Exhibit 10.5
EXHIBIT J
FORM OF WARRANT
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE TERMS AND CONDITIONS SPECIFIED IN THIS WARRANT.
VALUE CITY DEPARTMENT STORES, INC.
COMMON STOCK PURCHASE WARRANT
No. [W-] ___________, 2002
Warrant to Purchase 1,477,396(1)
Shares of Common Stock
VALUE CITY DEPARTMENT STORES, INC., an Ohio corporation (the
"Company"), for value received, hereby certifies that Cerberus Partners, L.P., a
Delaware limited partnership, or its registered assigns (the "Holder"), is
entitled to purchase from the Company 1,477,396 shares of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock, no par
value per share, of the Company (the "Common Stock"), at a purchase price equal
to the Purchase Price (this "Warrant"), at any time or from time to time but
prior to 5:00 P.M., New York City time, on ________(2) (the "Expiration Date"),
all subject to the terms, conditions and adjustments set forth below in this
Warrant; PROVIDED, that the purchase price per share of Common Stock hereunder
shall not in any event be less than the par value of the Common Stock.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned such terms in the Financing Agreement.
1. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms shall have the meanings indicated:
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(1) Each warrant is for one half of 2,954,793 shares.
(2) Expiration Date will be ten years from the date of issuance of the
warrant.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to Section 3.2(b)
or 3.5(b), deemed to be issued) by the Company after the date hereof, whether or
not subsequently reacquired or retired by the Company, other than
(a) shares issued upon the exercise of the Financing Warrants,
(b) such number of additional shares as may become issuable upon the
exercise of the Financing Warrants by reason of adjustments required pursuant to
the anti-dilution provisions applicable to the Financing Warrants as in effect
on the date hereof,
(c) 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 Company, including (i) shares of Common
Stock or options exercisable therefor, issued or to be issued under the
Company's 2000 Stock Option Plan as in effect on the date hereof or under any
other employee stock option or purchase plan or plans, or pursuant to
compensatory or incentive agreements, for officers, employees or consultants of
the Company or any of its Subsidiaries, in each case adopted or assumed after
such date by the Company's Board of Directors; PROVIDED in each case that the
exercise or purchase price for any such share shall not be less than 95% of the
fair market value (determined in good faith by the Company's Board of Directors)
of the Common Stock on the date of the grant, and such additional number of
shares as may become issuable pursuant to the terms of any such plans by reason
of adjustments required pursuant to antidilution provisions applicable to such
securities in order to reflect any subdivision or combination of Common Stock,
by reclassification or otherwise, or any dividend on Common Stock payable in
Common Stock, (ii) shares of restricted stock issued by the Company to executive
officers of the Company, and (iii) shares of Common Stock issued by the Company
as charitable gifts; PROVIDED; HOWEVER, that all options exercisable for shares
of Common Stock granted to executive officers of the Company or its Subsidiaries
during the six months following the date hereof shall have an exercise price of
no less than $4.50 per share, and
(d) (i) shares of Common Stock issued upon conversion of the
Convertible Facility and (ii) such additional number of shares as may become
issuable upon the exercise of any such securities by reason of adjustments
required pursuant to anti-dilution provisions applicable to such securities as
in effect on the date hereof.
"AGGREGATE PURCHASE PRICE" shall have the meaning set forth in Section
2.1(a).
"BUSINESS DAY" shall mean any day other than a Saturday or a Sunday or
any day on which national banks are authorized or required by law to close. Any
reference to "days" (unless Business Days are specified) shall mean calendar
days.
"COMMISSION" shall mean the Securities and Exchange Commission or any
successor agency having jurisdiction to enforce the Securities Act.
"COMMON STOCK" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any stock into which such
Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other
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stock of any class or classes (however designated) of the Company the holders of
which have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference.
"COMPANY" shall have the meaning assigned to it in the introduction to
this Warrant, such term to include any corporation or other entity which shall
succeed to or assume the obligations of the Company hereunder in compliance with
Section 4.
"CONVERSION" shall have the meaning assigned to it in Section 3.1(b).
"CONVERTIBLE FACILITY" shall mean that certain Amended and Restated
Senior Subordinated Convertible Loan Agreement dated as of June 11, 2002, among
the Company, Cerberus Partners, L.P. and SSC.
"CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness,
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
"CURRENT MARKET PRICE" shall mean, on any date specified herein, the
average of the daily Market Price during the 10 consecutive trading days before
such date, except that, if on any such date the shares of Common Stock 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.
"EBITDA" shall mean, with respect to any Person for any period, the
consolidated Net Income of such Person and its Subsidiaries for such period,
PLUS without duplication, the sum of the following amounts of such Person and
its Subsidiaries for such period to the extent deducted in determining
consolidated Net Income of such Person and its Subsidiaries for such period: (A)
Interest Expense, (B) federal, state, local and foreign income tax expense, (C)
depreciation expense, (D) amortization expense and (E) expenses incurred in
connection with the Financing Agreement, the Convertible Facility, the Revolving
Credit Facility, the refinancing of the Company's existing credit facilities and
subsequent refinancing of the Company.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"EXPIRATION DATE" shall have the meaning assigned to it in the
introduction to this Warrant.
