligations then outstanding to be due
and payable, whereupon all or such portion of the aggregate principal of the
Loan and other Obligations, all accrued and unpaid interest thereon, all fees
and all other amounts payable under this Agreement and the other Loan Documents
shall become due and payable immediately, without presentment, demand, protest
or further notice of any kind, all of which are hereby expressly waived by each
Loan Party and (ii) exercise any and
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all of its other rights and remedies under Applicable Law, hereunder and under
the other Loan Documents; provided, however, that upon the occurrence and during
the continuance of any Event of Default described in subsection (k) or (l) of
this Section 9.01, without any notice to any Loan Party or any other Person or
any act by the Agent or any Lender, and the Loan, together with all accrued and
unpaid interest and PIK Interest thereon, all fees and all other amounts due
under this Agreement and the other Loan Documents shall become due and payable
automatically and immediately, without presentment, demand, protest or notice of
any kind, all of which are expressly waived by each Loan Party.
ARTICLE X
AGENT
Section 10.01 Appointment. Each Lender (and each subsequent maker of
any Loan by its making thereof) hereby irrevocably appoints and authorizes the
Agent to perform the duties of the Agent as set forth in this Agreement
including: (i) to receive on behalf of each Lender any payment of principal of
or interest on the Loan outstanding hereunder and all other amounts accrued
hereunder for the account of the Lenders and paid to the Agent, and, subject to
Sections 2.02 and 3.02 of this Agreement, to distribute promptly to each Lender
its Pro Rata Share of all payments so received; (ii) to distribute to each
Lender copies of all material notices and agreements received by the Agent and
not required to be delivered to each Lender pursuant to the terms of this
Agreement, provided that the Agent shall not have any liability to the Lenders
for the Agent's inadvertent failure to distribute any such notices or agreements
to the Lenders; (iii) to maintain, in accordance with its customary business
practices, ledgers and records reflecting the status of the Obligations, the
Loan, and related matters and to maintain, in accordance with its customary
business practices, ledgers and records reflecting the status of the Collateral
and related matters; (iv) to execute or file any and all financing or similar
statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to this Agreement or any other Loan Document; (v) to make Agent Advances, for
the Agent or on behalf of the applicable Lenders as provided in this Agreement
or any other Loan Document; (vi) to perform, exercise, and enforce any and all
other rights and remedies of the Lenders with respect to the Loan Parties, the
Obligations, or otherwise related to any of same to the extent reasonably
incidental to the exercise by the Agent of the rights and remedies specifically
authorized to be exercised by the Agent by the terms of this Agreement or any
other Loan Document, or as directed by the Required Lenders; (vii) to incur and
pay such fees necessary or appropriate for the performance and fulfillment of
its functions and powers pursuant to this Agreement or any other Loan Document;
and (viii) subject to Section 10.03 of this Agreement, to take such action as
the Agent deems appropriate on its behalf to administer the Loan and the Loan
Documents and to exercise such other powers delegated to the Agent by the terms
hereof or the other Loan Documents (including, without limitation, the power to
give or to refuse to give notices, waivers, consents, approvals and instructions
and the power to make or to refuse to make determinations and calculations)
together with such powers as are reasonably incidental thereto to carry out the
purposes hereof and thereof. As to any matters not expressly provided for by
this Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Loan), the Agent shall not be required to
exercise any discretion or take any action, which, in the reasonable opinion of
the Agent, exposes the Agent to liability or which is contrary to this Agreement
or any other Loan Document or
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Applicable Law. The Lenders hereby agree that the Required Lenders shall make
all decisions concerning (A) waivers, (B) amendments, (C) remedial action,
including, without limitation, the right to call a default, accelerate take
action to realize upon the Collateral, and (D) performance by the Lenders or
enforcement of the rights of the Lenders hereunder and under the Intercreditor
Agreement; provided, however, that the foregoing shall not limit the rights of
all Lenders under Section 12.02 hereof.
Section 10.02 Nature of Duties. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement or in the
other Loan Documents. The duties of the Agent shall be mechanical and
administrative in nature. Neither the Agent nor the Lenders shall have by reason
of this Agreement or any other Loan Document any fiduciary relationship. Nothing
in this Agreement or any other Loan Document, express or implied, is intended to
or shall be construed to impose upon the Agent or the Required Lenders any
obligations in respect of this Agreement or any other Loan Document except as
expressly set forth herein or therein. Each Lender shall make its own
independent investigation of the financial condition and affairs of the Loan
Parties in connection with the making and the continuance of the Loan hereunder
and shall make its own appraisal of the creditworthiness of the Loan Parties and
the value of the Collateral, and neither the Agent nor the Required Lenders
shall have any duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the initial Loan hereunder or
at any time or times thereafter; provided, that, upon the reasonable request of
a Lender, the Agent shall provide to such Lender any documents or reports
delivered to the Agent by the Loan Parties pursuant to the terms of this
Agreement or any other Loan Document.
Section 10.03 Rights; Exculpation, Etc. Neither the Agent nor the
Lenders, nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by them under or in
connection with this Agreement or the other Loan Documents, except for their own
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction. Without limiting the generality of the
foregoing, the Agent and the Lenders (i) may treat the payee of any Loan as the
owner thereof until the Agent receives written notice of the assignment or
transfer thereof, pursuant to Section 12.07 hereof, signed by such payee and in
form satisfactory to the Agent; (ii) may consult with legal counsel (including,
without limitation, counsel to the Agent or counsel to the Loan Parties),
independent public accountants, and other experts selected by any of them and
shall not be liable for any action taken or omitted to be taken in reasonable
good faith by any of them in accordance with the advice of such counsel or
experts; (iii) make no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, certificates, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Person, the existence
or possible existence of any Default or Event of Default, or to inspect the
Collateral or other property (including, without limitation, the books and
records) of any Person; (v) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto. Neither the Agent nor the
Required Lenders shall be liable for any apportionment or distribution of
payments made in
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good faith pursuant to Section 3.04; and (vi) shall not be deemed to have made
any representation or warranty regarding the existence, value or collectibility
of the Collateral, the existence, priority or perfection of the Agent's Lien
thereon, or any certificate prepared by any Loan Party in connection therewith,
nor shall the Agent or the Required Lenders be responsible or liable to the
Lenders for any failure to monitor or maintain any portion of the Collateral.
The Agent may at any time (but shall not be required to) request instructions
from the Required Lenders with respect to any actions or approvals which by the
terms of this Agreement or of any of the other Loan Documents the Agent is
permitted or required to take or to grant, and if such instructions are promptly
requested, the Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval under any of the Loan Documents until it
shall have received such instructions from the Required Lenders. Without
limiting the foregoing, no Lender shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining from acting
under this Agreement or any of the other Loan Documents in accordance with the
instructions of the Required Lenders, or against the Required Lenders on the
same basis for which a right of action could be brought against the Agent in
connection with such acting or refraining from acting, except to the extent such
action, lack of action or instruction is determined by a court of competent
jurisdiction, pursuant to a final judgment, to have constituted gross negligence
or willful misconduct.
Section 10.04 Reliance. The Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in reasonable good faith to be genuine and
correct and to have been signed, sent or made by the proper Person, and with
respect to all matters pertaining to this Agreement or any of the other Loan
Documents and its duties hereunder or thereunder, upon advice of counsel
selected by it.
