PLEDGE AGREEMENT
Exhibit 10.4
PLEDGE AGREEMENT, dated as of August 16, 2006 made by Retail Ventures, Inc., an Ohio
corporation (the “Company”), with and in favor of Cerberus Partners, L.P., a Delaware
limited partnership (the “Warrant Holder”).
WITNESSETH:
WHEREAS, pursuant to the terms of the Warrants, upon the exercise of a Warrant into DSW Stock
by the Warrant Holder, the Company has agreed to deliver to the Warrant Holder the DSW Stock into
which the relevant Warrant has been exercised, upon the terms and subject to the conditions set
forth therein;
NOW, THEREFORE, in consideration of the premises the parties hereto hereby agree as follows:
1. Defined Terms. (a) Unless otherwise defined herein, each term defined in the
Warrants and used herein shall have the meaning given to such term in the Warrants.
(b) The following terms shall have the following meanings:
“Agreement”: this Pledge Agreement, as the same may be amended, modified or otherwise
supplemented from time to time.
“Collateral”: the collective reference to the Pledged Stock, the certificates (if
any) representing the Pledged Stock, all options and other rights contractual or otherwise in
respect thereof and all, documents, instruments, investment property and other property (including
but not limited to any stock dividend or distribution in connection with a stock split) from time
to time received, receivable or otherwise distributed, issued or delivered in respect of or in
exchange for any or all of the Pledged Stock, and all proceeds of any of the foregoing, in each
case whether now owned or hereafter acquired by the Company and howsoever its interest therein may
arise or appear.
“Event of Default”: the failure by the Company to perform the Obligations in
accordance with the terms of the Warrants.
“Obligations”: the obligation of the Company under a Warrant, upon notification that
a Warrant is to be exercised into DSW Stock and upon payment of the Aggregate Purchase Price, to
issue to the Warrant Holder DSW Stock on the terms set forth in the Warrant.
“Pledged Stock”: 644,705 shares of DSW Stock, as the same may be increased pursuant
to the provisions contained in the definition of the term “Collateral” and the final sentence of
Section 5(a) hereof.
“UCC”: the Uniform Commercial Code as in effect from time to time in the State of New
York.
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“Warrants”: the collective reference to Warrant number C1, and Warrant number W6
issued by the Company to the Warrant Holder (i) on September 26, 2002 and amended and restated on
July 5, 2005, in the case of Warrant number C1, and (ii) on July 5, 2005 in the case of Warrant
number W6, in each case, as the same may be amended, supplemented or modified after the date
hereof.
(c) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.
2. Delivery and Pledge.
(a) The Company hereby delivers, transfers, assigns, pledges and issues to the Warrant Holder
a continuing first priority Lien on, and security interest in, all of the Company’s right, title
and interest in and to the Collateral, in each case as collateral security for the prompt and
complete performance by the Company when due of the Obligations. The Company hereby agrees that
(i) subject to the terms hereof, the Warrant Holder may exercise its rights set forth herein or
under applicable law, and realize on the Collateral to satisfy, in whole or in part, the
Obligations, in accordance with, and subject to, the terms hereof and the terms of the Warrants.
(b) The Company agrees promptly to deliver or cause to be delivered to the Warrant Holder any
and all certificated Pledged Stock and any and all certificates or other instruments or documents
representing the Collateral. Upon delivery to the Warrant Holder, (i) any certificates evidencing
Pledged Stock shall be accompanied by transfer powers, duly executed in blank or other instruments
of transfer satisfactory to the Warrant Holder and by such other instruments and documents as the
Warrant Holder may reasonably request and (ii) all other property comprising part of the Collateral
shall be accompanied by proper instruments of assignment duly executed by the Company and such
other instruments or documents as the Warrant Holder may reasonably request.
3. Restrictions on Transfer of Pledged Stock; Voting of Pledged Stock.
(a) Unless an Event of Default shall have occurred and be continuing and the Warrant Holder
shall have exercised its remedies under Section 6 hereof, the Warrant Holder shall not sell, assign
or transfer the Pledged Stock.