"FAIR VALUE" shall mean, on any date specified herein (i) in the case
of cash, the dollar amount thereof, (ii) in the case of a security, the Current
Market Price, and (iii) in all other cases, the fair value thereof (as of a date
which is within 20 days of the date as of which the determination is to be made)
determined in good faith by a committee of the Company's Board of Directors
consisting of directors who are not Affiliates of the Company, SSC or Holder;
PROVIDED, however, that at the request of the Holder, the Fair Value shall be
determined in good
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faith by an independent investment banking firm selected jointly by the Company
and the Holder 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
Company shall pay all of the fees and expenses of any third parties incurred in
connection with determining the Fair Value.
"FINANCING AGREEMENT" shall mean that certain Financing Agreement,
dated as of June 11, 2002, among the Company, certain subsidiaries of the
Company, Cerberus Partners, L.P. and SSC.
"FINANCING WARRANTS" shall mean all warrants issued pursuant to the
Financing Agreement.
"HOLDER" shall have the meaning assigned to it in the introduction to
this Warrant.
"INITIAL HOLDERS" shall mean Cerberus Partners, L.P. and SSC.
"INTEREST EXPENSE" shall mean, with respect to any Person for any
period, gross interest expense of such Person and its Subsidiaries for such
period determined on a consolidated basis and in accordance with GAAP
(including, without limitation, interest expense paid to Affiliates of such
Person).
"MARKET PRICE" shall mean, on any date specified herein, the amount per
share of the Common Stock, equal to (i) the last reported sale price of such
Common Stock, 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 is then listed or admitted for
trading, (ii) if such Common Stock 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 on
such date, (iii) if there shall have been no trading on such date or if the
Common Stock is not so designated, the average of the closing bid and asked
prices of the Common Stock on such date as shown by the NASD automated quotation
system, (iv) if trading in such Common Stock is quoted in the over-the-counter
market, the average of the closing bid and asked prices of the Common Stock on
such date as shown on the OTC Bulletin Board, or (v) if such Common Stock 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 Company's Board of Directors consisting of directors
who are not Affiliates of the Company, SSC or Holder; PROVIDED, however, that at
the request of the Holder, the Market Price shall be determined in good faith by
an independent investment banking firm selected jointly by the Company and the
Holder or, if that selection cannot be made within 10 days, by an independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules, and PROVIDED, further, that the Company shall pay all
of the fees and expenses of any third parties incurred in connection with
determining the Market Price.
"NASD" shall mean the National Association of Securities Dealers, Inc.
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"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person and its Subsidiaries for such period, determined on
a consolidated basis and in accordance with GAAP, but excluding from the
determination of Net Income (without duplication) (a) any extraordinary or
non-recurring gains or losses or gains or losses from Dispositions, (b)
restructuring charges, (c) effects of discontinued operations and (d) interest
income.
"NEW ISSUANCE PRICE" shall have the meaning set forth in Section 3.2.
"OPTIONS" shall mean any rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"OTHER SECURITIES" shall mean any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Financing Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Financing Warrants, in
lieu of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Section 4 or otherwise.
"PERSON" shall mean any individual, firm, partnership, corporation,
trust, joint venture, association, joint stock company, limited liability
company, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof, and shall
include any successor (by merger or otherwise) of such entity.
"PURCHASE PRICE" shall mean initially $4.50 per share, subject to
adjustment and readjustment from time to time as provided in Section 3, and, as
so adjusted or readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by Section 3.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement, dated as of the date hereof among the Company and the Initial
Holders.
"RESTRICTED SECURITIES" shall mean (i) any Financing Warrants bearing
the applicable legend set forth in Section 10.1, (ii) any shares of Common Stock
(or Other Securities) issued or issuable upon the exercise of Financing Warrants
which are (or, upon issuance, will be) evidenced by a certificate or
certificates bearing the applicable legend set forth in Section 10.1, and (iii)
any shares of Common Stock (or Other Securities) issued subsequent to the
exercise of any of the Financing Warrants as a dividend or other distribution
with respect to, or resulting from a subdivision of the outstanding shares of
Common Stock (or other Securities) into a greater number of shares by
reclassification, stock splits or otherwise, or in exchange for or in
replacement of the Common Stock (or Other Securities) issued upon such exercise,
which are evidenced by a certificate or certificates bearing the applicable
legend set forth in Section10.1.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and the rules and regulations thereunder, or any successor
statute.
"SSC" shall mean Schottenstein Stores Corporation.
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"WARRANT" shall have the meaning assigned to it in the introduction to
this Warrant.
"WARRANT SHARES" means (a) the shares of Common Stock issued or
issuable upon exercise of this Warrant in accordance with Section 2, (b) all
other securities or other property issued or issuable upon any such exercise or
exchange in accordance with this Warrant and (c) any securities of the Company
distributed with respect to the securities referred to in the preceding clauses
(a) and (b).
2. EXERCISE OF WARRANT.
2.1. MANNER OF EXERCISE; PAYMENT OF THE PURCHASE PRICE. (a) Except as
set forth in Section 2.1(c) below, this Warrant may be exercised by the Holder
hereof, in whole or in part, at any time or from time to time prior to the
Expiration Date, by surrendering to the Company at its principal office this
Warrant, with the form of Election to Purchase Shares attached hereto as Exhibit
A (or a reasonable facsimile thereof) duly executed by the Holder and
accompanied by payment of the Purchase Price for the number of shares of Common
Stock specified in such form (the "Aggregate Purchase Price"). Any partial
exercise of this Warrant shall be for a whole number of Warrant Shares only.
