PREPAYMENT, COVENANT TERMINATION AND RELEASE AGREEMENT
Exhibit 10.3
PREPAYMENT, COVENANT TERMINATION AND RELEASE AGREEMENT, dated as of August 16, 2006, by and
among Value City Department Stores LLC, an Ohio limited liability company (“Value City” or
“Borrower”), Gramex Retail Stores, Inc., a Delaware corporation (“Gramex”),
Filene’s Basement, Inc., a Delaware corporation (“Filene’s”), GB Retailers, Inc. a Delaware
corporation (“GB”), Value City of Michigan, Inc., a Michigan corporation (“VC
Michigan”), X.X. Xxxxxxxx Delivery, Inc. (“Overland”), Value City Department Stores
Services, Inc. (“Services”), Retail Ventures, Inc., an Ohio corporation (the
“Parent”), Retail Ventures Jewelry, Inc., an Ohio corporation (“RV Jewelry”),
Retail Ventures Services, Inc., an Ohio corporation (“RV Services”), Retail Ventures
Licensing, Inc., a Delaware corporation (“RV Licensing”), and Retail Ventures Imports, Inc.
(formerly known as VC Acquisition, Inc.), an Ohio corporation (“Imports”, and together with
Gramex, Filene’s, GB, VC Michigan, Overland, Services, the Parent, RV Jewelry, RV Licensing and RV
Services, each a “Guarantor” and collectively, the “Guarantors”, and together with
the Borrower, each a “Loan Party”, and collectively, the “Loan Parties”), the
lenders currently party to the Financing Agreement referred to below (each a “Lender” and
collectively, the “Lenders”) and Cerberus Partners, L.P., a limited partnership formed
under the laws of the State of Delaware (“CPLP”), as agent for the Lenders (in such
capacity, together with its successors and assigns in such capacity, the “Agent”).
WITNESSETH:
WHEREAS, the Borrower, the Guarantors, the Agent and the Lenders are parties to a Second
Amended and Restated Senior Loan Agreement dated as of July 5, 2005 (as amended through the date
hereof, the “Financing Agreement”), pursuant to which the Lenders have made loans to the
Borrower (the “Loans”);
WHEREAS, the obligations of the Loan Parties to the Agent and Lenders in respect of the
Financing Agreement and the Loan Documents (as defined in the Financing Agreement) are guaranteed
and secured pursuant to the terms of the Financing Agreement and the other Loan Documents;
WHEREAS, simultaneously with the execution and delivery of this Agreement, the Borrower is
prepaying $49,500,000 of the Loans under the Financing Agreement (such payment the
“Prepayment” and the Loans prepaid, the “Prepaid Loans”)) and satisfying all of the
other obligations of the Borrower and the Guarantors to the Lenders and the Agent under the other
Loan Documents (other than the Restated Financing Agreements (as hereinafter defined, the
Convertible Warrants and the Warrants (collectively, the “Outstanding Warrants”), the
Registration Rights Agreement and the DSW Registration Rights Agreement (each as defined in the
Financing Agreement);
NOW, THEREFORE, in consideration of the premises and agreements herein and the Prepayment and
the satisfaction of the other obligations, the Borrower, the Guarantors, the Agent and the Lenders
hereby agree as follows:
1. Capitalized terms used and not otherwise defined herein have the respective meanings
assigned to them in the Financing Agreement.
2. As of the date hereof, (i) the accrued and unpaid interest on the Prepaid Loans is
$206,250; (ii) the amount of accrued and unpaid fees and expenses (other than fees and expenses of
Xxxxxxx Xxxx & Xxxxx LLP) is $0.00. Assuming no changes in applicable interest rates and no
changes in the outstanding principal amount of the Prepaid Loans, the aggregate per diem accrual of
such interest and fees is $13,750.00; and (iii) the prepayment premium that the Borrower has agreed
to pay with respect to the Prepaid Loans is $3,930,113.49.
3. The Borrower is obligated to pay to Xxxxxxx Xxxx & Xxxxx LLP $185,000.00 representing fees
and disbursements of counsel to the Agent, which amount shall be paid by wire transfer of
immediately available funds pursuant to the wire instructions set forth on Schedule B
attached hereto.