(b) Unless an Event of Default shall have occurred and be continuing the Warrant Holder shall
not vote or exercise any rights whatsoever with respect to the Pledged Stock. Notwithstanding the
foregoing, if an Event of Default shall have occurred and be continuing, the Warrant Holder may
vote the Pledged Stock as contemplated by Section 5 of this Agreement.
4. Representations, Warranties and Covenants. The Company represents, warrants and
covenants that:
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(a) it (i) is and will at all times continue to be the direct owner, beneficially and of
record, of the Collateral (ii) holds the same free and clear of all Liens, except for the security
interest granted hereunder, and (iii) will make no assignment, pledge, hypothecation or transfer
of, or create or permit to exist any security interest in, or other Lien on, the Collateral, other
than pursuant hereto;
(b) it (i) has the power and authority to execute this Agreement and to pledge the Collateral
in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or
therein against any and all Liens (other than the Lien created by this Agreement), however arising,
of all Persons whomsoever;
(c) no consent of any other Person (including stockholders, trustees, partners, members or
creditors of the Company) and no consent or approval of any governmental authority or any
securities exchange was or is necessary to the execution and delivery of this Agreement, validity
of the pledge effected hereby; and the exercise of remedies by the Lender hereunder; and (ii)
neither the execution and delivery of this Agreement by the Company, the granting of the security
interest hereunder, nor the exercise of remedies by the Lender hereunder contravene any law or any
contractual restriction binding on or affecting the Company or any of its properties and will not
result in or require the creation of any Lien upon the Collateral other than pursuant to this
Agreement;
(d) upon delivery of the certificates representing the Pledged Stock to the Warrant Holder,
the Warrant Holder shall have a valid and perfected first Lien upon and security interest in such
Pledged Stock, and (ii) filing of a UCC financing statement in the office of the Secretary of State
of Ohio, the Warrant Holder shall have a valid and perfected first Lien upon and security interest
in the other Collateral, in each case, as security for the performance of the Obligations;
(e) the pledge effected hereby is effective to vest in the Warrant Holder the rights in the
Collateral as set forth herein and there are no restrictions upon the transfer (other than pursuant
to state and federal securities laws and compliance by the Warrant Holder with the terms of the
Warrant) of, or the right to vote in respect of, any of the Collateral and that the Company has the
right to vote, pledge and grant a security interest in or otherwise transfer such Collateral free
of any Lien;
(f) it will not make or consent to any amendment or other modification or waiver with respect
to any Collateral or enter into any agreement restricting its right to pledge the Collateral
hereunder without the consent of the Lender (whose consent shall not be unreasonably withheld); and
(g) at any time and from time to time, upon the written request of the Lender, it will
promptly and duly execute and deliver, such further instruments and documents and take such further
actions as the Lender may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted.
5. Voting Rights; Dividends and Interest, etc.
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(a) Unless and until an Event of Default shall have occurred and be continuing: (i) the
Company shall be entitled to exercise any and all voting and/or other consensual rights and powers
inuring to an owner of Pledged Stock or any part thereof for any purpose consistent with the terms
of this Agreement, (ii) the Warrant Holder shall execute and deliver to the Company, or cause to be
executed and delivered to the Company, all such proxies, powers of attorney and other instruments
as the Company may reasonably request for the purpose of enabling the Company to exercise the
voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i)
above and to receive the dividends, distributions and payments it is entitled to receive pursuant
to subparagraph (iii) below, (iii) the Company shall be entitled to receive and retain any and all
dividends, interest, principal and other distributions and payments paid in cash on the Pledged
Stock. All dividends, interest, principal and other distributions and payments made on or in
respect of the Collateral other than in cash, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of DSW or received in exchange for the Collateral
or any part thereof, or in redemption thereof, or as a result of any merger, consolidation,
acquisition or other exchange of assets to which DSW may be a party or otherwise, shall be and
become part of the Collateral, and, if received by the Company, shall not be commingled by the
Company with any of its other funds or property but shall be held separate and apart therefrom,
shall be held in trust for the benefit of the Warrant Holder and shall be forthwith delivered to
the Warrant Holder in the same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default, all rights of the
Company to dividends, interest, principal or other distributions or payments that such Company is
authorized to receive, (with respect only to the DSW Stock that is the subject of the Event of
Default) pursuant to paragraph (a)(iii) above shall cease, and all such rights shall thereupon
become vested in the Warrant Holder, which shall have the sole and exclusive right and authority to
receive and retain such dividends, interest, principal or other distributions or payments. All
dividends, interest, principal or other distributions or payments received by the Company contrary
to the provisions of this Section 5 shall be held in trust for the benefit of the Warrant Holder,
shall be segregated from other property or funds of such Company and shall be forthwith delivered
to the Warrant Holder upon demand in the same form as so received (with any necessary endorsement).