(b) Payment of the Aggregate Purchase Price may be made as follows (or
by any combination of the following): (i) in United States currency by cash or
delivery of a certified check or bank draft payable to the order of the Company
or by wire transfer to the Company, (ii) by cancellation of all or any part of
the unpaid principal amount of the then-outstanding Obligations (as defined in
the Financing Agreement) in an amount equal to the Aggregate Purchase Price,
(iii) by cancellation of such number of the shares of Common Stock otherwise
issuable to the Holder upon such exercise as shall be specified for cancellation
in such Election to Purchase Shares, such that the excess of the aggregate
Current Market Price of such specified number of shares on the date of exercise
over the portion of the Aggregate Purchase Price attributable to such shares
shall equal the Aggregate Purchase Price attributable to the shares of Common
Stock to be issued upon such exercise, in which case such excess amount shall be
deemed to have been paid to the Company and the number of shares issuable upon
such exercise shall be reduced by such number specified for cancellation, or
(iv) by surrender to the Company for cancellation certificates representing
shares of Common Stock of the Company owned by the Holder (properly endorsed for
transfer in blank) having a Current Market Price on the date of Warrant exercise
equal to the Aggregate Purchase Price.
(c) The portion of the Warrant that constitutes the Allocated Warrants
(as defined in the Convertible Facility) shall not be exercisable by the Holder
from the date on which the Holder receives the Buyout Exercise Notice (as
defined in the Convertible Facility) until the date which is 31 days after the
receipt by the Holder of the Buyout Exercise Notice, unless such Buyout Exercise
Notice involves a Referred SSC Transaction (as defined in the Convertible
Facility) in which case, this Section 2.1(c) shall not apply to such Buyout
Exercise Notice, and the Warrant shall continue to be exercisable in full.
2.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which
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this Warrant shall have been surrendered to, and the Purchase Price shall have
been received by, the Company as provided in Section 2.1, and, to the extent
permitted by law, at such time the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock (or Other Securities)
shall be issuable upon such exercise as provided in Section 2.3 shall be deemed
to have become the holder or holders of record thereof for all purposes.
2.3. DELIVERY OF STOCK CERTIFICATES, ETC.; CHARGES, TAXES AND EXPENSES.
(a) As soon as practicable after each exercise of this Warrant, in whole or in
part, and in any event within two Business Days thereafter, the Company shall
cause to be issued in the name of and delivered to the Holder hereof or, subject
to Section 10, as the Holder may direct,
(i) a certificate or certificates for the number of shares of Common
Stock (or Other Securities) to which the Holder shall be entitled upon
such exercise, and
(ii) in case such exercise is for less than all of the shares of
Common Stock purchasable under this Warrant, a new Warrant or Warrants of
like tenor, for the balance of the shares of Common Stock purchasable
hereunder.
(b) Issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder hereof for
any issue or transfer tax or other incidental expense, in respect of the
issuance of such certificates, all of which such taxes and expenses shall be
paid by the Company; PROVIDED, HOWEVER, that the Company shall not be required
to pay any tax that may be payable in respect of any issuance of any Warrant or
any certificate for, or any other evidence of ownership of, Warrant Shares in a
name other than that of the Holder of this Warrant being exercised or exchanged.
2.4. TAX BASIS. The Company and the Holder shall mutually agree as to
the tax basis of this Warrant for purposes of the Internal Revenue Code of 1986,
as amended, and the treatment of this Warrant under such Code by each of the
Company and the Holder shall be consistent with such agreement.
3. ADJUSTMENT OF PURCHASE PRICE AND COMMON STOCK ISSUABLE UPON
EXERCISE.
3.1. ADJUSTMENT OF NUMBER OF SHARES.
(a) Upon each adjustment of the Purchase Price as a result of the
calculations made in this Section 3, except to the extent the Purchase Price is
adjusted pursuant to Section 3.10 hereof, this Warrant shall thereafter evidence
the right to receive, at the adjusted Purchase Price, that number of shares of
Common Stock (calculated to the nearest one-hundredth) obtained by dividing (i)
the product of the aggregate number of shares covered by this Warrant
immediately prior to such adjustment and the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price by (ii) the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
(b) In the event that, prior to the exercise in full of this Warrant,
the Company issues any shares of Common Stock upon the conversion of Convertible
Securities outstanding
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on the date hereof (including, without limitation, the Convertible Facility) (a
"Conversion"), the number of Warrant Shares issuable upon the exercise of this
Warrant (whether or not this Warrant has been partially exercised) shall be
automatically increased by the number of shares equal to 4.375% of the shares of
Common Stock issued upon such Conversion, and the Purchase Price shall not be
adjusted in connection with such increase. Any adjustments made to the Purchase
Price or the number of Warrant Shares issuable upon exercise of the Warrant
prior to such Conversion shall be made as if the Warrant were initially
exercisable for such increased number of shares. Upon each such Conversion, the
Company shall promptly deliver to the Holder the report required by Section 7
hereof.
3.2. ADJUSTMENT OF PURCHASE PRICE FOR NEW ISSUANCES.
(a) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company
at any time or from time to time after the date hereof shall issue or sell
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 3.2(b) and excluding shares issued
pursuant to Section 3.3) without consideration or for a consideration per share
less than the Purchase Price in effect immediately prior to such issue or sale
(the "New Issuance Price"), then, and in each such case, subject to Section 3.8,
the Purchase Price shall be reduced concurrently with such issue or sale, to the
New Issuance Price.