4. The Borrower hereby agrees that the Prepaid Loans, the interest thereon and the fees in
connection therewith set forth in paragraph 2 hereof, the prepayment premium set forth in paragraph
2 hereof, the accrued fees and disbursements of counsel to the Agent set forth in paragraph 3
hereof and the accrued fees and disbursements of counsel to Schottenstein Stores Corporation
(collectively, the “Prepaid Obligations”) are payable without any deduction, offset,
defenses or counterclaim, provided that the prepayment premium is only payable if, and to
the extent, that the Borrower actually repays the Prepaid Loans as contemplated herein.
5. Without recourse and without any representation or warranty of any kind, and subject to the
satisfaction of the conditions set forth in paragraph 9 hereof: (a) the Agent and the Lenders
hereby acknowledge payment in full of the Prepaid Obligations and hereby terminate all covenants
set forth in Article VI and Article VII of the Financing Agreement, (b) each Lender shall execute
and deliver a Third Amended and Restated Senior Loan Agreement restating the terms of the Loan
remaining outstanding to each Lender, on the terms set forth in Exhibit A (as amended and restated
as set forth herein, collectively, the “Restated Financing Agreements”), (c) the Agent and
the Lenders hereby terminate each Loan Document (other than the Restated Financing Agreements, the
Outstanding Warrants, the Registration Rights Agreement and the DSW Registration Rights Agreement),
(d) the Agent and the Lenders hereby acknowledge and agree that any and all liens, security
interests or other charges or encumbrances in favor of the Agent and the Lenders arising under the
Financing Agreement, any Loan Documents or any other documents securing the Financing Agreement
(collectively, the “Financing Agreement Liens”) are hereby automatically released and
terminated without any further action on the part of the Agent and Lenders, (e) the Agent and the
Lenders hereby acknowledge and agree that each Guarantor is hereby irrevocably released and
discharged from its Guaranty and from its liability for any Guaranteed Obligations, (f) (i) the
Borrower and Guarantors hereby release and discharge the Agent, the Lenders, and their respective
participants, if any, and their successors and assigns, from all claims, demands, accounts and
actions that they at any time had or have or that they or their successors and assigns hereinafter
may have against the Agent or the Lenders by reason of any account, cause or matter (the
“Claims”) arising out of the Financing Agreement and the other Loan Documents (other than
the Restated Financing Agreements, the Outstanding Warrants, the Registration Rights Agreement and
the DSW Registration Rights Agreement) and except to the extent arising out of this
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Agreement; and (ii) as to each and every claim released hereunder, the Borrower and each
Guarantor hereby represents that it has received the advice of legal counsel with regard to the
releases contained herein, and (g) the Agent and Lenders hereby release the Borrower and the
Guarantors from all Claims arising out of the Financing Agreement and the other Loan Documents
(other than the Restated Financing Agreements, the Outstanding Warrants, the Registration Rights
Agreement and DSW Registration Rights Agreement) except to the extent arising out of this Agreement
and any provision in any of the aforementioned documents which by its terms expressly survives the
termination thereof. Nothing contained herein shall be deemed to be a termination of, or a release
of any claims or obligations under this Agreement, any Restated Financing Agreement, any
Outstanding Warrant, the Registration Rights Agreement or the DSW Registration Rights Agreement.
For the avoidance of doubt, the parties hereby acknowledge and agree that neither the Stock Pledge
Agreement entered into in accordance with Section 9(d) hereof nor the Account Control agreement
entered into in accordance with Section 9(e) hereof, are Loan Documents and all parties agree that
such documents are not terminated by this Agreement.
6. Following the satisfaction of the conditions set forth in paragraph 9 hereof, the Agent and
Lenders, as appropriate (a) hereby authorize the Borrower and its counsel to file or cause to be
filed, UCC termination statements (the “Termination Statements”) to terminate those UCC
financing statements listed in Schedule C attached hereto, together with any others
hereafter identified to the Agent by the Borrower as securing the Obligations under the Financing
Agreement, (b) will promptly (i) cause to be delivered to the Borrower (or to another Person
designated by the Borrower), the stock certificate(s) representing the shares of stock of DSW
pledged to the Agent and the Lenders pursuant to the Pledge Agreement and the executed stock
power(s) related thereto, and (ii) deliver to the Revolving Credit Facility Agent, the stock
certificates representing the shares of the other Loan Parties pledged to the Agent and the Lenders
pursuant to the Pledge Agreement and the executed stock powers related thereto as set forth in
Schedule D attached hereto (collectively, the “Pledged Collateral”), together with
any others hereafter identified to the Agent by the Borrower as securing the Obligations under the
Financing Agreement, (c) promptly execute and deliver to the Borrower (or to another Person
designated by the Borrower) the Releases (Trademark) and the Release (Patent) in the form of
Exhibit B hereto (the “Intellectual Property Releases”), terminating the Agent’s
and the Lenders’ interests in each Loan Party’s trademarks and patents, and (d) promptly execute
and deliver to the Revolving Credit Facility Agent, the mortgage assignments in the form of
Exhibit C hereto (the “Mortgage Assignments”) assigning the Agent’s and the
Lenders’ interests in the Facilities owned by any Loan Party to the Revolving Credit Facility Agent
or amendments to such mortgages to designate the Revolving Credit Facility Agent as agent
thereunder, which Pledged Collateral, Termination Statements, Intellectual Property Releases and
Mortgage Assignments shall be made without representation, warranty or recourse of any kind.
7. The Agent and the Lenders will, at the request of the Borrower execute such additional
instruments and other writings, and take such other actions, as the Borrower may from time to time
reasonably request to effect or evidence the satisfaction of the Obligations and the termination of
the Financing Agreement Liens and each Loan Document (other than the Restated Financing Agreements,
the Outstanding Warrants, the Registration Rights Agreement and the DSW Registration Rights
Agreement) and any instruments executed pursuant thereto, but at the sole cost and expense of the
Borrower; provided that this paragraph 7 shall not apply to
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(i) the Restated Financing Agreement, the Outstanding Warrants, the Registration Rights
Agreement or the DSW Registration Rights Agreement, and (ii) any provisions in the Loan Documents
not expressly terminated hereby and which expressly provide for the survival thereof.
8. This Agreement shall (a) be binding on the Agent, the Lenders, the Borrower, the Guarantors
and their respective successors and assigns and (b) inure to the benefit of the Agent, the Lenders,
the Borrower, the Guarantors and their respective successors and assigns.
9. The effectiveness of this Agreement is subject to the conditions precedent that the Agent
shall have received (a) full payment in respect of all of the Prepaid Obligations by wire transfer
of immediately available funds pursuant to the instructions set forth in Schedule A and
Schedule B attached hereto, (b) counterparts of this Agreement, duly executed by the
Borrower, the Guarantors, the Agent and the Lenders, (c) a copy of the Third Amended and Restated
Senior Loan Agreement — Cerberus, and the Third Amended and Restated Senior Loan Agreement — SSC,
in each case in the form of Exhibit A hereto and executed by the Borrower and the relevant Lender,
(d) the stock pledge by RVI, in favor of Cerberus and the stock pledge in favor of SSC,
respectively, as a holder of Outstanding Warrants, pledging as collateral for the obligation of RVI
to deliver shares of stock of DSW upon exercise of the Outstanding Warrants for shares of stock of
DSW, the number of shares of stock of DSW into which the Outstanding Warrants may be exercised,
substantially in the form of Exhibit D hereto, duly executed by RVI, accompanied by stock
certificates representing such pledged shares and corresponding stock powers executed in blank, and
(e) an Account Control Agreement with National City Bank and each Lender, in each case reasonably
acceptable to such Lender, with respect to the account of the Borrower at National City Bank into
which it has placed the cash deposit in an amount equal to the remaining balance of the Loan owing
to each Lender securing the Loan outstanding under the Restated Financing Agreements, as required
pursuant thereto, duly executed by the Borrower, the Bank and such Lender.