(c) Upon the occurrence and during the continuance of an Event of Default, all rights of any
Company to exercise the voting and consensual rights and powers it is entitled to exercise pursuant
to paragraph (a)(i) of this Section 5, and the obligations of the Warrant Holder under paragraph
(a)(ii) of this Section 5, shall cease, and all such rights shall thereupon become vested in the
Warrant Holder, which shall have the sole and exclusive right and authority to exercise such voting
and consensual rights and powers. After all Events of Default have been cured or waived, such
Company will have the right to exercise the voting and consensual rights and powers that it would
otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above.
6. Remedies.
If an Event of Default shall have occurred and be continuing, and upon 10 days’ notice by the
Warrant Holder to the Company, the pledge set forth in Section 2 hereof shall be
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deemed (effective upon the expiry of the such 10 day period and payment in full of the Aggregate
Purchase Price in accordance with the terms of the applicable Warrant) to be an irrevocable
transfer and delivery, in accordance with the terms of the applicable Warrant, by the Company to
the Warrant Holder of that number of shares of the Pledged Stock then deliverable under the terms
of the relevant Warrant and legal title such shares shall be transferred to the Warrant Holder
without need for further actions on its behalf. Notwithstanding any other provision of this
Agreement, if an Event of Default shall have occurred and be continuing, the Warrant Holder shall
have the rights and remedies available to it as a secured party under the provisions of the UCC.
7. Warrant Holder’s Appointment as Attorney-in-Fact. At any time after the occurrence
and during the continuance of an Event of Default, the Company hereby irrevocably constitutes and
appoints the Warrant Holder and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority in the place and
stead of the Company and in the name of the Company or in its own name, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the purposes of this
Agreement. All powers, authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security interests created
hereby are released.
8. Execution of Financing Statements. Pursuant to any applicable law, the Company
authorizes the Warrant Holder to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of the Company in
such form and in such offices as the Warrant Holder reasonably determines appropriate to perfect
the security interests of the Warrant Holder under this Agreement. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement or other filing or
recording document or instrument for filing or recording for filing in any jurisdiction.
9. Notices. All notices, requests and demands to or upon the Company or the Warrant
Holder to be effective shall be in writing (or by telex, fax or similar electronic transfer
confirmed in writing) and shall be deemed to have been duly given or made (i) when delivered by
hand or (ii) if given by mail, three Business Days after being deposited in the mails by certified
mail, return receipt requested, or (iii) if by telex, fax or similar electronic transfer, when sent
and receipt has been confirmed, addressed to the Company or the Warrant Holder at the following:
(x) if to the Company:
Retail Ventures, Inc
0000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: General Counsel (Ph: 000-000-0000, Fax: 000-000-0000)
0000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: General Counsel (Ph: 000-000-0000, Fax: 000-000-0000)
and
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(y) if to the Warrant Holder:
Cerberus Partners, L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx (Ph: 000-000-0000, Fax: 000-000-0000)
Cerberus Partners, L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx (Ph: 000-000-0000, Fax: 000-000-0000)
10. Termination and Release.
(a) Subject to paragraph (b) below, this Agreement shall terminate and the Liens and security
interests granted hereby shall be released, upon the earlier to occur of (i) the transfer or
assignment to any Person (other than an affiliate of the Warrant Holder) by the Warrant Holder of
any of the Warrants, (ii) the exercise by the Warrant Holder of any of the Warrants into Common
Stock instead of DSW Stock, or (iii) the performance by the Company of the Obligations in
accordance with the terms of the Warrants.