(b) TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. Shares of
Additional Shares of Common Stock shall be deemed issued if the Company at any
time or from time to time after the date hereof shall issue, sell, grant or
assume, or shall fix a record date for the determination of holders of any class
of securities of the Company entitled to receive, any Options or Convertible
Securities (whether or not the rights thereunder are immediately exercisable)
for a consideration per share (determined pursuant to Section 3.6) that is less
than the Purchase Price in effect on the date of and immediately prior to such
issue, sale, grant or assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an ex-dividend basis, on
the date prior to the commencement of ex-dividend trading). Such issuance shall
be deemed to occur (i) as of the time of such issue, sale, grant or assumption
of the Convertible Securities or Options or (ii) in case such a record date
shall have been fixed, as of the close of business on such record date (or, if
the Common Stock trades on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading). No further adjustment of the Purchase
Price shall be made upon the subsequent issuance of shares of Common Stock upon
the exercise of such Options or the conversion or exchange of such Convertible
Securities.
3.3. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. If the Company at any
time or from time to time after the date hereof shall declare, order, pay or
make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock other than (a) a dividend
payable in shares of Common Stock subject to Section 3.4, or (b) a regularly
scheduled cash dividend payable out of consolidated earnings or earned surplus,
determined in accordance with generally accepted accounting principles or (c) a
deemed issuance of Additional Shares of Common Stock pursuant to Section 3.2(b),
in each such case, subject to Section 3.8, adequate provision shall be made so
that the Holder shall receive, upon Warrant exercise, a pro rata share of such
dividend
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or other distribution based upon the maximum number of shares of Common Stock at
the time issuable to the Holder (determined without regard to whether the
Warrant is exercisable at such time); PROVIDED, however, that if pursuant to
Section 2.1(c) the Allocated Warrants are assigned to SSC, then that portion of
the Holder's pro rata share of such dividend or other distribution attributable
to the Allocated Warrants shall be deemed assigned to SSC along with the
Allocated Warrants.
3.4. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, the number of shares of
Common Stock obtainable upon exercise of this Warrant shall be proportionately
increased and the Purchase Price shall be proportionately decreased. In case the
Company at any time or from time to time after the date hereof shall effect any
combination or consolidation of the outstanding shares of Common Stock into a
lesser number of shares of Common Stock, then, and in each such case, the number
of shares of Common Stock obtainable upon exercise of this Warrant shall be
proportionately decreased and the Purchase Price shall be proportionately
increased. Any adjustment made under this Section shall become effective (a) in
the case of any such dividend, immediately after the close of business on the
record date for the determination of holders of any class of securities entitled
to receive such dividend, or (b) in the case of any such subdivision, at the
close of business on the day immediately prior to the day upon which such
corporate action becomes effective.
3.5. ADJUSTMENT OF PURCHASE PRICE FOR OTHER ISSUANCES.
(a) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company
at any time or from time to time after the date hereof shall issue or sell
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 3.5(b)) for a consideration per share
less than the Current Market Price but greater than the Purchase Price in effect
immediately prior to such issue or sale, then, and in each such case, subject to
Section 3.8, the Purchase Price shall be reduced concurrently with such issue or
sale, to a price (calculated to the nearest .01 of a cent) determined by
multiplying such Purchase Price by a fraction
(x) The numerator of which shall be the sum of (i) the number
of shares of Common Stock outstanding immediately prior to such issue or sale
and (ii) the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at such Current Market Price, and
(y) The denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale, PROVIDED that,
for the purposes of this Section 3.5, (x) immediately after any Additional
Shares of Common Stock are deemed to have been issued pursuant to Section
3.5(b), such Additional Shares shall be deemed to be outstanding, and (y)
treasury shares shall not be deemed to be outstanding.
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(b) TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities of the Company entitled to receive, any
Options or Convertible Securities (whether or not the rights thereunder are
immediately exercisable) and the consideration per share (determined pursuant to
Section 3.6) of the shares issuable upon the exercise of such Options or, in the
case of Convertible Securities and the Options therefor, the conversion or
exchange of such Convertible Securities would be less than the Current Market
Price but greater than Purchase Price in effect on the date of and immediately
prior to such issue, sale, grant or assumption or immediately prior to the close
of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), then, and in each such case, the maximum number of Additional Shares
of Common Stock (as set forth in the instrument relating thereto, without regard
to any provisions contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued for
the purposes of Section 3.5 as of the time of such issue, sale, grant or
assumption or, in case such a record date shall have been fixed, as of the close
of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend trading,
PROVIDED, that in any such case in which Additional Shares of Common Stock are
deemed to be issued:
(i) whether or not the Additional Shares of Common Stock underlying
such Options or Convertible Securities are deemed to be issued, no further
adjustment of the Purchase Price shall be made upon the subsequent issue
or sale of Convertible Securities or shares of Common Stock upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities, except in the case of any such Options or Convertible
Securities which contain provisions requiring an adjustment, subsequent to
the date of the issue or sale thereof, of the number of Additional Shares
of Common Stock issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities by reason of (x) a
change of control of the Company, (y) the acquisition by any Person or
group of Persons of any specified number or percentage of the voting
securities of the Company or (z) any similar event or occurrence, each
such case to be deemed hereunder to involve a separate issuance of
Additional Shares of Common Stock, Options or Convertible Securities, as
the case may be;
(ii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion
or exchange under such Convertible Securities, which are outstanding at
such time;
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(iii) upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall not have been
exercised or the expiration of any rights of conversion or exchange under
any such Convertible Securities which (or purchase by the Company and
cancellation or retirement of any such Convertible Securities the rights
of conversion or exchange under which) shall not have been exercised, the
Purchase Price computed upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration (or such cancellation or retirement, as the case may be), be
recomputed as if:
(x) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or
sold were the Additional Shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or the conversion
or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the consideration actually
received by the Company upon such exercise, or for the issue or sale
of all such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and
(y) in the case of Options for Convertible Securities, only
the Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue or
sale, grant or assumption of such Options, and the consideration
received by the Company for the Additional Shares of Common Stock
deemed to have then been issued was the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Company (pursuant to Section
3.6) upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised; and
(iv) no readjustment pursuant to subdivision (ii) or (iii) above
shall have the effect of decreasing the Purchase Price by an amount in
excess of the amount of the adjustment thereof originally made in respect
of the issue, sale, grant or assumption of such Options or Convertible
Securities.