10. The Loan Parties hereby jointly and severally agree to pay all costs and expenses in
connection with the preparation, execution, delivery, filing and recording of this Agreement, the
notification and release documents executed in furtherance hereof, and the performance of any other
acts and the execution of any other documents required to effect the release of any Financing
Agreement Liens, including, without limitation, the reasonable fees and disbursements of counsel to
the Agent.
11. This Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement. Delivery of an executed counterpart of
this Agreement by telefacsimile or electronic mail shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed counterpart of this
Agreement, but the failure to deliver an original executed counterpart shall not affect the
validity, enforceability and binding effect of this Agreement.
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12. This Agreement shall be governed by and construed in accordance with the law of the State
of New York.
13. THE AGENT, THE LENDERS, THE BORROWER AND THE GUARANTORS HEREBY WAIVE ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR
UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN
THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING IN CONNECTION WITH THIS AGREEMENT,
AND AGREE THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered
by their duly authorized officers as of the date first written above.
| VALUE CITY DEPARTMENT STORES LLC, an Ohio limited liability company |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Vice President | |||
| GRAMEX RETAIL STORES, INC., a Delaware corporation |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Chief Financial Officer | |||
| FILENE’S BASEMENT, INC., a Delaware corporation |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Chief Financial Officer | |||
| VALUE CITY OF MICHIGAN, INC., a Michigan corporation |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Chief Financial Officer | |||
| GB RETAILERS, INC., a Delaware corporation |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Chief Financial Officer | |||
| X.X. XXXXXXXX DELIVERY, INC. a Delaware corporation |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Chief Financial Officer | |||
| VALUE CITY DEPARTMENT STORES SERVICES, INC. a Delaware corporation |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Chief Financial Officer | |||
| RETAIL VENTURES, INC. an Ohio corporation |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Chief Financial Officer | |||
| RETAIL VENTURES JEWELRY, INC. an Ohio corporation |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Chief Financial Officer | |||
| RETAIL VENTURES SERVICES, INC. an Ohio corporation |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Chief Financial Officer | |||
| RETAIL VENTURES IMPORTS, INC. (formerly known as VC Acquisition, Inc.), an Ohio corporation |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Chief Financial Officer | |||
| RETAIL VENTURES LICENSING, INC. a Delaware corporation |
||||
| By: | /s/ Xxxxx X. XxXxxxx | |||
| Name: | Xxxxx X. XxXxxxx | |||
| Title: | Chief Financial Officer | |||
| AGENT AND LENDER: CERBERUS PARTNERS, L.P., a Delaware limited partnership, on behalf of itself and its affiliate assigns By: CERBERUS ASSOCIATES, L.L.C. |
||||
| By: | /s/ Xxxxxx Xxxxxxx | |||
| Name: | Xxxxxx Xxxxxxx | |||
| Title: | ||||
| LENDER: SCHOTTENSTEIN STORES CORPORATION, a Delaware corporation |
||||
| By: | /s/ Xxxxx X. Xxxx | |||
| Name: | Xxxxx X. Xxxx | |||
| Title: | Senior Vice President and General Counsel | |||
Schedule A
Wire Instructions
Cerberus Partners, L.P.
| Bank: | ||
| ABA# : | 000000000 |
|
| Account Name: | Cerberus Partners, L.P. |
|
| Account #: | 00000000 |
|
| Attention: | Xxxxxx Xxxxxxx |
|
| Reference: | Value City |
Schedule B
Wire Instructions
Xxxxxxx Xxxx & Xxxxx LLP
| Name of Bank: | Citibank N.A. 000 Xxxx Xxxxxx Xxx Xxxx, Xxx Xxxx 00000 |
|
| ABA No.: | 000000000 |
|
| Account Name: | Xxxxxxx Xxxx & Xxxxx LLP Attorney Business Account |
|
| Account No.: | 00000000 |
|
| Reference: | 014951.0296 |
Schedule C
UCC Financing Statements to be terminated — Attached
Schedule D
Stock Certificates
Copies Attached
Exhibit A
Form of Third Amended and Restated Senior Loan Agreement
Exhibit B
Intellectual Property Releases
Attached
Exhibit C
Mortgage Assignments
As determined among SRZ and counsel to National City
Exhibit D
Form of Pledge Agreement