(b) If the Warrant Holder (i) transfers or assigns to any Person (other than an affiliate of
the Warrant Holder) some but not all of the Warrants held by it; (ii) exercises some but not all of
the Warrants into Common Stock instead of DSW Stock; or (iii) has only exercised some but not all
of the Warrants held by it, this Agreement and the Liens and security interests created hereby will
be terminated and released only as to that number of shares of Pledged Stock relating to the
Warrants so transferred or assigned, so exercised, or in respect of which the Company has performed
the Obligations, as the case may be.
(c) Upon termination of this Agreement, the Warrant Holder shall surrender the Pledged Stock
to the Company together with all other Collateral previously delivered to the Warrant Holder and
then held by it, in each case without recourse, representation or warranty, and execute and deliver
to the Company such documents of assignment as are reasonably necessary to terminate the Warrant
Holder’s security interest in the Collateral interest hereunder.
11. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Amendments. This Agreement may be amended by the written agreement of the parties
hereto.
13. Headings. The headings used in this Agreement are for convenience of reference
only and are not to affect the construction hereof or be taken into consideration in the
interpretation hereof.
14. Successors and Assigns. This Agreement shall be binding upon the successors and
assigns of the Company and shall inure to the benefit of the Warrant Holder and its successors but
not its assigns.
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15. Governing Law. This Agreement shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York.
16. WAIVER OF JURY TRIAL. THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
17. Indemnity and Expenses. (a) The Company agrees to indemnify and hold harmless the
Lender (and all of its respective officers, directors, employees, attorneys, consultants and
agents) from and against any and all claims, damages, losses, liabilities, obligations, penalties,
costs and expenses (including, without limitation, reasonable legal fees and disbursements of
counsel) to the extent that they arise out of or otherwise result from an enforcement of this
Agreement by the Lender after an Event of Default under this Agreement, except, as to any such
indemnified Person, claims, losses or liabilities resulting solely and directly from such Person’s
gross negligence or willful misconduct as determined by a final judgment of a court of competent
jurisdiction.
(b) The Company agrees to pay to the Lender upon demand the amount of any and all costs and
expenses, including the reasonable fees and disbursements of the Lender’s counsel, which the Lender
may incur in connection with (i) the preparation, negotiation, execution, delivery, amendment,
waiver or other modification of this Agreement, (ii) the exercise or enforcement of any of the
rights of the Lender hereunder, or (iii) the failure by the Company to perform or observe any of
the provisions hereof; provided that such costs and expenses shall not include those costs and
expenses that are determined, pursuant to a final judgment by a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of the Lender.
18. Security Interest Absolute. All rights of the Lender, all Liens and all
obligations of each of the Company hereunder shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Warrants or any other agreement or instrument
relating thereto, (ii) any change in the time, manner or place of payment of, or in any other term
in respect of, all or any of the Obligations, or any other amendment or waiver of or consent to any
departure from the Warrants, (iii) any exchange or release of, or non-perfection of any Lien on any
Collateral, or any release or amendment or waiver of, or consent to departure from, any guaranty
for all or any of the Obligations, or (iv) any other circumstance which might otherwise constitute
a defense available to, or a discharge of, the Company in respect of the Obligations. All
authorizations and agencies contained herein with respect to any of the Collateral are irrevocable
and powers coupled with an interest.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and
delivered as of the date first above written.
| RETAIL VENTURES, INC. |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title : | Chief Financial Officer | |||
| CERBERUS PARTNERS, L.P. as Warrant Holder |
||||
| By: | CERBERUS ASSOCIATES, L.L.C. | |||
| By: | /s/ Xxxxxx Xxxxxxx | |||
| Name: | Xxxxxx Xxxxxxx | |||
| Title : | ||||