3.6. COMPUTATION OF CONSIDERATION. For the purposes of this Section 3,
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the gross cash
proceeds to the Company, without deducting any expenses paid or incurred
by the Company or any
11
commissions or compensations paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in connection
with such issue or sale,
(ii) insofar as it consists of property (including securities) other
than cash, be computed at the Fair Value thereof at the time of such issue
or sale, and
(iii) in case Additional Shares of Common Stock are issued or sold
together with other stock or securities or other assets of the Company for
a consideration which covers both, be the portion of such consideration so
received, computed as provided in clauses (i) and (ii) above, allocable to
such Additional Shares of Common Stock, such allocation to be determined
in the same manner that the Fair Value of property not consisting of cash
or securities is to be determined as provided in the definition of 'Fair
Value' herein; and
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to Sections 3.2(b) and 3.5(b), relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the Company as
consideration for the issue, sale, grant or assumption of the Options or
Convertible Securities in question, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration to protect against dilution)
payable to the Company upon the exercise in full of such Options or the
conversion or exchange of such Convertible Securities or, in the case of
Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities, in each case computing such consideration as provided in the
foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number to protect against
dilution) issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
3.7. DILUTION IN CASE OF OTHER SECURITIES. In case any Other Securities
shall be issued or sold or shall become subject to issue or sale upon the
conversion or exchange of any stock (or Other Securities) of the Company (or any
issuer of Other Securities or any other Person referred to in Section 4) or to
subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Section 3, the purchase rights, if any, with respect to
such Other Securities, granted by this Warrant, then, and in each such case, the
computations, adjustments and readjustments provided for in this Section 3 with
respect to the Purchase Price shall be made as nearly as possible in the manner
so provided and applied to determine the amount of Other Securities from time to
time
12
receivable upon the exercise of the Warrants, so as to protect the holders of
the Warrants against the effect of such dilution.
3.8. DE MINIMIS ADJUSTMENTS. If the amount of any adjustment of the
Purchase Price required pursuant to Section 3.5 would be less than one tenth
(1/10) of one percent (1%) of the Purchase Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate a change in the Purchase
Price of at least one tenth (1/10) of one percent (1%) of such Purchase Price.
All calculations under this Warrant shall be made to the nearest one-hundredth
of a share.
3.9. ABANDONED DIVIDEND OR DISTRIBUTION. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution (which results in an adjustment to the
Purchase Price under the terms of this Warrant) and shall, thereafter, and
before such dividend or distribution is paid or delivered to shareholders
entitled thereto, legally abandon its plan to pay or deliver such dividend or
distribution, then any adjustment made to the Purchase Price by reason of the
taking of such record shall be reversed, and any subsequent adjustments, based
thereon, shall be recomputed; PROVIDED, however, that no additional Purchase
Price or any other adjustment shall be required with regard to Warrant Shares
that have been issued upon exercise of the Warrant prior to such abandonment.
3.10. PURCHASE PRICE RESET. If the consolidated EBITDA of the Company
and its subsidiaries for the fiscal year ending February 1, 2003, is less than
$90,000,000 or the combined, unconsolidated EBITDA of each of the Company
(excluding Subsidiaries), Value City Limited Partnership, Value City of
Michigan, Inc. GB Retailers, Inc., Gramex Retail Stores, Inc., VCD, Ltd. and any
Person acquired after the date hereof that operates Value City department stores
is less than $35,000,000 in the aggregate, then effective as of the close of
business on February 1, 2003, the Purchase Price shall be reduced to $4.00 per
share and the number of shares issuable upon exercise of this Warrant shall be
increased to give effect to all adjustments as provided in this Section 3 which
were made prior to February 3, 2003, as if the Purchase Price on the date hereof
had been $4.00 per share.
4. CONSOLIDATION, MERGER, ETC.
4.1. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS,
REORGANIZATION, ETC. In case the Company after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification for which adjustment in
the Purchase Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant is provided in Section 3.4),
13
then, and in the case of each such transaction, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this
Warrant, the Holder of this Warrant, upon the exercise hereof at any time after
the consummation of such transaction, shall be entitled to receive (at the
aggregate Purchase Price in effect at the time of such consummation for all
Common Stock or Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock or Other Securities issuable
upon such exercise prior to such consummation, the highest amount of securities,
cash or other property to which such Holder would actually have been entitled as
a shareholder upon such consummation if such Holder had exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in Sections 3 through 5, PROVIDED that if a purchase, tender or exchange offer
shall have been made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock, and if the Holder so designates in a notice
given to the Company on or before the date immediately preceding the date of the
consummation of such transaction, the Holder of this Warrant shall be entitled
to receive the highest amount of securities, cash or other property to which it
would actually have been entitled as a shareholder if the Holder of this Warrant
had exercised this Warrant, including the payment of the Purchase Price in
accordance with Section 2.1(b) hereof, prior to the expiration of such purchase,
tender or exchange offer and accepted such offer, subject to adjustments (from
and after the consummation of such purchase, tender or exchange offer) as nearly
equivalent as possible to the adjustments provided for in Section 3 through 5.