Section 10.05 Indemnification. To the extent that the Agent is not
reimbursed and indemnified by any Loan Party, the Lenders will reimburse and
indemnify the Agent from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Agent in any way relating to or arising out
of this Agreement or any of the other Loan Documents (it being understood that
the foregoing shall not be deemed to include principal, interest or fees owed by
a Loan Party to the Agent) or any action taken or omitted by the Agent under
this Agreement or any of the other Loan Documents, in proportion to each
Lender's Pro Rata Share, including, without limitation, advances and
disbursements made pursuant to Section 10.08; provided, however, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements for which there has been a final judicial determination that such
liability resulted from the Agent's gross negligence or willful misconduct. The
obligations of the Lenders under this Section 10.05 shall survive the payment in
full of the Loan and the termination of this Agreement.
Section 10.06 Agent Individually. With respect to its Pro Rata Share
of the Loan made by it, the Agent shall have and may exercise the same rights
and powers hereunder and is subject to the same obligations and liabilities as
and to the extent set forth herein for any other Lender or maker of a Loan. The
term "Lenders" or "Required Lenders" or any similar terms shall, unless the
context clearly otherwise indicates, include the Agent in its individual
capacity as a Lender. The Agent and its Affiliates may accept deposits from,
lend money to, and
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generally engage in any kind of banking, trust or other business with any Key
Loan Party as if it were not acting as the Agent pursuant hereto without any
duty to account to the other Lenders.
Section 10.07 Successor Agent. (a) The Agent may resign from the
performance of all its functions and duties hereunder and under the other Loan
Documents at any time by giving at least thirty (30) Business Days' prior
written notice to the Borrower and each Lender. Such resignation shall take
effect upon the acceptance by a successor Agent of appointment pursuant to
clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Borrower shall
appoint a successor Agent acceptable to SSC. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the Agent, and the Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After the Agent's
resignation hereunder as the Agent, the provisions of this Article X shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
the Agent under this Agreement and the other Loan Documents.
(c) If a successor Agent shall not have been so appointed
within said thirty (30) Business Day period, the Agent shall then appoint a
successor Agent who shall serve as the Agent until such time, if any, as the
Borrower (with the consent of SSC) appoints a successor Agent as provided above.
Section 10.08 Collateral Matters.
(a) The Agent may from time to time make such disbursements
and advances ("Agent Advances") which the Agent, in its sole discretion, deems
reasonably necessary or desirable to preserve, protect, prepare for sale or
lease or dispose of the Collateral or any portion thereof, to enhance the
likelihood or maximize the amount of repayment by the Borrower of the Loan and
other Obligations or to pay any other amount chargeable to the Key Loan Parties
pursuant to the terms of this Agreement, including, without limitation, costs,
fees and expenses as described in Section 12.04. The Agent Advances shall be
repayable on demand and be secured by the Collateral. The Agent Advances shall
constitute Obligations hereunder. The Agent shall notify each Lender and the
Borrower in writing of each such Agent Advance, which notice shall include a
description of the purpose of such Agent Advance. Without limitation to its
obligations pursuant to Section 10.05, each Lender agrees that it shall make
available to the Agent, upon the Agent's demand, in Dollars in immediately
available funds, the amount equal to such Lender's Pro Rata Share of each such
Agent Advance. If such funds are not made available to the Agent by such Lender,
the Agent shall be entitled to recover such funds on demand from such Lender,
together with interest thereon for each day from the date such payment was due
until the date such amount is paid to the Agent, at the Federal Funds Rate for
three Business Days and thereafter at the Reference Rate.
(b) The Lenders hereby irrevocably authorize the Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Agent upon any Collateral upon payment and satisfaction of the Loan and all
other Obligations which have matured and which the Agent has been notified in
writing are then due and payable; or constituting property
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being sold or disposed of in compliance with the terms of this Agreement and the
other Loan Documents; or constituting property in which the Loan Parties owned
no interest at the time the Lien was granted or at any time thereafter; or if
approved, authorized or ratified in writing by the Lenders. Upon request by the
Agent at any time, the Lenders will confirm in writing the Agent's authority to
release particular types or items of Collateral pursuant to this Section
10.08(b).
(c) Without in any manner limiting the Agent's authority to
act without any specific or further authorization or consent by the Lenders (as
set forth in Section 10.08(b)), each Lender agrees to confirm in writing, upon
request by the Agent, the authority to release Collateral conferred upon the
Agent under Section 10.08(b). Upon receipt by the Agent of confirmation from the
Lenders of its authority to release any particular item or types of Collateral,
and upon prior written request by any Loan Party, the Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as may be
necessary to evidence the release of the Liens granted to the Agent for the
benefit of the Lenders upon such Collateral; provided, however, that (i) the
Agent shall not be required to execute any such document on terms which, in the
Agent's opinion, would expose the Agent to liability or create any obligations
or entail any consequence other than the release of such Liens without recourse
or warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Lien upon (or obligations of any Loan Party in
respect of) all interests in the Collateral retained by any Loan Party.
(d) The Agent shall have no obligation whatsoever to any
Lender to assure that the Collateral exists or is owned by the Loan Parties or
is cared for, protected or insured or has been encumbered or that the Lien
granted to the Agent pursuant to this Agreement or any other Loan Document has
been properly or sufficiently or lawfully created, perfected, protected or
enforced or is entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to the Agent in this Section 10.08 or in any other Loan Document, it
being understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole discretion, given the Agent's own interest in the
Collateral as one of the Lenders and that the Agent shall have no duty or
liability whatsoever to any other Lender, except as otherwise provided herein.
Section 10.09 Agency for Perfection. Each Lender hereby appoints the
Agent and each other Lender as agent and bailee for the purpose of perfecting
the security interests in and liens upon the Collateral in assets which, in
accordance with Article 9 of the Uniform Commercial Code, can be perfected only
by possession or control (or where the security interest of a secured party with
possession or control has priority over the security interest of another secured
party) and each Agent and each Lender hereby acknowledges that it holds
possession of or otherwise controls any such Collateral for the benefit of the
Agent and the Lenders as secured party. Should any Lender obtain possession or
control of any such Collateral, such Lender shall notify the Agent thereof, and,
promptly upon the Agent's request therefor shall deliver such Collateral to the
Agent or in accordance with the Agent's instructions. Each Loan Party by its
execution and delivery of this Agreement hereby consents to the foregoing.
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ARTICLE XI
GUARANTY
Section 11.01 Guaranty. Each Guarantor hereby unconditionally and
irrevocably guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all Obligations of the Borrower and
the Parent, now or hereafter existing under any Loan Document, whether for
principal, interest (including, without limitation, all interest that accrues
after the commencement of any Insolvency Proceeding of the Borrower or the
Parent), fees, commissions, indemnifications or otherwise (such obligations, to
the extent not paid by the Borrower or the Parent, as applicable, being the
"Guaranteed Obligations"), and agrees to pay any and all expenses (including
reasonable counsel fees and expenses) incurred by the Agent and the Lenders in
enforcing any rights under the Guaranty set forth in this Article XI. Without
limiting the generality of the foregoing, each Guarantor's liability shall
extend to all amounts that constitute part of the Guaranteed Obligations and
would be owed by the Borrower or the Parent, as applicable, to the Agent and the
Lenders under any Loan Document but for the fact that they are unenforceable or
not allowable due to the existence of an Insolvency Proceeding involving the
Borrower or the Parent, as applicable.
Section 11.02 Guaranty Absolute. Each Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Loan Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent or the Lenders with respect thereto. The Obligations of each Guarantor
under this Article XI are independent of the Guaranteed Obligations, and a
separate action or actions may be brought and prosecuted against each Guarantor
to enforce such Obligations, irrespective of whether any action is brought
against any Loan Party or any other Person or whether any Loan Party or any
other Person is joined in any such action or actions. The liability of each
Guarantor under this Article XI shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor hereby irrevocably waives any defenses it
may now or hereafter have in any way relating to, any or all of the following:
(a) Any lack of validity or enforceability of any Loan
Document or any agreement or instrument relating thereto;
(b) Any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Loan Party or
otherwise;
(c) Any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent to
departure from any other Guaranty, for all or any of the Guaranteed Obligations;
(d) Any change, restructuring or termination of the corporate,
limited liability company or partnership structure or existence of any Loan
Party; or
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(e) Any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any representation by
the Agent or the Lenders that might otherwise constitute a defense available to,
or a discharge of, any Loan Party or any other Guarantor or surety.
This Article XI shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Agent, the Lenders or any other person upon
the insolvency, bankruptcy or reorganization of the Borrower or the Parent or
otherwise, all as though such payment had not been made.
Section 11.03 Waiver. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Article XI and any requirement that the Agent or
the Lenders exhaust any right or take any action against any Loan Party or any
other Person or any Collateral. Each Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated herein
and that the waiver set forth in this Section 11.03 is knowingly made in
contemplation of such benefits. Each Guarantor hereby waives any right to revoke
this Article XI, and acknowledges that this Article XI is continuing in nature
and applies to all Guaranteed Obligations, whether existing now or in the
future.
Section 11.04 Continuing Guaranty; Assignments. This Article XI is a
continuing guaranty and shall (a) remain in full force and effect until the
later of the cash payment in full of the Guaranteed Obligations (other than
indemnification obligations as to which no claim has been made) and all other
amounts payable under this Article XI and the Final Maturity Date, (b) be
binding upon each Guarantor, its successors and assigns and (c) inure to the
benefit of and be enforceable by the Agent and the Lenders and their successors,
pledgees, transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Lender may pledge, assign or otherwise transfer all or
any portion of its rights and obligations under this Agreement (including,
without limitation, all or any portion of its Pro Rata Share of the Loan owing
to it) to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted such Lender herein or
otherwise, in each case as provided in Section 12.07.
Section 11.05 Subrogation. No Guarantor will exercise any rights
that it may now or hereafter acquire against any Loan Party or any other
Guarantor that arise from the existence, payment, performance or enforcement of
such Guarantor's obligations under this Article XI, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of the
Agent and the Lenders against any Loan Party or any other Guarantor or any
Collateral, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including, without limitation, the right to
take or receive from any Loan Party or any other Guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security solely on account of such claim, remedy or right, unless and
until all of the Guaranteed Obligations and all other amounts payable under this
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Article XI shall have been paid in full in cash and the Final Maturity Date
shall have occurred. If any amount shall be paid to any Guarantor in violation
of the immediately preceding sentence at any time prior to the later of the
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Article XI and the Final Maturity Date, such amount shall be
held in trust for the benefit of the Agent and the Lenders and shall forthwith
be paid to the Agent and the Lenders to be credited and applied to the
Guaranteed Obligations and all other amounts payable under this Article XI,
whether matured or unmatured, in accordance with the terms of this Agreement or
to be held as Collateral for any Guaranteed Obligations or other amounts payable
under this Article XI thereafter arising. If (i) any Guarantor shall make
payment to the Agent and the Lenders of all or any part of the Guaranteed
Obligations, (ii) all of the Guaranteed Obligations and all other amounts
payable under this Article XI shall be paid in full in cash and (iii) the Final
Maturity Date shall have occurred, the Agent and the Lenders will, at such
Guarantor's request and expense, execute and deliver to such Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to such Guarantor of an
interest in the Guaranteed Obligations resulting from such payment by such
Guarantor.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage, prepaid and return receipt requested), telecopied or delivered,
if to any Loan Party, at the following address:
Value City Department Stores LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇, Esq./▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇/3378
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
if to the Agent, to it at the following address:
Cerberus Partners, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
or, as to each party, at such other address as shall be designated
by such party in a written notice to the other parties complying as to delivery
with the terms of this Section 12.01. All such notices and other communications
shall be effective, (i) if sent by certified mail, return receipt requested, the
date when actually received, (ii) if sent by recognized overnight express
delivery, the Business Day following the day when sent, (iii) if delivered by
hand on a Business Day after 9:00 AM and no later than three (3) hours prior to
the close of customary business hours of the recipient, when delivered
(otherwise, at the opening of the then next Business Day), and (iv) by
telecopier and sent on a Business Day after 9:00 AM and no later than three (3)
hours prior to the close of customary business hours of the recipient, one (1)
hour after being sent (otherwise, at the opening of the then next Business Day).
Section 12.02 Amendments, Etc. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by any Loan Party
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Agent, the Borrower and the Guarantors, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given, provided, however, that no amendment, waiver or consent
shall (i) reduce the principal of, or interest on, the Loan, reduce the amount
of any fee payable for the account of any Lender, or postpone or extend any date
fixed for any payment of principal of, or interest or fees on the Loan payable
to any Lender, in each case without the written consent of any Lender affected
thereby, (ii) amend the definition of "Pro Rata Share", (iii) release all or a
substantial portion of the Collateral (except as otherwise provided in this
Agreement and the other Loan Documents), subordinate any Lien granted in favor
of the Agent for the benefit of the Lenders, or release the Borrower or any
Guarantor or (iv) amend, modify or waive Section 3.04, Article XII or this
Section 12.02 of this Agreement in each case, without the written consent of
each Lender. Notwithstanding the foregoing, no amendment, waiver or consent
shall, unless in writing and signed by the Agent, affect the rights or duties of
the Agent (but not in its capacity as a Lender) under this Agreement or the
other Loan Documents.
Section 12.03 No Waiver; Remedies, Etc. No failure on the part of
the Agent or any Lender to exercise, and no delay in exercising, any right
hereunder or under any other Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any right under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies of the Agent and the Lenders provided herein and
in the other Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the Agent
and the Lenders under any Loan Document against any party thereto are not
conditional or contingent on any attempt by the Agent and the Lenders to
exercise any of their rights under any other Loan Document against such party or
against any other Person.
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Section 12.04 Expenses; Taxes; Attorneys' Fees. The Borrower will
pay within ten (10) days after demand therefor (which demand shall include a
statement of the nature thereof), all costs and expenses incurred by or on
behalf of the Agent and each Lender, regardless of whether the transactions
contemplated hereby are consummated, including, without limitation, reasonable
fees, costs, client charges and expenses of counsel for the Agent and each
Lender), accounting, due diligence, periodic field audits, physical counts,
valuations, investigations, searches and filings, monitoring of assets,
appraisals of Collateral, title searches and reviewing environmental
assessments, miscellaneous disbursements, examination, travel, lodging and
meals, arising from or relating to the following: (a) the negotiation,
preparation, execution, delivery, performance and administration of this
Agreement and the other Loan Documents (including, without limitation, the
preparation of any additional Loan Documents pursuant to Section 6.01(b) or the
review of any of the agreements, instruments and documents referred to in
Section 6.01(f)); (b) any requested amendments, waivers or consents to this
Agreement or the other Loan Documents whether or not such documents become
effective or are given; (c) the preservation and protection of any of the
Lenders' rights under this Agreement or the other Loan Documents; (d) the
defense of any claim or action asserted or brought against the Agent or any
Lender by any Person that arises from or relates to this Agreement, any other
Loan Document, the Agent's or the Lenders' claims against any Loan Party, or any
and all matters in connection therewith; (e) the commencement or defense of, or
intervention in, any court proceeding arising from or related to this Agreement
or any other Loan Document; (f) the filing of any petition, complaint, answer,
motion or other pleading by the Agent or any Lender, or the taking of any action
in respect of the Collateral or other security, in connection with this
Agreement or any other Loan Document; (g) the protection, collection, lease,
sale, taking possession of or liquidation of, any Collateral or other security
in connection with this Agreement or any other Loan Document; (h) any attempt to
enforce any Lien or security interest in any Collateral or other security in
connection with this Agreement or any other Loan Document; (i) any attempt to
collect from any Loan Party; (j) all liabilities and costs arising from or in
connection with the past, present or future operations of any Loan Party
involving any damage to real or personal property or natural resources or harm
or injury alleged to have resulted from any Release of Hazardous Materials on,
upon or into such property; (k) any Environmental Liabilities and Costs incurred
in connection with the investigation, removal, cleanup and/or remediation of any
Hazardous Materials present or arising out of the operations of any facility of
any Loan Party; (l) any Environmental Liabilities and Costs incurred in
connection with any Environmental Lien; or (m) the receipt by the Agent or any
Lender of any advice from professionals with respect to any of the foregoing;
provided that with respect to clauses (d), (e) and (f) above, such costs and
expenses shall not include those costs and expenses that have been determined by
a court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such Lender or Agent, as the case may be. Without
limitation of the foregoing or any other provision of any Loan Document: (x) the
Borrower agree to pay all stamp, document, transfer, recording or filing taxes
or fees and similar impositions now or hereafter determined by the Agent or any
Lender to be payable in connection with this Agreement or any other Loan
Document, and the Borrower agrees to save the Agent and each Lender harmless
from and against any and all present or future claims, liabilities or losses
with respect to or resulting from any omission to pay or delay in paying any
such taxes, fees or impositions unless such omission is the result of the gross
negligence or willful misconduct of any Lender; (y) the Borrower agrees to pay
all broker and investment banking
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fees that may become due in connection with the transactions contemplated by
this Agreement and the other Loan Documents (the Agent and the Lenders represent
and warrant that no brokers have been engaged or retained by any of them in
connection with the transactions evidenced by the Loan Documents); and (z) if
the Borrower fails to perform any covenant or agreement contained herein or in
any other Loan Document, the Agent may itself perform or cause performance of
such covenant or agreement, and the expenses of the Agent incurred in connection
therewith shall be reimbursed on demand by the Borrower.
Section 12.05 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, the Agent or any Lender may, and is hereby
authorized to, at any time and from time to time, without notice to any Loan
Party (any such notice being expressly waived by the Loan Parties) and to the
fullest extent permitted by law, set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
Indebtedness at any time owing by the Agent or such Lender to or for the credit
or the account of any Loan Party against any and all obligations of the Loan
Parties either now or hereafter existing under any Loan Document, irrespective
of whether or not the Agent or such Lender shall have made any demand hereunder
or thereunder and although such obligations may be contingent or unmatured. The
Agent and each Lender agree to notify such Loan Party promptly after any such
set-off and application made by the Agent or such Lender provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Agent and the Lenders under this Section 12.05
are in addition to the other rights and remedies (including other rights of
set-off) which the Agent and the Lenders may have under this Agreement or any
other Loan Documents of law or otherwise.
Section 12.06 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 portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 12.07 Assignments and Participations. (a) This Agreement and
the other Loan Documents shall be binding upon and inure to the benefit of each
Loan Party and the Agent and each Lender and their respective successors and
assigns; provided, however, that none of the Loan Parties may assign or transfer
any of its rights hereunder without the prior written consent of each Lender and
any such assignment without the Lenders' prior written consent shall be null and
void.
(b) Each Lender may, with the written consent (which consent
shall not be unreasonably withheld) of SSC (so long as SSC is the Agent or a
Lender under this Agreement) and the Borrower (so long as no Event of Default
has occurred and is continuing), assign to one or more other Lenders or other
Eligible Assignees all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of the Loan made by
it); provided, however, that (i) such assignment is in an amount which is at
least $5,000,000 or a multiple of $1,000,000 in excess thereof (or the remainder
of such Lender's Pro Rata Share of the Loan) (except such minimum amount shall
not apply to an assignment by a Lender to an Affiliate of such Lender or a fund
or account managed by such Lender or an Affiliate of such Lender or, in the case
of SSC, a shareholder of such Lender), (ii) the parties to each such assignment
shall execute and deliver to the Agent, for its acceptance, an Assignment
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and Acceptance, together with any promissory note subject to such assignment and
such parties shall deliver to the Agent a processing and recordation fee of
$5,000 (except the payment of such fee shall not be required in connection with
an assignment by a Lender to an Affiliate of such Lender or a fund or account
managed by such Lender or an Affiliate of such Lender, or, in the case of SSC, a
shareholder of such Lender) and (iii) no written consent of the SSC and the
Borrower shall be required in connection with any assignment by a Lender to an
Affiliate of such Lender or a fund or account managed by such Lender or an
Affiliate of such Lender, or in the case of SSC, a shareholder of such Lender.
Upon such execution, delivery and acceptance, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least three (3) Business Days after the delivery thereof to the Agent (or such
shorter period as shall be agreed to by the Agent and the parties to such
assignment), (A) the assignee thereunder shall become a "Lender" hereunder and,
in addition to the rights and obligations hereunder held by it immediately prior
to such effective date, have the rights and obligations hereunder that have been
assigned to it pursuant to such Assignment and Acceptance and (B) the assigning
Lender thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto).
(i) By executing and delivering an Assignment and
Acceptance, the assigning Lender and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (A) other than as
provided in such Assignment and Acceptance, the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document furnished pursuant hereto provided that such assigning Lender's
obligations and responsibilities under the confidentiality provisions of this
Agreement shall continue despite any assignment by such assigning Lender; (B)
the assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or any
of its Subsidiaries or the performance or observance by any Loan Party of any of
its obligations under this Agreement or any other Loan Document furnished
pursuant hereto; (C) such assignee confirms that it has received a copy of this
Agreement and the other Loan Documents, together with such other documents and
information it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (D) such assignee will,
independently and without reliance upon the assigning Lender, the Agent or any
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Loan Documents; (E) such assignee
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Loan Documents as are
delegated to the Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental hereto and thereto; and (F) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement and the other Loan Documents
are required to be performed by it as a Lender.
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(ii) The Borrower authorizes the Agent, and the Agent
agrees, to maintain, or cause to be maintained at the Payment Office, a copy of
each Assignment and Acceptance delivered to and accepted by it and a register
(the "Register") for the recordation of the names and addresses of the Lenders,
and the principal amount of the Loan (the "Registered Loans") owing to each
Lender from time to time. The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the Agent and
the Lenders shall treat each Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower and any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(iii) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee, together with any promissory
notes subject to such assignment, the Agent shall, if the Agent consents to such
assignment and if such Assignment and Acceptance has been completed (A) accept
such Assignment and Acceptance and (B) record the information contained therein
in the Register.
(iv) In addition to the other requirements contained in
this Section 12.07, a Registered Loan (and the registered note, if any,
evidencing the same) may be assigned or sold in whole or in part only by
registration of such assignment or sale on the Register (and each registered
note shall expressly so provide). Any assignment or sale of all or part of such
Registered Loan (and the registered note, if any, evidencing the same) may be
effected only by registration of such assignment or sale on the Register,
together with the surrender of the registered note, if any, evidencing the same
duly endorsed by (or accompanied by a written instrument of assignment or sale
duly executed by) the holder of such registered note, whereupon, at the request
of the designated assignee(s) or transferee(s), one or more new registered notes
in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or sale of
any Registered Loan (and the registered note, if any, evidencing the same), the
Agent shall treat the Person in whose name such Registered Loan (and the
registered note, if any, evidencing the same) is registered as the owner thereof
for the purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary.
(v) In the event that any Lender sells participations in
a Registered Loan, such Lender shall maintain a register on which it enters the
name of all participants in the Registered Loans held by it (the "Participant
Register"). A Registered Loan (and the registered note, if any, evidencing the
same) may be participated in whole or in part only by registration of such
participation on the Participant Register (and each registered note shall
expressly so provide). Any participation of such Registered Loan (and the
registered note, if any, evidencing the same) may be effected only by the
registration of such participation on the Participant Register.
(vi) Any foreign Person who purchases or is assigned or
participates in any portion of such Registered Loan shall provide the Agent and
the assigning or selling Lender with a completed Internal Revenue Service Form
W-8BEN (Certificate of Foreign Status) or a substantially similar form for such
purchaser, participant or any other affiliate who is a holder of beneficial
interests in the Registered Loan.
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(c) Each Lender may, with the written consent (which consent
shall not be unreasonably withheld) of SSC (so long as SSC is the Agent or a
Lender under this Agreement) and the Borrower (so long as no Event of Default
has occurred and is continuing), sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Loan Documents (including, without limitation, all
or a portion of its Pro Rata Share of the Loan made by it); provided, that (i)
such Lender's obligations under this Agreement (including without limitation,
its Commitments hereunder) and the other Loan Documents shall remain unchanged;
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, and the Borrower, the Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents; (iii) a participant shall not be entitled to require
such Lender to take or omit to take any action hereunder except (A) action
directly effecting an extension of the maturity dates or decrease in the
principal amount of the Loan, (B) action directly effecting an extension of the
due dates or a decrease in the rate of interest payable on the Loan or the fees
payable under this Agreement, or (C) actions directly effecting a release of any
Loan Party (except as provided otherwise by this Agreement or any other Loan
Document); and (iv) no consent of SSC or the Borrower will be required for the
sale by a Lender to an Affiliate of such Lender or a fund or account managed by
such Lender or an Affiliate of such Lender.
Section 12.08 Counterparts. 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 telecopier 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 telecopier 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. The foregoing shall apply to each other Loan
Document mutatis mutandis.
SECTION 12.09 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN
RESPECT OF SUCH OTHER LOAN DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK.
SECTION 12.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE BROUGHT IN ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ IN THE COUNTY OF
NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY HEREBY
IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE AGENT AND THE LENDERS TO SERVICE OF PROCESS IN ANY MANNER PERMITTED BY
LAW OR TO COMMENCE
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LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY LOAN PARTY IN ANY OTHER
JURISDICTION. EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY LOAN PARTY HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, EACH LOAN PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF
ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 12.11 WAIVER OF JURY TRIAL, ETC. EACH LOAN PARTY, THE AGENT
AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS, 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 FROM ANY FINANCING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH LOAN
PARTY CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT
OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY
LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK
TO ENFORCE THE FOREGOING WAIVERS. EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO
THIS AGREEMENT.
Section 12.12 Consent by the Agent and Lenders. Except as otherwise
expressly set forth herein to the contrary, if the consent, approval,
satisfaction, determination, judgment, acceptance or similar action (an
"Action") of the Agent shall be permitted or required pursuant to any provision
hereof or any provision of any other agreement to which any Loan Party is a
party and to which the Agent or any Lender has succeeded thereto, such Action
shall be required to be in writing and may be withheld or denied by the Agent,
in its sole good faith discretion.
Section 12.13 No Party Deemed Drafter. Each of the parties hereto
agrees that no party hereto shall be deemed to be the drafter of this Agreement.
Section 12.14 Reinstatement; Certain Payments. If any claim is ever
made upon the Agent or any Lender for repayment or recovery of any amount or
amounts received by the Agent or such Lender in payment or on account of any of
the Obligations, the Agent or such Lender shall give prompt notice of such claim
to each other Lender and the Borrower, and if the Agent or such Lender repays
all or part of such amount by reason of (i) any judgment, decree or
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order of any court or administrative body having jurisdiction over the Agent or
such Lender or any of its property, or (ii) any good faith settlement or
compromise of any such claim effected by the Agent or such Lender with any such
claimant, then and in such event each Loan Party agrees that (A) any such
judgment, decree, order, settlement or compromise shall be binding upon it
notwithstanding the cancellation of any Indebtedness hereunder or under the
other Loan Documents or the termination of this Agreement or the other Loan
Documents, and (B) it shall be and remain liable to the Agent or such Lender
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by the Agent or such Lender.
Section 12.15 Indemnification.
(a) General Indemnity. In addition to each Loan Party's other
Obligations under this Agreement, each Loan Party agrees to, jointly and
severally, defend, protect, indemnify and hold harmless the Agent and each
Lender and all of their respective officers, directors, employees, attorneys,
consultants and agents (collectively called the "Indemnitees") from and against
any and all losses, damages, liabilities, obligations, penalties, reasonable
fees, costs and expenses (including, without limitation, reasonable attorneys'
fees, costs and expenses) incurred by such Indemnitees, whether prior to or from
and after the Effective Date, whether direct, indirect or consequential, as a
result of or arising from or relating to or in connection with any of the
following: (i) the negotiation, preparation, execution or performance or
enforcement of this Agreement, any other Loan Document or of any other document
executed in connection with the transactions contemplated by this Agreement;
(ii) the Agent's or any Lender's furnishing of funds to the Borrower under this
Agreement or the other Loan Documents, including, without limitation, the
management of the Loan; (iii) any matter relating to the financing transactions
contemplated by this Agreement or the other Loan Documents or by any document
executed in connection with the transactions contemplated by this Agreement or
the other Loan Documents; or (iv) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any Indemnitee is a
party thereto (collectively, the "Indemnified Matters"); provided, however, that
the Loan Parties shall not have any obligation to any Indemnitee under this
subsection (a) for any Indemnified Matter caused by the gross negligence or
willful misconduct of such Indemnitee, as determined by a final judgment of a
court of competent jurisdiction.
(b) Environmental Indemnity. Without limiting Section 12.15(a)
hereof, each Loan Party agrees to, jointly and severally, defend, indemnify, and
hold harmless the Indemnitees against any and all Environmental Liabilities and
Costs and all other claims, demands, penalties, fines, liability (including
strict liability), losses, damages, costs and expenses (including without
limitation, reasonable legal fees and expenses, consultant fees and laboratory
fees), arising out of (i) any Releases or threatened Releases (A) at any
property presently or formerly owned or operated by any Loan Party or any
Subsidiary of any Loan Party, or any predecessor in interest, or (B) of any
Hazardous Materials generated and disposed of by any Loan Party or any
Subsidiary of any Loan Party, or any predecessor in interest; (ii) any
violations of Environmental Laws; (iii) any Environmental Action relating to any
Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest;
(iv) any personal injury (including wrongful death) or property damage (real or
personal) arising out of exposure to Hazardous Materials used, handled,
generated, transported or disposed by any Loan Party or any
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Subsidiary of any Loan Party, or any predecessor in interest; and (v) any breach
of any warranty or representation regarding environmental matters made by the
Loan Parties in Section 6.01(g) or the breach of any covenant made by the Loan
Parties in Section 5.01(r). Notwithstanding the foregoing, the Loan Parties
shall not have any obligation to any Indemnitee under this subsection (b)
regarding any potential environmental matter covered hereunder which is caused
by the gross negligence or willful misconduct of such Indemnitee, as determined
by a final judgment of a court of competent jurisdiction.
(c) To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section 12.15 may be unenforceable because it is
violative of any law or public policy, each Loan Party shall, jointly and
severally, contribute the maximum portion which it is permitted to pay and
satisfy under Applicable Law, to the payment and satisfaction of all Indemnified
Matters incurred by the Indemnitees. The indemnities set forth in this Section
12.15 shall survive the repayment of the Obligations and discharge of any Liens
granted under the Loan Documents.
Section 12.16 [Intentionally Omitted.]
Section 12.17 Records. The unpaid principal of and interest on the
Loan, the interest rate or rates applicable to such unpaid principal and
interest, the duration of such applicability, and the accrued and unpaid fees
shall at all times be ascertained from the records of the Agent, which shall be
rebuttably presumed to be correct, absent manifest error.
Section 12.18 Binding Effect. This Agreement shall become effective
when it shall have been executed by each Loan Party, the Agent and each Lender
and when the conditions precedent set forth in Section 4.01 hereof have been
satisfied or waived in writing by the Agent, and thereafter shall be binding
upon and inure to the benefit of each Loan Party, the Agent and each Lender, and
their respective successors and assigns, except that the Loan Parties shall not
have the right to assign their rights hereunder or any interest herein without
the prior written consent of each Lender, and any assignment by any Lender shall
be governed by Section 12.07 hereof.
Section 12.19 Maximum Interest. It is the intention of the parties
hereto that the Agent and each Lender shall conform strictly to usury laws
applicable to it. Accordingly, if the transactions contemplated hereby or by any
other Loan Document would be usurious as to the Agent or any Lender under laws
applicable to it (including the laws of the United States of America and the
State of New York or any other jurisdiction whose laws may be mandatorily
applicable to the Agent or such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in this Agreement or any other Loan Document or any agreement entered into in
connection with or as security for the Obligations, it is agreed as follows: (i)
the aggregate of all consideration which constitutes interest under law
applicable to the Agent or any Lender that is contracted for, taken, reserved,
charged or received by the Agent or such Lender under this Agreement or any
other Loan Document or agreements or otherwise in connection with the
Obligations shall under no circumstances exceed the maximum amount allowed by
such applicable law, any excess shall be canceled automatically and if
theretofore paid shall be credited by the Agent or such Lender on the principal
amount of the Obligations (or, to the extent that the principal amount of the
Obligations shall have been or
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would thereby be paid in full, refunded by the Agent or such Lender, as
applicable, to the Borrower); and (ii) in the event that the maturity of the
Obligations is accelerated by reason of any Event of Default under this
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest under law applicable to the
Agent or any Lender may never include more than the maximum amount allowed by
such applicable law, and excess interest, if any, provided for in this Agreement
or otherwise shall be canceled automatically by the Agent or such Lender, as
applicable, as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by the Agent or such Lender, as applicable,
on the principal amount of the Obligations (or, to the extent that the principal
amount of the Obligations shall have been or would thereby be paid in full,
refunded by the Agent or such Lender to the Borrower). All sums paid or agreed
to be paid to the Agent or any Lender for the use, forbearance or detention of
sums due hereunder shall, to the extent permitted by law applicable to the Agent
or such Lender, be amortized, prorated, allocated and spread throughout the full
term of the Loan until payment in full so that the rate or amount of interest on
account of the Loan hereunder does not exceed the maximum amount allowed by such
applicable law. If at an time and from time to time (x) the amount of interest
payable to the Agent or any Lender on any date shall be computed at the Highest
Lawful Rate applicable to the Agent or such Lender pursuant to this Section
12.19 and (y) in respect of any subsequent interest computation period the
amount of interest otherwise payable to the Agent or such Lender would be less
than the amount of interest payable to the Agent or such Lender computed at the
Highest Lawful Rate applicable to the Agent or such Lender, then the amount of
interest payable to the Agent or such Lender in respect of such subsequent
interest computation period shall continue to be computed at the Highest Lawful
Rate applicable to the Agent or such Lender until the total amount of interest
payable to the Agent or such Lender shall equal the total amount of interest
which would have been payable to the Agent or such Lender if the total amount of
interest had been computed without giving effect to this Section 12.19.
For purposes of this Section 12.19, the term "applicable law" shall
mean that law in effect from time to time and applicable to the loan transaction
between the Borrower, on the one hand, and the Agent and the Lenders, on the
other, that lawfully permits the charging and collection of the highest
permissible, lawful non-usurious rate of interest on such loan transaction and
this Agreement, including laws of the State of New York and, to the extent
controlling, laws of the United States of America.
The right to accelerate the maturity of the Obligations does not
include the right to accelerate any interest that has not accrued as of the date
of acceleration.
Section 12.20 Confidentiality. The Agent and each Lender agrees (on
behalf of itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of this nature and in accordance with safe and sound practices of comparable
commercial finance companies, any non-public information supplied to it by the
Loan Parties pursuant to this Agreement or the other Loan Documents which is
identified in writing by the Loan Parties as being confidential at the time the
same is delivered to such Person (or consists of information (such as business
plans and financial information) which is customarily confidential information)
(and which at the time is not, and does not thereafter become, publicly
available or legally available to such Person from another source (other than
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the Loan Parties) on a nonconfidential basis), provided, that nothing herein
shall limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for the Agent or
any Lender, (iii) to examiners, auditors, accountants or Securitization Parties,
so long as such Person first agrees, in writing, to be bound by confidentiality
provisions similar in substance to this Section 12.20, (iv) in connection with
any litigation to which the Agent or any Lender is a party or (v) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) first agrees,
in writing, to be bound by confidentiality provisions similar in substance to
this Section 12.20. The Agent and each Lender agrees that, upon receipt of a
request or identification of the requirement for disclosure pursuant to clause
(iv) hereof, it will make reasonable efforts to keep the Loan Parties informed
of such request or identification; provided, that the each Loan Party
acknowledges that the Agent and each Lender may make disclosure as required or
requested by any Governmental Authority or representative thereof and that the
Agent and each Lender may be subject to review by Securitization Parties or
other regulatory agencies and may be required to provide to, or otherwise make
available for review by, the representatives of such parties or agencies any
such non-public information.
Section 12.21 Integration. This Agreement, together with the other
Loan Documents, reflects the entire understanding of the parties with respect to
the transactions contemplated hereby and shall not be contradicted or qualified
by any other agreement, oral or written, before the date hereof.
ARTICLE XIII
ISSUANCE OF EQUITY INTERESTS TO LENDERS
Section 13.01 Authorization and Issuance of Warrants. On the
Effective Date, the Parent shall issue to the Lenders one or more warrant
certificates covering the purchase of shares of Common Stock and Class A Common
Shares substantially in the form of Exhibit B-2 hereto (such certificates,
together with the rights to purchase Common Stock and Class A Common Shares
provided thereby and all warrant certificates covering such stock issued upon
transfer, division or combination of, or in substitution for, any thereof, being
herein called the "Conversion Warrants") in an aggregate amount equal to, on the
Effective Date, in the case of an exercise of the Conversion Warrants for Common
Stock, the Common Stock Exercise Amount (as defined in the Conversion Warrant),
and in the case of an exercise of the Conversion Warrants for Class A Common
Shares, an amount equal to the Initial DSW Stock Exercise Amount. It is
understood and agreed that the Conversion Warrants contain provisions affecting
the number of shares of Common Stock and Class A Common Shares for which the
Conversion Warrants may be exercised and the exercise price of the Conversion
Warrants, and that such provisions are set forth in the Conversion Warrants.
Section 13.02 Securities Act Matters.
(a) Each of the Lenders severally represents and warrants to
the Parent and for the benefit of DSW as of the date hereof and as of the date
of the issuance of the Conversion Warrants that:
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(i) Such Lender is acquiring the Conversion Warrants
hereunder for its own account, without a view to, or sale in connection with,
the distribution thereof. Such Lender has no present agreement, undertaking,
arrangement, commitment or obligation providing for the disposition of the
Conversion Warrant or the Warrant Shares, all without prejudice, however, to the
right of such Lender at any time, in accordance with this Agreement, lawfully to
sell or otherwise to dispose of all or any part of the Conversion Warrants or
Warrant Stock held by it.
(ii) Such Lender is an "accredited investor" within the
meaning of Regulation D under the Securities Act. Such Lender has not retained,
utilized or been represented by any broker or finder in connection with the
transactions contemplated by this Agreement.
(iii) Such Lender acknowledges that, subject to the
Registration Rights Agreement and the DSW Registration Rights Agreement (A) the
Conversion Warrants and the Warrant Stock 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
Conversion Warrants and the Warrant Stock are not so registered, such Lender
must bear the economic risk of holding the Conversion Warrants and the Warrant
Stock for an indefinite period of time unless the Conversion Warrants and the
Warrant Stock 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
Conversion Warrants or the Warrant Stock in the future and, if so, may only be
available for sales in limited amounts; (D) there is presently no trading market
for the Conversion Warrants and there is no assurance that such market will
exist in the future; and (E) while there is presently a trading market for the
Warrant Stock, there is no assurance that such market will be in existence in
the future.
(iv) If such Lender decides to dispose of the Conversion
Warrants or the Warrant Stock, which it does not now contemplate, that such
Lender 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.
(b) The Parent represents and warrants to each of the Lenders
as of the date hereof and as of the date of the issuance of the Conversion
Warrants that assuming the truth and accuracy of such Lender's representations
and warranties contained in Section 13.02(a), the issuance of the Conversion
Warrants hereunder and the issuance of shares of Common Stock and Class A Common
Shares to such Lender pursuant to the Conversion Warrants are exempt from the
registration and prospectus delivery requirements of the Securities Act.
(c) The Parent agrees that other than under or in connection
with the IPO, neither it nor any Person acting on its behalf has offered or will
offer the Conversion Warrants or Warrant Stock or any part thereof or any
similar securities for issue or sale to, or has solicited or will solicit any
offer to acquire any of the same from, any Person which to its knowledge, is or
will be integrated with the issuance of the Conversion Warrants.
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Section 13.03 Certain Taxes. The Parent shall pay all transfer
taxes, if any, which may be payable in connection with the execution and
delivery of this Agreement or the issuance of the Conversion Warrants or Warrant
Stock hereunder or in connection with any modification of this Agreement or the
Conversion Warrants and shall hold the Lenders harmless without limitation as to
time against any and all liabilities with respect to all such taxes. The
obligations of the Parent under this Section 13.03 shall survive any redemption,
repurchase or acquisition of Conversion Warrants or Warrant Stock by the Parent,
any termination of this Agreement, and any cancellation or termination of the
Conversion Warrants. The parties hereto agree that for income tax purposes, the
purchase price to be attributed to the Conversion Warrants issued to the Lenders
hereunder on the date hereof is $__________.
Section 13.04 Cancellation and Issuance. If any Lender assigns or
otherwise transfers all or any of its Loan (including by selling participations
therein) to any Person, such Lender may request (upon 10 days' prior notice to
the Parent) that (a) a number of Conversion Warrants held by such Lender be
canceled on the date of such assignment and transfer and (b) a like number of
Conversion Warrants be issued by the Parent to the Person to whom such Loan is
being assigned or otherwise transferred. Upon the date specified in such
request:
(i) the Parent shall issue, and such Lender shall
surrender (or cause to be surrendered) for cancellation, such number of
Conversion Warrants as aforesaid, provided that such issuance shall not violate
the Securities Act or any applicable state securities laws and, if requested,
Parent receives an opinion of counsel as to such matters, satisfactory to it;
and
(ii) each Person that receives Conversion Warrants will
deliver a certificate to the Parent affirming the representations and warranties
contained in Section 13.02(a) hereof as of such date.
ARTICLE XIV
TRANSACTIONS WITH AFFILIATES
Section 14.01 Transaction Approval. Unless the Buyout Option (as
defined below) has been exercised, neither the Parent nor any of its
Subsidiaries shall enter into an SSC Transaction (as defined below) without the
prior written consent of CPLP. In the event that the Parent, SSC or any of their
Subsidiaries propose to enter into an SSC Transaction, Parent shall promptly
notify CPLP in writing of the proposed SSC Transaction (the "Notification Date")
which notice shall (i) describe the proposed SSC Transaction in reasonable
detail and (ii) be accompanied by such information as Parent reasonably believes
that a third party investor would reasonably require in order to determine the
fairness of the proposed SSC Transaction. The Parent shall promptly provide such
additional information (and make personnel available to discuss the same) as
CPLP may reasonably request regarding the SSC Transaction during the three (3)
Business Days following the Notification Date. Within five (5) Business Days of
the Notification Date, CPLP shall deliver to the Parent and SSC a written notice
(an "Objection Notice") stating that it objects to such SSC Transaction (the
"Objection Date"). If CPLP does not deliver an Objection Notice with respect to
an SSC Transaction on or prior to the Objection Date, it shall be deemed
(subject to the provisions of Section 14.02(b)) to have consented to such
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SSC Transaction.
An "SSC Transaction" means any transaction, agreement, arrangement,
lease, guaranty, loan or advance of money (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service) or a series of related transactions or the material amendment or
modification of any existing or previously approved transaction, between (i) the
Parent or any of its Subsidiaries and (ii) SSC or any Affiliate of SSC (other
than the Parent and its Subsidiaries but including, for purposes of this
definition, any Person to whom SSC transfers any of the Common Stock that was
owned by SSC on the Effective Date) unless: (x) the transaction, or series of
related transactions, has a value of at less than $500,000, (y) such
transactions and other prior transactions of the Parent and its Subsidiaries in
any Fiscal Year of the Parent have a value of less than $5,000,000 in the
aggregate, or (iii) the transaction is an Approved Existing Transaction.
An "Approved Existing Transaction" means a transaction, agreement,
arrangement, lease, guaranty, loan or advance of money (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) described in the confidential side letter between the
Borrower (as successor to Value City Department Stores, Inc.) and the Agent of
June 11, 2002 on the terms in effect as of the date hereof and excluding any
material modification or amendment thereto.
Section 14.02 Buyout Option. (a) In the event that CPLP delivers an
Objection Notice, SSC shall have the right exercisable by delivering a written
notice, not more that five (5) Business Days after the Objection Date, to CPLP
stating that it elects to exercise its Buyout Option (a "Buyout Exercise
Notice") to purchase all but not less than all of the Buyout Securities (as
defined below) for a cash purchase price equal to all principal and interest due
to CPLP with respect to the Loan and CPLP's pro rata portion of any fees payable
to it under this Agreement (the "Buyout Option"). If SSC does not deliver a
Buyout Exercise Notice in accordance with the terms of this Section 14.02, then
SSC shall be deemed to have waived its Buyout Option as to the transactions
stated in the Buyout Exercise Notice, and the parties may not proceed with the
SSC Transaction that is the subject of such Objection Notice.
(b) If a Buyout Exercise Notice is delivered, CPLP, within
five (5) Business Days of delivery of such Buyout Exercise Notice, may request
by written notice to the Parent and SSC (a "Referral Notice") that a committee
comprised of all of the independent directors of the Borrower not affiliated
with SSC, CPLP or the Parent's management (the "Fairness Committee") review and
approve the SSC Transaction that is the subject of the Buyout Exercise Notice (a
"Referred SSC Transaction") as to its fairness to the Parent and its
unaffiliated shareholders. The Parent shall cause a Fairness Committee to be
appointed within five (5) Business Days of its receipt of a Referral Notice. In
the event that the Fairness Committee reviews and approves as fair to Parent and
its unaffiliated shareholders the Referred SSC Transaction as proposed by SSC or
if the Fairness Committee modifies the Referred SSC Transaction, and as modified
approves the Referred SSC Transaction as fair to the Parent and its unaffiliated
shareholders, CPLP shall be deemed to have consented to the SSC Transaction as
so approved. In the event that CPLP requests that an SSC Transaction be reviewed
by a Fairness Committee, such request shall be irrevocable, SSC shall not have
any rights to exercise a Buyout Option in connection with such Referred SSC
Transaction, and Section 14.03 shall not apply to
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such Referred SSC Transaction.
(c) If SSC elects to exercise the Buyout Option and CPLP does
not timely deliver a Referral Notice pursuant to Section 14.02(b), then the
closing of the Buyout Option shall occur on the 30th day following the delivery
of the Buyout Exercise Notice.
"Buyout Securities" means (i) amounts payable to CPLP under this
Agreement.
Section 14.03 CPLP Transaction. Neither the Parent nor any of its
Subsidiaries will enter into any transaction with CPLP or its Affiliates, other
than the transactions contemplated by this Agreement and the other Loan
Documents, without the prior written consent of the Parent's Board of Directors
and SSC unless the transaction, or series of related transactions, is valued at
less than $500,000.
ARTICLE XV
REAFFIRMATION AND CONSENT
Section 15.01 Reaffirmation and Confirmation.
(a) Each of the Loan Parties hereby (i) acknowledges and
reaffirms its respective obligations under the Loan Documents executed pursuant
to the Original Agreement set forth in Schedule 15.01(a), (ii) acknowledges and
agrees that Loan Documents under the Original Agreement are made in favor of the
Agent, for the benefit of itself and the Lenders under this Agreement, (iii)
agrees to continue to comply with, and be subject to, all of the terms,
provisions, conditions, covenants, agreements and obligations applicable to it
set forth in such Loan Documents from the Original Agreement, each of which
remains in full force and effect except as the same may be amended or restated
by or in connection with this Agreement.
(b) With respect to each of the Security Agreement and the
Pledge Agreement, each of the undersigned Loan Parties hereby (i) acknowledges
and reaffirms its respective obligations, (ii) acknowledges and agrees that the
Security Agreement and the Pledge Agreement is made in favor of the Agent, for
the benefit of itself and the Lenders, (iii) agrees to continue to comply with,
and be subject to, all of the terms, provisions, conditions, covenants,
agreements and obligations contained therein applicable to it, each of which
remains in full force and effect, (iv) reaffirms its grant, assignment,
conveyance, mortgage, pledge and hypothecation to Agent, for the benefit of
itself and the Lenders, of a Lien upon all of its right, title and interest in,
to and under all now owned or hereafter acquired or arising Collateral (as
defined in the Security Agreement) in order to secure the prompt payment of all
of the Obligations and the Guaranteed Obligations, as the case may be, (v)
confirms, ratifies and reaffirms that the Lien granted to Agent, for the benefit
of itself and the Lenders, pursuant to the Security Agreement in all of its
respective right, title, and interest in all then existing and thereafter
acquired or arising Collateral in order to secure prompt payment and performance
of the Obligations and the Guaranteed Obligations, as the case may be, is
continuing and is and shall remain unimpaired and continue to constitute a first
priority security interest (subject to the terms of the Intercreditor Agreement)
in favor of Agent, for the benefit of itself and Lenders, with the same force,
effect and priority in effect both immediately prior to and after entering into
this Agreement and the
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other Loan Documents entered into on or as of the date hereof, and (vi)
confirms, ratifies and reaffirms that the security interest granted to Agent,
for the benefit of itself and the Lenders, pursuant to the Pledge Agreement in
all of its respective right, title, and interest in all then existing and
thereafter acquired or arising Pledged Collateral in order to secure prompt
payment and performance of the Obligations is continuing and is and shall remain
unimpaired and continue to constitute a first priority security interest
(subject to the terms of the Intercreditor Agreement) in favor of Agent, for the
benefit of itself and Lenders, with the same force, effect and priority in
effect both immediately prior to and after entering into this Agreement and the
other Loan Documents entered into on or as of the date hereof.
(c) Schedule I and Schedule II to the Pledge Agreement are
hereby amended and restated in their entirety in the forms of Annex I and Annex
II, respectively, attached hereto.
(d) Schedule I through Schedule VIII to the Security Agreement
are hereby amended and restated in their entirety in the forms of Annex III
through Annex X, respectively, attached hereto. -
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
VALUE CITY DEPARTMENT STORES LLC,
an Ohio limited liability company
By: ___________________________
Name:
Title:
GUARANTORS:
RETAIL VENTURES, INC.,
an Ohio corporation
By: ___________________________
Name:
Title:
GRAMEX RETAIL STORES, INC.,
a Delaware corporation
By: ___________________________
Name:
Title:
FILENE'S BASEMENT, INC.,
a Delaware corporation
By: ___________________________
Name:
Title:
GB RETAILERS, INC.,
a Delaware corporation
By: ___________________________
Name:
Title:
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VALUE CITY OF MICHIGAN, INC.,
a Michigan corporation
By: ___________________________
Name:
Title:
▇.▇. ▇▇▇▇▇▇▇▇ DELIVERY, INC.,
a Delaware corporation
By: ___________________________
Name:
Title:
VALUE CITY DEPARTMENT STORES
SERVICES, INC.,
a Delaware corporation
By: ___________________________
Name:
Title:
RETAIL VENTURES JEWELRY, INC.
an Ohio corporation
By: ___________________________
Name:
Title:
RETAIL VENTURES SERVICES, INC.,
a Delaware corporation
By: ___________________________
Name:
Title:
RETAIL VENTURES IMPORTS, INC.,
an Ohio corporation
By: ___________________________
Name:
Title:
ii
AGENT AND LENDER:
CERBERUS PARTNERS, L.P.
a Delaware limited partnership, as Agent,
on behalf of itself and its affiliate assigns
By: CERBERUS ASSOCIATES, L.L.C.
By: ___________________________
Name:
Title:
LENDER:
SCHOTTENSTEIN STORES CORPORATION,
a Delaware corporation
By: ___________________________
Name:
Title:
iii