4.2. ASSUMPTION OF OBLIGATIONS. Notwithstanding anything contained in
this Warrant or in the Financing Agreement to the contrary, the Company shall
not effect any of the transactions described in clauses (a) through (d) of
Section 4.1 unless, prior to the consummation thereof, each Person (other than
the Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant), (b) the obligations of the
Company under the Registration Rights Agreement and (c) the obligation to
deliver to the Holder such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this Section 4, the Holder may be
entitled to receive. Nothing in this Section 4 shall be deemed to authorize the
Company to enter into any transaction not otherwise permitted by the Financing
Agreement.
5. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the
provisions of Section 3 or Section 4 hereof are not strictly applicable or if
strictly applicable would not fairly protect the purchase rights of the Holder
in accordance with the essential intent and principles of such Sections, then in
each such case, the Board of Directors of the Company shall make an adjustment
in the application of such provisions, in accordance with such essential intent
and principles, so as to preserve, without dilution, the purchase rights
represented by this Warrant.
14
6. NO DILUTION OR IMPAIRMENT. The Company shall not, by amendment of
its articles of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) shall not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) shall take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all liens,
security interests, encumbrances (in each of the foregoing cases, other than
those imposed by the Holder), taxes, preemptive rights and charges on the
exercise of the Warrants from time to time outstanding, and (c) shall not take
any action which results in any adjustment of the Purchase Price if the total
number of shares of Common Stock (or Other Securities) issuable after the action
upon the exercise of all of the Warrants would exceed the total number of shares
of Common Stock (or Other Securities) then authorized by the Company's articles
of organization and available for the purpose of issue upon such exercise.
7. ACCOUNTANTS' REPORT. In each case of any adjustment or readjustment
in the number of shares of Common Stock (or Other Securities) issuable upon the
exercise of this Warrant or in the Purchase Price, including, without
limitation, pursuant to Section 3.1, 3.2, 3.4, 3.5 or 3.10, the Company at its
sole expense shall promptly compute such adjustment or readjustment in
accordance with the terms of this Warrant and prepare a report setting forth
such adjustment or readjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or to be received
by the Company for any Additional Shares of Common Stock issued or sold or
deemed to have been issued under Section 3, (b) the number of shares of Common
Stock outstanding or deemed to be outstanding, and (c) the Purchase Price in
effect immediately prior to such issue or sale and as adjusted and readjusted
(if required by Section 3) on account thereof. The Company shall forthwith mail
a copy of each such report to each holder of a Warrant. In the event that a
holder of a Warrant disagrees with such report, the Company shall cause
independent certified public accountants of recognized national standing (which
may be the regular auditors of the Company) selected by the Company to review
and verify or revise such computation (other than any computation of the Fair
Value of property) and report. The Company shall also keep copies of all such
reports at its principal office and shall cause the same to be available for
inspection at such office during normal business hours by any holder of a
Warrant or any prospective purchaser of a Warrant designated by the holder
thereof.
8. NOTICES OF CORPORATE ACTION. In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
15
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any consolidation or
merger involving the Company and any other Person, any transaction or series of
transactions in which more than 50% of the voting securities of the Company are
transferred to another Person, or any transfer, sale or other disposition of all
or substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company,
the Company shall mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, sale, disposition, dissolution, liquidation or winding-up is to take
place and the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 20 days prior to the date
therein specified.
9. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required
to be reserved for purposes of exercise of this Warrant require registration
with or approval of any governmental authority under any federal or state law
(other than the Securities Act) before such shares may be issued upon exercise,
the Company shall, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. At any such time as Common Stock is listed on any national securities
exchange, the Company shall, at its expense, obtain promptly and maintain the
approval for listing on each such exchange, upon official notice of issuance,
the shares of Common Stock issuable upon exercise of the then outstanding
Warrants and maintain the listing of such shares after their issuance; and the
Company shall also list on such national securities exchange, shall register
under the Exchange Act and shall maintain such listing of, any Other Securities
that at any time are issuable upon exercise of the Warrants, if and at the time
that any securities of the same class shall be listed on such national
securities exchange by the Company.
10. RESTRICTIONS ON TRANSFER.
10.1. RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 10, each Warrant (including each Warrant issued upon the transfer of any
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAW OF ANY STATE, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR PURSUANT TO AN APPLICABLE
16
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS
WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS SPECIFIED
IN THIS WARRANT.
Except as otherwise permitted by this Section 10, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."
10.2. TRANSFER TO COMPLY WITH THE SECURITIES ACT. Restricted Securities
may not be sold, assigned, pledged, hypothecated, encumbered or in any manner
transferred or disposed of (a "Transfer"), in whole or in part, except in
compliance with the provisions of the Securities Act and state securities or
Blue Sky laws and the terms and conditions hereof.
10.3. NOTICE OF TRANSFER. Each Holder shall, prior to any Transfer of
any Warrants, give written notice to the Company of such Holder's intention to
Transfer.
10.4. TERMINATION OF RESTRICTIONS. The restrictions imposed by this
Section 10 on the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) when such securities are
sold pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, or (c) when, in the reasonable opinion of both counsel for the
Holder and counsel for the Company, such restrictions are no longer required or
necessary in order to protect the Company against a violation of the Securities
Act upon any sale or other disposition of such securities without registration
thereunder. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the Holder shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing the applicable legends
required by Section 10.1.
10.5. EXEMPT TRANSFERS. The restrictions on the transfer of this
Warrant or the Warrant Shares set forth in this Section 10 shall not apply to
any transfer to an affiliate of the Holder or to any transfer to any other
Person, PROVIDED that such transfer is made in compliance with the provisions of
the Securities Act and state securities laws.
17
11. RESERVATION OF STOCK, ETC. The Company shall at all times reserve
and keep available, solely for issuance and delivery upon exercise of this
Warrant, the number of shares of Common Stock (or Other Securities) from time to
time issuable upon exercise of this Warrant. All shares of Common Stock (or
Other Securities) issuable upon exercise of any Warrants shall be duly
authorized and, when issued upon such exercise, shall be validly issued and, in
the case of shares, fully paid and nonassessable, with no liability on the part
of the holders thereof, and, in the case of all securities, shall be free from
all liens, security interests, encumbrances (in each of the foregoing cases,
other than those imposed by the Holder), taxes, preemptive rights and charges.
The transfer agent for the Common Stock, and every subsequent transfer agent for
any shares of the Company's capital stock issuable upon the exercise of any of
the purchase rights represented by this Warrant, are hereby irrevocably
authorized and directed at all times until the Expiration Date to reserve such
number of authorized and unissued shares as shall be requisite for such purpose.
The Company shall keep copies of this Warrant on file with the transfer agent
for the Common Stock and with every subsequent transfer agent for any shares of
the Company's capital stock issuable upon the exercise of the rights of purchase
represented by this Warrant. The Company shall supply such transfer agent with
duly executed stock certificates for such purpose. All Warrants surrendered upon
the exercise of the rights thereby evidenced shall be canceled, and such
canceled Warrants shall constitute sufficient evidence of the number of shares
of stock which have been issued upon the exercise of such Warrants. Subsequent
to the Expiration Date, no shares of stock need be reserved in respect of any
unexercised Warrant.
12. REGISTRATION AND TRANSFER OF WARRANTS, ETC.
12.1. WARRANT REGISTER; OWNERSHIP OF WARRANTS. Each Warrant issued by
the Company shall be numbered and shall be registered in a warrant register (the
"Warrant Register") as it is issued and transferred, which Warrant Register
shall be maintained by the Company at its principal office or, at the Company's
election and expense, by a Warrant agent or the transfer agent. The Company
shall be entitled to treat the registered Holder of any Warrant on the Warrant
Register as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other Person, and shall not be affected by any notice to the
contrary, except that, if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes. Subject to Section 10, a Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
12.2. TRANSFER OF WARRANTS. Subject to compliance with Section 10, if
applicable, this Warrant and all rights hereunder are transferable in whole or
in part, without charge to the Holder hereof, upon surrender of this Warrant
with a properly executed Form of Assignment attached hereto as Exhibit B at the
principal office of the Company. Upon any partial transfer, the Company shall at
its expense issue and deliver to the Holder a new Warrant of like tenor, in the
name of the Holder, which shall be exercisable for such number of shares of
Common Stock with respect to which rights under this Warrant were not so
transferred.
12.3. REPLACEMENT OF WARRANTS. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this
18
Warrant and, in the case of any such loss, theft or destruction of this Warrant,
on delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender of such
Warrant to the Company at its principal office and cancellation thereof, the
Company at its expense shall execute and deliver, in lieu thereof, a new Warrant
of like tenor.
12.4. ADJUSTMENTS TO PURCHASE PRICE AND NUMBER OF SHARES.
Notwithstanding any adjustment in the Purchase Price or in the number or kind of
shares of Common Stock purchasable upon exercise of this Warrant, any Warrant
theretofore or thereafter issued may continue to express the same number and
kind of shares of Common Stock as are stated in this Warrant, as initially
issued.
12.5. FRACTIONAL SHARES. Notwithstanding any adjustment pursuant to
Section 3 in the number of shares of Common Stock covered by this Warrant or any
other provision of this Warrant, the Company shall not be required to issue
fractions of shares upon exercise of this Warrant or to distribute certificates
which evidence fractional shares. In lieu of fractional shares, the Company
shall make payment to the Holder, at the time of exercise of this Warrant as
herein provided, in an amount in cash equal to such fraction multiplied by the
Current Market Price of a share of Common Stock on the date of Warrant exercise.
13. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that there
would be no adequate remedy at law to any Holder in the event of any default or
threatened default by the Company in the performance of or compliance with any
of the terms of this Warrant and accordingly, the Company agrees that, in
addition to any other remedy to which the Holder may be entitled at law or in
equity, the Holder shall be entitled to seek to compel specific performance of
the obligations of the Company under this Warrant, without the posting of any
bond, in accordance with the terms and conditions of this Warrant in any court
of the United States or any State thereof having jurisdiction, and if any action
should be brought in equity to enforce any of the provisions of this Warrant,
the Company shall not raise the defense that there is an adequate remedy at law.
Except as otherwise provided by law, a delay or omission by the Holder hereto in
exercising any right or remedy accruing upon any such breach shall not impair
the right or remedy or constitute a waiver of or acquiescence in any such
breach. No remedy shall be exclusive of any other remedy. All available remedies
shall be cumulative.
14. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing contained in this
Warrant shall be construed as conferring upon the Holder hereof any rights as a
shareholder of the Company or as imposing any obligation on the Holder to
purchase any securities or as imposing any liabilities on the Holder as a
shareholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
15. NOTICES. All notices and other communications (and deliveries)
provided for or permitted hereunder shall be made in writing by hand delivery,
telecopier, any nationally-recognized courier guaranteeing overnight delivery or
first class registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
19
If to the Company: Value City Department Stores, Inc.
0000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Xxxxx X. XxXxxxx
Fax No. (000) 000-0000
with copies to: Porter, Wright, Xxxxxx & Xxxxxx LLP
00 X. Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Fax No. (000) 000-0000
If to Holder: Cerberus Partners, L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxx
Fax No. (000) 000-0000
with copies to: Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Fax No. (000) 000-0000
All such notices and communications (and deliveries) shall be deemed to
have been duly given: at the time delivered by hand, if personally delivered;
when receipt is acknowledged, if telecopied; on the next Business Day, if timely
delivered to a courier guaranteeing overnight delivery; and five days after
being deposited in the mail, if sent first class or certified mail, return
receipt requested, postage prepaid; PROVIDED, that the exercise of any Warrant
shall be effective in the manner provided in Section 2.
16. AMENDMENTS. This Warrant and any term hereof may not be amended,
modified, supplemented or terminated, and waivers or consents to departures from
the provisions hereof may not be given, except by written instrument duly
executed by the Company and the Holder.
17. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Warrant otherwise
requires: (1) words of any gender shall be deemed to include each other gender;
(2) words using the singular or plural number shall also include the plural or
singular number, respectively; (3) the words "hereof", "herein" and "hereunder"
and words of similar import when used in this Warrant shall refer to this
Warrant as a whole and not to any particular provision of this Warrant, and
Section and paragraph references are to the Sections and paragraphs of this
Warrant unless otherwise specified; (4) the word "including" and words of
similar import when used in this Warrant shall
20
mean "including, without limitation," unless otherwise specified; (5) "or" is
not exclusive; and (6) provisions apply to successive events and transactions.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of New York.
19. REGISTRATION RIGHTS AGREEMENT. The shares of Common Stock (and
Other Securities) issuable upon exercise of this Warrant (or upon conversion of
any shares of Common Stock issued upon such exercise) shall constitute
Registrable Securities (as such term is defined in the Registration Rights
Agreement). Each Holder shall be entitled to all of the benefits afforded to a
holder of any such Registrable Securities under the Registration Rights
Agreement and such Holder, by its acceptance of this Warrant, agrees to be bound
by and to comply with the terms and conditions of the Registration Rights
Agreement applicable to such Holder as a holder of such Registrable Securities.
20. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
p.m., New York City time, on ________________.(3)
21. COSTS AND ATTORNEYS' FEES. In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Warrant, the
Company agrees and the Holder, by taking and holding this Warrant agrees, that
the prevailing party shall recover from the non-prevailing party all of such
prevailing party's costs and reasonable attorneys' fees incurred in each and
every such action, suit or other proceeding, including any and all appeals or
petitions therefrom.
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(3) Expiration Date will be ten years from the date of issuance of the warrant.
21
IN WITNESS WHEREOF, the Company has executed and delivered this Warrant
as of the date first above written.
VALUE CITY DEPARTMENT STORES, INC.
By:
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Name:
--------------------------------------
Title:
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22
EXHIBIT A to
COMMON STOCK PURCHASE WARRANT
FORM OF
ELECTION TO PURCHASE SHARES
The undersigned hereby irrevocably elects to exercise the Warrant to
purchase ____ shares of Common Stock, no par value per share ("Common Stock"),
of VALUE CITY DEPARTMENT STORES, INC. and hereby makes payment of $________
therefor [or] makes payment therefor by application pursuant to Section
2.1(b)(ii) of the Warrant of $_______ aggregate principal amount of the
then-outstanding Obligations (as defined in the Financing Agreement) [or] makes
payment by reduction pursuant to Section 2.1(b)(iii) of the Warrant of the
number of shares of Common Stock otherwise issuable to the Holder upon Warrant
exercise by ___ shares [or] makes payment therefor by delivery of the following
Common Stock Certificates of the Company (properly endorsed for transfer in
blank) for cancellation by the Company pursuant to Section 2.1(b)(iv) of the
Warrant, certificates of which are attached hereto for cancellation [list
certificates by number and amount]. The undersigned hereby requests that
certificates for such shares be issued and delivered as follows:
ISSUE TO:
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(NAME)
-------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
-------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
--------------------------------------------------------------------
(NAME)
-------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock purchased (and/or reduced)
hereby is less than the number of shares of Common Stock covered by the Warrant,
the undersigned requests that a new Warrant representing the number of shares of
Common Stock not so purchased (or reduced) be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME OF HOLDER
-------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO:
--------------------------------------------------------------------
(NAME OF HOLDER)
-------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
Dated: ____________, 20__ NAME OF HOLDER
By
------------------------------------
Name:
Title:
EXHIBIT B to
COMMON STOCK PURCHASE WARRANT
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Stock, no par value per share ("Common Stock") of VALUE CITY
DEPARTMENT STORES, INC. represented by the Warrant, with respect to the number
of shares of Common Stock set forth below:
NAME OF ASSIGNEE ADDRESS NO. OF SHARES
and does hereby irrevocably constitute and appoint ________ Attorney to make
such transfer on the books of maintained for that purpose, with full power of
substitution in the premises.
Dated: _______________, 20__ NAME OF HOLDER
By
----------------------------
Name:
Title:
