| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Ohio | 31-0746639 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 4150 East Fifth Avenue, Columbus, Ohio | 43219 | |
| (Address of principal executive offices) | (Zip Code) |
| Title of each class: | Name of each exchange on which registered: | |
| Class A Common Shares, without par value | New York Stock Exchange | |
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| Exhibit 3.1 | ||||||||
| Exhibit 3.2 | ||||||||
| Exhibit 4.1 | ||||||||
| Exhibit 10.6 | ||||||||
| Exhibit 10.7 | ||||||||
| Exhibit 10.11 | ||||||||
| Exhibit 10.23 | ||||||||
| Exhibit 10.24 | ||||||||
| Exhibit 10.45 | ||||||||
| Exhibit 21.1 | ||||||||
| Exhibit 23.1 | ||||||||
| Exhibit 24.1 | ||||||||
| Exhibit 31.1 | ||||||||
| Exhibit 31.2 | ||||||||
| Exhibit 32.1 | ||||||||
| Exhibit 32.2 | ||||||||
2
| F-1 | ||||
| F-2 | ||||
| F-3 | ||||
| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
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SCHEDULES
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| S-1 | ||||
|
Index to Exhibits
|
E-1 |
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
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Northeast
West
Central
Southeast
3
Arizona
5
Illinois
10
Alabama
1
1
California
14
Indiana
6
Florida
15
1
Colorado
6
Iowa
1
Georgia
7
6
Nevada
3
Kansas
3
North Carolina
4
8
Texas
19
Michigan
11
Tennessee
3
1
Minnesota
5
Virginia
9
8
Missouri
4
17
Nebraska
1
10
Ohio
11
1
Oklahoma
1
Wisconsin
4
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Category
Percent of Net Sales
64
%
17
%
13
%
6
%
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•
identify suitable markets and sites for new store locations;
•
negotiate favorable lease terms;
•
build-out or refurbish sites on a timely and effective basis;
•
obtain sufficient levels of inventory to meet the needs of new stores;
•
obtain sufficient financing and capital resources or generate sufficient cash flows from operations to fund growth;
•
open new stores at costs not significantly greater than those anticipated;
•
successfully open new DSW stores in regions of the United States in which we currently have few or no stores;
•
control the costs of other capital investments associated with store openings;
•
hire, train and retain qualified managers and store personnel; and
•
successfully integrate new stores into our existing
infrastructure, operations, management and distribution systems or adapt such infrastructure, operations and systems to
accommodate our growth.
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•
variations in local economic conditions, which could affect our customers’ discretionary spending;
•
unanticipated fashion trends;
•
our success in developing and maintaining vendor relationships that provide us access to
in-season merchandise at attractive prices;
•
our success in distributing merchandise to our stores in an efficient manner; and
•
changes in weather patterns, which in turn affect consumer preferences.
•
changes in our merchandising strategy;
•
timing and concentration of new DSW store openings and related pre-opening and other start-up costs;
•
levels of pre-opening expenses associated with new DSW stores;
•
changes in our merchandise mix;
•
changes in and regional variations in demographic and population characteristics;
•
timing of promotional events;
•
seasonal fluctuations due to weather conditions;
•
actions by our competitors; and
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•
general U.S. economic conditions and, in particular, the retail sales environment.
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•
economic and political instability in countries where these suppliers are located;
•
international hostilities or acts of war or terrorism affecting the United States or
foreign countries from which our merchandise is sourced;
•
increases in shipping costs;
•
transportation delays and interruptions, including increased inspections of import
shipments by domestic authorities;
•
work stoppages;
•
adverse fluctuations in currency exchange rates;
•
U.S. laws affecting the importation of goods, including duties, tariffs and quotas and other non-tariff barriers;
•
expropriation or nationalization;
•
changes in local government administration and governmental policies;
•
changes in import duties or quotas;
•
compliance with trade and foreign tax laws; and
•
local business practices, including compliance with local laws and with domestic and international labor standards.
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•
the election of directors;
•
mergers or other business combinations; and
•
acquisitions or dispositions of assets.
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23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
High
Low
$
27.50
$
23.11
27.32
17.50
28.10
20.00
$
31.77
$
26.32
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For the Fiscal Year Ended
2/2/02
2/1/03
1/31/04
1/29/05
1/28/06
(Dollars in thousands except net sales per average gross square foot)
$
523,509
$
644,345
$
791,348
$
961,089
$
1,144,061
$
123,396
$
158,756
$
202,927
$
270,211
$
315,719
$
4,668
$
17,781
$
28,053
$
56,109
$
70,112
$
239
$
8,060
$
14,807
$
34,955
$
37,181
$
232,821
$
295,703
$
291,184
$
395,437
$
507,715
$
60,121
$
87,141
$
103,244
$
138,919
$
238,528
1.77
2.07
2.39
2.28
2.71
$
325
$
54,116
$
35,000
$
55,000
$
—
78
104
126
142
172
26
22
16
31
29
0
0
0
1
2
104
126
142
172
199
54
74
102
124
139
2,583,295
3,180,006
3,571,498
4,372,671
5,061,642
2,217,108
2,912,545
3,364,094
4,010,245
4,721,129
$
230
$
214
$
214
$
217
$
217
16
113
168
224
238
0.0
%
0.1
%
5.9
%
5.0
%
5.4
%
(1)
Includes net sales of leased shoe departments.
(2)
Results for the fiscal year ended January 28, 2006 include a $6.5 million pre-tax
charge, and a $3.9 million after-tax charge in operating profit and net income,
respectively, related to the reserve for estimated losses associated with the theft of
credit card and other purchase information.
(3)
Working capital represents current assets less current liabilities.
(4)
Current ratio represents current assets divided by current liabilities.
(5)
Comprised of borrowings under the Value City revolving credit facility.
(6)
Number of DSW stores for each fiscal period presented prior to fiscal 2005 includes two
combination DSW/Filene’s Basement stores which were re-categorized as leased shoe
departments at the beginning of fiscal 2005.
(7)
Comparable DSW stores and comparable leased shoe departments are those units that have
been in operation for at least 14 months at the beginning of the fiscal year. Stores or
leased shoe departments, as the case may be, are added to the comparable base at the
beginning of the year and are dropped for comparative purposes in the month that they are
closed.
(8)
DSW total square footage represents the total amount of square footage for DSW stores
only; it does not reflect square footage of leased shoe departments.
(9)
Average gross square footage represents the monthly average of square feet for DSW
stores only for each period presented and consequently reflects the effect of opening
stores in different months throughout the period.
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(10)
Net sales per average gross square foot is the result of dividing net sales for DSW
stores only for the period presented by average gross square foot calculated as described
in footnote 9 above.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
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•
Revenue Recognition.
Revenues from merchandise sales are recognized at the point of sale
and are net of returns and exclude sales tax. Revenue from gift cards is deferred and the
revenue is recognized upon redemption of the gift cards.
•
Cost of Sales and Merchandise Inventories.
Merchandise inventories are stated at the
lower of cost, determined using the first-in, first-out basis, or market, using the retail
inventory method. The retail inventory method is widely used in the retail industry due to
its practicality. Under the retail inventory method, the valuation of inventories at cost
and the resulting gross profit are calculated by applying a calculated cost to retail ratio
to the retail value of inventories. The cost of the inventory reflected on our consolidated
balance sheet is decreased by charges to cost of sales at the time the retail value of the
inventory is lowered through the use of markdowns. Hence, earnings are negatively impacted
as merchandise is marked down prior to sale. Reserves to value inventory at the lower of
cost or market were $19.2 million and $14.2 million at the end of fiscal 2005 and 2004,
respectively.
Inherent in the calculation of inventories are certain significant management judgments and
estimates, including setting the original merchandise retail value or mark-on, markups of
initial prices established, reductions in prices due to customers’ perception of value
(known as markdowns), and estimates of losses between physical inventory counts, or
shrinkage, which, combined with the averaging process within the retail inventory method,
can significantly impact the ending inventory valuation at cost and the resulting gross
profit.
We include in the cost of sales expenses associated with warehousing, distribution and store
occupancy. Warehousing costs are comprised of labor, benefits and other labor-related costs
associated with the operations of the warehouse, which are primarily payroll-related taxes
and benefits. The non-labor costs associated with warehousing include rent, depreciation,
insurance, utilities and maintenance and other operating costs that are passed to us from
the landlord. Distribution costs include the transportation of merchandise to the warehouse
and from the warehouse to our stores. Store occupancy costs include rent, utilities,
repairs, maintenance, insurance, and janitorial costs and other costs associated with
licenses and occupancy-related taxes, which are primarily real estate taxes passed to us by
our landlords.
•
Asset Impairment and Long-lived Assets.
We must periodically evaluate the carrying
amount of our long-lived assets, primarily property and equipment, and finite life
intangible assets when events and circumstances warrant such a review to ascertain if any
assets have been impaired. The carrying amount of a long-lived asset is considered impaired
when the carrying value of the asset exceeds the expected future cash flows from the asset.
Our reviews are conducted at the lowest identifiable level, which includes a store. The
impairment loss recognized is the excess of the carrying amount of
the asset over its fair value, estimated on discounted cash flow. Should an impairment loss be realized, it
will be included in cost of sales. The amount of impairment losses recorded during fiscal
2005 and fiscal 2004 were $0.2 and $0.8 million, respectively, while in fiscal 2003 the
amount of the impairment loss was immaterial to the financial statements. We believe at
this time that the long-lived assets’ carrying amounts and useful lives continue to
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be appropriate. To the extent these future projections or our strategies change, the
conclusion regarding impairment may differ from our current estimates.
•
Self-insurance Reserves.
We record estimates for certain health and welfare, workers
compensation and casualty insurance costs that are self-insured programs. These estimates
are based on actuarial assumptions and are subject to change based on actual results.
Should the total cost of claims for health and welfare, workers compensation and casualty
insurance exceed those anticipated, reserves recorded may not be sufficient, and, to the
extent actual results vary from assumptions, earnings would be impacted.
•
Customer Loyalty Program.
We maintain a customer loyalty program for our DSW stores in
which customers receive a future discount on qualifying purchases. The “Reward Your Style”
program is designed to promote customer awareness and loyalty and provide us with the
ability to communicate with our customers and enhance our understanding of their spending
trends. Upon reaching the target spending level, customers may redeem these discounts on a
future purchase. Generally, these future discounts must be redeemed within six months. We
accrue the estimated costs of the anticipated redemptions of the discount earned at the
time of the initial purchase and charge such costs to operating expense based on historical
experience. The estimates of the costs associated with the loyalty program require us to
make assumptions related to customer purchase levels and redemption rates. The accrued
liability as of January 28, 2006 and January 29, 2005 was $8.3 million and $4.5 million,
respectively. To the extent assumptions of purchases and redemption rates vary from actual
results, earnings would be impacted.
•
Income Taxes.
We are required to determine the aggregate amount of income tax expense to
accrue and the amount which will be currently payable based upon tax statutes of each
jurisdiction we do business in. In making these estimates, we adjust income based on a
determination of generally accepted accounting principles for items that are treated
differently by the applicable taxing authorities. Deferred tax assets and liabilities, as a
result of these differences, are reflected on our balance sheet for temporary differences
that will reverse in subsequent years. A valuation allowance is established against
deferred tax assets when it is more likely than not that some or all of the deferred tax
assets will not be realized. If our management had made these determinations on a different
basis, our tax expense, assets and liabilities could be different.
For the Fiscal Year Ended
January 31,
January 29,
January 28,
2004
2005
2006
(52 Weeks)
(52 Weeks)
(52 Weeks)
100.0
%
100.0
%
100.0
%
(74.4
)
(71.9
)
(72.4
)
25.6
28.1
27.6
(22.1
)
(22.3
)
(21.5
)
3.5
5.8
6.1
(0.3
)
(0.3
)
(0.6
)
3.2
5.5
5.5
(1.3
)
(1.9
)
(2.3
)
1.9
%
3.6
%
3.2
%
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Payments due by Period
No
Less Than
1 - 3
3 -5
More Than
Expiration
Contractual Obligations
Total
1 Year
Years
Years
5 Years
Date
$
—
$
—
$
—
$
—
$
—
$
—
804,322
91,666
184,028
173,870
354,758
—
299
299
—
—
—
—
495
375
120
—
—
—
$
805,116
$
92,340
$
184,148
$
173,870
$
354,758
$
—
(1)
Our operating leases require us to pay for common area maintenance costs and real
estate taxes. In fiscal 2005, these common area maintenance costs and real estate taxes
represented 30.1% of our required lease payments. These costs and taxes vary year by year
and are based almost entirely on actual costs incurred and taxes paid incurred by the
landlord. As such, they are not included in the lease obligations presented above.
(2)
Construction commitments include capital items to be purchased for projects that were
under construction, or for which a lease had been signed, as of January 28, 2006.
(3)
Many of our purchase obligations are cancelable by us without payment or penalty, and
we have excluded such obligations, along with all associate employment and intercompany
obligations.
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ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
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38
39
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40
Page in
Form 10-K
F-1
F-2
F-3
F-4
F-5
F-6
S-1
Table of Contents
41
DSW INC.
April 12, 2006
By:
/s/ Douglas J. Probst
Douglas J. Probst, Executive
Vice President, Chief Financial Officer, and Treasurer
/s/ Douglas J. Probst
Douglas J. Probst, (Attorney-in-fact)
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F-1
DSW Inc.
Columbus, Ohio 43219
April 12, 2006
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F-2
| January 28, | January 29, | January 31, | ||||||||||
| 2006 | 2005 | 2004 | ||||||||||
|
|
||||||||||||
|
Net sales
|
1,144,061 | 961,089 | 791,348 | |||||||||
|
Cost of sales
|
(828,342 | ) | (690,878 | ) | (588,421 | ) | ||||||
|
|
||||||||||||
|
Gross profit
|
315,719 | 270,211 | 202,927 | |||||||||
|
Operating expenses
|
(245,607 | ) | (214,102 | ) | (174,874 | ) | ||||||
|
|
||||||||||||
|
Operating profit
|
70,112 | 56,109 | 28,053 | |||||||||
|
|
||||||||||||
|
Interest expense, net
|
||||||||||||
|
Non-related parties
|
(914 | ) | (2,734 | ) | (2,739 | ) | ||||||
|
Related parties
|
(6,591 | ) | ||||||||||
|
|
||||||||||||
|
Earnings before income taxes
|
62,607 | 53,375 | 25,314 | |||||||||
|
|
||||||||||||
|
Income tax provision
|
(25,426 | ) | (18,420 | ) | (10,507 | ) | ||||||
|
|
||||||||||||
|
Net income
|
37,181 | 34,955 | 14,807 | |||||||||
|
|
||||||||||||
|
Basic and diluted earnings per share:
|
||||||||||||
|
Basic
|
$ | 1.00 | $ | 1.26 | $ | 0.53 | ||||||
|
Diluted
|
$ | 1.00 | $ | 1.26 | $ | 0.53 | ||||||
|
|
||||||||||||
|
Shares used in per share calculations:
|
||||||||||||
|
Basic
|
37,219 | 27,703 | 27,703 | |||||||||
|
Diluted
|
37,347 | 27,703 | 27,703 | |||||||||
F-3
| Number of | ||||||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Deferred | ||||||||||||||||||||||||
| Common | Common | Common | Common | Retained | Compensation | |||||||||||||||||||||||
| Shares | Shares | Shares | Shares | Earnings | Expense | Total | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance, February 1, 2003
|
27,703 | $ | 101,442 | $ | 27,622 | $ | 129,064 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Net income
|
14,807 | 14,807 | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance, January 31, 2004
|
27,703 | $ | 101,442 | $ | 42,429 | $ | 143,871 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Net income
|
34,955 | 34,955 | ||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance, January 29, 2005
|
27,703 | $ | 101,442 | $ | 77,384 | $ | 178,826 | |||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Sale of stock
|
16,172 | $ | 277,963 | 277,963 | ||||||||||||||||||||||||
|
Net income
|
37,181 | 37,181 | ||||||||||||||||||||||||||
|
Dividend to parent
|
(101,442 | ) | (88,558 | ) | (190,000 | ) | ||||||||||||||||||||||
|
Restricted stock units granted
|
2,686 | $ | (2,686 | ) | ||||||||||||||||||||||||
|
Amortization of deferred
compensation expense
|
276 | 276 | ||||||||||||||||||||||||||
|
Stock units granted
|
17 | 447 | 447 | |||||||||||||||||||||||||
|
Exercise of stock options
|
1 | 23 | 23 | |||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
Balance, January 28, 2006
|
16,190 | 27,703 | $ | 281,119 | $ | 0 | $ | 26,007 | $ | (2,410 | ) | $ | 304,716 | |||||||||||||||
F-4
| January 28, | January 29, | January 31, | ||||||||||
| 2006 | 2005 | 2004 | ||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Net income
|
$ | 37,181 | $ | 34,955 | $ | 14,807 | ||||||
|
Adjustments to reconcile net income
to net cash provided by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
19,444 | 18,275 | 15,478 | |||||||||
|
Amortization of debt issuance costs
|
613 | 469 | 479 | |||||||||
|
Amortization of deferred compensation expense
|
276 | |||||||||||
|
Deferred income taxes
|
2,084 | (7,813 | ) | 26 | ||||||||
|
Loss on disposal of assets
|
691 | 135 | 585 | |||||||||
|
Impairment Charges
|
234 | 833 | ||||||||||
|
Grants of director stock units
|
447 | |||||||||||
|
Change in working capital, assets and liabilities:
|
||||||||||||
|
Accounts receivable
|
(1,748 | ) | (27 | ) | 2,965 | |||||||
|
Accounts receivable from related parties
|
(49 | ) | ||||||||||
|
Inventories
|
(8,683 | ) | (57,996 | ) | (8,907 | ) | ||||||
|
Prepaid expenses and other assets
|
(5,815 | ) | (338 | ) | (641 | ) | ||||||
|
Advances to/from affiliates
|
23,676 | (22,236 | ) | 20,574 | ||||||||
|
Accounts payable
|
13,207 | 19,502 | (9,209 | ) | ||||||||
|
Proceeds from lease incentives
|
10,781 | 11,509 | 6,394 | |||||||||
|
Other noncurrent liabilities
|
(419 | ) | 3,026 | 386 | ||||||||
|
Accrued expenses
|
17,337 | 15,019 | 1,973 | |||||||||
|
Net cash provided by operating activities
|
109,257 | 15,313 | 44,910 | |||||||||
|
|
||||||||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Cash paid
for property and equipment
|
(25,344 | ) | (33,949 | ) | (22,110 | ) | ||||||
|
Proceeds from sale of assets
|
91 | 37 | — | |||||||||
|
Net cash used in investing activities
|
(25,253 | ) | (33,912 | ) | (22,110 | ) | ||||||
|
|
||||||||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Payments on capital lease obligations
|
(138 | ) | (205 | ) | ||||||||
|
Proceeds from sale of stock
|
277,963 | |||||||||||
|
Payment of note to parent
|
(190,000 | ) | ||||||||||
|
Net (decrease) increase in revolving credit facility
|
(55,000 | ) | 20,000 | (19,000 | ) | |||||||
|
Debt issuance costs
|
(570 | ) | ||||||||||
|
Proceeds from exercise of stock options
|
23 | |||||||||||
|
Net cash provided (used in) by financing activities
|
32,416 | 19,862 | (19,205 | ) | ||||||||
|
|
||||||||||||
|
Net increase in cash and equivalents
|
116,420 | 1,263 | 3,595 | |||||||||
|
Cash and equivalents, beginning of period
|
8,339 | 7,076 | 3,481 | |||||||||
|
|
||||||||||||
|
Cash and equivalents, end of period
|
$ | 124,759 | $ | 8,339 | $ | 7,076 | ||||||
F-5
| 1. | SIGNIFICANT ACCOUNTING POLICIES | |
| Business Operations — DSW Inc. (“DSW”) and its wholly-owned subsidiary, DSW Shoe Warehouse, Inc. (“DSWSW”), are herein referred to collectively as DSW or the Company. Prior to December 2004, DSW was a wholly-owned subsidiary of Value City Department Stores, Inc., a wholly-owned subsidiary of Retail Ventures, Inc. (“RVI”). In December 2004, RVI completed a corporate reorganization whereby Value City Department Stores, Inc. merged with and into Value City Department Stores, LLC (“Value City”), another wholly-owned subsidiary of RVI. In turn, Value City transferred all of the issued and outstanding shares of DSW to RVI in exchange for a promissory note. On June 29, 2005, DSW commenced an initial public offering (“IPO”) that closed on July 5, 2005. DSW is listed on the New York Stock Exchange trading under the symbol “DSW”. | ||
| DSW operates in two segments and sells better-branded footwear in both. DSW stores also sell accessories. As of January 28, 2006, DSW operated a total of 199 stores located throughout the United States as one segment. These DSW stores offer a wide selection of brand name and designer dress, casual and athletic footwear for men and women. During the years ended January 28, 2006, January 29, 2005, and January 31, 2004, DSW opened 29, 31, and 16 new DSW stores, respectively, and, during the year ended January 28, 2006, we re-categorized two DSW/Filene’s Basement combination locations from the DSW segment to the leased segment. | ||
| DSW also operates leased shoe departments for three non-affiliated retailers and one affiliated retailer in our leased department segment. We entered into supply agreements to merchandise the non-affiliated shoe departments in Stein Mart, Gordmans and Frugal Fannie’s stores as of July 2002, June 2004 and September 2003, respectively. We have operated leased shoe departments for Filene’s Basement, a wholly-owned subsidiary of Retail Ventures, since its acquisition by Retail Ventures in March 2000. Effective as of January 30, 2005, we updated and reaffirmed our contractual arrangement with Filene’s Basement. We own the merchandise, record sales of merchandise net of returns and sales tax, own the fixtures (except for Filene’s Basement) and provide supervisory assistance in these covered locations. Stein Mart, Gordmans, Frugal Fannie’s and Filene’s Basement provide the sales associates. We pay a percentage of net sales as rent. As of January 28, 2006, we supplied merchandise to 157 Stein Mart stores, 55 Gordmans stores, one Frugal Fannie’s, and 25 Filene’s Basement stores. | ||
| Fiscal Year —The Company’s fiscal year ends on the Saturday nearest January 31. Fiscal years 2005, 2004 and 2003 consist of 52 weeks. Unless otherwise stated, references to years in this report relate to fiscal years rather than calendar years. | ||
| Use of Estimates —The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Significant estimates are required as a part of inventory valuation, depreciation, amortization, recoverability of long-lived assets and establishing reserves for self- insurance. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, actual results could differ from these estimates. |
F-6
| Financial Instruments —The following assumptions were used to estimate the fair value of each class of financial instruments: |
| Cash and Equivalents — Cash and equivalents represent cash, highly liquid investments with original maturities of three months or less at the date of purchase and credit card receivables, which generally settle within three days. The carrying amounts approximate fair value. | |||
| Accounts Receivable —Accounts receivable are classified as current assets because the average collection period is generally less than one year. The carrying amount approximates fair value because of the relatively short average maturity of the instruments and no significant change in interest rates. | |||
| Long-Term Debt —The carrying amount approximates fair value as a result of the variable rate-based borrowings. |
| Concentration of Credit Risk —Financial instruments, which principally subject the Company to concentration of credit risk, consist of cash and cash equivalents. The Company invests excess cash when available through financial institutions in overnight investments. At times, such amounts may be in excess of FDIC insurance limits. | ||
| Concentration of Vendor Risk — During fiscal 2005, taking into account industry consolidation, merchandise supplied to the Company by three key vendors accounted for approximately 22% of net sales. | ||
| Inventories —Merchandise inventories are stated at the lower of cost, determined using the first-in, first-out basis, or market, using the retail inventory method. The retail method is widely used in the retail industry due to its practicality. Under the retail inventory method, the valuation of inventories at cost and the resulting gross profits are calculated by applying a calculated cost to retail ratio to the retail value of inventories. The cost of the inventory reflected on the balance sheet is decreased by charges to cost of sales at the time the retail value of the inventory is lowered through the use of markdowns. Hence, earnings are negatively impacted as the merchandise is marked down prior to sale. Reserves to value inventory at the lower of cost or market were $19.2 million and $14.2 million at the end of fiscal years 2005 and 2004, respectively. | ||
| Inherent in the calculation of inventories are certain significant management judgments and estimates, including setting the original merchandise retail value or mark-on, markups of initial prices established, reductions in prices due to customers’ perception of value (known as markdowns), and estimates of losses between physical inventory counts, or shrinkage, which combined with the averaging process within the retail method, can significantly impact the ending inventory valuation at cost and the resulting gross profit. | ||
| Vendor Allowances —Vendor allowances include allowances, rebates and cooperative advertising funds received from vendors. The amount of these funds is determined for each fiscal year and the majority is based on various quantitative contract terms. Amounts expected to be received from vendors relating to the purchase of merchandise inventories are recognized as a reduction of cost of goods sold as the merchandise is sold. Amounts that represent a reimbursement of costs incurred, such as advertising, are recorded as a reduction to the related expense in the period that the related expense is incurred. On an annual basis, the Company confirms earned allowances with vendors to determine the amounts are recorded in accordance with the terms of the contract. At January 28, 2006 and January 29, 2005, the Company had a vendor allowance balance of less than $100,000. |
F-7
| Property and Equipment —Property and equipment are stated at cost less accumulated depreciation determined by the straight-line method over the expected useful lives of the assets. Assets held under capital leases and related obligations are recorded initially at the lower of fair market value or the present value of the minimum lease payments. The straight-line method is used to amortize such capitalized costs over the lesser of the expected useful life of the asset or the life of the lease. Leasehold improvements are amortized under the straight-line method over the lesser of the initial lease term or the expected useful life (10 years). The estimated useful lives of furniture, fixtures and equipment are 3 to 10 years. | ||
| Asset Impairment and Long-Lived Assets —The Company periodically evaluates the carrying amount of its long-lived assets, primarily property and equipment, and finite life intangible assets when events and circumstances warrant such a review to ascertain if any assets have been impaired. The carrying amount of a long-lived asset is considered impaired when the carrying value of the asset exceeds the expected future cash flows from the asset. The Company reviews are conducted down at the lowest identifiable level, which include a store. The impairment loss recognized is the excess of the carrying value of the asset over its fair value, estimated on discounted cash flow. Should an impairment loss be realized, it will be included in cost of sales. The Company expensed $0.2 million and $0.8 million in fiscal 2005 and 2004, respectively, of identified store assets where the recorded value could not be supported by future cash flows. The impairment charge was recorded within the DSW stores segment. The amount of impairment losses recorded during fiscal 2003 was immaterial to the financial statements. | ||
| Goodwill —Goodwill represents the excess cost over the estimated fair values of net assets including identifiable intangible assets of businesses acquired. Goodwill is tested for impairment at least annually. The Company, as a result of adoption of Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets , no longer records goodwill amortization. All of the Company’s goodwill relates to the DSW stores segment. | ||
| Tradenames and Other Intangible Assets —Tradenames and other intangible assets are comprised of values assigned to names the Company acquired and leases acquired. The accumulated amortization for these assets is $6.7 million and $5.8 million at January 28, 2006 and January 29, 2005, respectively. The asset value and accumulated amortization of intangible assets is as follows: |
| January 28, | January 29, | |||||||
| 2006 | 2005 | |||||||
| (In thousands) | ||||||||
|
Tradenames:
|
||||||||
|
Gross Asset
|
$ | 12,750 | $ | 12,750 | ||||
|
Accumulated amortization
|
(6,587 | ) | (5,738 | ) | ||||
|
|
||||||||
|
Subtotal
|
6,163 | 7,012 | ||||||
|
|
||||||||
|
Useful life
|
15 | 15 | ||||||
|
|
||||||||
|
Favorable leases:
|
||||||||
|
Gross Asset
|
140 | 140 | ||||||
|
Accumulated amortization
|
(87 | ) | (73 | ) | ||||
|
|
||||||||
|
Subtotal
|
53 | 67 | ||||||
|
|
||||||||
|
Useful life
|
14 | 14 | ||||||
|
|
||||||||
|
Tradenames and other intangible assets—net
|
$ | 6,216 | $ | 7,079 | ||||
|
|
||||||||
F-8
| Aggregate amortization expense for the current and each of the five succeeding years is as follows: |
| Fiscal Year | (In thousands) | |||
|
2005
|
$ | 864 | ||
|
2006
|
$ | 861 | ||
|
2007
|
$ | 854 | ||
|
2008
|
$ | 854 | ||
|
2009
|
$ | 854 | ||
|
2010
|
$ | 854 | ||
| Income Taxes— Income taxes are accounted for using the asset and liability method. Under this method, deferred income taxes arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. A valuation allowance is established against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of January 28, 2006, and January 29, 2005, the Company did not have any income tax valuation allowances. | ||
| Deferred Rent— Many of the Company’s operating leases contain predetermined fixed increases of the minimum rental rate during the initial lease term. For these leases the Company recognizes the related rental expense on a straight-line basis and records the difference between the amount charged to expense and the rent paid as deferred rent and begins amortizing such deferred rent upon the delivery of the lease location by the lessor. The amounts included in the other noncurrent liabilities caption were $22.6 million and $16.7 million, at January 28, 2006 and January 29, 2005, respectively. | ||
| Tenant Allowances— The Company receives cash allowances from landlords, which are deferred and amortized on a straight-line basis over the life of the lease as a reduction of rent expense. These allowances are included in the caption other noncurrent liabilities and were $40.5 million and $35.0 million, at January 28, 2006 and January 29, 2005, respectively. | ||
| Sales and Revenue Recognition —Sales of merchandise are net of returns and exclude sales tax. Revenues from our retail operations are recognized at the later of point of sale or delivery of goods to the customer. Revenue from gift cards is deferred and the revenue is recognized upon redemption of the gift card. | ||
| As of January 28, 2006, the Company supplies footwear, under supply arrangements, to 25 Filene’s Basement stores and 213 locations for other non-related retailers in the United States of America. Sales for these leased supply locations are net of returns and sales tax, as tracked by the lessor, and are included in net sales and represent 10.5%, 9.4% and 8.9% of total net sales for fiscal 2005, 2004, and 2003, respectively. | ||
| Cost of Sales —Cost of sales includes the cost of merchandise, distribution and warehousing (including depreciation), store occupancy (excluding depreciation), permanent and point of sale reductions, markdowns and shrinkage provision. | ||
| Warehousing costs are comprised of labor, benefits and other labor-related costs associated with the operations of the warehouse, which are primarily payroll-related taxes and benefits. The non-labor costs associated with the warehouse include rent, depreciation, insurance, utilities and maintenance and other operating costs that are passed to the Company from the landlord. Distribution costs include the transportation of merchandise to the warehouse and from the warehouse to the stores. Store occupancy costs include rent, utilities, repairs, maintenance, insurance and janitorial costs and other costs associated |
F-9
| with licenses and occupancy-related taxes, which are primarily real estate taxes passed to the Company by the landlords. | ||
| Operating Expenses – Operating expenses include expenses related to store selling, store management and store payroll costs, advertising, leased shoe department operations, store depreciation and amortization, pre-opening advertising and other pre-opening costs (which are expensed as incurred), corporate expenses for buying services, information services, depreciation expense for corporate cost centers, marketing, insurance, legal, finance, outside professional services, allocable costs from our parent and other corporate related departments, and benefits for associates and related payroll taxes. Corporate level expenses are primarily attributable to operations at our corporate offices in Columbus, Ohio. | ||
| Customer Loyalty Program —The Company maintains a customer loyalty program for its DSW operations in which customers receive a future discount on qualifying purchases in exchange for marketing information. The “Reward Your Style” is designed to promote customer awareness and loyalty and provide the Company with the ability to communicate with its customers. Upon reaching the spending levels, customers may redeem these discounts on a future purchase. Generally these future discounts must be redeemed within six months. The Company accrues the estimated costs of the anticipated redemptions of the discount earned at the time of the initial purchase and charges such costs to operating expenses based on historical experience. The estimates of the costs associated with the loyalty program require the Company to make assumptions related to customer purchase levels and redemption rates. The accrued liability as of January 28, 2006 and January 29, 2005 was $8.3 million and $4.5 million, respectively. | ||
| Pre-Opening Costs —Pre-opening costs associated with opening or remodeling of stores are expensed as incurred. Pre-opening costs expensed were $7.7 million, $10.8 million and $5.1 million for fiscal 2005, 2004, and 2003, respectively. | ||
| Advertising Expense —The cost of advertising is expensed as incurred or when the advertising first takes place. Advertising costs were $38.0 million, $39.3 million and $36.4 million in fiscal 2005, 2004, and 2003, respectively. | ||
| Earnings Per Share (“EPS”) —Basic earnings per share are based on net income and a simple weighted average of Class A and Class B common shares and directors stock units outstanding, calculated using the treasury stock method. Diluted earnings per share reflect the potential dilution of Class A common shares related to outstanding stock options and restricted stock units. The numerator for the diluted earnings per share calculation is net income. The denominator is the weighted average diluted shares outstanding. |
| Years ended | ||||||||||||
| January 28, | January 29, | January 31, | ||||||||||
| 2006 | 2005 | 2004 | ||||||||||
| (in thousands) | ||||||||||||
|
Weighted average shares outstanding
|
37,219 | 27,703 | 27,703 | |||||||||
|
Assumed exercise of dilutive stock options
|
62 | |||||||||||
|
Restricted stock units
|
66 | |||||||||||
|
Number of shares for computation of
dilutive earnings per share
|
37,347 | 27,703 | 27,703 | |||||||||
F-10
| For the fiscal year ended January 28, 2006, all potentially issuable shares from the exercise of stock options were dilutive. For the fiscal years ended January 29, 2005 and January 31, 2004, there were no potentially dilutive instruments outstanding. | ||
| Recent Accounting Pronouncements —The Financial Accounting Standards Board (“FASB”) periodically issues SFAS, some of which require implementation by a date falling within or after the close of the fiscal year. | ||
| In December 2004, the FASB issued SFAS No. 123 (revised 2004) (“SFAS No. 123R”), Share-Based Payment . This statement revised SFAS No. 123, Accounting for Stock-Based Compensation , and requires companies to expense the value of employee stock options and similar awards. The effective date of this standard is interim and annual periods beginning after June 15, 2005. In April 2005, the SEC delayed the compliance date for SFAS 123R until the beginning of the Company’s fiscal year 2006. No stock options or similar awards were granted by the Company during fiscal 2004 and prior. The Company will utilize the modified prospective method of adoption. The Company expects that the impact of adoption of SFAS 123R to the Company’s results of operations will be similiar, on an annualized basis, to the pro forma disclosures presented in Note 3 below. | ||
| In November, 2005, the FASB issued FIN 47, Accounting for Conditional Asset Retirement Obligations , (“FIN 47”) which clarified the term “conditional asset retirement obligation” as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations . Conditional asset retirement obligation refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are dependent on a future event that may or may not be within the control of the entity. While the timing and/or method of settlement is unknown, the obligation to perform the asset retirement obligation is unconditional. FIN 47 requires that the fair value of the asset retirement activity be recorded when it can be reasonably estimated. The adoption of FIN 47 during the fourth quarter of fiscal 2005 did not have a material impact on our financial position or results of operations. | ||
| 2. | INITIAL PUBLIC OFFERING | |
| On July 5, 2005, DSW completed its IPO of 14,062,500 Class A common shares. In connection with this offering, DSW granted an option to the underwriters to purchase up to an additional 2,109,375 Class A common shares to cover over-allotments, which option was exercised in full by the underwriters and also closed on July 5, 2005. DSW sold 16,171,875 Class A common shares raising net proceeds of $285.8 million, net of the underwriters’ commission and before expenses of approximately $7.8 million. DSW used the net proceeds of the offering to repay $196.6 million of intercompany indebtedness, including interest, owed to RVI and for working capital and general corporate purposes, including the paying down of $20 million outstanding on Value City’s old secured revolving credit facility and $10 million intercompany advance. The 410.09 common shares of DSW held by RVI outstanding at January 29, 2005 were changed to 27,702,667 Class B common shares. It is the 27,702,667 Class B common shares which are being used in the prior period’s calculation of earnings per share. Subsequent to the IPO, the transactions between DSW and RVI and its other subsidiaries are settled in accordance with a shared services agreement and resulted in the advances from affiliates being classified as a current payable. At January 28, 2006, Retail Ventures owned approximately 63.1% of DSW’s outstanding Common Shares, representing approximately 93.2% of the combined voting power of DSW’s outstanding Common Shares. | ||
| 3. | STOCK BASED COMPENSATION | |
| DSW has various stock-based employee compensation plans. DSW accounts for those plans in accordance with Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued |
F-11
| to Employees,” and related interpretations. Accordingly, no stock-based employee compensation cost has been recognized for the fixed stock option plans, as the exercise price of the options equals the market price of the stock on the grant date. The following table illustrates the effect on net income and income per share if DSW had applied the fair value recognition of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation.” |
| Year ended | ||||||||||||
| January 28, | January 29, | January 31, | ||||||||||
| 2006 | 2005 | 2004 | ||||||||||
| (in thousands, except per share amounts) | ||||||||||||
|
Net income, as reported
|
$ | 37,181 | $ | 34,955 | $ | 14,807 | ||||||
|
Add: Stock-based employee
compensation expense included
in reported net income, net of tax
|
167 | |||||||||||
|
Deduct: Total stock-based employee
compensation expense determined
under the fair value based method
for all awards, net of tax
|
(1,212 | ) | ||||||||||
|
Pro forma net income
|
$ | 36,136 | $ | 34,955 | $ | 14,807 | ||||||
|
|
||||||||||||
|
Income per share:
|
||||||||||||
|
Basic as reported
|
$ | 1.00 | $ | 1.26 | $ | 0.53 | ||||||
|
Diluted as reported
|
$ | 1.00 | $ | 1.26 | $ | 0.53 | ||||||
|
|
||||||||||||
|
Basic pro forma
|
$ | 0.97 | $ | 1.26 | $ | 0.53 | ||||||
|
Diluted pro forma
|
$ | 0.97 | $ | 1.26 | $ | 0.53 | ||||||
| To determine the pro forma amounts, the fair value of each stock option has been estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in the fiscal year 2005: expected volatility of 42.3%; dividend yield of 0.0%; risk-free interest rate of 4.1%; and expected lives of 5.0 years. The weighted average fair value of options granted in the fiscal year 2005 was $8.43. There were no options granted prior to fiscal 2005. Pro forma disclosures may not be representative of the actual results to be expected in future years. |
| 4. | RELATED PARTY TRANSACTIONS | |
| The Company purchases merchandise from Value City and other affiliates of Schottenstein Stores Corporation (“SSC”). Purchases from affiliates were immaterial in fiscal 2005, fiscal 2004 and fiscal 2003. | ||
| The Company also leases certain store and warehouse locations owned by SSC as described in Note 5. | ||
| Accounts receivable from and payable to affiliates principally result from commercial transactions with entities owned or controlled by SSC or intercompany transactions with SSC. Settlement of affiliate receivables and payables are in the form of cash. These transactions settle normally in 30 to 60 days. Amounts receivable or payable to SSC or its affiliates at January 28, 2006 and January 29, 2005 were immaterial. | ||
| The Company shares certain personnel, administrative and service costs with SSC and its affiliates. The costs of providing these services are allocated among the Company, SSC and its affiliates without a premium. The allocated amounts are not significant. SSC does not charge the Company for general corporate management services. In the opinion of the Company and SSC management, the aforementioned charges are reasonable. | ||
| The Company participated in SSC’s self-insurance program for general liability, casualty loss and certain state workers’ compensation programs, which participation ended in fiscal 2003. While the |
F-12
| Company no longer participates in the program, it continues to remain responsible for liabilities it incurred under the program. The Company expensed an immaterial amount in fiscal 2005 and 2004 and $0.2 million in fiscal 2003, respectively, for such program. Estimates for self-insured programs are determined by independent actuaries based on actuarial assumptions, which incorporate historical incurred claims and incurred but not reported (“IBNR”) claims. | ||
| Through the shared services agreement with RVI and in the ordinary course of business, the Company has received various services provided by RVI or its subsidiaries, including import administration, risk management, human resources, information technology, tax, financial services and payroll, as well as other corporate services. RVI has also provided the Company with the services of a number of its executives and employees. The financial statements include allocations by RVI of its costs related to these services. These costs allocations have been determined on a basis that the Company and RVI consider to be reasonable reflections of the use of services provided or the benefit received to the Company. These allocations totaled $17.3 million, $29.5 million and $24.4 million in fiscal 2005, fiscal 2004 and fiscal 2003, respectively. In addition, the Company has entered into agreements with various subsidiaries of RVI to supply all of their shoe inventories. The net balance of these transactions is reflected within the balance sheets as advances to affiliates. | ||
| See Notes 5, 6, and 8 for additional related party disclosures. | ||
| 5. | LEASES | |
| The Company leases stores and warehouses under various arrangements with related and unrelated parties. Such leases expire through 2024 and in most cases provide for renewal options. Generally, the Company is required to pay base rent, real estate taxes, maintenance, insurance and contingent rentals based on sales in excess of specified levels. | ||
| As of January 28, 2006, the Company leased or had other agreements with 15 store locations owned by SSC or affiliates of SSC, and one warehouse facility for an annual minimum rent of $7.7 million and additional contingent rents based on aggregate sales in excess of specified sales for the store locations. Under supply agreements to Filene’s Basement stores and other non-related retailers, the Company pays contingent rents based on sales. | ||
| Future minimum lease payments required under the aforementioned leases, exclusive of real estate taxes, insurance and maintenance costs, at January 28, 2006 are as follows: |
| Operating Leases | ||||||||||||
| Fiscal | Unrelated | Related | ||||||||||
| Year | Total | Party | Party | |||||||||
| (In thousands) | ||||||||||||
|
2006
|
$ | 91,666 | $ | 83,258 | $ | 8,408 | ||||||
|
2007
|
92,768 | 84,122 | 8,646 | |||||||||
|
2008
|
91,260 | 82,376 | 8,884 | |||||||||
|
2009
|
89,199 | 80,387 | 8,812 | |||||||||
|
2010
|
84,671 | 76,304 | 8,367 | |||||||||
|
Future years
|
354,758 | 302,020 | 52,738 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Total minimum lease payments
|
$ | 804,322 | $ | 708,467 | $ | 95,855 | ||||||
|
|
||||||||||||
F-13
| The composition of rental expense is as follows: |
| January 28, | January 29, | January 31, | ||||||||||
| 2006 | 2005 | 2004 | ||||||||||
| (In thousands) | ||||||||||||
|
Minimum rentals:
|
||||||||||||
|
Unrelated parties
|
$ | 73,189 | $ | 63,172 | $ | 52,326 | ||||||
|
Related parties
|
7,683 | 6,152 | 6,011 | |||||||||
|
Contingent rentals:
|
||||||||||||
|
Unrelated parties
|
17,331 | 13,692 | 10,785 | |||||||||
|
Related parties
|
10,778 | 6,931 | 5,796 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Total
|
$ | 108,981 | $ | 89,947 | $ | 74,918 | ||||||
|
|
||||||||||||
| At January 28, 2006 and January 29, 2005, the Company had no capital leases. | ||
| 6. | LONG-TERM OBLIGATIONS | |
| Long-term obligations consist of the following: |
| January 28, | January 29, | |||||||
| 2006 | 2005 | |||||||
| (In thousands) | ||||||||
|
Revolving credit facility (long-term)
|
$ | — | $ | 55,000 | ||||
|
|
||||||||
|
|
||||||||
|
Letters of credit outstanding
|
$ | 13,577 | $ | 14,854 | ||||
|
|
||||||||
|
|
||||||||
|
Availability under revolving credit facility
|
$ | 136,423 | $ | 108,544 | ||||
|
|
||||||||
| DSW $150 Million Credit Facility —Simultaneously with the amendment and restatement of the revolving credit facility described below and the Company’s initial public offering, the Company entered into a new $150 million secured revolving credit facility with a term of five years. Under this facility, the Company and its subsidiary, DSWSW, are named as co-borrowers. The facility has borrowing base restrictions and provides for borrowings at variable interest rates based on LIBOR, the prime rate and the Federal Funds effective rate, plus a margin. The Company’s obligations under the secured revolving credit facility are secured by a lien on substantially all of its and its subsidiary’s personal property and a pledge of its shares of DSWSW. In addition, the secured revolving credit facility contains usual and customary restrictive covenants relating to the management and the operation of the business. These covenants will, among other things, restrict the Company’s ability to grant liens on its assets, incur additional indebtedness, open or close stores, pay cash dividends and redeem its stock, enter into transactions with affiliates and merge or consolidate with another entity. In addition, if at any time the Company utilizes over 90% of its borrowing capacity under the facility, the Company must comply with a fixed charge coverage ratio test set forth in the facility documents. |
F-14
| Credit Facilities Which DSW Is No Longer Obligated —At January 29, 2005, the Company’s direct parent, RVI and its subsidiaries, had an aggregate $525.0 million of financing that consisted of three separate credit facilities (collectively, the “Credit Facilities”): (i) a $350.0 million revolving credit facility (subsequently increased to $425 million) (the “Revolving Loan”), (ii) two $50.0 million term loan facilities provided equally by Cerberus Partners, L.P. and SSC (the “Term Loans”), and (iii) an amended and restated $75.0 million senior subordinated convertible term loan facility, initially entered into by RVI and its subsidiaries on March 15, 2000, which is held equally by Cerberus Partners, L.P. and SSC (the “Convertible Loan”). The Company was a co-borrower under the Revolving Loan and the Term Loans, and was a guarantor under the Convertible Loan. The Company, the other co-borrowers and the guarantors were jointly and severally liable under the Revolving Loan and the Term Loans. All of the Credit Facilities were guaranteed by RVI. The Company is no longer a party to these Credit Facilities. | ||
| The Company has reflected in the historical financial statements its direct obligations under the Revolving Loan as it relates to the borrowings thereunder. The Term Loans and Convertible Loan are not reflected on the Company’s financial statements as they are recorded on consolidated financial statements of RVI. These Credit Facilities are also subject to an Intercreditor Agreement which provides for an established order of payment of obligations from the proceeds of collateral upon default (the “Intercreditor Agreement”). | ||
| Under the Revolving Loan, the borrowing base formula applicable to the Company was based on the value of the Company’s inventory and accounts receivable. Primary security for the Revolving Loan was provided in part by a first priority lien on all of the inventory and accounts receivable of the Company and other borrowers thereunder, as well as certain notes and payment intangibles. Subject to the Intercreditor Agreement, the Revolving Loan also had the substantial equivalent of a second priority-perfected security interest in all of the first priority collateral securing the Term Loans. Interest on borrowings under the Revolving Loan was calculated at the bank’s base rate plus 0% to 0.5%, or at the Eurodollar offer rate plus 2.00% to 2.75%, depending upon the level of average excess availability that the Company and the other borrowers maintain. The interest rate on borrowings under the Revolving Loan was 4.7% and 3.2% at January 29, 2005 and January 31, 2004, respectively. DSW is no longer a party to this credit facility. At January 29, 2005, the outstanding borrowings for the Company and RVI and their affiliates under the Credit Facilities were: Revolving Loan, $140.0 million; Term Loans, $100.0 million; and Convertible Loan, $75.0 million. | ||
| The weighted average interest rate on borrowings under the Company’s Credit Facilities during fiscal years 2005, 2004 and 2003, and the dividend notes issued and repaid during fiscal 2005 to RVI was 8.5%, 3.6% and 3.3% respectively. The total interest expense was $8.9 million, $2.7 million and $2.7 million and included fees, such as commitment and line of credit fees, of $0.2 million, $0.5 million and $0.6 million for fiscal 2005, 2004 and 2003, respectively. |
F-15
| 7. | INCOME TAX PROVISION | |
| The provision for income taxes consists of the following: |
| January 28, | January 29, | January 31, | ||||||||||
| 2006 | 2005 | 2004 | ||||||||||
| (In thousands) | ||||||||||||
|
Current:
|
||||||||||||
|
Federal
|
$ | 18,891 | $ | 21,438 | $ | 8,711 | ||||||
|
State and local
|
4,451 | 4,803 | 1,770 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
|
23,342 | 26,241 | 10,481 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Deferred:
|
||||||||||||
|
Federal
|
(1,110 | ) | (6,843 | ) | (27 | ) | ||||||
|
State and local
|
3,194 | (978 | ) | 53 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
|
2,084 | (7,821 | ) | 26 | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Income tax expense
|
$ | 25,426 | $ | 18,420 | $ | 10,507 | ||||||
|
|
||||||||||||
| A reconciliation of the expected income taxes based upon the statutory rate is as follows: |
| January 28, | January 29, | January 31, | ||||||||||
| 2006 | 2005 | 2004 | ||||||||||
| (In thousands) | ||||||||||||
|
Income tax expense at federal statutory rate
|
$ | 21,912 | $ | 18,681 | $ | 8,860 | ||||||
|
State and local taxes—net
|
2,800 | 2,538 | 1,188 | |||||||||
|
Non-deductible amortization
|
— | — | 298 | |||||||||
|
Work opportunity tax credit—net
|
(292 | ) | (119 | ) | (131 | ) | ||||||
|
State tax
deferred tax asset write-off of commercial activity tax
|
1,574 | — | — | |||||||||
|
Officer compensation
|
— | — | 169 | |||||||||
|
Meals and entertainment
|
— | 201 | 123 | |||||||||
|
Non-deductible expenses and other
|
(568 | ) | (2,881 | ) | — | |||||||
|
|
||||||||||||
|
|
||||||||||||
|
|
$ | 25,426 | $ | 18,420 | $ | 10,507 | ||||||
|
|
||||||||||||
F-16
| The components of the net deferred tax asset are as follows: |
| The net deferred tax asset is recorded in the Company’s balance sheet as follows: |
| January 28, | January 29, | |||||||
| 2006 | 2005 | |||||||
| (In thousands) | ||||||||
|
Current deferred tax asset
|
$ | 18,591 | $ | 20,261 | ||||
|
Non-current deferred tax (liability) asset
|
(364 | ) | 50 | |||||
|
|
||||||||
|
|
||||||||
|
Total — net
|
$ | 18,227 | $ | 20,311 | ||||
|
|
||||||||
| Prior to the completion of its initial public offering, the Company filed a consolidated federal income tax return with RVI and its other subsidiaries. The allocation of the RVI current consolidated federal income tax to its subsidiaries historically was in accordance with SFAS No. 109, Accounting for Income Taxes . RVI used the “parent company down” approach in allocating the consolidated amount of current and deferred tax expense to its subsidiaries. For the current fiscal year the Company will file its own tax return for the stub period subsequent to the initial public offering. | ||
| The net operating loss deferred tax assets consist of a state and local component. These net operating losses are available to reduce state and local taxable income for the fiscal years 2006 to 2023. | ||
| 8. | OTHER BENEFIT PLANS | |
| The Company participates in a 401(k) Plan (the “Plan”) through the shared services agreement with RVI. Employees who attain age twenty-one are eligible to defer compensation as of the first day of the month following 60 days of employment and may contribute up to thirty percent of their compensation to the Plan, on a pre-tax basis, subject to Internal Revenue Service limitations. As of the first day of the month following an employee’s completion of one year of service as defined under the terms of the Plan, the Company matches employee deferrals into the Plan, 100% on the first 3% of eligible |
F-17
| compensation deferred and 50% on the next 2% of eligible compensation deferred. Additionally, the Company may contribute a discretionary profit sharing amount to the Plan each year. The Company incurred costs associated with the 401(k) Plan of $1.1 million, $0.7 million, and $0.9 million for fiscal years 2005, 2004 and 2003, respectively. | ||
| 9. | STOCK OPTION PLANS | |
| The Company has a 2005 Equity Incentive Plan that provides for the issuance of equity awards to purchase up to 4,600,000 common shares, including stock options and restricted stock units to management, key employees of the Company and affiliates, consultants as defined, and directors of the Company. Options generally vest 20% per year on a cumulative basis. Options granted under the 2005 Equity Incentive Plan generally remain exercisable for a period of ten years from the date of grant. Prior to fiscal 2005, the Company did not have a stock option plan or any equity units outstanding. | ||
| In 2005, the Company issued 17,000 stock units to directors who are not employees of the Company or RVI. Stock units will be automatically granted to each director who is not an employee of the Company or Retail Ventures on the date of each annual meeting of the shareholders for the purpose of electing directors. The number of stock units granted to each non-employee director is calculated by dividing one-half of their annual retainer (excluding any amount paid for service as the chair of a board committee) by the fair market value of a share of DSW stock on the date of the meeting. In addition, each director eligible to receive compensation for board service may elect to have the cash portion of their compensation paid in the form of restricted stock units. Stock units granted to non-employee directors vest and are settled upon the director terminating service from the board. Stock units granted to directors which are not subject to forfeiture are considered to be outstanding for the purposes of computing basic earnings per share. | ||
| In addition, the Company granted 131,000 restricted stock units to employees during fiscal 2005. Restricted stock units generally cliff vest at the end of four years. Restricted stock units granted to employees that are subject to the risk of forfeiture are not included in the computation of basic earnings per share. | ||
| The following table summarizes the Company’s stock option plan and related per share Weighted Average Exercise Prices (“WAEP”) (shares in thousands): |
| January 28, 2006 | ||||||||
| Shares | WAEP | |||||||
|
Outstanding beginning of year
|
— | — | ||||||
|
Granted
|
937 | $ | 19.53 | |||||
|
Exercised
|
(1 | ) | 19.00 | |||||
|
Canceled
|
(22 | ) | 19.00 | |||||
|
|
||||||||
|
Outstanding end of year
|
914 | $ | 19.54 | |||||
|
|
||||||||
|
|
||||||||
|
Options exercisable end of year
|
30 | $ | 19.00 | |||||
|
|
||||||||
|
Shares available for additional grants
|
3,536 | |||||||
F-18
| The following table summarizes information about stock options outstanding as of January 28, 2006 (shares in thousands): |
| Options Outstanding | Options Exercisable | |||||||||||||||||||
| Weighted | ||||||||||||||||||||
| Average | ||||||||||||||||||||
| Remaining | ||||||||||||||||||||
| Contract | ||||||||||||||||||||
| Range of Exercise Prices | Shares | Life | WAEP | Shares | WAEP | |||||||||||||||
|
$19.00 — $20.00
|
829 | 9 years | $ | 19.00 | 30 | $ | 19.00 | |||||||||||||
|
$20.01 — $25.00
|
73 | 10 years | $ | 24.52 | ||||||||||||||||
|
$25.01 — $30.00
|
12 | 10 years | $ | 26.84 | ||||||||||||||||
| 10. | COMMITMENTS AND CONTINGENCIES | |
| As previously reported, on March 8, 2005 RVI announced that it had learned of the theft of credit card and other purchase information from a portion of the Company’s customers. On April 18, 2005, RVI issued the findings from its investigation into the theft. The theft covered transaction information involving approximately 1.4 million credit cards and data from transactions involving approximately 96,000 checks. | ||
| DSW and RVI contacted and continue to cooperate with law enforcement and other authorities with regard to this matter. The Company is involved in several legal proceedings arising out of this incident, which seek unspecified monetary damages, credit monitoring and other relief. After consultation with counsel, the Company believes that the damages arising out of these legal proceedings will not exceed the reserves the Company currently has recorded. | ||
| In connection with this matter, the Company entered into a consent order with the Federal Trade Commission (“FTC”), which has jurisdiction over consumer protection matters. The FTC published the final order on March 14, 2006, and copies of the complaint and consent order are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. | ||
| The Company has not admitted any wrongdoing or that the facts alleged in the FTC’s proposed unfairness complaint are true. Under the consent order, the Company will pay no fine or damages. The Company has agreed, however, to maintain a comprehensive information security program and to undergo a biannual assessment of such program by an independent third party. | ||
| There can be no assurance that there will not be additional proceedings or claims brought against the Company in the future. The Company has contested and will continue to vigorously contest the claims made against it and will continue to explore its defenses and possible claims against others. | ||
| The Company estimates that the potential exposure for losses related to this theft including exposure under currently pending proceedings, ranges from approximately $6.5 million to approximately $9.5 million. Because of many factors, including the early development of information regarding the theft and recoverability under insurance policies, there is no amount in the estimated range that represents a better estimate than any other amount in the range. Therefore, in accordance with Financial Accounting Standard No. 5, Accounting for Contingencies , the Company has accrued a charge to operations in the first quarter of fiscal 2005 equal to the low end of the range set forth above. As the situation develops and more information becomes available, the amount of the reserve may increase or decrease accordingly. The amount of any such change may be material. At January 28, 2006, the balance of the reserve was $4.8 million. | ||
| Although difficult to quantify, since the announcement of the theft, the Company has not discerned any material negative effect on sales trends it believes is attributable to the theft. However, this may not be indicative of the long-term developments regarding this matter. | ||
| The Company is involved in various legal proceedings that are incidental to the conduct of its business. The Company estimates the range of liability related to pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss when the loss is considered probable. Where a liability is probable and there is a range of estimated loss, the Company records the most likely estimated liability related to the claim. In the opinion of management, the amount of any liability with respect to these proceedings will not be material. As additional information becomes available, the Company will assess the potential liability related to its pending litigation and revises the estimates. Revisions in our estimates and potential liability could materially impact the Company’s results of operations. |
F-19
| 11. | SEGMENT REPORTING | |
| The Company is managed in two operating segments: DSW owned stores and leased departments. All of the operations are located in the United States. The Company has identified such segments based on internal management reporting and management responsibilities and measures segment profit as gross profit, which is defined as net sales less cost of sales. The tables below present segment information (in thousands): |
| DSW | Leased | |||||||||||
| Stores | Departments | Total | ||||||||||
|
As of January 28, 2006
|
||||||||||||
|
Net sales
|
$ | 1,023,501 | $ | 120,560 | $ | 1,144,061 | ||||||
|
Gross profit
|
298,082 | 17,637 | 315,719 | |||||||||
|
Capital expenditures
|
25,379 | 158 | 25,537 | |||||||||
|
Total assets
|
479,364 | 28,351 | 507,715 | |||||||||
|
|
||||||||||||
|
As of January 29, 2005
|
||||||||||||
|
Net sales
|
$ | 870,692 | $ | 90,397 | $ | 961,089 | ||||||
|
Gross profit
|
256,159 | 14,052 | 270,211 | |||||||||
|
Capital expenditures
|
32,633 | 1,342 | 33,975 | |||||||||
|
Total assets
|
376,997 | 18,440 | 395,437 | |||||||||
|
|
||||||||||||
|
As of January 31, 2004
|
||||||||||||
|
Net sales
|
$ | 720,635 | $ | 70,713 | $ | 791,348 | ||||||
|
Gross profit
|
193,600 | 9,327 | 202,927 | |||||||||
|
Capital expenditures
|
19,384 | 2,940 | 22,324 | |||||||||
F-20
| 12. | QUARTERLY FINANCIAL DATA (UNAUDITED) |
| Thirteen weeks ended | ||||||||||||||||
| April 30, | July 30, | October 29, | January 28, | |||||||||||||
| (in thousands except per share data) | 2005 | 2005 | 2005 | 2006 | ||||||||||||
|
Net sales
|
$ | 281,806 | $ | 276,211 | $ | 302,240 | $ | 283,804 | ||||||||
|
Cost of sales
|
(199,008 | ) | (199,848 | ) | (219,221 | ) | (210,265 | ) | ||||||||
|
|
||||||||||||||||
|
Gross profit
|
82,798 | 76,363 | 83,019 | 73,539 | ||||||||||||
|
Operating expenses
|
(67,745 | ) | (55,675 | ) | (65,292 | ) | (56,895 | ) | ||||||||
|
|
||||||||||||||||
|
Operating profit
|
15,053 | 20,688 | 17,727 | 16,644 | ||||||||||||
|
Interest (expense) income, net:
|
||||||||||||||||
|
Non-related
|
(849 | ) | (1,092 | ) | 149 | 879 | ||||||||||
|
Related parties
|
(2,672 | ) | (3,920 | ) | — | — | ||||||||||
|
|
||||||||||||||||
|
Income before income taxes
|
11,532 | 15,676 | 17,876 | 17,523 | ||||||||||||
|
Income taxes expense
|
(4,552 | ) | (6,425 | ) | (6,965 | ) | (7,484 | ) | ||||||||
|
|
||||||||||||||||
|
Net income
|
$ | 6,980 | $ | 9,251 | $ | 10,911 | $ | 10,039 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Earnings per share
(1)
:
|
||||||||||||||||
|
|
||||||||||||||||
|
Basic
|
$ | 0.25 | $ | 0.28 | $ | 0.25 | $ | 0.23 | ||||||||
|
Diluted
|
$ | 0.25 | $ | 0.28 | $ | 0.25 | $ | 0.23 | ||||||||
| Thirteen weeks ended | ||||||||||||||||
| May 1, | July 31, | October 30, | January 29, | |||||||||||||
| (in thousands except per share data) | 2004 | 2004 | 2004 | 2005 | ||||||||||||
|
Net sales
|
$ | 232,559 | $ | 234,403 | $ | 262,444 | $ | 231,683 | ||||||||
|
Cost of sales
|
(164,972 | ) | (167,464 | ) | (184,991 | ) | (173,451 | ) | ||||||||
|
|
||||||||||||||||
|
Gross profit
|
67,587 | 66,939 | 77,453 | 58,232 | ||||||||||||
|
Operating Expenses
|
(53,782 | ) | (51,305 | ) | (60,664 | ) | (48,351 | ) | ||||||||
|
|
||||||||||||||||
|
Operating profit
|
13,805 | 15,634 | 16,789 | 9,881 | ||||||||||||
|
Interest expense, net:
|
||||||||||||||||
|
Non-related
|
(726 | ) | (745 | ) | (989 | ) | (274 | ) | ||||||||
|
Related parties
|
— | — | — | — | ||||||||||||
|
|
||||||||||||||||
|
Income before income taxes
|
13,079 | 14,889 | 15,800 | 9,607 | ||||||||||||
|
Provision for income taxes
|
(5,263 | ) | (5,992 | ) | (6,358 | ) | (807 | ) | ||||||||
|
|
||||||||||||||||
|
Net income
|
$ | 7,816 | $ | 8,897 | $ | 9,442 | $ | 8,800 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Basic and diluted earnings per share
(1)
|
$ | 0.28 | $ | 0.32 | $ | 0.34 | $ | 0.32 | ||||||||
|
|
||||||||||||||||
| (1) | The earnings per share calculations for each quarter are based upon the applicable weighted average shares outstanding for each period and may not necessarily be equal to the full year share amount. |
F-21
| 13. | SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
| January 28, | January 29, | January 31, | ||||||||||
| (in thousands) | 2006 | 2005 | 2004 | |||||||||
|
Cash paid during the period for:
|
||||||||||||
|
Interest:
|
||||||||||||
|
Non-related parties
|
$ | 1,985 | $ | 2,138 | $ | 2,121 | ||||||
|
Related parties
|
6,591 | |||||||||||
|
|
||||||||||||
|
Income taxes
|
14,649 | 3,998 | 898 | |||||||||
|
|
||||||||||||
|
Noncash investing and operating activities:
|
||||||||||||
|
Changes in accounts payable due to asset purchases
|
193 | 381 | 214 | |||||||||
F-22
| Column A | Column B | Column C | Column D | Column E | ||||||||||||||||
| Balance at | Charge to | Charges to | Balance at | |||||||||||||||||
| Beginning | Costs and | Other | End | |||||||||||||||||
| Description | of Period | Expenses | Accounts | Deductions | of Period | |||||||||||||||
|
Allowance deduction from
|
||||||||||||||||||||
|
asset to which it applies:
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Inventory Reserve:
|
||||||||||||||||||||
|
Year Ended:
|
||||||||||||||||||||
|
1/31/2004
|
$ | 11,389 | $ | 3,730 | $ | 3,614 | $ | 11,505 | ||||||||||||
|
1/29/2005
|
11,505 | 2,697 | 14,202 | |||||||||||||||||
|
1/28/2006
|
14,202 | 5,548 | 533 | 19,217 | ||||||||||||||||
|
|
||||||||||||||||||||
|
Allowance for Sales Returns:
|
||||||||||||||||||||
|
Year Ended:
|
||||||||||||||||||||
|
1/31/2004
|
619 | 786 | 1,405 | |||||||||||||||||
|
1/29/2005
|
1,405 | 176 | 109 | 1,472 | ||||||||||||||||
|
1/28/2006
|
1,472 | 1,394 | 1,294 | 1,572 | ||||||||||||||||
|
|
||||||||||||||||||||
|
Store Closing Reserve:
|
||||||||||||||||||||
|
Year Ended:
|
||||||||||||||||||||
|
1/31/2004
|
128 | 1,249 | 574 | 803 | ||||||||||||||||
|
1/29/2005
|
803 | 129 | 400 | 532 | ||||||||||||||||
|
1/28/2006
|
532 | 0 | 250 | 282 | ||||||||||||||||
S-1
INDEX TO EXHIBITS
E-1
E-2
E-3
Exhibit
No.
Description
Amended Articles of Incorporation of the registrant.*
Amended and Restated Code of Regulations of the registrant.*
Specimen Class A Common Shares certificate.*
Second Amended and Restated Registration Rights Agreement, dated as of July 5,
2005, by and among Retail Ventures, Inc., Cerberus Partners, L.P., Schottenstein
Stores Corporation and Back Bay Funding LLC. Incorporated by reference to Exhibit
4.2 to Retail Ventures’ Form 8-K (file no. 1-10767) filed July 11, 2005.
Exchange Agreement, dated July 5, 2005, by and between Retail Ventures, Inc. and
DSW Inc. Incorporated by reference to Exhibit 10.4 to Retail Ventures’ Form 8-K
(file no. 1-10767) filed July 11, 2005.
Amended Common Stock Purchase Warrant issued by Retail Ventures, Inc. to Cerberus
Partners, L.P. Incorporated by reference to Exhibit 4.1 to Retail Ventures’ Form
8-K (file no. 1-10767) filed October 19, 2005.
Amended Common Stock Purchase Warrant issued by Retail Ventures, Inc. to
Schottenstein Stores Corporation. Incorporated by reference to Exhibit 4.2 to
Retail Ventures’ Form 8-K (file no. 1-10767) filed October 19, 2005.
Form of Conversion Warrant issued by Retail Ventures, Inc. to Cerberus Partners,
L.P. and Schottenstein Stores Corporation. Incorporated by reference to Exhibit 4.1
to Form 8-K (file no. 1-10767) filed July 11, 2005.
Form of Term Loan Warrant issued by Retail Ventures, Inc. to Millennium Partners,
L.P. Incorporated by reference to Exhibit 4.1 to Retail Ventures’ Form 10-Q (file
no. 1-10767) filed December 8, 2005.
Corporate Services Agreement, dated June 12, 2002, between Retail Ventures and
Schottenstein Stores Corporation. Incorporated by reference to Exhibit 10.6 to
Retail Ventures’ Form 10-Q (file no. 1-10767) filed June 18, 2002.
Amendment to Corporate Services Agreement, dated July 5, 2005, among Retail
Ventures, Schottenstein Stores Corporation and Schottenstein Management Company,
together with Side Letter Agreement, dated July 5, 2005, among Schottenstein Stores
Corporation, Retail Ventures, Inc., Schottenstein Management Company and DSW Inc.
related thereto. Incorporated by reference to Exhibit 5 to Retail Ventures’ Form
8-K (file no. 1-10767) filed July 11, 2005.
Employment Agreement, dated March 4, 2005, between Deborah L. Ferrée and DSW Inc.**#
Employment Agreement, dated June 1, 2005, between Peter Z. Horvath and DSW Inc.**#
Employment Agreement, dated June 1, 2005, between Douglas J. Probst and DSW Inc.**#
Employment Agreement, dated December 1, 2005, between Kevin Lonergan and DSW Inc.
Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed January
24, 2006.#
Employment Agreement, dated June 26, 2005, between Derek Ungless and DSW Inc.*#
Summary of Director Compensation.*#
Loan and Security Agreement, between DSW Inc. and DSW Shoe Warehouse, Inc., as the
Borrowers, and National City Business Credit, Inc., as Administrative Agent and
Collateral Agent for the Revolving Credit Lenders.*
Lease, dated March 22, 2000, by and between East Fifth Avenue, LLC, an
affiliate of Schottenstein Stores Corporation, as landlord, and Shonac, as
tenant, re: warehouse facility and corporate headquarters. Incorporated by
reference to Exhibit 10.60 to Retail Ventures’ Form 10-K (file no. 1-10767)
filed April 28, 2000.
Form of Common Stock Purchase Warrants (with respect to the stock of Retail
Ventures) issued to Cerberus Partners, L.P. and Schottenstein Stores
Corporation. Incorporated by reference to Exhibit 10.5 to Retail Ventures’
Form 10-Q (file no. 1-10767) filed June 18, 2002.
Form of Conversion Warrant to be issued by Retail Ventures to Schottenstein
Stores Corporation and Cerberus Partners, L.P.**
DSW Inc. 2005 Equity Incentive Plan.*#
Form of Restricted Stock Units Award Agreement for Employees.**#
Form of Stock Units for automatic grants to non-employee directors.**#
Form of Stock Units for conversion of non-employee directors’ cash retainer.**#
Form of Non-Employee Directors’ Cash Retainer Deferral Election Form.**#
Form of Nonqualified Stock Option Award Agreement for Consultants.**#
Form of Nonqualified Stock Option Award Agreement for Employees.**#
DSW Inc. 2005 Cash Incentive Compensation Plan.*#
Master Separation Agreement, dated July 5, 2005, between Retail Ventures, Inc.
and DSW. Incorporated by reference to Exhibit 10.1 to Retail Ventures’ Form
8-K (file no. 1-10767) filed July 11, 2005.
Shared Services Agreement, dated as of January 30, 2005, between Retail
Ventures, Inc. and DSW. Incorporated by reference to Exhibit 10.2 to Retail
Ventures’ Form 8-K (file no. 1-10767) filed July 11, 2005.
Tax Separation Agreement, dated July 5, 2005, among Retail Ventures, Inc. and
its affiliates and DSW Inc. and its affiliates. Incorporated by reference to
Exhibit 10.3 to Retail Ventures’ Form 8-K (file no. 1-10767) filed July 11,
2005.
Supply Agreement, effective as of January 30, 2005, between Filene’s Basement
and DSW. Incorporated by reference to Exhibit 10.6 to Retail Ventures’ Form
8-K (file no. 1-10767) filed July 11, 2005.
Lease, dated August 30, 2002, by and between Jubilee Limited Partnership, an
affiliate of Schottenstein Stores Corporation, and Shonac
Corporation, re: Troy, MI DSW store. Incorporated by reference to Exhibit 10.44 to Retail
Ventures’ Form 10-K (file no. 1-10767) filed April 29, 2004.
Table of Contents
Exhibit
No.
Description
Assignment and Assumption Agreement, dated October 23, 2002,
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee re: Troy, MI DSW store. Incorporated by
reference to Exhibit 10.29.1 to Retail Ventures’ Form 10-K/A (file
no. 1-10767) filed May 12, 2005.
Lease, dated October 8, 2003, by and between Jubilee Limited
Partnership, an affiliate of Schottenstein Stores Corporation, and
Shonac Corporation, re: Denton, TX DSW store. Incorporated by
reference to Exhibit 10.46 to Retail Ventures’ Form 10-K (file no.
1-10767) filed April 29, 2004.
Assignment and Assumption Agreement, dated December 18, 2003
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee re: Denton, TX DSW store. Incorporated by
reference to Exhibit 10.30.1 to Retail Ventures’ Form 10-K/A (file
no. 1-10767) filed May 12, 2005.
Lease, dated October 28, 2003, by and between JLP-RICHMOND LLC, an
affiliate of Schottenstein Stores Corporation, and Shonac
Corporation, re: Richmond, VA DSW store. Incorporated by reference
to Exhibit 10.47 to Retail Ventures’ Form 10-K (file no. 1-10767)
filed April 29, 2004.
Assignment and Assumption Agreement, dated December 18, 2003
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee re: Richmond, VA DSW store. Incorporated by
reference to Exhibit 10.31.1 to Retail Ventures’ Form 10-K/A (file
no. 1-10767) filed May 12, 2005.
Lease, dated May 2000, by and between Jubilee-Richmond LLC, an
affiliate of Schottenstein Stores Corporation, and DSW Shoe
Warehouse, Inc. (as assignee of Shonac Corporation), re: Glen
Allen, VA DSW store. Incorporated by reference to Exhibit 10.49 to
Retail Ventures’ Form 10-K (file no. 1-10767) filed April 14,
2005.
Lease, dated February 28, 2001, by and between Jubilee-Springdale,
LLC, an affiliate of Schottenstein Stores Corporation, and Shonac
Corporation d/b/a DSW Shoe Warehouse, re: Springdale, OH DSW
store. Incorporated by reference to Exhibit 10.50 to Retail
Ventures’ Form 10-K (file no. 1-10767) filed April 14, 2005.
Assignment and Assumption Agreement, dated May 11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee re: Springdale, OH DSW store. Incorporated by reference
to Exhibit 10.50.1, to Retail Ventures’ Form 10-K/A (file no.
1-10767) filed May 12, 2005.
Agreement of Lease, dated 1997, between Shoppes of Beavercreek
Ltd., an affiliate of Schottenstein Stores Corporation, and Shonac
corporation (assignee of Schottenstein Stores Corporation d/b/a
Value City Furniture through Assignment of Tenant’s Leasehold
Interest and Amendment No. 1 to Agreement of Lease, dated February
28, 2001), re: Beavercreek, OH DSW store. Incorporated by
reference to Exhibit 10.51 to Retail Ventures’ Form 10-K (file no.
1-10767) filed April 14, 2005.
Assignment and Assumption Agreement, dated May 11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee re: Beavercreek, OH DSW store. Incorporated by reference
to Exhibit 10.51.1 to Retail Ventures’ Form 10-K/A (file no.
1-10767) filed May 12, 2005.
Lease, dated February 28, 2001, by and between JLP-Chesapeake,
LLC, an affiliate of Schottenstein Stores Corporation, and Shonac
Corporation, re: Chesapeake, VA DSW store. Incorporated by
reference to Exhibit 10.52 to Retail Ventures’ Form 10-K (file no.
1-10767) filed April 14, 2005.
Assignment and Assumption Agreement, dated May 11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee re: Chesapeake, VA DSW store. Incorporated by reference
to Exhibit 10.52.1 to Retail Ventures’ Form 10-K/A (file no.
1-10767) filed May 12, 2005.
Ground Lease Agreement, dated April 30, 2002, by and between
Polaris Mall, LLC, a Delaware limited liability company, and
Schottenstein Stores Corporation-Polaris LLC, an affiliate of
Schottenstein Stores Corporation, as modified by Sublease
Agreement, dated April 30, 2002, by and between Schottenstein
Stores Corporation-Polaris LLC, as sublessor, and DSW Shoe
Warehouse, Inc., as sublessee (assignee of Shonac Corporation),
re: Columbus, OH (Polaris) DSW store. Incorporated by reference to
Exhibit 10.53 to Retail Ventures’ Form 10-K (file no. 1-10767)
filed April 14, 2005.
Assignment and Assumption Agreement, dated August 6, 2002, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Columbus, OH (Polaris) DSW store. Incorporated by
reference to Exhibit 10.53.1 to Retail Ventures’ Form 10-K/A (file
no. 1-10767) filed May 12, 2005.
Lease, dated August 30, 2002, by and between JLP-Cary, LLC, an
affiliate of Schottenstein Stores Corporation, and Shonac
Corporation, re: Cary, NC DSW store. Incorporated by reference to
Exhibit 10.54 to Retail Ventures’ Form 10-K (file no. 1-10767)
filed April 14, 2005.
Assignment and Assumption Agreement, dated October 23, 2002,
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee, re: Cary, NC DSW store. Incorporated by
reference to Exhibit 10.54.1 to Retail Ventures’ Form 10-K/A (file
No. 1-10767) filed May 12, 2005.
Table of Contents
Exhibit
No.
Description
Lease, dated August 30, 2002, by and between JLP-Madison, LLC, an affiliate of
Schottenstein Stores Corporation, and Shonac Corporation, re: Madison, TN DSW
store. Incorporated by reference to Exhibit 10.55 to Retail Ventures’ Form 10-K
(file no. 1-10767) filed April 14, 2005.
Assignment and Assumption Agreement, dated October 23, 2002, between Shonac
Corporation, as assignor, and DSW Shoe Warehouse, Inc., as assignee, re: Madison,
TN DSW store. Incorporated by reference to Exhibit 10.55.1 to Retail Ventures’ Form
10-K/A (file no. 1-10767) filed May 12, 2005.
Sublease, dated May 2000, by and between Schottenstein Stores Corporation, as
sublessor, and Shonac Corporation d/b/a DSW Shoe Warehouse, Inc., as sublessee, re: Pittsburgh, PA DSW store. Incorporated by reference to Exhibit 10.48 to Retail
Ventures’ Form 10-K (file no. 1-10767) filed April 14, 2005.
Assignment and Assumption Agreement, dated January 8, 2001, between Shonac
Corporation, as assignor, and DSW Shoe Warehouse, Inc. as assignee, re: Pittsburgh,
PA DSW store. Incorporated by reference to Exhibit 10.48.1 to Retail Ventures’ Form
10-K/A (file no. 1-10767) filed May 12, 2005.
Lease, dated September 24, 2004, by and between K&S Maple Hill Mall, L.P., an
affiliate of Schottenstein Stores Corporation, and Shonac Corporation, re: Kalamazoo, MI DSW store. Incorporated by reference to Exhibit 10.58 to Retail
Ventures’ Form 10-K (file no. 1-10767) filed April 14, 2005.
Assignment and Assumption Agreement, dated February 28, 2005, between Shonac
Corporation, as assignor, and DSW Shoe Warehouse, Inc., as assignee, re: Kalamazoo,
MI DSW store. Incorporated by reference to Exhibit 10.58.1 to Retail Ventures’ Form
10-K/A (file no. 1-10767) filed May 12, 2005.
Lease, dated November 2004, by and between KSK Scottsdale Mall, L.P., an affiliate
of Schottenstein Stores Corporation, and Shonac Corporation, re: South Bend, IN DSW
store. Incorporated by reference to Exhibit 10.59 to Retail Ventures’ Form 10-K
(file no. 1-10767) filed April 14, 2005.
Assignment and Assumption Agreement, dated March 18, 2005, between Shonac
Corporation, as assignor, and DSW Shoe Warehouse, Inc., as assignee, re: South
Bend, IN DSW store. Incorporated by reference to Exhibit 10.59.1 to Retail
Ventures’ Form 10-K/A (file no. 1-10767) filed May 12, 2005.
Sublease Agreement, dated June 12, 2000, by and between Jubilee Limited
Partnership, an affiliate of Schottenstein Stores Corporation, and Shonac
Corporation, re: Fairfax, VA DSW store.**
Assignment and Assumption Agreement, dated January 8, 2001, between Shonac
Corporation, as assignor, and DSW Shoe Warehouse, Inc., as assignee, re: Fairfax,
VA DSW store.**
Lease, dated March 1, 1994, between Jubilee Limited Partnership, an affiliate of
Schottenstein Stores Corporation, and Value City Department Stores, Inc., as
modified by First Lease Modification, dated November 1, 1994, re: Merrilville, IN
DSW store. Incorporated by reference to Exhibit 10.44 to Retail Ventures’ Form 10-K
(file no. 1-10767) filed April 14, 2005.**
License Agreement, dated August 30, 2002, by and between Value City Department
Stores, Inc. and Shonac Corporation, re: Merrillville, IN DSW store.**
Form of Indemnification Agreement between DSW Inc. and its officers and directors.**
Agreement of Lease, dated April 7, 2006, by and between JLP-Harvard Park, LLC, an
affiliate of Schottenstein Stores Corporation, and DSW Inc., re: Chagrin Highlands,
Warrendale, Ohio DSW store.*
List of Subsidiaries.*
Consent of Deloitte & Touche LLP.*
Powers of Attorney.*
Rule 13a-14(a)/15d-14(a) Certification – Principal Executive Officer.*
Rule 13a-14(a)/15d-14(a) Certification – Principal Financial Officer.*
Section 1350 Certification – Principal Executive Officer.*
Section 1350 Certification – Principal Financial Officer.*
*
Filed herewith.
**
Previously filed as the same Exhibit Number to the Company’s Form S-1 filed with the
Securities and Exchange Commission on March 14, 2005 and amended on May 9, 2005, June 7, 2005,
June 15, 2005 and June 29, 2005, and incorporated herein by reference.
#
Management contract or compensatory plan or arrangement.
EXHIBIT 3.1
PRESCRIBED BY J. KENNETH BLACKWELL
Ohio Secretary of State
Central Ohio: (614) 466-3910
Toll Free: 1-877-SOS-FILE (1-877-767-3453)
www.state.oh.us/sos
e-mail: busserv@sos.state.oh.us
CERTIFICATE OF AMENDMENT BY
SHAREHOLDERS OR MEMBERS
(Domestic)
Filing Fee $50.00
COMPLETE THE GENERAL INFORMATION IN THIS SECTION FOR THE BOX CHECKED ABOVE.
Name of Corporation DSW Inc.
------------------------------------------------
Charter Number 379756
------------------------------------------------
Name of Officer Julia A. Davis
------------------------------------------------
Title Secretary
------------------------------------------------
|
[X] Please check if additional provisions attached.
The above named Ohio corporation, does hereby certify that:
[ ] A meeting of the [ ] shareholders [ ] directors (NON-PROFIT AMENDED
ARTICLES ONLY)
[ ] members was duly called and held on __________________________
(Date)
at which meeting a quorum was present in person or by proxy, based upon the quorum present, an affirmative vote was cast which entitled them to exercise _________% as the voting power of the corporation.
[X] In a writing signed by all of the [X] shareholders [ ] directors
(NON-PROFIT AMENDED
ARTICLES ONLY)
SECOND: The place in the State of Ohio where its principal office is located is in the City of:
Columbus Franklin ---------------------------------------------- ----------------- (city, village or township) (county) |
THIRD: The purposes of the corporation are as follows:
The purposes for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be formed under Chapter 1701 of the Ohio Revised Code.
FOURTH: The number of shares which the corporation is authorized to have outstanding is: 370,000,000(see attached)
REQUIRED /s/ Julia A. Davis
Must be authenticated ----------------------------- _________,2005
(SIGNED) by an Authorized Representative Date
authorized representative
(SEE INSTRUCTIONS) Julia A. Davis
-----------------------------
(Print Name)
|
______________________________ _______________ Authorized Representative Date ----------------------------- (Print Name) ----------------------------- |
ADDITIONAL PROVISIONS TO THE
AMENDED ARTICLES OF INCORPORATION
OF
DSW INC.
FOURTH (Cont'd): The number of shares which the corporation is authorized to have outstanding is the authorized number of shares of the corporation. One Hundred Seventy Million (170,000,000) of the authorized number of shares of the corporation shall be Class A Common Shares, without par value (the "Class A Common Shares"), One Hundred Million (100,000,000) shall be Class B Common Shares, without par value (the "Class B Common Shares"; and together with the Class A Common Shares, the "Common Shares"), and One Hundred Million (100,000,000) shall be preferred shares, without par value (the "Preferred Shares").
Effective upon the filing of a Certificate of Amendment with the Office of the Secretary of State of Ohio certifying adoption of these Amended Articles of Incorporation by the sole shareholder, the issued and outstanding common shares of the corporation shall be changed into 27,702,667 Class B Common Shares.
The designations, preferences, privileges and voting powers of shares of each class and the restrictions or qualifications thereof are as follows:
Section 1. Common Shares. Except as specifically otherwise provided herein, the Class A and Class B Common Shares shall be identical and shall entitle the holders thereof to the same rights and privileges.
(a) Voting Rights. The voting rights of the Common Shares shall be as follows:
i. each outstanding Class A Common Share shall entitle the holder thereof to one (1) vote on each matter properly submitted to the shareholders, or to the holders of the Class A Common Shares, for their vote, consent, waiver, release or other action;
ii. each outstanding Class B Common Share shall entitle the holder thereof to eight (8) votes on each matter properly submitted to the shareholders, or to the holders of the Class B Common Shares, for their vote, consent, waiver, release or other action; and
iii. the holders of Class A Common Shares and Class B Common Shares shall vote as a single class upon all matters submitted to the shareholders of the corporation except as otherwise provided by law.
(b) Dividend and Other Rights of Common Shares. Holders of Class A Common Shares and Class B Common Shares will share in any dividend declared by the Board of Directors, subject to any preferential rights of any outstanding Preferred Shares. The corporation shall not subdivide or combine any of the Common Shares, or pay any dividend or other distribution on any of the Common Shares, or accord any other payment, benefit or preference to any of the Common Shares, except by extending such subdivision, combination, distribution, payment, benefit or preference equally to all Common Shares. If dividends are
declared that are payable in Common Shares, such dividends shall be payable in Class A Common Shares to holders of Class A Common Shares and in Class B Common Share to holders of Class B Common Shares.
Section 2. Preferred Shares
(a) The directors of the corporation are authorized to adopt amendments to the Articles of Incorporation in respect of any unissued Preferred Shares and thereby to fix or change, to the full extent now or hereafter permitted by Ohio law, the express terms of the Preferred Shares, or of any one or more series of the Preferred Shares, including without limitation, the division of such shares into series and the designation and authorized number of shares of each series; dividend or distribution rights; redemption rights and price; liquidation rights, preferences and price; sinking fund requirements; voting rights; conversion rights; and restrictions on the issuance of shares of the same series or of any other class or series.
(b) All shares of each series of the Preferred Shares shall be identical with each other in all respects.
FIFTH: No shareholder of the corporation shall have, as a matter of right, the pre-emptive right to purchase, subscribe for or otherwise acquire any shares of any class, now or hereafter authorized, or to purchase, subscribe or otherwise acquire for securities or other obligations convertible into or exchangeable for any such shares or which by warrants or otherwise entitle the holders thereof to purchase, subscribe for or otherwise acquire any such shares.
SIXTH:
Section 1. Authority of the Corporation to Deal in its Securities. The directors of the corporation shall have the power to cause the corporation from time to time and at any time to purchase, hold, sell, transfer or otherwise deal with (i) any shares issued by it, (ii) any security or other obligation of the corporation that confers upon the holder thereof the right to convert the same into shares authorized by the articles of the corporation, and (iii) any security or other obligation that confers upon the holder thereof the right to purchase shares authorized by the articles of the corporation. The corporation shall have the right to repurchase, if and when any shareholder desires to sell, or on the happening of any event is required to sell, any shares issued by the corporation.
Section 2. Limitation on Authority to Issue Class B Common Shares. The authority granted in this Article SIXTH shall not limit the plenary authority of the directors to purchase, hold, sell, transfer or otherwise deal with any shares or other securities issued by the corporation or authorized by its Articles. Notwithstanding the foregoing, to the extent that any of the Class B Common Shares are hereafter surrendered in exchange for Class A Common Shares, the Class B Common Shares so surrendered shall be retired. Except in connection with a subdivision of, or dividend or other distribution on, the Class B Common Shares, the directors of the corporation shall not have the power to cause the corporation to reissue, sell, transfer or otherwise deal with such Class B Common Shares.
SEVENTH:
Section 1. Definitions. For purposes of this Article SEVENTH:
(a) The "corporation" shall include all subsidiary corporations and all partnerships, joint ventures, associations and other entities in which the corporation owns (directly or indirectly) fifty percent or more of the outstanding voting shares, voting power, partnership interests or similar ownership interests.
(b) "RVI" means Retail Ventures, Inc., an Ohio corporation and, at the time this Certificate of Amendment is filed with the Secretary of State of Ohio, the sole shareholder of the corporation, and all successors to RVI by merger, consolidation or otherwise, and all subsidiary corporations and all partnerships, joint ventures, associations and other entities in which RVI owns (directly or indirectly) fifty percent or more of the outstanding voting shares, voting power, partnership interests or similar ownership interests, but shall not include the corporation and its subsidiaries.
(c) "SSC" means Schottenstein Stores Corporation, a Delaware corporation and, at the time this Certificate of Amendment is filed with the Secretary of State of Ohio, the controlling shareholder of RVI, and all successors to SSC by merger, consolidation or otherwise, and all subsidiary corporations and all partnerships, joint ventures, associations and other entities in which SSC owns (directly or indirectly) fifty percent or more of the outstanding voting shares, voting power, partnership interests or similar ownership interests, but shall not include the RVI and its subsidiaries or corporation and its subsidiaries.
(c) "Family Trust" means one or more trusts established for the benefit of any of Jay L. Schottenstein, Susan S. Diamond, Ann S. Deshe, Lori Schottenstein, Geraldine Schottenstein, any of their respective spouses, children or lineal descendants, or any person controlled by any such trust or trusts.
(d) "Related Entities" means SSC and its subsidiaries and RVI and its subsidiaries.
(e) "Related Persons" means directors of the corporation and directors of one or more of the Related Entities and corporations, partnerships, associations or other organizations in which one or more of such directors has a financial interest.
Section 2. Corporate Opportunity
(a) In anticipation that RVI will remain a substantial shareholder of the corporation, SSC will remain a substantial shareholder of RVI and the Related Entities may engage in the same or similar activities or lines of business and have interests in the same areas of corporate opportunities, and in recognition of the benefits to be derived by the corporation through its continued contractual, corporate and business relations with RVI and SSC (including services of officers and directors of RVI and SSC as officers and directors of the corporation), the provisions of this Section 2 are set forth to regulate and define the conduct of certain affairs of the corporation as they may involve the Related Entities and their respective officers and directors, and the powers, rights, duties and liabilities of the corporation and its officers, directors and shareholders in connection therewith.
(b) The Related Entities shall have the right to, and shall have no duty not to, (i) engage in the same or similar activities or lines of business as the corporation, (ii) do business with any supplier or customer of the corporation, and (iii) unless restricted by contract, employ or otherwise engage any officer or employee of the corporation, and the Related Entities nor any of their respective officers or directors (except as provided in Paragraph (c) of this Section 2) shall
be liable to the corporation or its shareholders for breach of any fiduciary duty by reason of any such activities of the Related Entities or of such person's participation therein. In the event that a Related Entity acquires knowledge of a potential transaction or matter which may be a corporate opportunity for both the corporation and such Related Entity, the Related Entity shall have no duty to communicate or offer such corporate opportunity to the corporation and shall not be liable to the corporation or its shareholders for breach of any fiduciary duty as a shareholder of the corporation by reason of the fact that it pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another person or entity, or does not communicate information regarding such corporate opportunity to the corporation.
(c) In the event that a director or officer of the corporation who is also a director or officer of a Related Entity acquires knowledge of a potential transaction or matter which may be corporate opportunity for both the corporation and such Related Entity, such director or officer of the corporation shall not be liable to the corporation or its shareholders by reason of the fact that the Related Entity pursues or acquires such corporate opportunity for itself or directs such corporate opportunity to another person or does not communicate information regarding such corporate opportunity to the corporation, if such director or officer acts in a manner consistent with the following policy:
i. a corporate opportunity offered to any person who is an officer of the corporation, and who is also a director but not an officer of a Related Entity, shall belong to the corporation, unless such opportunity is expressly offered to such person in writing solely in his capacity as a director of the a Related Entity, in which case such opportunity shall belong to such Related Entity;
ii. a corporate opportunity offered to any person who is a director but not an officer of the corporation, and who is also a director or officer of a Related Entity, shall belong to the corporation only if such opportunity is expressly offered to such person in writing solely in his or her capacity as a director of the corporation, and otherwise shall belong to the Related Entity; and;
iii. a corporate opportunity offered to any person who is an officer, whether or not such person is also a director, of both the corporation and a Related Entity shall belong to the corporation only if such opportunity is expressly offered to such person in writing solely in his or her capacity as an officer or director of the corporation, and otherwise shall belong to the Related Entity.
(d) For the purposes of this Section 2, a "corporate opportunity" shall include, but not be limited to, any business opportunity which the corporation is financially able to undertake, is, from its nature, in the line of the corporation's business and is of practical advantage to it, and is one in which the corporation has an interest or a reasonable expectancy, where the circumstances are such that the self-interest of the Related Entity or the officer or directors, as the case may be, would be brought into conflict with that of the corporation if the Related Entity should embrace the opportunity.
(e) If any contract, agreement, arrangement or transaction between the corporation and a Related Entity involves a corporate opportunity and is approved in accordance with the procedures set forth in Section 3 of this Article SEVENTH, the Related Entity and its officers and directors shall be deemed to have fulfilled their fiduciary duties to the corporation and its shareholders with respect thereto under this Section 2. Any such contract, agreement, arrangement or transaction involving a corporate opportunity not so approved shall not by reason
thereof result in any breach of any fiduciary duty, but shall be governed by the other provisions of this Section 2, these Articles and the code of regulations of the corporation (the "Regulations") and Chapter 1701 of the Ohio Revised Code.
Section 3. Contract, Action or Transaction Not Voidable
(a) In anticipation that (i) the corporation will have continued
contractual, corporate and business relations with the Related Entities, and in
anticipation that the corporation may enter into contracts or otherwise transact
business with the Related Entities and that the corporation may derive benefits
therefrom and (ii) the corporation may from time to time enter into contractual,
corporate or business relations with one or more of the Related Persons have a
financial interest, the provisions of this Section 3 are set forth to regulate
and define certain contractual relations and other business relations of the
corporation as they may involve Related Entities and Related Persons, and the
powers, rights, duties and liabilities of the corporation and its officers,
directors and shareholders in connection therewith. The provisions of this
Section 3 are in addition to, and not in limitation of, the provisions of
Chapter 1701 of the Ohio Revised Code and the other provisions of these Articles
of Incorporation. Any contract or business relation which does not comply with
the procedures set forth in this Section 3 shall not by reason thereof be deemed
void or voidable or result in any breach of any fiduciary duty, but shall be
governed by the provisions of these Articles, the Regulations and Chapter 1701
of the Ohio Revised Code.
(b) No contract, action or transaction (or any amendment, modification or termination thereof) between the corporation and one or more of the Related Entities or between the corporation and one or more of the Related Persons shall be void or voidable solely for the reason that any Related Entity or any Related Person are parties thereto, or solely because any Related Person is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because such Related Person's votes are counted for such purpose, and the Related Entity or Related Person shall not be liable to the corporation or its shareholders by reason of entering into, performance or consummation of any such contraction, action, or transaction if:
i. The material fact as to his or their relationship or interest and as to the contract, action or transaction are disclosed or are known to the Board of Directors or the committee thereof and the Board of Directors or committee thereof, in good faith reasonably justified by such facts, authorizes the contract, action, or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors constitute less than a quorum of the directors or committee;
ii. The material facts as to his or their relationship or interest and as to the contract, action or transaction are disclosed or are known to the shareholders entitled to vote thereon and the contract, action or transaction is specifically approved at a meeting of the shareholders held for such purpose by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the corporation held by persons not interested in the contract, action or transaction; or
iii. The contract, action or transaction is fair as to the corporation as of the time it is authorized or approved by the Board of Directors, a committee of the Board of Directors, or the shareholders; provided, however, that nothing
contained in this Section 2 shall limit or otherwise affect the liability of directors under Section 1701.95 of the Ohio Revised Code.
(c) Directors of the corporation who are also directors or officers of any Related Entity or Related Person may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract, agreement, arrangement or transaction.
Section 4. The directors, by the affirmative vote of a majority of those in office, and irrespective of any financial or personal interest in any of them, shall have the authority to establish reasonable compensation, which may include pension, disability, and death benefits, for services to the corporation by directors and officers, or to delegate such authority to one or more officers or directors.
Section 5. Any person or entity purchasing or otherwise acquiring any interest in shares of the corporation shall be deemed to have notice of and to have consented to the provisions of this Article SEVENTH.
Section 6. This Article SEVENTH shall remain in effect so long as RVI, SSC and the Family Trusts (or any of them) shall hold (as a group) shares of the corporation entitled to ten percent (10%) or more of the combined voting power of all shares of the corporation regularly entitled to vote for the election of directors
Section 7. Neither the alteration, amendment or repeal of this Article SEVENTH, nor the adoption of any provision inconsistent with this Article SEVENTH, shall eliminate or reduce the effect of this Article SEVENTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article SEVENTH would accrue or arise, prior to such alteration, amendment, repeal or adoption.
EIGHTH: None of the provisions of Section 1701.831 of the Ohio Revised Code relating to control share acquisitions, shall be applicable to this corporation.
NINTH: None of the provisions of Chapter 1704 of the Ohio Revised Code relating to transactions affecting control shall be applicable to this corporation.
TENTH: Notwithstanding any provision of the Ohio Revised Code requiring for any purpose the vote, consent, waiver or release of the holders of shares of the corporation entitling them to exercise two-thirds, or any other proportion (but less than all), of the voting power of the corporation or of any class or classes of shares thereof, for such purpose the vote, consent, waiver or release of the holders of shares entitling them to exercise not less than a majority of the voting power of the corporation, or of such class or classes shall be required.
ELEVENTH: Notwithstanding any provision of the Ohio Revised Code now or hereafter in effect, no shareholder shall have the right to vote cumulatively in the election of directors.
Exhibit 3.2
AMENDED AND RESTATED
CODE OF REGULATIONS
OF
DSW INC.
ARTICLE ONE
MEETINGS OF SHAREHOLDERS
Section 1.01. Annual Meetings . An annual meeting of shareholders for the election of directors, for the consideration of reports to be laid before such meeting, and for the transaction of such other business as may properly come before such meeting shall be held on such date as may be fixed from time to time by the directors.
Section 1.02. Calling of Meetings . Meetings of the shareholders may be called only by:
(A) the chairman of the board, the president, or, in case of the president’s absence, death, or disability, the vice president authorized to exercise the authority of the president;
(B) the directors by action at a meeting, or a majority of the incumbent directors acting without a meeting; or
(C) the holders of at least fifty percent of all shares outstanding and entitled to vote thereat.
Section 1.03. Place of Meetings . Each meeting of shareholders shall be held at the principal office of the corporation, unless otherwise provided by action of the directors. Meetings of shareholders may be held at any place either within or without the State of Ohio. If authorized by the directors, a meeting of shareholders may be held solely by means of communication equipment as authorized by law.
Section 1.04. Notice of Meetings .
(A) Written notice stating the time, place, if any, and purposes of a meeting of the shareholders, and the means, if any, by which shareholders can be present and vote at the meeting through the use of communications equipment, shall be given either by personal delivery or by mail, or overnight delivery service, or any other means of communication authorized by the shareholder to whom the notice is given, not less than seven nor more than ninety days before the date of the meeting (i) to every shareholder of record entitled to notice of the meeting (ii) by or at the direction of the president, the secretary, or another officer expressly authorized by action of the directors to give such notice. If mailed or sent by overnight delivery
service, such notice shall be addressed to the shareholder at such shareholder’s address as it appears on the records of the corporation. If sent by another means of communication authorized by the shareholder, the notice shall be sent to the address furnished by the shareholder for those transmissions. Notice of adjournment of a meeting need not be given if the time and place, if any, to which it is adjourned and the means, if any, by which shareholders can be present and vote at the adjourned meeting through the use of communications equipment are fixed and announced at such meeting. In the event of a transfer of shares after the record date for determining the shareholders who are entitled to receive notice of a meeting of shareholders, it shall not be necessary to give notice to the transferee.
(B) Upon request in writing delivered either in person or by registered mail to the president or the secretary, specifying the purpose or the purposes for which the persons properly making such request have called a meeting of shareholders, that officer shall forthwith cause to be given to the shareholders entitled thereto notice of a meeting to be held on a date not less than ten nor more than sixty days after the receipt of such request, as the officer may fix. If the notice is not given within thirty days after the receipt of such request by the president or the secretary, then the persons properly calling the meeting may fix the time of the meeting and give notice thereof in accordance with Section 1.04(A), or cause the notice to be so given by any designated representative.
Section 1.05. Waiver of Notice . Notice of the time, place, if any, and purposes of any meeting of shareholders may be waived in writing, either before or after the holding of such meeting, by any shareholder, which writing shall be filed with or entered upon the records of such meeting. The attendance of any shareholder at any such meeting without protesting, prior to or at the commencement of the meeting, the lack of proper notice shall be deemed to be a waiver by such shareholder of notice of such meeting. A telegram, cablegram, electronic mail, or an electronic or other transmission capable of authentication that appears to have been sent by a shareholder and that contains a waiver by such shareholder is a writing for purposes of this Section 1.05.
Section 1.06. Quorum .
(A) At any meeting of shareholders, the presence, in person, by proxy, or by the use of communications equipment, of the holders, of record on the record date for such meeting, of at least fifty percent of all shares outstanding and entitled to vote thereat shall be necessary to constitute a quorum for such meeting or at any adjournment thereof.
(B) Except as otherwise provided in Section 1.07(B)(2) in respect of adjournment, no action may be taken at any meeting of shareholders, or at any adjournment thereof, unless a quorum is present.
(C) If a quorum is present at a meeting of shareholders, it cannot be broken by the subsequent withdrawal of one or more shareholders or their proxies or by any decrease in the number of shares represented at the meeting.
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Section 1.07. Votes Required .
(A) At all elections of directors, the candidates receiving the greatest number of votes shall be elected; and
(B) Any other proposal submitted to the shareholders at a meeting can be authorized or approved only by the affirmative vote of the holders of the greater of (i) a majority of the shares required to constitute a quorum for such meeting and (ii) a majority of the shares voted on such proposal; provided, however, that:
(1) no action required by law, the articles, or the regulations to be authorized or taken by the holders of a designated proportion of the shares may be authorized or taken by a lesser proportion; and
(2) the holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, or the officer of the corporation acting as chairman of the meeting, may adjourn such meeting from time to time; and at such adjourned meeting, any business may be transacted as if the meeting had been held as originally noticed.
Section 1.08. Conduct of the Meeting . At any meeting of shareholders, unless otherwise determined at such meeting by the holders of a majority of the voting shares represented and entitled to vote at such meeting, the officer of the corporation acting as chairman of such meeting shall have plenary authority to conduct the meeting and may, among other things, set the order of business, prescribe reasonable rules to preserve order, impose limits on the shareholders’ right to speak and, except as otherwise provided in the regulations, determine the manner of voting.
Section 1.09. Record Date. The directors may fix a record date for the determination of the shareholders who are entitled to receive notice of and to vote at a meeting of shareholders, which record date shall not be a date earlier than the date on which the record date is fixed and which record date may be a maximum of sixty days preceding the date of the meeting of shareholders.
Section 1.10. Proxies . At meetings of the shareholders, any shareholder entitled to vote thereat may be represented and may vote by a proxy or proxies appointed by a writing signed, or a verifiable communication authorized, by such shareholder, but such writing or verifiable communication must be filed with the secretary of the meeting before such proxy shall be allowed to vote thereunder.
Section 1.11. Inspectors of Election . In advance of any meeting of shareholders, the directors may appoint one or more inspectors of election to act at such meeting or any adjournment thereof; if inspectors are not so appointed, the officer of the corporation acting as chairman of any such meeting may make such appointment. In case any person appointed as inspector fails to appear or act, the vacancy may be filled only by appointment made by the directors in advance of such meeting or, if not so filled, at the meeting by the officer of the
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corporation acting as chairman of such meeting. No other person or persons may appoint or require the appointment of inspectors of election.
ARTICLE TWO
DIRECTORS
Section 2.01. Authority and Qualifications . Except where the law, the articles or the regulations otherwise provide, all authority of the corporation shall be vested in and exercised by or under the direction of its directors. Directors need not be shareholders of the corporation.
Section 2.02 Number of Directors and Term of Office
(A) Until changed in accordance with the provisions of the regulations, the authorized number of directors of the corporation shall be seven (7).
(B) The authorized number of directors may be fixed or changed at a meeting of the shareholders called for the purpose of electing directors at which a quorum is present by the holders of a majority of the voting shares represented and entitled to vote at the meeting.
(C) The directors may fix or change the authorized number of directors and may fill any director’s office that is created by an increase in the authorized number of directors; provided, however, that the directors may not increase the authorized number of directors to more than fifteen (15) nor reduce the authorized number of directors to fewer than five (5).
(D) When the authorized number of directors is less than six, each director shall be elected for a term of one year.
(E) When the authorized number of directors is six or more, but less than nine, the directors shall be divided into two classes, designated Class I and Class II. Each class shall consist, as nearly as possible, of one-half of the total authorized number of directors. Except as may be necessary to initially establish the classes of directors, each director shall be elected for a two year term.
(F) When the authorized number of directors is nine or more, the directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as possible, of one-third of the total authorized number of directors. Except as may be necessary to initially establish the classes of directors or to fill a vacancy in an unexpired term, each director shall be elected for a three year term.
(G) If the authorized number of directors is increased, the directors elected to fill the directors’ offices resulting from such increase shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible; provided, however, if the increase would permit the creation an additional class of directors, the new
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directors shall be assigned to the new class as necessary to maintain the number of directors in each class as nearly equal as possible. When new directors are apportioned among existing classes, any director elected to fill a director’s office created by an increase in the authorized number of directors shall hold office for a term that coincides with the remaining term of that class.
(H) If the authorized number of directors is decreased, such reduction shall not shorten the term of any incumbent director, but, as their terms expire, the directors shall be reapportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible. When directors are reapportioned among the classes, any director assigned to a different class shall thereafter hold office for a term that coincides with the remaining term of that class.
(I) At each annual meeting of shareholders, successors to the directors whose terms expire at that annual meeting shall be elected for (i) one year if the authorized number of directors is less than six, (ii) two years if there are two classes of directors, or (iii) three years if there are three classes of directors. Each director shall be elected to serve until the election, at an annual meeting of shareholders for the election of directors for the year in which the director’s term expires or at a special meeting called for that purpose, of the director’s successor.
Section 2.03. Election .
(A) Directors may be elected at an annual meeting of shareholders or at a special meeting called for the purpose of electing directors.
(B) The election of directors shall be by ballot (i) whenever the number of candidates exceeds the number of directors to be elected or (ii) if requested by the officer of the corporation acting as chairman of the meeting or by the holders of a majority of the voting shares represented and entitled to vote at such meeting, but the election shall otherwise be by voice vote.
Section 2.04. Removal by Shareholders. All the directors, all the directors of a particular class (if the directors of the Corporation are divided into classes), or any individual director may be removed from office by the shareholders, without assigning any cause, only by the vote of the holders of not less than three-fourths of the voting power of the corporation entitling them to elect directors in place of those to be removed. In case of any removal pursuant to this Section 2.04, a new director may be elected at the same meeting for the unexpired term of each director removed. Failure to elect a director to fill the unexpired term of any director removed shall be deemed to create a vacancy in the board.
Section 2.05. Vacancies . The remaining directors, though less than a majority of the whole authorized number of directors, may, by the vote of a majority of their number, fill any vacancy in the board for the unexpired term.
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Section 2.06. Meetings .
(A) A meeting of the directors shall be held immediately following the adjournment of each annual meeting of shareholders at which directors are elected, and notice of such meeting need not be given. The directors shall hold such other meetings as may from time to time be called, and such other meetings of directors may be called only by the chairman of the board, the president, another officer expressly authorized by action of the directors to give notice of meetings of directors, or any two directors.
(B) All meetings of directors shall be held at the principal office of the corporation unless the directors from time to time otherwise determine.
(C) Meetings of the directors may be held through any communications equipment if all persons participating can hear each other, and participation in a meeting pursuant to this provision shall constitute presence at such meeting.
Section 2.07. Notice of Meetings .
(A) Notice of the place, if any, and time of each meeting of the directors, other than a meeting held immediately following the adjournment of an annual meeting of shareholders at which directors are elected, shall be given to each of the directors:
(1) by personal delivery or by mail, telegram, cablegram, overnight delivery service, or any other means of communication authorized by the director, if such notice is given at least two days before the meeting; or
(2) orally, either in person or by telephone, not later than the day before the meeting.
(B) Notice of any meeting of the directors may be given only by the chairman of the board, the president, the secretary of the corporation, or another officer expressly authorized by action of the directors to give such notice. The method of giving notice to all directors need not be uniform. Any such notice need not specify the purpose or purposes of the meeting. Notice of adjournment of a meeting of directors need not be given if the time and place to which it is adjourned are fixed and announced at such meeting.
Section 2.08. Waiver of Notice . Notice of the place, if any, and time of any meeting of the directors may be waived in writing, either before or after the holding of such meeting, by any director, which writing shall be filed with or entered upon the records of the meeting. The attendance of any director at any meeting of the directors without protesting, prior to or at the commencement of such meeting, the lack of proper notice shall be deemed to be a waiver by the director of such notice. A telegram, cablegram, electronic mail, or an electronic or other transmission capable of authentication that appears to have been sent by a director and that contains a waiver by such director is a writing for the purposes of this Section 2.08.
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Section 2.09. Quorum; Vote Required .
(A) A majority of the whole authorized number of directors shall be necessary to constitute a quorum for a meeting of the directors, except that a majority of the directors in office shall constitute a quorum for filling a vacancy in the board. If a quorum is present at a meeting of the directors, it cannot be broken by the subsequent withdrawal of one or more directors.
(B) The affirmative vote of a majority of the directors present at a meeting at which a quorum is present is the act of the board, unless the vote of a greater number of the directors is required by law, the articles, the regulations or the bylaws.
Section 2.10. Committees .
(A) The directors may create an executive committee or any other committee of directors, to consist of one or more of the directors, and may delegate to any such committee any of the authority of the directors, however conferred, other than the authority to fill vacancies among the directors or in any committee of the directors. Any act or authorization of any act by the executive committee or any other committee within the authority delegated to it shall be as effective for all purposes as the act or authorization of the directors.
(B) The executive committee or any other committee of directors shall serve at the pleasure of the directors, shall act only in the intervals between meetings of the directors, and shall be subject to the control and direction of the directors.
(C) No notice of a meeting of the executive committee or of any other committee of directors
shall be required. A meeting of the executive committee or of any other committee of directors may
be called only by the president, another officer expressly authorized by action of the directors to
give notice of a meeting of such committee, or a member of such executive or other committee of
directors. Meetings of the executive committee or of any other committee of directors may be held
through any communications equipment if all persons participating can hear each other, and
participation in such a meeting shall constitute presence thereat.
Section 2.11. Bylaws
. The directors may adopt, and amend from time to time, bylaws for
their own government, which bylaws shall not be inconsistent with the law, the articles or the
regulations.
Section 2.12. Nominations
. Nominations for the election of directors may be made by
the directors or a committee appointed by the directors or by any shareholder entitled to vote in
the election of directors generally; however, any shareholder entitled to vote in the election of
directors generally may nominate one or more persons for election as directors at a meeting only if
written notice of such shareholder’s intent to make such nomination or nominations has been given
to the Secretary of the corporation. Such notice shall be personally delivered to, or mailed by
United States mail, postage prepaid, and received at, the principal executive offices of the
corporation not less than sixty (60) days, nor more than ninety (90) days,
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prior to the first anniversary of the date of the preceding year ‘s annual meeting (or, if the date of the annual meeting is changed by more than thirty (30) days from the anniversary date of the preceding year’s annual meeting or in the case of a special meeting, within seven (7) days after the corporation mails or otherwise gives public notice of the meeting). Each such notice shall set forth: (A) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (B) a representation that the shareholder is a holder of record of shares of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (C) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (D) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the directors; and (E) the consent of each nominee to serve as a director of the corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.
ARTICLE THREE
OFFICERS
Section 3.01. Officers . The officers of the corporation to be elected by the directors shall be a chief executive officer, president, a secretary, a treasurer, and, if desired, one or more executive vice presidents and such other officers and assistant officers as the directors may from time to time elect. The directors may elect a chairman of the board, who must be a director. Officers need not be shareholders of the corporation. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity if such instrument is required by law, the articles or the regulations to be executed, acknowledged, or verified by two or more officers.
Section 3.02. Tenure of Office . The officers of the corporation shall hold office at the pleasure of the directors and need not be elected annually. Any officer of the corporation may be removed, either with or without cause, at any time, by the affirmative vote of a majority of all the directors then in office; such removal, however, shall be without prejudice to the contract rights, if any, of the person so removed.
Section 3.03. Duties of Officers. All officers shall, respectively, have such powers and perform such duties as the law, the articles, the regulations or the directors may from time to time provide. Unless otherwise provided by the directors:
(A) The chairman of the board, if any, shall preside at all meetings of the directors.
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(B) The chief executive officer shall be the active executive officer of the corporation and shall exercise supervision over the other officers, subject, however, to the control of the board of directors. The chief executive officer shall be entitled to exercise the powers of the president, however conferred. The chief executive officer shall have such other powers and duties as the directors shall from time to time assign to him. The chief executive officer of the corporation shall preside at all meetings of shareholders.
(C) The president shall be the chief administrative officer of the corporation and shall, subject to the control of the board of directors and, if there be one, the chief executive officer, exercise supervision over the business of the corporation and shall have, among such additional powers and duties as the directors or, if there be one, the chief executive officer may from time to time assign to him, including the power and authority to sign all certificates evidencing shares of the corporation and all deeds, mortgages, bonds, contracts, notes and other instruments requiring the signature of the president of the corporation. In the absence of the chairman of the board and if there be one, the chief executive officer, it shall be the duty of the president to preside at all meetings of shareholders.
(D) In the absence of the president or in the event of the president’s inability or refusal to act, the vice president, if any (or in the event there be more than one vice president, the vice presidents in the order designated, or in the absence of any designation, then in the order of their election), shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all restrictions upon the president. The vice presidents shall perform such other duties and have such other powers as the president may from time to time prescribe.
(E) The secretary, or an assistant secretary, if any, in case of the absence or inability to act of the secretary, shall keep minutes of all the proceedings of the shareholders and the directors and make a proper record of the same and shall perform such other duties and have such other powers as the president may from time to time prescribe.
(F) The treasurer, or an assistant treasurer, if any, in case of the absence or inability to act of the treasurer, shall be the chief financial officer of the corporation, shall exercise supervision over the finances of the corporation and shall perform such other duties and have such other powers as the president may from time to time prescribe.
Section 3.04. Executives. Notwithstanding the foregoing, the chief executive officer and president of the corporation may appoint the executives of the corporation, who shall not be officers of the corporation for purposes of Ohio law but who may have titles below the title of executive vice president, and may fix their salaries. Such executives shall serve at the pleasure of the chief executive officer and president of the corporation and shall have such powers and perform such duties as may be assigned by the chief executive officer or president of the corporation.
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ARTICLE FOUR
SHARES
Section 4.01. Certificates . Certificates evidencing ownership of shares of the corporation shall be issued to those entitled to them. Each certificate evidencing shares of the corporation:
(A) shall bear (i) the signatures of the chairman of the board, the president, or a vice president, and of the secretary, an assistant secretary, the treasurer, or an assistant treasurer (except that when any such certificate is countersigned by an incorporated transfer agent or registrar, such signatures may be facsimile, engraved, stamped or printed) and (ii) such recitals as may be required by law; and
(B) may bear such other recitals as are permitted by law.
Section 4.02. Lost, Wrongfully Taken or Destroyed Certificates . Except as otherwise provided by law, where the owner of a certificate evidencing shares of the corporation claims that such certificate has been lost, destroyed or wrongfully taken, the directors must cause the corporation to issue a new certificate in place of the original certificate if the owner:
(A) so requests before the corporation has notice that such original certificate has been acquired by a protected purchaser;
(B) files with the corporation, unless waived by the directors, an indemnity bond, with surety or sureties satisfactory to the corporation, in such sums as the directors may, in their discretion, deem reasonably sufficient as indemnity against any loss or liability that the corporation may incur by reason of the issuance of each such new certificate; and
(C) satisfies any other reasonable requirements which may be imposed by the directors, in their discretion.
ARTICLE FIVE
INDEMNIFICATION AND INSURANCE
Section 5.01. Indemnification . The corporation shall indemnify each person who was or is a party or is threatened to be made a party to, or is or was involved or is threatened to be involved (as a deponent, witness or otherwise) in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrative, administrative or investigative (including, without limitation, any threatened, pending or completed action, suit or proceeding by or in the right of the corporation)(hereinafter a “Proceeding”), by reason of the fact that such person is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, trustee, officer, partner, member or manager, of another corporation,
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limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (hereinafter an “Indemnitee”), against all expenses (including, without limitation, attorneys’ fees, filing fees, court reporters’ fees, expert witnesses’ fees and transcript costs)(hereinafter “Expenses”), judgments, fines, excise taxes assessed with respect to an employee benefit plan, penalties and amounts paid in settlement (such judgments, fines, excise taxes, penalties and amounts paid in settlement are hereinafter referred to as “Liabilities”) actually and reasonably incurred by the Indemnitee in connection with any Proceeding, unless and only to the extent that it is determined, as provided in Section 5.04, that any such indemnification should be denied or limited. Notwithstanding the foregoing, except as to claims to enforce rights conferred on an Indemnitee by this Article Five that may be brought, initiated or otherwise asserted by the Indemnitee pursuant to Section 5.07, the corporation shall not be required by this Section 5.01 to indemnify an Indemnitee in connection with any claim (including, without limitation, any original claim, counterclaim, cross-claim or third-party claim) in a Proceeding, which claim is brought, initiated or otherwise asserted by the Indemnitee, unless the bringing, initiation or assertion of the claim in the Proceeding by the Indemnitee was authorized or ratified by the Board of Directors of the corporation.
Section 5.02. Court-Approved Indemnification . Anything contained in Section 5.01 to the contrary notwithstanding, the corporation shall not indemnify an Indemnitee (A) in such Indemnitee’s capacity as a director of the corporation in respect of any claim, issue or matter asserted in a Proceeding by or in the right of the corporation as to which the Indemnitee shall have been adjudged to be liable to the corporation for an act or omission undertaken by such Indemnitee in such capacity with deliberate intent to cause injury to the corporation or with reckless disregard for the best interests of the corporation, (B) in such Indemnitee’s capacity other than that of director of the corporation in respect of any claim, issue or matter asserted in a Proceeding by or in the right of the corporation as to which the Indemnitee shall have been adjudged to be liable to the corporation for negligence or misconduct or (C) in any Proceeding by or in the right of the corporation in which the only liability is asserted pursuant to Section 1701.95 of the Ohio Revised Code against the Indemnitee, unless and only to the extent that the court of common pleas in the county in Ohio in which the principal office of the corporation is located or the court in which a Proceeding is brought (each, a “Designated Court”) shall determine, upon application of either the Indemnitee or the corporation, that, despite the adjudication or assertion of such liability, and in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to such indemnity as the Designated Court shall deem proper. In the event of any such determination by the Designated Court, the corporation shall timely pay any indemnification determined by the Designated Court to be proper as contemplated by this Section 5.02.
Section 5.03. Indemnification for Expenses When Successful on the Merits or Otherwise .
(A) Anything contained in this Article Five to the contrary notwithstanding, to the extent that an Indemnitee has been successful on the merits or otherwise in defense of any Proceeding or in defense of any claim, issue or matter asserted therein, the Indemnitee shall be promptly indemnified by the corporation against all Expenses actually and reasonably incurred by Indemnitee in connection therewith.
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(B) Without limiting the generality of the foregoing, an Indemnitee claiming indemnification under Section 5.03 shall be deemed to have been successful on the merits or otherwise in defense of any Proceeding or in defense of any claim, issue or matter asserted therein, if such Proceeding shall be terminated as to such Indemnitee, with or without prejudice, without the entry of a judgment or order against the Indemnitee, without a conviction of the Indemnitee, without the imposition of a fine or penalty upon the Indemnitee, and without the Indemnitee’s payment or agreement to pay any other Liability (whether or not any such termination is based upon a judicial or other determination of lack of merit of the claims made against the Indemnitee or otherwise results in a vindication of the Indemnitee).
Section 5.04. Determination .
(A) Any indemnification covered by Section 5.01 and that is not precluded by Section 5.02 shall be timely paid by the corporation unless and only to the extent that a determination is made that such indemnification shall be denied or limited because (i) the Indemnitee did not act in good faith and in a manner which the Indemnitee reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal Proceeding, the Indemnitee had reasonable cause to believe that such Indemnitee’s conduct was unlawful, or (ii) the Indemnitee did not actually or reasonably incur an Expense or Liability to be indemnified.
(B) Any indemnification covered by Section 5.03 shall be timely paid by the corporation unless and only to the extent that a determination is made that such indemnification shall be denied or limited because the Indemnitee did not actually or reasonably incur the Expense to be indemnified.
(C) Each determination required or permitted by this Section 5.04 may be made only by a Designated Court.
Section 5.05. Presumptions . Upon making any request for indemnification under this Article Five, the Indemnitee shall be presumed to be entitled to indemnification under this Article Five, and the corporation shall have the burden of proof in the making of any determination contrary to such presumption by clear and convincing evidence. Without limiting the generality of the foregoing, for purposes of this Article Five, it shall be presumed that (A) the Indemnitee acted in good faith and in a manner which the Indemnitee reasonably believed to be in or not opposed to the best interests of the corporation, (B) with respect to any criminal Proceeding, the Indemnitee had no reasonable cause to believe that such Indemnitee’s conduct was unlawful and (C) each Liability and Expense for which indemnification is claimed was actually and reasonably incurred by the Indemnitee. The termination of any Proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, rebut any such presumption.
Section 5.06. Advances for Expenses . The Expenses incurred by an Indemnitee in defending a Proceeding shall be paid by the corporation in advance of the final disposition of such Proceeding at the request of the Indemnitee within thirty days after the receipt by the
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corporation of a written statement or statements from the Indemnitee requesting such advance or advances from time to time. Such statement or statements shall reasonably evidence the Expenses incurred by the Indemnitee in connection with the defense of the Proceeding and shall include or be accompanied by a written undertaking by or on behalf of such Indemnitee to repay such amount if it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the corporation in respect of such Expense.
Section 5.07. Right of Indemnitee to Bring Suit . If (A) a claim for indemnification under this Article Five is not paid in full by the corporation within sixty days after a written claim has been received by the corporation or (B) a claim for advancement of Expenses under Section 5.06 is not paid in full by the corporation within thirty days after a written claim has been received by the corporation, the Indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the Indemnitee shall be entitled to be indemnified for all the Expenses actually and reasonably incurred by the Indemnitee in prosecuting such claim in enforcing the Indemnitee’s rights under this Article Five.
Section 5.08. Article Five Not Exclusive . The indemnification provided by this Article Five shall not be exclusive of, and shall be in addition to, any other rights to which any person seeking indemnification may be entitled under the articles, the regulations, any agreement, a vote of shareholders or disinterested directors, or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, trustee, partner, member or manager and shall inure to the benefit of the heirs, executors and administrators of such a person.
Section 5.09. Insurance . The corporation may purchase and maintain insurance, or furnish similar protection, including but not limited to trust funds, letters of credit, or self-insurance, for or on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, partner, member, manager or agent of another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the obligation or the power to indemnify such person against such liability under the provisions of this Article Five. Insurance may be purchased from or maintained with a person in which the corporation has a financial interest.
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Section 5.10. Venue; Jurisdiction .
(A) Any action, suit or proceeding to determine a right to indemnification under this Article Five may be maintained by an Indemnitee claiming such indemnification or by the corporation only in a Designated Court. Each of the corporation and, by claiming or accepting such indemnification, any such Indemnitee consents to the exercise of jurisdiction by a Designated Court in any such action, suit or proceeding.
(B) Any action, suit or proceeding to determine (i) the obligation of an Indemnitee under this Article Five to repay any Expenses previously advanced by the corporation or (ii) the obligation of the corporation under this Article Five to advance any Expenses may be maintained by the corporation or by such Indemnitee only in a Designated Court. Each of the corporation and, by claiming or accepting such advancements, any such Indemnitee consents to the exercise of jurisdiction by a Designated Court in any such action, suit or proceeding.
ARTICLE SIX
MISCELLANEOUS
Section 6.01. Amendments . The regulations may be amended, or new regulations may be adopted, at a meeting of shareholders held for such purpose, only by the affirmative vote of the holders of shares entitling them to exercise not less than a majority of the voting power of the corporation on such proposal, or without a meeting by the written consent of the holders of shares entitling them to exercise not less than a majority of the voting power of the corporation on such proposal.
Section 6.02. Actions Without a Meeting . Anything contained in the regulations to the contrary notwithstanding, except as provided in Section 6.01, any action which may be authorized or taken at a meeting of the shareholders or of the directors or of a committee of the directors, as the case may be, may be authorized or taken without a meeting with the affirmative vote or approval of, and in a writing or writings signed by, all the shareholders who would be entitled to notice of a meeting of the shareholders held for such purpose, or all the directors, or all the members of such committee of the directors, respectively, which writings shall be filed with or entered upon the records of the corporation.
Section 6.03. Seal . If the corporation adopts a seal, it shall be circular, about two inches in diameter, with the name of the corporation engraved around the margin and the word “SEAL” engraved across the center; provided, however, that nothing contained in this Section 6.03 shall be construed to require the corporation to obtain a seal or to use a seal for any purpose.
14
EXHIBIT 4.1
WITHOUT PAR VALUE
NUMBER THIS CERTIFICATE IS [DSW INC. LOGO] CLASS A
[DSW GRAPHIC LOGO] TRANSFERABLE IN CLEVELAND, COMMON SHARES
OHIO
INCORPORATED UNDER THE SHARES
LAWS OF THE STATE OF OHIO
CUSIP 23334L 10 2
SEE REVERSE FOR
CERTAIN
DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS A COMMON SHARES, WITHOUT PAR VALUE PER SHARE, OF DSW INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile signatures of the Corporation's duly authorized officers.
Dated:
/s/ [ILLEGIBLE]
COUNTERSIGNED AND REGISTERED: ---------------
NATIONAL CITY BANK CHAIRMAN
(Cleveland, Ohio) TRANSFER AGENT
AND REGISTRAR
BY /s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
--------------- ---------------
AUTHORIZED SIGNATURE VICE CHAIRMAN TREASURER
|
The Corporation will furnish without charge within five days after receipt of written request therefor to each shareholder who so requests a statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of shares or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT --____Custodian_____
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act_________________________
in common (State)
|
Additional abbreviations may also be used though not in the above list.
For value received, ____________________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
________________________________________________________________________Attorney to transfer the said Certificate on the books of the within named Corporation with full power of substitution in the premises. Dated__________________________________
SIGNATURE(S) GUARANTEED:
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR: MIKE PETERS: 931-490-1714
711 ARMSTRONG LANE PROOF OF JUNE 20, 2005
COLUMBIA, TENNESSEE 38401 DSW INC.
(931) 388-3003 TSB 20238 BACK
SALES: R. JOHNS 212-269-0339 X 13 OPERATOR: TERESA
/ ETHER 7 / LIVE JOBS / D / DSW/ 20238 BACK NEW
|
PLEASE INITIAL THE APPROPRIATE SELECTION FOR THIS PROOF: __________ OK AS IS __________ OK WITH CHANGES __________ MAKE CHANGES AND SEND ANOTHER PROOF
EXHIBIT 10.6
STANDARD EXECUTIVE EMPLOYMENT AGREEMENT
BETWEEN
DSW INC.
AND
DEREK UNGLESS
This Standard Executive Employment Agreement ("Agreement") by and between DSW Inc. ("Company") and Derek Ungless ("Executive"), collectively, the "Parties," is effective as of the date signed ("Effective Date") and supercedes and replaces any other oral or written employment-related agreement between the Executive and the Company.
1.00 DURATION
This Agreement will remain in effect from the Effective Date until it terminates as provided in Section 5.00. Any notice of termination required to be given under this Agreement must be given as provided in Section 6.00 and will be effective on the date prescribed in Section 5.00.
2.00 EXECUTIVE'S EMPLOYMENT FUNCTION
2.01 POSITION. The Executive agrees to serve as the Company's Executive Vice President, Chief Marketing Officer with the authority and duties customarily associated with this position and to discharge any other duties and responsibilities assigned by the President, Chief Merchandising Officer. The Executive will report directly to and be subject to the supervision, advice and direction of the President, Chief Merchandising Officer, or her designate. The Executive agrees at all times to observe and be bound by all Company rules, policies, practices, procedures and resolutions that generally apply to Company employees of comparable status and which do not conflict with the specific terms of this Agreement.
2.02 PLACE OF PERFORMANCE. The Executive's duties will principally be performed in Columbus, Ohio, except for required travel on the Company's business, unless the President, Chief Merchandising Officer requires the Executive to perform duties at another location.
3.00 COMPENSATION
The Company will pay the Executive the amounts described in Section 3.00 as compensation for the services described in this Agreement and in exchange for the duties and responsibilities described in Section 4.00.
3.01 BASE SALARY. The Company will pay to the Executive an annualized base salary of $350,000 which may be adjusted at the Company's discretion ("Base Salary"). The Executive's Base Salary will be paid in installments that correspond with the Company's normal payroll practices.
3.02 CASH INCENTIVE BONUS.
[1] The Executive will be eligible to receive a Cash Incentive Bonus under the terms of the Retail Ventures, Inc. Incentive Compensation Plan ("Incentive Plan"), as modified by the Company. The Company intends to provide the Executive with a cash bonus of 50 percent of Base Salary based on the Executive's achievement of the incentive goals established by the Company. Subsequent annual cash bonuses will be based, in the Company's discretion, on Incentive Goals and percentages of Base Salary determined under the Incentive Plan that is then in effect.
[2] PAYMENT OF CASH BONUS. Any Cash Incentive Bonus will be payable, in cash, consistent with the Company's normal bonus payment policy.
3.03 EQUITY INCENTIVE. The Company shall negotiate in good faith with Executive concerning Executive's equity incentive compensation to provide equity incentive compensation to a level that is commensurate with Executive's new position. It is agreed that these enhancements may include grants of stock appreciation rights and/or restricted stock units and other equity or equity-based compensation awards. Any award provided will subtract from the agreed-upon vesting schedule the time the Executive has already served in his position.
[1] STANDARD STOCK OPTIONS. Subject to the terms of the DSW Inc. 2005 Equity Incentive Plan and any applicable stock option agreement, the Company will grant to the Executive options to purchase shares of the Company's common stock at a per share exercise price as approved by the Board of Directors. These options would typically become exercisable pursuant to the terms set forth in the Company's standard 5-year schedule.
[2] RESTRICTED STOCK OPTIONS. Subject to the terms of the DSW Inc. 2005 Equity Incentive Plan and any applicable Restricted Stock grant agreement, Executive is eligible to receive Restricted Stock equity grants as approved by the Board of Directors.
[3] ADDITIONAL EQUITY INCENTIVE. Subject to the Company's discretion, the Executive will be eligible for additional discretionary grants of stock options.
3.04 BENEFIT PLANS. Subject to their terms, the Executive may participate in any Company sponsored employee pension or welfare benefit plan at a level commensurate with the Executive's title and position.
3.05 VACATIONS. Subject to the terms of the Company's vacation policy, the Executive is entitled to four weeks of vacation each calendar year to be taken during periods approved by the President, Chief Merchandising Officer.
3.06 EXPENSES. The Executive is entitled to receive prompt reimbursement for all normal and reasonable expenses incurred while performing services under this Agreement, including all
Initials ______ Date ______
reasonable travel expenses. Reimbursement for these expenses will be made as soon as administratively feasible after the date the Executive submits appropriate evidence of the expenditure and otherwise complies with the Company's business expense reimbursement policy.
3.07 CAR. The Company will provide Executive with the applicable car allowance under the Company's executive car allowance program, and with a fuel card. The allowance will be grossed-up for taxes at the 45 percent tax rate. (The term "grossed up" as used in this Agreement refers to a payment to Executive that, after reduction for any income or excise taxes due, is equal to the net amount payable.)
3.08 TERMINATION BENEFITS. The Company also will provide the Executive with the termination benefits described in Section 5.00.
4.00 EXECUTIVE'S OBLIGATIONS
The amounts described in Sections 3.00 and 5.00 are provided by the Company in exchange for (and have a value to the Company equivalent to) the Executive's performance of the obligations described in this Agreement, including performance of the duties and the covenants and releases made and entered into by and between the Executive and the Company in this Agreement.
4.01 SCOPE OF DUTIES. The Executive will:
[1] Devote all available business time, best efforts and undivided attention to the Company's business and affairs; and
[2] Not engage in any other business activity, whether or not for gain, profit or other pecuniary benefit.
[3] However, the restriction described in Section 4.01[1] and [2] will not preclude the Executive from:
[A] Making or holding passive investments in outstanding shares in
the securities of publicly-owned companies or other businesses
[other than organizations described in Section 4.05], regardless of
when and how that investment was made; or
[B] Serving on corporate, civic, religious, educational and/or charitable boards or committees but only if this activity [I] does not interfere with the performance of duties under this Agreement and [II] is approved by the President, Chief Merchandising Officer.
4.02 CONFIDENTIAL INFORMATION.
[1] OBLIGATION TO PROTECT CONFIDENTIAL INFORMATION. The Executive
acknowledges that the Company and its subsidiaries, parent corporation and affiliated entities (collectively, "Group" and separately, "Group Member") have a legitimate and continuing proprietary interest in the protection of Confidential Information (as defined
Initials ______ Date ______
in Section 4.02[2]) and have invested, and will continue to invest, substantial sums of money to develop, maintain and protect Confidential Information. The Executive agrees [A] during and after employment with all Group Members [I] that any Confidential Information will be held in confidence and treated as proprietary to the Group, [II] not to use or disclose any Confidential Information except to promote and advance the Group's business interests and [B] immediately upon separation from employment with all Group Members, to return to the Company any Confidential Information.
[2] DEFINITION OF CONFIDENTIAL INFORMATION. For purposes of this
Agreement, Confidential Information includes any confidential data,
figures, projections, estimates, pricing data, customer lists, buying
manuals or procedures, distribution manuals or procedures, other policy
and procedure manuals or handbooks, supplier information, tax records,
personnel histories and records, information regarding sales, information
regarding properties and any other Confidential Information regarding the
business, operations, properties or personnel of the Group (or any Group
Member) which are disclosed to or learned by the Executive as a result of
employment with any Group Member, but will not include [A] the Executive's
personal personnel records or [B] any information that [I] the Executive
possessed before the date of initial employment (including periods before
the Effective Date) with any Group Member that was a matter of public
knowledge, [II] became or becomes a matter of public knowledge through
sources independent of the Executive, [III] has been or is disclosed by
any Group Member without restriction on its use or [IV] has been or is
required to be disclosed by law or governmental order or regulation. The
Executive also agrees that, if there is any reasonable doubt whether an
item is public knowledge, to not regard the item as public knowledge until
and unless the Vice President of Human Resources confirms to the Executive
that the information is public knowledge or an arbitrator, acting under
Section 9.00, finally decides that the information is public knowledge.
[3] INTELLECTUAL PROPERTY. The Executive expressly acknowledges that all right, title and interest to all inventions, designs, discoveries, works of authorship, and ideas conceived, produced, created, discovered, authored, or reduced to practice during the Executive's performance of services under this Agreement, whether individually or jointly with any Group Member (the "Intellectual Property") shall be owned solely by the Group, and shall be subject to the restrictions set forth in Section 4.02[1] above. All Intellectual Property which constitutes copyrightable subject matter under the copyright laws of the United States shall, from the inception of creation, be deemed to be a "work made for hire" under the United States copyright laws and all right, title and interest in and to such copyrightable works shall vest in the Group. All right, title and interest in and to all Intellectual Property developed or produced under this Agreement by the Executive, whether constituting patentable subject matter or copyrightable subject matter (to the extent deemed not to be a "work made for hire") or otherwise, shall be assigned and is hereby irrevocably assigned to the Group by the Executive. The Executive shall, without any additional consideration, execute all documents and take all other actions needed to convey the Executive's complete ownership interest in any Intellectual Property to the Group so that the Group may own and protect such Intellectual Property and obtain patent, copyright and trademark registrations for it. The Executive agrees that
Initials ______ Date ______
any Group Member may alter or modify the Intellectual Property at the Group Member's sole discretion, and the Executive waives all right to claim or disclaim authorship.
4.03 SOLICITATION OF EMPLOYEES. The Executive agrees that during employment, and
for the longer of any period of salary continuation or for two years after
terminating employment with all Group Members [1] not, directly or indirectly,
to solicit any employee of any Group Member to leave employment with the Group,
[2] not, directly or indirectly, to employ or seek to employ any employee of any
Group Member and [3] not to cause or induce any of the Group's (or Group
Member's) competitors to solicit or employ any employee of any Group Member.
4.04 SOLICITATION OF THIRD PARTIES. The Executive agrees that during employment, and for the longer of any period of salary continuation or for two years after terminating employment with all Group Members not, directly or indirectly, to recruit, solicit or otherwise induce or influence any customer, supplier, sales representative, lender, lessor, lessee or any other person having a business relationship with the Group (or any Group Member) to discontinue or reduce the extent of that relationship except in the course of discharging the duties described in this Agreement and with the good faith objective of advancing the Group's (or any Group Member's) business interests.
4.05 NON-COMPETITION. The Executive agrees that for the longer of any period of salary continuation or for one year after terminating employment with all Group Members not, directly or indirectly, to accept employment with, act as a consultant to, or otherwise perform services that are substantially the same or similar to those for which the Executive was compensated by any Group Member (this comparison will be based on job-related functions and responsibilities and not on job title) for any business that directly competes with the Group's (or any Group Member's) business, which is understood by the Parties to be the sale of off-price and discount merchandise, including discount and off-price shoes and accessories. Illustrations of businesses that compete with the Group's business include, but are not limited to, The TJX Companies, Inc. (T.J. Maxx; Marshall's; HomeGoods; A.J. Wright; Marmaxx; Winners); Shoe Carnival; MJM Designer Shoes; Ross Stores, Inc; Payless ShoeSource; Off-Broadway Shoes; Famous Footwear; Footstar; Big Lots Stores, Inc.; and Burlington Coat Factory Warehouse Corporation and any of its affiliates. This restriction applies to any parent, division, affiliate, newly formed or purchased business(es) and/or successor of a business that competes with the Group's (or any Group Member's) business.
4.06 POST-TERMINATION COOPERATION. As is required of the Executive during employment, the Executive agrees that during and after employment with any Group Members and without additional compensation (other than reimbursement for reasonable associated expenses), to cooperate with the Group (and with each Group Member) in the following areas:
[1] COOPERATION WITH THE COMPANY. The Executive agrees [A] to be
reasonably available to answer questions for the Group's (and any Group
Member's) officers regarding any matter, project, initiative or effort for
which the Executive was responsible while employed by any Group Member and
[B] to cooperate with the Group (and with each Group Member) during the
course of all third-party proceedings arising out of the Group's (and any
Group Member's) business about which the Executive has knowledge or
information. For purposes of this Agreement, [C] "proceedings" includes
internal
Initials ______ Date ______
investigations, administrative investigations or proceedings and lawsuits (including pre-trial discovery and trial testimony) and [D] "cooperation" includes [I] the Executive's being reasonably available for interviews, meetings, depositions, hearings and/or trials without the need for subpoena or assurances by the Group (or any Group Member), [II] providing any and all documents in the Executive's possession that relate to the proceeding, and [III] providing assistance in locating any and all relevant notes and/or documents.
[2] COOPERATION WITH THIRD PARTIES. Unless compelled to do so by lawfully-served subpoena or court order, the Executive agrees not to communicate with, or give statements or testimony to, any opposing attorney, opposing attorney's representative (including private investigator) or current or former employee relating to any matter (including pending or threatened lawsuits or administrative investigations) about which the Executive has knowledge or information (other than knowledge or information that is not Confidential Information as defined in Section 4.02[2]) as a result of employment with the Group (or any Group Member) except in cooperation with the Company. The Executive also agrees to notify the Vice President of Human Resources immediately after being contacted by a third party or receiving a subpoena or court order to appear and testify with respect to any matter affected by this section.
[3] COOPERATION WITH MEDIA. The Executive agrees not to communicate with, or give statements to, any member of the media (including print, television or radio media) relating to any matter (including pending or threatened lawsuits or administrative investigations) about which the Executive has knowledge or information (other than knowledge or information that is not Confidential Information as defined in Section 4.02[2]) as a result of employment with the Group (or any Group Member). The Executive also agrees to notify the Vice President of Human Resources immediately after being contacted by any member of the media with respect to any matter affected by this section.
4.07 NON-DISPARAGEMENT. The Executive and the Company (on its behalf and on behalf of the Group and each Group Member) agree that neither will make any disparaging remarks about the other and the Executive will not make any disparaging remarks about the Company's Chairman, Chief Executive Officer or any of the Group's senior executives. However, this section will not preclude [1] any remarks that may be made by the Executive under the terms of Section 4.06[2] or that are required to discharge the duties described in this Agreement or [2] the Company from making (or eliciting from any person) disparaging remarks about the Executive concerning any conduct that may lead to a termination for Cause, as defined in Section 5.04[5] (including initiating an inquiry or investigation that may result in a termination for Cause), but only to the extent reasonably necessary to investigate the Executive's conduct and to protect the Group's (or any Group Member's) interests.
4.08 NOTICE OF SUBSEQUENT EMPLOYMENT. The Executive agrees to immediately notify the Company of any subsequent employment during the period of salary continuation after employment terminates.
Initials ______ Date ______
[5] DEFINITION OF CAUSE. For these purposes, Cause means the Executive's
[A] failure to substantially perform the duties associated with employment
under this Agreement; [B] willful, illegal or grossly negligent conduct
that is materially injurious to the Company or any Group Member monetarily
or otherwise; [C] violation of laws or regulations governing the Company
or to any Group Member; [D] breach of any fiduciary duty owed to the
Company or any Group Member; [E] misrepresentation or dishonesty which the
Company determines has had or is likely to have a material adverse effect
upon the Company's or any Group Member's operations or financial
condition; [F] breach of Section 4.00 of this Agreement; [G] involvement
in any act of moral turpitude that has an injurious effect on the Company
(or any Group Member) or its reputation; or [H] breach of the terms of any
non-solicitation or confidentiality clauses contained in an employment
agreement(s) with a former employer. The Company's dissatisfaction with
the Executive's performance, or the business results achieved, shall not
constitute Cause under this Section.
4.09 NONDISCLOSURE. The Executive agrees not to disclose the terms of this Agreement in any manner to any person other than the President, Chief Merchandising Officer, one of the Company's Vice Presidents of Human Resources (or any Company representative they expressly approve for such disclosure), the Executive's personal attorney, accountant and financial advisor, and the Executive's immediate family or as otherwise required by law.
4.10 REMEDIES. The Executive acknowledges that money will not adequately
compensate the Group for the substantial damages that will arise upon the breach
of any provision of Section 4.00. For this reason, any disputes arising under
Section 4.00 will not be subject to arbitration under Section 9.00. Instead, if
the Executive breaches or threatens to breach any provision of Section 4.00, the
Company will be entitled, in addition to other rights and remedies, to specific
performance, injunctive relief and other equitable relief to prevent or restrain
any breach or threatened breach of Section 4.00.
4.11 RETURN OF COMPANY PROPERTY. Upon termination of employment, the Executive agrees to promptly return to the Company all property belonging to the Group or any Group Member.
5.00 TERMINATION AND RELATED BENEFITS
This Agreement will terminate upon the occurrence of any of the events described in this section.
5.01 RULES OF GENERAL APPLICATION. The following rules apply generally to the implementation of Section 5.00:
[1] METHOD OF PAYMENT. The Company, at its option, may elect to pay, as a
lump sum, any installment payments due under Section 5.00. If the Company
decides to accelerate payment of any installment obligation due under
Section 5.00, the amount paid will be reduced to reflect the value of the
accelerated payment. This reduction will be based on the rate paid under
90-day U.S. Treasury Bills issued on the first issue date after this
Agreement terminates.
[2] APPLICATION OF PRO RATA. Any pro rata share required to be paid under
Section 5.00 will be based on the number of days between the first day of
the fiscal year
Initials ______ Date ______
during which the Executive terminates employment and the date that the Executive terminates employment divided by the number of days in the fiscal year during which the Executive terminates employment.
5.02 TERMINATION DUE TO EXECUTIVE'S DEATH. This Agreement will terminate
automatically on the date the Executive dies. As of that date, and subject to
Section 5.04[6], the Company will make the following payments to the person the
Executive designates on the attached Beneficiary designation form or, with
respect to any Equity Incentive, the beneficiary the Executive designates under
the Stock Incentive Plan under which the award was issued ("Beneficiary"):
[1] BASE SALARY. The unpaid Base Salary the Executive earned to the date of termination.
[2] CASH INCENTIVE BONUS. The pro rata share of any Cash Incentive Bonus that would have been paid to the Executive had the Executive not died based on the extent to which performance standards are met on the last day of the year in which the Executive dies.
[3] EQUITY INCENTIVE. Subject to the terms of any applicable agreement,
[A] the Executive's Beneficiary may exercise any outstanding stock options
that are then vested when the Executive dies and [B] those that would have
been vested on the last day of the fiscal year during which the Executive
dies if the Executive had not died.
[4] OTHER. Any rights accruing to the Executive under any employee benefit plan, fund or program maintained by any Group Member will be distributed or made available as required by the terms of the plan fund or program or as required by law.
5.03 TERMINATION DUE TO EXECUTIVE'S DISABILITY. The Company may terminate this Agreement after ascertaining that the Executive is Disabled (as defined below - "Disability") by delivering to the Executive a written notice of termination for Disability that includes the date termination for Disability is to be effective. Subject to Section 5.04[6], if that notice is given and if all requirements of this Agreement are met (including those imposed under Section 7.00), the Company will make the following payments to the Executive:
[1] BASE SALARY. The unpaid Base Salary the Executive earned to the date of termination.
[2] CASH INCENTIVE BONUS. The pro rata share of any Cash Incentive Bonus that would have been paid to the Executive had the Executive not become Disabled based on the extent to which performance standards are met on the last day of the year in which the Executive becomes Disabled.
[3] EQUITY INCENTIVE. Subject to the terms of any applicable agreement,
[A] the Executive may exercise any outstanding stock options that are
vested when the Executive became Disabled and [B] those that would have
been vested on the last day of the fiscal year during which the Executive
becomes Disabled if the Executive had not become Disabled.
Initials ______ Date ______
[4] OTHER. Any rights accruing to the Executive under any employee benefit plan, fund or program maintained by any Group Member will be distributed or made available as required by the terms of the plan fund or program or as required by law.
[5] DEFINITION OF DISABILITY. For these purposes, Disability means that, for more than six consecutive months, the Executive is unable, with a reasonable accommodation, to perform the duties described in Section 4.01 on a full-time basis due to a physical or mental disability or infirmity.
5.04 TERMINATION FOR CAUSE. The Company may terminate the Executive's employment
for Cause (as defined below - "Cause") by delivering to the Executive a written
notice describing the basis for this termination and the date the termination
for Cause is to be effective. If the Executive is terminated for Cause and if
all requirements of this Agreement are met (including those imposed under
Section 7.00), the Company will make the following payments to the Executive:
[1] BASE SALARY. The unpaid Base Salary the Executive earned to the date of termination.
[2] CASH INCENTIVE BONUS. Any unpaid Cash Incentive Bonus earned for the fiscal year that ends before the fiscal year during which the Executive is terminated for Cause (but no Cash Incentive Bonus will be given with respect to the fiscal year during which the Executive is terminated for Cause).
[3] EQUITY INCENTIVE. The Executive's entitlement to Equity Incentive will be limited to those specifically described in the Company's Stock Incentive Plan and any applicable stock option and restricted stock agreements.
[4] OTHER. Any rights accruing to the Executive under any employee benefit plan, fund or program maintained by any Group Member will be distributed or made available as required by the terms of the plan fund or program or as required by law.
[5] DEFINITION OF CAUSE. For these purposes, Cause means the Executive's
[A] failure to substantially perform the duties associated with employment
under this Agreement; [B] willful, illegal or grossly negligent conduct
that is materially injurious to the Company or any Group Member monetarily
or otherwise; [C] violation of laws or regulations governing the Company
or to any Group Member; [D] breach of any fiduciary duty owed to the
Company or any Group Member; [E] misrepresentation or dishonesty which the
Company determines has had or is likely to have a material adverse effect
upon the Company's or any Group Member's operations or financial
condition; [F] breach of Section 4.00 of this Agreement; [G] involvement
in any act of moral turpitude that has an injurious effect on the Company
(or any Group Member) or its reputation; or [H] breach of the terms of any
non-solicitation or confidentiality clauses contained in an Standard
Executive Employment Agreement(s) with a former employer. The Company's
dissatisfaction with the Executive's performance, or the business results
achieved, shall not constitute Cause under this Section.
Initials ______ Date ______
[6] SUBSEQUENT INFORMATION. The terms of Section 5.04 will apply if, after the Executive terminates under any other provision of Section 5.00, the Company learns of an event that, had it been known before the Executive terminated employment, would have justified a termination for Cause. In this case, the Company will be entitled to recover (and the Executive agrees to repay) any amounts (other than legally protected benefits) that the Executive received under any other provision of Section 5.00 reduced by the amount the Executive is entitled to receive under Section 5.04.
5.05 VOLUNTARY TERMINATION BY EXECUTIVE. The Executive may voluntarily terminate employment with the Company at any time by delivering to the Company a written notice specifying the date termination is to be effective, in which case the Company will make the following payments to the Executive if all requirements of this Agreement are met (including those imposed under Section 7.00):
[1] BASE SALARY. The unpaid Base Salary the Executive earned to the date of termination.
[2] CASH INCENTIVE BONUS. Any unpaid Cash Incentive Bonus earned for the fiscal year that ends before the fiscal year during which the Executive voluntarily terminates (but no Cash Incentive Bonus will be given with respect to the fiscal year during which the Executive voluntarily terminates).
[3] EQUITY INCENTIVE. The Executive's entitlement to Equity Incentive will be limited to those specifically described in the Company's Stock Incentive Plan and any applicable stock option and restricted stock agreements.
[4] OTHER. Any rights accruing to the Executive under any employee benefit plan, fund or program maintained by any Group Member will be distributed or made available as required by the terms of the plan fund or program or as required by law.
5.06 INVOLUNTARY TERMINATION WITHOUT CAUSE. The Company may terminate the Executive's employment at any time Without Cause (as defined below) by delivering to the Executive a written notice specifying the date termination is to be effective. Subject to Section 5.04[6], if this notice is given and if all requirements of this Agreement are met (including those imposed under Section 7.00), the Company will make the following payments to the Executive as of the effective date of termination Without Cause:
[1] BASE SALARY. For 12 months beginning on the date of termination Without Cause, the Company will continue to pay the Executive's Base Salary at the rate in effect on the date of termination Without Cause. As a condition of this salary continuation, the Executive is expected to promptly and reasonably pursue new employment. If during the 12 months of salary continuation the Executive becomes employed either as an employee or a consultant, the Executive's Base Salary paid by the Company will be reduced by the amount of Base Salary or consultant compensation paid by the new employer or entity for the remainder of the 12 month salary continuation period. The Executive agrees to immediately
Initials ______ Date ______
notify the Company of any subsequent employment or consulting work during the period of salary continuation.
[2] HEALTH CARE. The Company will reimburse the Executive for the cost of maintaining continuing health coverage under COBRA for a period of no more than 12 months following the date of termination, less the amount the Executive is expected to pay as a regular employee premium for such coverage. Such reimbursements will cease if the Executive becomes eligible for similar coverage under another benefit plan.
[3] CASH INCENTIVE BONUS. The pro rata share of any Cash Incentive Bonus that would have been paid to the Executive had the Executive not been terminated Without Cause based on the extent to which performance standards are met on the last day of the year in which the Executive is terminated Without Cause.
[4] EQUITY INCENTIVE. Subject to the terms of the Company's Stock Incentive Plan and any applicable agreement, the Executive may exercise any outstanding stock options that are vested on the date of termination Without Cause and those that would have vested during the one year following the effective date of termination Without Cause as if the Executive had remained employed throughout that one-year period.
[5] OTHER. Any rights accruing to the Executive under any employee benefit plan, fund or program maintained by any Group Member will be distributed or made available as required by the terms of the plan fund or program or as required by law.
[6] DEFINITION OF WITHOUT CAUSE. For purposes of this Agreement, Without Cause means termination of the Executive's employment by the Company for any reason other than those set forth in Section 5.02, 5.03 or 5.04.
6.00 NOTICE
6.01 HOW GIVEN. Any notice permitted or required to be given under this Agreement must be given in writing and delivered in person or by registered, U.S. mail, return receipt requested, postage prepaid, or through Federal Express, UPS, DHL and any other reputable professional delivery service that maintains a confirmation of delivery system. Any delivery must be addressed to the Company's Executive Vice President of Human Resources at the Company's then-current corporate offices or to the Executive at the Executive's address as contained in the Executive's personnel file.
6.02 EFFECTIVE DATE. Any notice permitted or required to be given under this Agreement will be effective on the date it is delivered, in the event of personal delivery, or on the date its receipt is acknowledged, in the event of delivery by registered mail or through a professional delivery service described in Section 6.01.
7.00 RELEASE
In exchange for the payments and benefits described in this Agreement, as well as any and all other mutual promises made in this Agreement, the Executive and the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, legatees
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and assigns agree to release and forever discharge the Company, the Group and each Group Member and their executives, officers, directors, agents, attorneys, successors and assigns, from any and all claims, suits and/or causes of action that grow out of or are in any way related to the Executive's recruitment to or employment with the Company and all Group Members, other than any claim that the Company has breached this Agreement. This release includes, but is not limited to, any claims that the Company, the Group or any Group Member violated the Employee Retirement and Income Security Act of 1974; the Age Discrimination in Employment Act; the Older Worker's Benefit Protection Act; the Americans with Disabilities Act; Title VII of the Civil Rights Act of 1964 (as amended); the Family and Medical Leave Act; any law prohibiting discrimination, harassment or retaliation in employment; any claim of promissory estoppel or detrimental reliance, defamation, intentional infliction of emotional distress; or the public policy of any state, or any federal, state or local law. The Executive agrees, upon termination of employment with all Group Members, to reaffirm and execute this release in writing. If the Executive fails to reaffirm and execute this release, the Executive agrees to forego any payment from the Company as if the Executive had terminated employment voluntarily under Section 5.05. Specifically, the Executive agrees that a necessary condition for the payment of any of the amounts described in Section 5.00 in the event of termination (except termination under Section 5.02) is the Executive's reaffirmation of this release upon termination of employment. The Executive acknowledges that the Executive is an experienced senior executive knowledgeable about the claims that might arise in the course of employment with the Company and knowingly agrees that the payments upon termination (except those payable upon the Executive's death) provided for in this Agreement are satisfactory consideration for the release of all possible claims. The Executive is advised to consult with an attorney prior to executing this Agreement. The Executive acknowledges that 21 days have been given to consider this release. The Executive may revoke consent to this Agreement by delivering a written notice of such revocation to the Company within seven days of signing this Agreement. If the Executive revokes this consent, this Agreement will become null and void and the Executive must return any compensation received under it, except salary earned for actual work.
8.00 INSURANCE
To the extent permitted by law and its organizational documents, the Company will include the Executive under any liability insurance policy the Company maintains for employees of comparable status. The level of coverage will be at least as favorable to the Executive (in amount and each other material respect) as the coverage of other employees of comparable status. This obligation to provide insurance for the Executive will survive termination of this Agreement with respect to proceedings or threatened proceedings based on acts or omissions occurring during the Executive's employment with the Company or with any Group Member.
9.00 ARBITRATION
9.01 ACKNOWLEDGEMENT OF ARBITRATION. Unless stated otherwise in this Agreement, the Parties agree that arbitration is the sole and exclusive remedy for each of them to resolve and redress any dispute, claim or controversy involving the interpretation of this Agreement or the terms, conditions or termination of this Agreement or the terms, conditions or termination of Executive's employment with the Group and with each Group Member, including any claims for
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any tort, breach of contract, violation of public policy or discrimination, whether such claim arises under federal or state law.
9.02 SCOPE OF ARBITRATION. The Executive expressly understands and agrees that claims subject to arbitration under this section include asserted violations of the Employee Retirement and Income Security Act of 1974; the Age Discrimination in Employment Act; the Older Worker's Benefit Protection Act; the Americans with Disabilities Act; Title VII of the Civil Rights Act of 1964 (as amended); the Family and Medical Leave Act; any law prohibiting discrimination, harassment or retaliation in employment; any claim of promissory estoppel or detrimental reliance, defamation, intentional infliction of emotional distress; or the public policy of any state, or any federal, state or local law.
9.03 EFFECT OF ARBITRATION. The Parties intend that any arbitration award relating to any matter described in Section 9.00 will be final and binding on them and that a judgment on the award may be entered in any court of competent jurisdiction, and enforcement may be had according to the terms of that award. This section will survive the termination or expiration of this Agreement.
9.04 LOCATION OF ARBITRATION. Arbitration will be held in Columbus, Ohio, and will be conducted by a retired federal judge or other qualified arbitrator. The arbitrator will be mutually agreed upon by the Parties and the arbitration will be conducted in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association. The Parties will have the right to conduct discovery pursuant to the Federal Rules of Civil Procedure; provided, however, that the arbitrator will have the authority to establish an expedited discovery schedule and cutoff and to resolve any discovery disputes. The arbitrator will have no jurisdiction or authority to change any provision of this Agreement by alterations of, additions to or subtractions from the terms of this Agreement. The arbitrator's sole authority will be to interpret or apply any provision(s) of this Agreement or any public law alleged to have been violated. The arbitrator will be limited to awarding compensatory damages, including unpaid wages or benefits, but, to the extent allowed by law, will have no authority to award punitive, exemplary or similar-type damages.
9.05 TIME FOR INITIATING ARBITRATION. Any claim or controversy not sought to be submitted to arbitration, in writing, within 120 days of the date the Party asserting the claim knew, or through reasonable diligence should have known, of the facts giving rise to that Party's claim, will be deemed waived and the Party asserting the claim will have no further right to seek arbitration or recovery with respect to that claim or controversy. Both Parties agree to strictly comply with the time limitation specified in Section 9.00. For purposes of this section, a claim or controversy is sought to be submitted to arbitration on the date the complaining Party gives written notice to the other that [1] an issue has arisen or is likely to arise that, unless resolved otherwise, may be resolved through arbitration under Section 9.00 and [2] unless the issue is resolved otherwise, the complaining Party intends to submit the matter to arbitration under the terms of Section 9.00.
9.06 COSTS OF ARBITRATION. The Company will bear the arbitrator's fee and other costs associated with any arbitration, unless the arbitrator, acting under Federal Rule of Civil Procedure 54(b), elects to award these fees to the Company.
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9.07 ARBITRATION EXCLUSIVE REMEDY. The Parties acknowledge that, because arbitration is the exclusive remedy for resolving issues arising under this Agreement, neither Party may resort to any federal, state or local court or administrative agency concerning breaches of this Agreement or any other matter subject to arbitration under Section 9.00, except as otherwise provided in this Agreement, and that the decision of the arbitrator will be a complete defense to any suit, action or proceeding instituted in any federal, state or local court before any administrative agency with respect to any arbitrable claim or controversy.
9.08 WAIVER OF JURY. The Executive and the Company each waive the right to have a claim or dispute with one another decided in a judicial forum or by a jury, except as otherwise provided in this Agreement.
10.00 GENERAL PROVISIONS
10.01 REPRESENTATION OF EXECUTIVE. The Executive represents and warrants that the Executive is not under any contractual or legal restraint that prevents or prohibits the Executive from entering into this Agreement or performing the duties and obligations described in this Agreement.
10.02 MODIFICATION OR WAIVER; ENTIRE AGREEMENT. No provision of this Agreement may be modified or waived except in a document signed by the Executive and the Company's Chief Executive Officer or other person designated by the Company's Board of Directors. This Agreement, and any attachments referenced in the Agreement, constitute the entire agreement between the Parties regarding the employment relationship described in this Agreement, and any other agreements are terminated and of no further force or legal effect. No agreements or representations, oral or otherwise, with respect to the Executive's employment relationship with the Company have been made or relied upon by either Party which are not set forth expressly in this Agreement.
10.03 GOVERNING LAW; SEVERABILITY. This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations. If any provision of this Agreement, or the application of any provision of this Agreement to any person or circumstance, is, for any reason and to any extent, held invalid or unenforceable, such invalidity and unenforceability will not affect the remaining provisions of this Agreement of its application to other persons or circumstances, all of which will be enforced to the greatest extent permitted by law and the Executive and the Company agree that the arbitrator (or judge) is authorized to reform the invalid or enforceable provision [1] to the extent needed to avoid the invalidity or unenforceability and [2] in a manner that is as similar as possible to the intent (as described in this Agreement). The validity, construction and interpretation of this Agreement and the rights and duties of the Parties will be governed by the laws of the State of Ohio, without reference to the Ohio choice of law rules.
10.04 NO WAIVER. Except as otherwise provided in Section 9.05, failure to insist upon strict compliance with any term of this Agreement will not be considered a waiver of any such term.
10.05 WITHHOLDING. All payments made to the Executive under this Agreement will be reduced by any amount:
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[1] That the Company is required to withhold in advance payment of the Executive's federal, state and local income, wage and employment tax liability; and
[2] To the extent allowed by law, that the Executive owes (or, after employment is deemed to owe) to the Company.
However, application of Section 10.06[2] will not extinguish the Company's right
to seek additional amounts from the Executive (or to pursue other appropriate
remedies) to the extent that the amount that may be recovered by application of
Section 10.06[2] does not fully discharge the amount the Executive owes to the
Company and does not preclude the Company from proceeding directly against the
Executive without first exhausting its right of recovery under Section 10.06[2].
10.06 SURVIVAL. Subject to the terms of the Executive's Beneficiary designation form, the Parties agree that the covenants and promises set forth in this Agreement will survive the termination of this Agreement and continue in full force and effect.
10.07 MISCELLANEOUS.
[1] The Executive may not assign any right or interest to, or in, any payments payable under this Agreement; provided, however, that this prohibition does not preclude the Executive from designating in writing one or more beneficiaries to receive any amount that may be payable after the Executive's death and does not preclude the legal representative of the Executive's estate from assigning any right under this Agreement to the person or persons entitled to it.
[2] This Agreement will be binding upon and will inure to the benefit of the Executive, the Executive's heirs and legal representatives and the Company and its successors.
[3] The headings in this Agreement are inserted for convenience of reference only and will not be a part of or control or affect the meaning of any provision of the Agreement.
10.08 SUCCESSORS TO COMPANY. This Agreement may and will be assigned or transferred to, and will be binding upon and will inure to the benefit of, any successor of the Company, and any successor will be substituted for the Company under the terms of this Agreement. As used in this Agreement, the term "successor" means any person, firm, corporation or business entity which at any time, whether by merger, purchase or otherwise, acquires all or essentially all of the assets of the business of the Company. Notwithstanding any assignment, the Company will remain, with any successor, jointly and severally liable for all its obligations under this Agreement.
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IN WITNESS WHEREOF, the Parties have duly executed and delivered this Agreement, which includes an arbitration provision, and consists of ___ pages.
EXECUTIVE
/s/ Derek Ungless ----------------------------------------- Signed: June 26, 2005 |
DSW INC.
By: /s/ Kathleen Maurer
-------------------------------------
Signed: June 28, 2005
|
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EXHIBIT 10.7
DSW Inc. SUMMARY OF DIRECTOR COMPENSATION
1. Pursuant to the terms of the DSW Inc. 2005 Equity Incentive Plan (the "Equity Incentive Plan"), each of Messrs. Miller, Robbins, Sonnenberg and Tanenbaum and Ms. Friedlander receives:
o an annual cash retainer of $50,000, payable in quarterly installments of $12,500 beginning on the last day of each fiscal quarter; and
o on the date of each annual meeting of the shareholders for the purpose of electing directors, an automatic grant of a number of Stock Units to each director serving after such annual meeting determined by dividing $50,000 by the "Fair Market Value" of a share of "Stock" on the "Grant Date" pursuant to Section 7.01[3] of the Equity Incentive Plan;
2. Mr. Tanenbaum receives an additional annual cash retainer of $5,000, payable in quarterly installments of $1,250 on the last business day of each fiscal quarter, for service as the Chair of the Nominating and Corporate Governance Committee;
3. Mr. Miller receives an additional annual cash retainer of $7,500, payable in quarterly installments of $1,850 on the last business day of each fiscal quarter, for service as the Chair of the Compensation Committee; and
4. Mr. Robbins receives an additional annual cash retainer of $10,000, payable in quarterly installments of $2,500 on the last business day of each fiscal quarter, for service as the Chair of the Audit Committee.
Exhibit 10.11
LOAN AND SECURITY AGREEMENT
DSW INC.
THE LEAD BORROWER
FOR:
DSW INC.
DSW SHOE WAREHOUSE, INC.
THE BORROWERS
NATIONAL CITY BUSINESS CREDIT, INC. ADMINISTRATIVE AGENT AND COLLATERAL AGENT FOR THE REVOLVING CREDIT LENDERS REFERENCED HEREIN
NATIONAL CITY BANK
AS LETTER OF CREDIT ISSUER
THE CIT GROUP/BUSINESS CREDIT, INC.
BANK OF AMERICA, N.A.
AS CO-SYNDICATION AGENTS
GENERAL ELECTRIC CAPITAL CORPORATION
WELLS FARGO RETAIL FINANCE, LLC
AS CO-DOCUMENTATION AGENTS
NATIONAL CITY BANK
AS LEAD ARRANGER
TABLE OF CONTENTS
LOAN AND SECURITY AGREEMENT............................................... i
Article 1 - Definitions................................................... 1
Article 2 - The Revolving Credit:......................................... 39
2.1. Establishment of Revolving Credit.............................. 39
2.2. Advances in Excess of Borrowing Base (OverLoans)................ 39
2.3. Risks of Value of Collateral.................................... 40
2.4. Commitment to Make Revolving Credit Loans and Support Letters
of Credit....................................................... 40
2.5. Revolving Credit Loan Requests.................................. 40
2.6. Suspension of Revolving Credit.................................. 42
2.7. Making of Revolving Credit Loans................................ 42
2.8. SwingLine Loans................................................. 43
2.9. The Loan Account................................................ 44
2.10. The Revolving Credit Notes...................................... 45
2.11. Payment of The Loan Account..................................... 45
2.12. Interest on Revolving Credit Loans.............................. 47
2.13. Underwriting Fee; Collateral Monitoring Fee..................... 47
2.14. Unused Line Fee................................................. 48
2.15. Concerning Fees................................................. 48
2.16. Agent's and Revolving Credit Lenders' Discretion................ 48
2.17. Procedures For Issuance of L/Cs and Banker's Acceptances........ 48
2.18. Fees For L/Cs and Banker's Acceptances.......................... 50
2.19. Concerning L/C's and Banker's Acceptances....................... 52
2.20. Changed Circumstances........................................... 53
2.21. Designation of Lead Borrower as Borrowers' Agent................ 54
2.22. Revolving Credit Lenders' Commitments........................... 55
2.23. Payments........................................................ 56
Article 3 - Conditions Precedent:......................................... 57
3.1. Corporate Due Diligence......................................... 57
3.2. Opinions........................................................ 57
3.3. Additional Documents............................................ 58
3.4. Officers' Certificates.......................................... 58
3.5. Representations and Warranties.................................. 58
3.6. Minimum Day One Availability.................................... 58
3.7. Senior Non-convertible facility................................. 58
3.8. DSW Initial public offering..................................... 58
3.9. Repayment of Existing Indebtedness.............................. 58
3.10. Consents........................................................ 58
3.11. Appraisals and Commercial Finance Examinations.................. 58
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3.12. Financial Information........................................... 58 3.13. Material Agreements............................................. 59 3.14. Litigation...................................................... 59 3.15. Perfection of Encumbrances...................................... 59 3.16. All Fees and Expenses Paid...................................... 59 3.17. Cash Management................................................. 59 3.18. Insurance....................................................... 59 3.19. Separation and Service Agreements............................... 60 3.20. No Loan Party in Default........................................ 60 3.21. No Adverse Change............................................... 60 3.22. Certain Changes................................................. 60 3.23. Benefit of Conditions Precedent................................. 60 Article 4 - General Representations and Warranties........................ 60 4.1. Due Organization. Authorization. No Conflicts................... 60 4.2. Trade Names..................................................... 61 4.3. Intellectual Property........................................... 62 4.4. Locations....................................................... 62 4.5. Encumbrances.................................................... 62 4.6. Indebtedness.................................................... 62 4.7. Insurance....................................................... 63 4.8. Licenses........................................................ 63 4.9. Leases.......................................................... 63 4.10. Requirements of Law............................................. 63 4.11. Labor Relations................................................. 63 4.12. Taxes........................................................... 64 4.13. No Margin Stock................................................. 65 4.14. Investment and Holding Company Status........................... 65 4.15. ERISA........................................................... 66 4.16. Hazardous Materials............................................. 66 4.17. Litigation...................................................... 67 4.18. Adequacy of Disclosure.......................................... 67 4.19. Unrestricted Subsidiaries....................................... 68 4.20. No Bankruptcy Filing............................................ 68 4.21. Patriot Act..................................................... 68 4.22. Foreign Asset Control Regulations............................... 68 Article 5 - GENERAL COVENANTS............................................. 68 5.1. Payment and Performance of Liabilities.......................... 68 5.2. Maintenance of existence........................................ 68 5.3. Trade Names..................................................... 69 5.4. Locations....................................................... 69 5.5. Encumbrances.................................................... 70 5.6. Indebtedness.................................................... 70 5.7. Insurance....................................................... 70 |
5.8. Licenses........................................................ 71 5.9. Requirements of Law............................................. 71 5.10. Labor Relations................................................. 71 5.11. Maintain Properties............................................. 71 5.12. Taxes........................................................... 72 5.13. No Margin Stock................................................. 73 5.14. ERISA........................................................... 73 5.15. Hazardous Materials............................................. 73 5.16. Dividends. Investments. Corporate Action........................ 74 5.17. Loans........................................................... 75 5.18. Protection of Assets............................................ 76 5.19. Line of Business; Conduct of Business........................... 76 5.20. Affiliate Transactions.......................................... 77 5.21. Additional Subsidiaries......................................... 77 5.22. Further Assurances.............................................. 78 5.23. Adequacy of Disclosure.......................................... 78 5.24. No Restrictions on Liabilities.................................. 78 5.25. Unrestricted Subsidiaries....................................... 79 Article 6 - Financial Reporting and Performance Covenants:................ 79 6.1. Maintain Records................................................ 79 6.2. Access to Records............................................... 79 6.3. Prompt Notice to Administrative Agent........................... 80 6.4. Weekly Reports.................................................. 82 6.5. Monthly Reports................................................. 82 6.6. Quarterly Reports............................................... 82 6.7. Annual Reports.................................................. 82 6.8. Officers' Certificates.......................................... 83 6.9. Inventories, Appraisals, and Audits............................. 84 6.10. Additional Financial Information................................ 85 6.11. Information Delivered Pursuant to Article 6..................... 85 6.12. Financial Covenant.............................................. 86 Article 7 - USE OF COLLATERAL:............................................ 86 7.1. Use of Inventory Collateral..................................... 86 7.2. Inventory Quality............................................... 86 7.3. Adjustments and Allowances...................................... 86 7.4. Validity of Accounts............................................ 87 7.5. Notification to Account Debtors................................. 87 Article 8 - CASH MANAGEMENT. PAYMENT OF LIABILITIES:...................... 87 8.1. Depository Accounts............................................. 87 8.2. Credit Card Receipts............................................ 88 8.3. The Administrative agent's, Collection, and Operating Accounts.. 88 8.4. Proceeds and Collections........................................ 89 |
8.5. Payment of Liabilities.......................................... 90 8.6. The Operating Account........................................... 91 Article 9 - GRANT OF SECURITY INTEREST:................................... 91 9.1. Grant of Security Interest...................................... 91 9.2. Extent and Duration of Security Interest........................ 92 Article 10 - COLLATERAL AGENT AS BORROWERS' ATTORNEY-IN-FACT:............. 93 10.1. Appointment as Attorney-In-Fact................................. 93 10.2. No Obligation to Act............................................ 94 Article 11 - Events of Default:........................................... 94 11.1. Failure to Pay the Revolving Credit............................. 94 11.2. Failure To Make Other Payments.................................. 94 11.3. Failure to Perform Covenant or Liability (No Grace Period)...... 95 11.4. Financial Reporting Requirements................................ 95 11.5. Failure to Perform Covenant or Liability (Grace Period)......... 95 11.6. Misrepresentation............................................... 95 11.7. Acceleration of Other Debt. Breach of Lease..................... 96 11.8. Default Under Other Agreements.................................. 96 11.9. Uninsured Casualty Loss......................................... 96 11.10. Attachment. Judgment. Restraint of Business..................... 96 11.11. Business Failure................................................ 96 11.12. Bankruptcy...................................................... 97 11.13. Termination of Guaranty......................................... 97 11.14. Challenge to Loan Documents..................................... 97 11.15. Change in Control............................................... 97 Article 12 - RIGHTS AND REMEDIES UPON DEFAULT:............................ 97 12.1. Acceleration.................................................... 97 12.2. Rights of Enforcement........................................... 98 12.3. Sale of Collateral.............................................. 98 12.4. Occupation of Business Location................................. 99 12.5. Grant of Nonexclusive License................................... 99 12.6. Assembly of Collateral.......................................... 99 12.7. Rights and Remedies............................................. 100 Article 13 - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:................. 100 13.1. Revolving Credit Funding Procedures............................. 100 13.2. SwingLine Loans................................................. 100 13.3. Administrative Agent's Covering of Fundings:.................... 101 13.4. Ordinary Course Distributions................................... 103 Article 14 - ACCELERATION AND LIQUIDATION:................................ 104 14.1. Acceleration Notices............................................ 104 14.2. Acceleration.................................................... 104 |
14.3. Initiation of Liquidation....................................... 105
14.4. Actions At and Following Initiation of Liquidation.............. 105
14.5. Collateral Agent' Conduct of Liquidation........................ 105
14.6. Distribution of Liquidation Proceeds:........................... 106
14.7. Relative Priorities To Proceeds of Liquidation.................. 106
Article 15 - THE AGENT:................................................... 107
15.1. Appointment of The Agent........................................ 107
15.2. Responsibilities of Agent....................................... 107
15.3. Concerning Distributions By the Agent........................... 108
15.4. Dispute Resolution.............................................. 109
15.5. Distributions of Notices and of Documents....................... 109
15.6. Confidential Information........................................ 110
15.7. Reliance by Agent............................................... 110
15.8. Non-Reliance on Agent and Other Revolving Credit Lenders........ 110
15.9. Indemnification................................................. 111
15.10. Resignation of Agent............................................ 111
15.11. Lead Arranger, Co-Syndication Agents and Co-Documentation
Agents.......................................................... 112
Article 16 - ACTION BY AGENT - CONSENTS - AMENDMENTS - WAIVERS:........... 112
16.1. Administration of Credit Facilities............................. 112
16.2. Actions Requiring or On Direction of Majority Lenders........... 113
16.3. Actions Requiring or On Direction of SuperMajority Lenders...... 113
16.4. Action Requiring Certain Consent................................ 114
16.5. Actions Requiring or Directed By Unanimous Consent.............. 114
16.6. Actions Requiring SwingLine Lender Consent...................... 116
16.7. Actions Requiring Agent's Consent............................... 116
16.8. Miscellaneous Actions........................................... 116
16.9. Actions Requiring Lead Borrower's Consent....................... 116
16.10. NonConsenting Revolving Credit Lender........................... 117
Article 17 - ASSIGNMENTS BY REVOLVING CREDIT LENDERS:..................... 119
17.1. Assignments and Assumptions:.................................... 119
17.2. Assignment Procedures........................................... 119
17.3. Effect of Assignment............................................ 120
Article 18 - NOTICES:..................................................... 121
18.1. Notice Addresses................................................ 121
18.2. Notice Given.................................................... 122
18.3. Wire Instructions. Notice Given................................. 122
Article 19 - TERM:........................................................ 122
19.1. Termination of Revolving Credit.............................. 122
19.2. Actions On Termination....................................... 123
Article 20 - GENERAL:..................................................... 123
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20.1. Protection of Collateral........................................ 123 20.2. Publicity....................................................... 123 20.3. Confidentiality................................................. 124 20.4. Successors and Assigns.......................................... 124 20.5. Severability.................................................... 125 20.6. Amendments. Course of Dealing.................................. 125 20.7. Power of Attorney............................................... 125 20.8. Application of Proceeds......................................... 126 20.9. Increased Costs................................................. 126 20.10. Replacement of Revolving Credit Lender.......................... 127 20.11. Costs and Expenses of the Agent and Issuer...................... 127 20.12. Copies and Facsimiles........................................... 128 20.13. Ohio Law........................................................ 128 20.14. Consent to Jurisdiction......................................... 128 20.15. Indemnification................................................. 129 20.16. Rules of Construction........................................... 129 20.17. Agent's Consent................................................. 131 20.18. Participations.................................................. 131 20.19. Right of Set-Off................................................ 131 20.20. Pledges To Federal Reserve Banks................................ 131 20.21. Maximum Interest Rate........................................... 132 20.22. Waivers......................................................... 132 20.23. Additional Waivers.............................................. 133 20.24. Patriot Act Notices............................................. 134 |
EXHIBITS
1.1 Existing L/Cs 1.3 : Intercompany Notes 1.4 : Exempt DDAs 1.5 : Unrestricted Subsidiaries 1.6 : Existing Investments 1.7 : Permitted Dispositions 2.5 : Form of Loan Request 2.8(c) : SwingLine Note 2.10 : Revolving Credit Note 2.22 : Revolving Credit Lenders' Commitments 3.3 : Additional Documents 4.1 : Corporate Information 4.2 : Trade Names 4.4 : Locations, Leases, and Landlords 4.5(a) : Encumbrances 4.5(b) : Consigned Property 4.6 : Indebtedness 4.7 : Insurance Policies 4.8 : Licenses 4.9 : Capital Leases 4.11 : Labor Contracts 4.12 : Taxes |
4.16(a) : Hazardous Materials
4.17 : Litigation
5.17(e) : Existing Loans
5.17(f) : Intercompany Loans
6.4 : Borrowing Base Certificate
6.5 : Monthly Financial Reporting Requirements
8.1 : DDA's.
8.2 : Credit Card Arrangements
8.3 : Administrative Agent's Accounts; Collection Account Banks; Operating
Accounts
17.2 : Assignment / Assumption
LOAN AND SECURITY AGREEMENT
As of 12:01 a.m. July 5, 2005
THIS AGREEMENT is made between
National City Business Credit, Inc., an Ohio corporation with offices at 1965 E. Sixth Street, Cleveland, Ohio 44114, as administrative agent (in such capacity, herein the "ADMINISTRATIVE AGENT"), for the ratable benefit of the "REVOLVING CREDIT LENDERS", who are, at present, those financial institutions identified on the signature pages of this Agreement and who in the future are those Persons (if any) who become "Revolving Credit Lenders" in accordance with the provisions hereof;
National City Business Credit, Inc., as Collateral Agent (in such capacity, herein the "COLLATERAL AGENT"), for the ratable benefit of the Revolving Credit Lenders,
and
The Revolving Credit Lenders;
and
DSW Inc. (in such capacity, the "LEAD BORROWER"), an Ohio corporation with its principal executive offices at 4150 East Fifth Avenue, Columbus, Ohio 43219, as agent for the following (individually, a "BORROWER" and collectively, the "BORROWERS"):
Said DSW Inc. ("DSW"); and
DSW Shoe Warehouse, Inc. ("DSW SHOE"), a Missouri corporation with its principal executive offices at 4150 East Fifth Avenue, Columbus, Ohio 43219
in consideration of the mutual covenants contained herein and benefits to be derived herefrom,
WITNESSETH:
ARTICLE 1 - DEFINITIONS
As used herein, the following terms have the following meanings or are defined in the section of this Agreement so indicated:
"ACCELERATION": The making of demand or declaration that any Indebtedness, not otherwise due and payable, is due and payable. Derivations of the word "Acceleration" (such as "Accelerate") are used with like meaning in this Agreement.
"ACCELERATION NOTICE": Written notice as follows:
(a) From the Administrative Agent to the Revolving Credit Lenders, as provided in Section 14.1(a).
(b) From the SuperMajority Lenders to the Administrative Agent, as provided in Section 14.1(b).
"ACCOUNT DEBTOR": Has the meaning given that term in the UCC.
"ACCOUNTS" include, without limitation, "accounts" as defined in the UCC, and also all: accounts, accounts receivable, receivables, and rights to payment (whether or not earned by performance) for: property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of; services rendered or to be rendered; a policy of insurance issued or to be issued; a secondary obligation incurred or to be incurred; arising out of the use of a credit or charge card or information contained on or used with that card; winnings in a lottery or other game of chance; and also all Inventory which gave rise thereto, and all rights associated with such Inventory, including the right of stoppage in transit; all reclaimed, returned, rejected or repossessed Inventory (if any) the sale of which gave rise to any Account.
"ACH": Automated clearing house.
"ACQUISITION ": The purchase or acquisition of all or substantially all of the assets of any Person, the purchase of a controlling equity interest in any Person, or the merger or consolidation of any Person with any other Person, in any transaction or group of transactions which are part of a common plan.
"ADMINISTRATIVE AGENT": NCBC, or its successors or assigns, in its capacity as administrative agent for the Revolving Credit Lenders hereunder.
"ADMINISTRATIVE AGENT'S ACCOUNT": Is defined in Section 8.3.
"ADMINISTRATIVE AGENT'S COVER": Defined in Section 13.3(c)(i).
"AFFILIATE": The following:
(a) With respect to any Person, any other Person that directly or, alone or with a group of related Persons whose interests taken as a whole, indirectly through one of more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. Notwithstanding anything to the contrary herein contained, in no event shall the Agent, the Issuer, or any Revolving Credit Lender be considered an "Affiliate" of a Loan Party.
(b) Any Person: which is a parent, brother-sister or subsidiary, of a Borrower; whose enterprise's tax returns or financial statements are consolidated
with those of a Borrower; which is a member of the same controlled group of corporations (within the meaning of Section 1563(a)(1), (2) and (3) of the Internal Revenue Code of 1986, as amended from time to time) of which any Borrower is a member; or Controls or is Controlled by any Borrower.
(c) With respect to the Loan Parties, without limiting the provisions of clauses (a) and (b) hereof, "Affiliate" includes Schottenstein Stores Corporation.
"AGENT": Collectively, the Administrative Agent and the Collateral Agent.
"AGENTS' RIGHTS AND REMEDIES": Is defined in Section 12.7.
"APPLICABLE LAW": As to any Person: (i) All statutes, rules, regulations, orders, or other requirements having the force of law and (ii) all court orders and injunctions, arbitrator's decisions, and/or similar rulings, in each instance ((i) and (ii)) of or by any federal, state, municipal, and other governmental authority, or court, tribunal, panel, or other body which has or claims jurisdiction over such Person, or any property of such Person, or of any other Person for whose conduct such Person would be responsible.
"APPLICABLE MARGIN": The following percentages for Base Margin Loans and LIBOR Loans based upon the following criteria:
APPLICABLE
MARGIN FOR
BASE MARGIN APPLICABLE MARGIN
LEVEL EXCESS AVAILABILITY LOANS FOR LIBOR LOANS
----- ------------------------- ----------- -----------------
1 Greater than $120,000,000 0% 1.25%
2 Greater than $75,000,000, 0% 1.50%
but less than or equal to
$120,000,000
3 Greater than $35,000,000, 0% 1.75%
but less than or equal to
$75,000,000
|
4 Less than or equal to 0% 2.00%
$35,000,000
|
The Applicable Margin shall initially be established at Level 2. Thereafter, the Applicable Margin shall be adjusted quarterly on the first day of each calendar quarter, commencing January 1, 2006, based upon the Average Excess Availability during the prior quarter, provided that in no event shall the Applicable Margin be established at Level 1 during the first six (6) months subsequent to the Effective Date. Upon the occurrence and during the continuance of a Specified Event of Default, the Applicable Margin may, at the option of the Agent, be immediately increased to the percentages set forth in Level 4 (even if the Excess Availability requirements for another Level have been met) and interest shall be determined in the manner set forth in Section 2.12(g).
"APPRAISED INVENTORY LIQUIDATION VALUE": The product of (a) the Cost of Eligible Inventory (net of Inventory Reserves) multiplied by (b) that percentage, determined from the then most recent appraisal of each Borrower's Inventory undertaken initially at the Lead Borrower's request, and subsequently at the request of the Collateral Agent, to reflect the appraiser's estimate of the net recovery on such Borrower's Inventory in the event of an in-store liquidation of that Inventory.
"APPRAISED INVENTORY PERCENTAGE": 87.5%.
"ASSIGNING REVOLVING CREDIT LENDER": Defined in Section 17.1(a).
"ASSIGNMENT AND ACCEPTANCE": Defined in Section 17.2.
"AUTHORIZED OFFICER": Is defined in Section 6.8.
"AVAILABILITY RESERVES": Without duplication, such reserves as the Collateral Agent from time to time determines in the Collateral Agent's reasonable, good faith discretion as being appropriate to reflect the impediments to the Collateral Agent's ability to realize upon the Collateral. The Collateral Agent shall furnish the Lead Borrower with written notice two (2) Business Days prior to imposing or changing any Availability Reserve (unless a Specified Event of Default then exists and is continuing, in which event no prior notice shall be required). Without limiting the generality of the foregoing, Availability Reserves may include (but are not limited to) reserves based on the following:
(i) rent (but only if a landlord's waiver, acceptable to the Collateral Agent, has not been received by the Collateral Agent).
(ii) Customer Credit Liabilities.
(iii) taxes and other governmental charges, including, ad valorem, personal property, and such other taxes which are reasonably likely to have priority over the Collateral Interests of the Collateral Agent in the Collateral.
(iv) L/C Landing Costs.
(v) Hedge Agreements.
Without limiting the rights of the Collateral Agent to establish or modify Availability Reserves, the initial Availability Reserves on the Effective Date shall be the following:
(a) gift certificates and Merchandise Credits (in an amount equal to fifty percent (50%) of the outstanding gift certificates and merchandise credits reflected in the Borrowers' financial statements (which amount shall be updated no less frequently than every thirty (30) days and which financial statements will be maintained consistently with past practices)).
(b) landlord lien reserve equal to two months' rent for all stores located in Pennsylvania and Virginia.
(c) layaway deposits (in an amount equal to one hundred percent (100%) of the outstanding layaway deposits reflected in the Borrowers' financial statements (which amount shall be updated no less frequently than every thirty (30) days and which financial statements will be maintained consistently with past practices)).
(d) Hedge Agreements.
"AVERAGE EXCESS AVAILABILITY ": For any period, the sum of Excess Availability for each day comprising such period divided by the number of days in such period.
"BANKER'S ACCEPTANCE": A time draft or bill of exchange relating to a Documentary Letter of Credit which has been accepted by the Issuer. Without limitation, Existing Banker's Acceptances shall be deemed to be Banker's Acceptances issued under this Agreement and shall be entitled to all of the benefits hereof.
"BANKER'S ACCEPTANCE FEES": The fees payable in respect of Banker's Acceptances pursuant to Section 2.18.
"BANKRUPTCY CODE": Title 11, U.S.C., as amended from time to time.
"BASE": For any day, a rate per annum equal to the higher of (a) the rate of interest which is established from time to time by NCB at its principal office in Cleveland, Ohio as its "prime rate" in effect, such rate to be adjusted automatically, without notice, as of the opening of business on the effective date
of any change in such rate (it being agreed that (i) such rate is not necessarily the lowest rate of interest then available from NCB on fluctuating rate loans, and (ii) such rate may be established by NCB by public announcement or otherwise), and (b) the Federal Funds Effective Rate in effect on such day plus one-half of one percent (0.50%) per annum.
"BASE MARGIN LOAN": Each Revolving Credit Loan while bearing interest at the Base Margin Rate.
"BASE MARGIN RATE": That per annum rate which is the aggregate of the Base plus the Applicable Margin for Base Margin Loans.
"BORROWER" and "BORROWERS": Is defined in the Preamble.
"BORROWING BASE CERTIFICATE": Is defined in Section 6.4.
"BUSINESS DAY": Any day other than (a) a Saturday or Sunday; (b) any day on which banks in Cleveland, Ohio, generally are not open to the general public for the purpose of conducting commercial banking business; (c) a day on which the principal office of the Administrative Agent is not open to the general public to conduct business; or (d) when used in connection with a LIBOR Loan, any day on which banks are not open for dealings in dollar deposits in the London interbank market.
"BUSINESS PLAN": The business plan for the Loan Parties fiscal years 2005 through and including 2010 dated April 19, 2005, as set forth in that certain confidential side letter from the Lead Borrower to the Administrative Agent.
"CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of liabilities which may be capitalized in accordance with GAAP.
"CAPITAL LEASE": Any lease which may be capitalized in accordance with
GAAP.
"CASH CONTROL EVENT": Either (i) an Event of Default has occurred and is continuing, or (ii) the Average Excess Availability for any five (5) consecutive Business Days is less than Thirty Million Dollars ($30,000,000). For purposes hereof, the occurrence of a Cash Control Event shall be deemed continuing notwithstanding that Average Excess Availability may thereafter exceed the amount set forth in the preceding sentence unless and until Average Excess Availability exceeds such amounts for ninety (90) consecutive Business Days, in which case a Cash Control Event shall no longer be deemed to be continuing for purposes hereof; provided that a Cash Control Event shall be deemed continuing (even if Average Excess Availability exceeds the required amounts for ninety (90) consecutive Business Days) if a Cash Control Event has occurred and been discontinued on one (1) occasion during the preceding twelve month period.
"CCM": Cerberus Partners, L.P., a Delaware limited partnership with its principal office at 450 Park Avenue, New York, New York 10022.
"CCM TERM LOAN FACILITIES": The term loan facilities entered into between, among others, the Borrowers and CCM, as agent, pursuant to a Financing Agreement dated June 11, 2002, in the aggregate principal amount of $100,000,000.00, as amended and in effect.
"CHANGE IN CONTROL": The occurrence of any of the following:
(a) The acquisition, by any group of Persons (within the meaning of the Securities Exchange Act of 1934, as amended) or by any Person (other than by (x) a Person Controlled by Schottenstein Stores Corporation, or (y) one or more Family Trusts) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission) of 25% or more of the issued and outstanding capital stock of the Parent having the right, under ordinary circumstances, to vote for the election of directors of the Parent, excluding from the foregoing any acquisition pursuant to warrants issued under the exercise of conversion rights under the Senior Non-Convertible Facility.
(b) Other than as a result of the exercise by CCM of board representation rights under the Senior Non-Convertible Facility, more than thirty percent (30%) of the Persons who were directors of the Parent on the first day of any period consisting of twelve (12) consecutive calendar months (the first of which twelve (12) month periods commencing with the first day of May, 2005), cease to be directors of the Parent for any reason, other than death, disability, or replacement (in the ordinary course of business and not as a result of any change in the equity ownership of the Parent) by other Persons nominated by the nominating committee of the board of directors of the Parent.
(c) The failure of the Parent to own, directly or indirectly, 35% of the capital stock of each of the other Loan Parties and any group of Persons (within the meaning of the Securities Exchange Act of 1934, as amended) or any Person (other than by (x) a Person Controlled by Schottenstein Stores Corporation, or (y) one or more Family Trusts) owns beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission) of the capital stock of the Loan Parties in an amount greater than the number of shares of such capital stock beneficially owned by (x) a Person Controlled by Schottenstein Stores Corporation, or (y) one or more Family Trusts.
(d) The failure of Schottenstein Stores Corporation or one or more Family Trusts to possess, directly or indirectly, the power to cause the direction of the management and policies of the Parent and the Borrowers.
"CHATTEL PAPER": Has the meaning given that term in the UCC.
"COLLATERAL": Is defined in Section 9.1.
"COLLATERAL AGENT": NCBC, in its capacity as Collateral Agent for the Revolving Credit Lenders hereunder.
"COLLATERAL INTEREST": Any interest in property to secure an obligation, including, without limitation, a security interest, mortgage, and deed of trust.
"COLLATERAL MONITORING FEE": Is defined in Section 2.13.
"COLLECTION ACCOUNT": Any DDA into which the proceeds of Collateral are transferred and concentrated, including, without limitation, transfers from other DDAs, credit card processors, checks, and accounts receivables. The Collection Accounts as of the Effective Date are set forth on EXHIBIT 8.3 hereto.
"COLLECTION ACCOUNT AGREEMENT": An agreement, in form satisfactory to the Collateral Agent, which agreement recognizes the Collateral Agent' Collateral Interest in the contents of the DDA which is the subject of such agreement and agrees that, after and during the continuance of a Cash Control Event, such contents shall be transferred only to the Administrative Agent's Account or as otherwise instructed by the Administrative Agent.
"COMMERCIAL TORT CLAIM": Has the meaning given that term in the UCC.
"COMPETITIVE BUSINESS": Any business or enterprise consisting of any of the following:
(a) operation of off-price discount department stores.
(b) operation of retail furniture stores and related accessories.
(c) operation of designer and name brand shoe stores.
(d) operation of licensed shoe departments.
(e) furniture manufacturing.
(f) bedding manufacturing.
"CONSENT": Actual consent given by the Revolving Credit Lender from whom such consent is sought; or the passage of seven (7) Business Days from receipt of written notice to a Revolving Credit Lender from any Agent of a proposed course of action to be followed by such Agent without such Revolving Credit Lender's giving such Agent written notice of that Revolving Credit Lender's objection to such course of action, provided that the Agent may rely on such passage of time as consent by a Revolving Credit Lender only if such written notice states that
consent will be deemed effective if no objection is received within such time period.
"CONSOLIDATED": When used to modify a financial term, test, statement, or report, refers to the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of the DSW and its Subsidiaries.
"CONTROL": The possession, direct or indirect, of the power to cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. A Person shall be deemed to have control of another Person if it is a "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 of the Securities Exchange Act of 1934, as amended) or a member of a "group" that is the beneficial owner, directly or indirectly, of 20% or more of the voting stock or equity interest in such Person. The terms "Controlled" and "Controlling" as used herein are intended to have the same meaning as "Control."
"COST": The lower of cost or market, determined in each case in accordance with GAAP.
"COSTS OF COLLECTION": Includes, without limitation, all reasonable attorneys' fees and reasonable out-of-pocket expenses incurred by the Agents' and Issuer's attorneys, and all reasonable out-of-pocket costs incurred by the Agents and the Issuer in the administration of the Liabilities and/or the Loan Documents, including, without limitation, reasonable costs and expenses associated with travel on behalf of the Agents and Issuer, where such costs and expenses are related to or in respect of the Agents' and Issuer's: administration and management of the Liabilities; negotiation, documentation, and amendment of any Loan Document; or efforts to preserve, protect, collect, or enforce the Collateral, the Liabilities, and/or the Agents' Rights and Remedies and/or any of the rights and remedies of the Agents and Issuer against or in respect of any guarantor or other Person liable in respect of the Liabilities (whether or not suit is instituted in connection with such efforts). "Costs of Collection" also includes the reasonable fees and expenses of Lenders' Special Counsel. The Costs of Collection are Liabilities, and at the Administrative Agent's option may bear interest at the then effective Base Margin Rate after such time as they have been added to the Loan Account.
"CREDIT CARD ADVANCE RATE": 85%
"CUSTOMER CREDIT LIABILITY": Gift certificates, customer deposits, merchandise credits, layaway obligations, frequent shopping programs, and similar liabilities of any Borrower to its retail customers and prospective customers.
"DDA": Any checking or other demand daily depository account maintained by any Borrower other than any Exempt DDA.
"DEFAULT": Any occurrence, circumstance, or state of facts with respect to a Borrower which (a) is an Event of Default; or (b) would become an Event of Default if any requisite notice were given and/or any requisite period of time were to run and such occurrence, circumstance, or state of facts were not cured within any applicable grace period.
"DELINQUENT REVOLVING CREDIT LENDER": Defined in Section 13.3(c).
"DEPOSIT ACCOUNT": Has the meaning given that term in the UCC and also includes all demand, time, savings, passbook, or similar accounts maintained with a bank.
"DOCUMENTS": Has the meaning given that term in the UCC.
"DOCUMENTS OF TITLE": Has the meaning given that term in the UCC.
"DSW": Has the meaning given that term in the Preamble hereto.
"DSW SHOE" Has the meaning given that term in the Preamble hereto.
"DSW
"AVAILABILITY": The result of the following:
(i) The lesser of
(A) The Revolving Credit Ceiling
or
(B) The DSW Borrowing Base
Minus
(ii) The aggregate unpaid balance of the Loan Account attributable to Revolving Credit Loans made to DSW or DSW Shoe.
Minus
(iii) The aggregate undrawn Stated Amount of all then outstanding L/Cs and Banker's Acceptances issued for the account of DSW or DSW Shoe.
Minus
(iv) The aggregate of the Availability Reserves.
"DSW BORROWING BASE": The aggregate of the following:
(a) The face amount of Eligible Credit Card Receivables of DSW and DSW Shoe multiplied by the Credit Card Advance Rate.
Plus
(b) The lesser of (a) the Cost of Eligible Inventory (net of Inventory Reserves) of DSW and DSW Shoe multiplied by the Inventory Advance Rate or (b) the Appraised Inventory Percentage of the Appraised Inventory Liquidation Value of the Inventory of DSW and DSW Shoe.
"EBITDA": For the Borrowers, on a consolidated basis, in any period of determination, the sum, without duplication, of the following: Net Income determined in accordance with GAAP, plus, (a) Interest Expense, (b) taxes on income, (c) depreciation expense, (d) amortization expense, (e) all other non-cash and/or non-recurring charges and expenses, and (f) loss from any sale of assets, other than sales in the ordinary course of business, less (x) gain from any sale of assets, other than sales in the ordinary course of business and (y) all non-cash and/or non-recurring income, all of the foregoing determined in accordance with GAAP.
"EFFECTIVE DATE": The date upon which the conditions precedent set forth in Article 3 hereof have been satisfied or waived and the first Revolving Credit Loans are to be made and L/Cs to be issued hereunder.
"ELIGIBLE ASSIGNEE": A bank, insurance company, or company engaged in the business of making commercial loans having a combined capital and surplus in excess of $500,000,000 or any domestic Affiliate of any Revolving Credit Lender, or any Person to whom a Revolving Credit Lender assigns its rights and obligations under this Agreement as part of a programmed assignment and transfer of such Revolving Credit Lender's rights in and to a material portion of such Revolving Credit Lender's portfolio of asset based credit facilities. In no event shall an "Eligible Assignee" include a Person who is engaged in a Competitive Business with any Loan Party, and as long as Schottenstein Stores Corporation remains in Control of the Borrowers, an "Eligible Assignee" shall in no event include a Person which is engaged in a Competitive Business or a Related Business with Schottenstein Stores Corporation.
"ELIGIBLE CREDIT CARD RECEIVABLES": Accounts due on a non-recourse basis from major or private label credit card processors, which have been outstanding for less than five (5) Business Days.
"ELIGIBLE INVENTORY": Such of the Borrowers' Inventory, inclusive of Eligible L/C Inventory, at such locations, and of such types, character, qualities and quantities, as the Collateral Agent in its reasonable, good faith discretion from time to time determines to be acceptable for borrowing, as to which Inventory, the Collateral
Agent has a perfected security interest which is prior and superior to all security interests, claims, and Encumbrances. Without limiting the foregoing, Inventory acquired in a Permitted Acquisition (other than a Permitted Acquisition involving the merger of one or more Loan Parties) shall not be deemed Eligible Inventory unless the Collateral Agent otherwise agrees.
"ELIGIBLE L/C INVENTORY": Without duplication of other Eligible Inventory, Inventory not yet delivered to the Borrowers, the purchase of which is supported by a documentary L/C or Banker's Acceptance then having an initial expiry of sixty (60) or less days, provided that
(a) Such Inventory is of such types, character, qualities and quantities (net of Inventory Reserves) as the Collateral Agent in its reasonable, good faith discretion from time to time determines to be eligible for borrowing and it would otherwise constitute Eligible Inventory; and
(b) The documentary L/C supporting such purchase names the Collateral Agent as consignee of the subject Inventory or the Collateral Agent has control over the documents which evidence ownership of the subject Inventory (such as by the providing to the Collateral Agent of a customs brokers agreement in form reasonably satisfactory to the Collateral Agent).
"EMPLOYEE BENEFIT PLAN": An employee benefit pension benefit plan that is covered by Title IV of ERISA or is subject to the minimum finding standards under Section 412 of the Internal Revenue Code of 1986, as amended from time to time, and as to which a Borrower or any ERISA Affiliate may have any liability.
"ENCUMBRANCE": Each of the following:
(a) A Collateral Interest or agreement to create or grant a Collateral Interest; a security interest; the interest of a lessor under a Capital Lease; conditional sale or other title retention agreement; sale of accounts receivable or chattel paper; or other arrangement pursuant to which any Person is entitled to any preference or priority with respect to the property or assets of another Person or the income or profits of such other Person; each of the foregoing whether consensual or non-consensual and whether arising by way of agreement, operation of law, legal process or otherwise.
(b) The filing of any financing statement under the UCC or comparable law of any jurisdiction unless such financing statement is terminated promptly upon any Loan Party's knowledge thereof.
"END DATE": The date upon which all of the following conditions are met:
(a) all payment Liabilities described in Section 19.2(a) have been paid in
full (b) satisfactory arrangements with respect to L/Cs and Banker's
Acceptances have been made in accordance with the provisions of Section
19.2(b), and (c) all
obligations of any Revolving Credit Lender to make loans and advances and to provide other financial accommodations to the Borrowers hereunder shall have been irrevocably terminated.
"ENVIRONMENTAL ACTIONS": Any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter or other communication from any Person or Governmental Authority involving violations of Environmental Laws or Releases of Hazardous Materials (i) from any assets, properties or businesses owned or operated by any Loan Party or any of its Subsidiaries or any predecessor in interest; or (ii) onto any facilities which received Hazardous Materials generated by any Loan Party or any of its Subsidiaries or any predecessor in interest.
"ENVIRONMENTAL LAWS": The Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.), the Federal Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.) and the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), as such laws may be amended or otherwise modified from time to time, and any other present or future federal, state, local or foreign statute, ordinance, rule, regulation, order, judgment, decree, permit, license or other binding determination of any Governmental Authority imposing liability or establishing standards of conduct for protection of the environment or other government restrictions relating to the protection of the environment or the Release, deposit or migration of any Hazardous Materials into the environment.
"ENVIRONMENTAL LIABILITIES AND COSTS": All liabilities, monetary obligations, remedial actions, losses, damages, punitive damages, consequential damages, treble damages, reasonable costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigations and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any environmental condition or a Release of Hazardous Materials from or onto (i) any property presently or formerly owned by any Loan Party or any of its Subsidiaries or (ii) any facility which received Hazardous Materials generated by any Loan Party or any of its Subsidiaries.
"ENVIRONMENTAL LIEN": Any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.
"EQUIPMENT": Includes, without limitation, "equipment" as defined in the UCC, and also all furniture, store fixtures, motor vehicles, rolling stock, machinery, office equipment, plant equipment, tools, dies, molds, and other goods, property, and assets which are used and/or were purchased for use in the operation or
furtherance of a Borrowers' business, and any and all accessions or additions thereto, and substitutions therefor.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended.
"ERISA AFFILIATE": Any Person which is under common control with a Borrower
within the meaning of Section 4001 of ERISA or is part of a group which
includes any Borrower and which would be treated as a single employer under
Section 414 of the Internal Revenue Code of 1986, as amended from time to
time.
"EUROCURRENCY RESERVE PERCENTAGE": For any Interest Period with respect to a LIBOR Loan, as of any date of determination, the aggregate of the then stated maximum reserve percentages (including any marginal, special, emergency or supplemental reserves), expressed as a decimal, applicable to such Interest Period (if more than one such percentage is applicable, the daily average of such percentages for those days in such Interest Period during which any such percentages shall be so applicable) by the Board of Governors of the Federal Reserve System, any successor thereto, or any other banking authority, domestic or foreign, to which the Administrative Agent or any Revolving Credit Lender may be subject in respect of eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board) or in respect of any other category of liabilities including deposits by reference to which the rate of interest on LIBOR Loans is determined or any category or extension of credit or other assets that include LIBOR Loans. as defined in such regulations. For purposes hereof, such reserve requirements shall include, without limitation, those imposed under Regulation D of the Federal Reserve Board and the LIBOR Loans shall be deemed to constitute Eurocurrency Liabilities subject to reserve requirements without benefit of credits for proration, exceptions or offsets which may be available to any Revolving Credit Lender under Regulation D.
"EVENTS OF DEFAULT": Is defined in Article 11. An "Event of Default" shall be deemed to have occurred and to be continuing unless and until that Event of Default has been duly waived by the Administrative Agent in writing or cured to the satisfaction of the Administrative Agent.
"EXCESS AVAILABILITY": As of any date of determination, DSW Availability less all then held checks, accounts payable which are beyond customary payment terms consistent with past practice (other than accounts payable which are being disputed in good faith and for which the Borrowers have adequate reserves), and overdrafts (other than daylight overdrafts, as defined in the Federal Reserve Daylight Credit Policies in effect from time to time).
"EXCLUDED PROPERTY": Shall mean the following:
(a) the Equipment that is subject to a "purchase money security
interest", as such term is now or hereafter defined in the UCC, which
(x) constitutes a Permitted Encumbrance under this Agreement and (y)
prohibits the creation by a Loan Party of a junior security interest
therein, unless the holder thereof has consented to the creation of
such a junior security interest; or
(b) any General Intangibles, other than Payment Intangibles, if and only to the extent that (i) in the case of any such General Intangible, (x) any contract evidencing such General Intangible contains a valid and effective contractual restriction or limitation which prohibits the grant or creation of a security interest therein, or (y) a valid and effective restriction or limitation imposed by applicable law, regulation, rule, order or other directive of any governmental body, agency or authority, or the order of any court of competent jurisdiction, prohibits the grant or creation of a security interest in such General Intangible, or (ii) in the case of any such General Intangible, such General Intangible would be subject to loss or forfeiture upon the grant or creation of a security interest therein by reason of (x) a valid and effective contractual restriction or limitation contained in any contract evidencing such General Intangible, or (y) a valid and effective restriction or limitation imposed by applicable law, regulation, rule, order or other directive of any governmental body, agency or authority, or the order of any court of competent jurisdiction; or
(c) Inventory or other property held pursuant to consignment arrangements (other than between the Loan Parties) in which a Borrower is the consignee to the extent that the consignor has properly perfected its interest therein; or
(d) all motor vehicles owned by any Loan Party; or
(e) any Exempt DDA.
provided that the Proceeds realized from any of the foregoing shall not be deemed Excluded Property but shall constitute Collateral.
"EXEMPT DDA": Those depository accounts described on EXHIBIT 1.4 hereto, and, in addition, any depository account maintained by any Borrower, the only contents of which may be transfers from the Operating Account and actually used solely (i) for petty cash purposes; (ii) for payroll; (iii) for charitable contributions; or (iv) for medical, pension, benefits, VEBA, employees, taxes, stock options and like special purpose accounts.
"EXISTING L/CS": Those letters of credit described on EXHIBIT 1.1 hereto which have been issued by NCB under the Borrowers' existing credit facility with, among others, NCB.
"FACILITY GUARANTEE": A guaranty executed by the Facility Guarantors in favor of the Agent, the Issuer and the Revolving Credit Lenders.
"FACILITY GUARANTORS": Each Borrower and all other Subsidiaries of the Borrowers now existing or hereafter created, other than the Unrestricted Subsidiaries.
"FACILITY GUARANTORS COLLATERAL DOCUMENTS": All security agreements, mortgages, pledge agreements, deeds of trust, and other instruments, documents or agreements executed and delivered by any Facility Guarantor to secure the Facility Guarantee.
"FAMILY TRUST": One or more trusts established for the benefit of any of Jay L. Schottenstein, Susan S. Diamond, Ann S. Deshe, Lori Schottenstein, Geraldine Schottenstein, any of their respective spouses, children or lineal descendants, or any Person Controlled by any such trust or trusts.
"FARM PRODUCTS": Has the meaning given that term in the UCC.
"FEDERAL FUNDS EFFECTIVE RATE": For any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Effective Rate for such day shall be such rate on such transactions on the immediately preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any Business Day, the Federal Funds Effective Rate for such day shall be the average of quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by the Administrative Agent.
"FEE LETTER": That letter dated on or about the Effective Date and styled "Fee Letter" between the Lead Borrower and the Administrative Agent, as such letter may from time to time be amended.
"FISCAL": When followed by "month", "quarter" or "year", the relevant fiscal period based on the Borrowers' fiscal year and accounting conventions.
"FIXED CHARGES": The sum of the following for the Borrowers on a consolidated basis: (a) Interest Expense, plus (b) scheduled payments of principal on Indebtedness (including Capital Leases).
"FIXED CHARGE COVERAGE RATIO": For the Borrowers on a consolidated basis, at any date of determination, the ratio of (a) EBITDA, minus Capital Expenditures, minus income taxes paid in cash, minus dividends and other distributions on account of
DSW's capital stock, for the applicable period then ending taken as one accounting period, to (b) Fixed Charges, for the applicable period then ending taken as one accounting period.
"FIXTURES": Has the meaning given that term in the UCC.
"GAAP": Generally accepted accounting principles in effect from time to time in the United States, applied on a consistent basis, provided that "GAAP" shall mean generally accepted accounting principles consistent with those used in the preparation of the financial statements described herein.
"GENERAL INTANGIBLES": Includes, without limitation, "general intangibles" as defined in the UCC; and also all: rights to payment for credit extended; deposits (other than DDAs); amounts due to any Borrower; credit memoranda in favor of any Borrower; warranty claims; tax refunds and abatements; insurance refunds and premium rebates; all means and vehicles of investment or hedging, including, without limitation, options, warrants, and futures contracts; records; customer lists; telephone numbers; goodwill; causes of action; judgments; payments under any settlement or other agreement; literary rights; rights to performance; royalties; license and/or franchise fees; rights of admission; licenses; franchises; license agreements, including all rights of any Borrower to enforce same; permits, certificates of convenience and necessity, and similar rights granted by any governmental authority; patents, patent applications, patents pending, and other intellectual property; internet addresses and domain names; developmental ideas and concepts; proprietary processes; blueprints, drawings, designs, diagrams, plans, reports, and charts; catalogs; manuals; technical data; computer software programs (including the source and object codes therefor), computer records, computer software, rights of access to computer record service bureaus, service bureau computer contracts, and computer data; tapes, disks, semi-conductors chips and printouts; trade secrets rights, copyrights, mask work rights and interests, and derivative works and interests; user, technical reference, and other manuals and materials; trade names, trademarks, service marks, and all goodwill relating thereto; applications for registration of the foregoing; and all other general intangible property of any Borrower in the nature of intellectual property; proposals; cost estimates, and reproductions on paper, or otherwise, of any and all concepts or ideas, and any matter related to, or connected with, the design, development, manufacture, sale, marketing, leasing, or use of any or all property produced, sold, or leased, by any Borrower or credit extended or services performed, by any Borrower, whether intended for an individual customer or the general business of any Borrower, or used or useful in connection with research by any Borrower.
"GOODS": Has the meaning given that term in the UCC, and also includes all things movable when a security interest therein attaches and also all computer programs embedded in goods and any supporting information provided in connection with a transaction relating to the program if (i) the program is associated with the goods
in such manner that it customarily is considered part of the goods or (ii) by becoming the owner of the goods, a Person acquires a right to use the program in connection with the goods.
"GOVERNMENTAL AUTHORITY": Any nation or government, any federal, state, city, town, municipality, county, local or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
"HAZARDOUS MATERIALS": (a) Any element, compound or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely hazardous substance or chemical, hazardous waste, special waste, or solid waste under Environmental Laws or that is reasonably likely to cause immediately, or at some reasonably foreseeable future time, harm to or have an adverse effect on, the environment or risk to human health or safety, including, without limitation, any pollutant, contaminant, waste, hazardous waste, toxic substance or dangerous good which is defined or identified in any Environmental Law and which is present in the environment in such quantity or state that it contravenes any Environmental Law; (b) petroleum and its refined products; (c) polychlorinated biphenyls; (d) any substance exhibiting a hazardous waste characteristic, including, without limitation, corrosivity, ignitability, toxicity or reactivity as well as any radioactive or explosive materials; and (e) any raw materials, building components (including, without limitation, asbestos-containing materials) and manufactured products containing hazardous substances listed or classified as such under Environmental Laws.
"HEDGE AGREEMENTS": All obligations of any Person in respect of interest rate swap agreements, currency swap agreements and other similar agreements designed to hedge against fluctuations in interest rates or foreign exchange rates.
"INDEBTEDNESS": Without duplication, all obligations, contingent and otherwise, that in accordance with GAAP should be classified upon the balance sheet of any Borrower and/or the consolidated balance sheet of the Borrowers as liabilities, other than trade payables, deferred rent, or accrued expenses incurred in the ordinary course of business or to which reference should be made by footnotes thereto, including in any event and whether or not so classified:
(a) All obligations in respect of money borrowed (including any indebtedness which is non-recourse to the credit of such Person but which is secured by an Encumbrance on any asset of such Person) whether or not evidenced by a promissory note, bond, debenture or other written obligation to pay money.
(b) All obligations evidenced by bonds, notes, debentures or other similar instruments.
(c) All obligations in connection with Hedge Agreements.
(d) All obligations in connection with any letter of credit or acceptance transaction (including, without limitation, the face amount of all letters of credit and acceptances issued for the account of such Person or reimbursement on account of which such Person would be obligated).
(e) All obligations in connection with the sale or discount of accounts receivable or chattel paper of such Person.
(f) All obligations on account of deposits or advances other than deferred rent incurred in the ordinary course of business.
(g) All obligations as lessee under Capital Leases; and
(h) All obligations in connection with any sale and leaseback transaction.
"Indebtedness" also includes:
(x) Indebtedness of others secured by an Encumbrance on any asset of such Person, whether or not such Indebtedness is assumed by such Person.
(y) Any guaranty, endorsement, suretyship or other undertaking pursuant to which that Person may be liable in respect of Indebtedness of any third party; and
(z) The Indebtedness of a partnership or joint venture for which such Person is liable as a general partner or joint venturer.
"INDEMNIFIED PERSON": Is defined in Section 20.15.
"INFORMATION": Is defined in Section 20.3.
"INSTRUMENTS": Has the meaning given that term in the UCC.
"INTERCOMPANY NOTES": The promissory notes and other evidences of Indebtedness amongst the Loan Parties outstanding from time to time. The Intercompany Notes outstanding as of the Effective Date are set forth on EXHIBIT 1.3 hereto.
"INTEREST EXPENSE": Total interest expense generated during the period in question (including attributable to conditional sales contracts, Capital Leases and other title retention agreements in accordance with GAAP) of the Borrowers on a consolidated basis with respect to all outstanding Indebtedness including accrued interest and interest paid in kind and capitalized interest, fees, commissions,
discounts and other fees owed with respect to letters of credit and bankers' acceptance financing, and net costs under Hedge Agreements.
"INTEREST PAYMENT DATE": With reference to:
Each LIBOR Loan: The last day of the Interest Period relating thereto (and on the last day of the third month for any such loan which has a six month Interest Period); the Termination Date; and the End Date.
Each Base Margin Loan: The first day of each [August, November, February and May]; the Termination Date; and the End Date.
"INTEREST PERIOD": The following:
(a) With respect to each LIBOR Loan: Subject to Subsection (c), below, the period commencing on the date of the making or continuation of, or conversion to, the subject LIBOR Loan and ending one, two, three, or six months thereafter, as the Lead Borrower may elect by notice (pursuant to Section 2.5) to the Administrative Agent
(b) With respect to each Base Margin Loan: Subject to Subsection
(c), below, the period commencing on the date of the making or
continuation of or conversion to such Base Margin Loan and ending on
that date (i) as of which the subject Base Margin Loan is converted to
a LIBOR Loan, as the Lead Borrower may elect by notice (pursuant to
Section 2.5) to the Administrative Agent, or (ii) on which the subject
Base Margin Loan is paid by the Borrowers.
(c) The setting of Interest Periods is in all instances subject to the following:
(i) Any Interest Period for a Base Margin Loan which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day.
(ii) Any Interest Period for a LIBOR Loan which would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day, unless that succeeding Business Day is in the next calendar month, in which event such Interest Period shall end on the last Business Day of the month during which the Interest Period ends.
(iii) Subject to Subsection (iv), below, any Interest Period applicable to a LIBOR Loan, which Interest Period begins on a day for which there is no numerically corresponding day in the calendar month during which such Interest
Period ends, shall end on the last Business Day of the month during which that Interest Period ends.
(iv) Any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date.
(v) The number of Interest Periods in effect at any one time is subject to Section 2.12 hereof.
"INVENTORY": Includes, without limitation, "inventory" as defined in the UCC and also all: (a) Goods which are leased by a Person as lessor; are held by a Person for sale or lease or to be furnished under a contract of service; are furnished by a Person under a contract of service; or consist of raw materials, work in process, or materials used or consumed in a business; (b) Goods of said description in transit; (c) Goods of said description which are returned, repossessed and rejected; (d) packaging, advertising, and shipping materials related to any of the foregoing; (e) all names, marks, and General Intangibles affixed or to be affixed or associated thereto; and (f) Documents and Documents of Title which represent any of the foregoing.
"INVENTORY ADVANCE RATE": The following percentages of the Cost of Eligible Inventory of the Borrowers specified below for the periods indicated:
Period Inventory Advance Rate ------ ---------------------- January 1 through March 31 of each 79% year April 1 through October 14 of each 83% year October 15 through 79% December 31 of each year |
Any Inventory Advance Rate may be increased by the Collateral Agent from time to time in its sole discretion by an amount not to exceed two percent (2%) from the rates set forth above. Without limiting the generality of the Collateral Agent's discretion, the increase of an Inventory Advance Rate by the Collateral Agent shall not obligate the Collateral Agent to maintain such increased Inventory Advance Rate for any specific period of time and the Collateral Agent may reduce the Inventory Advance Rate (but not below the levels set forth in the above table) at any time in their sole discretion. The increase of the Inventory Advance Rate by the Collateral Agent on any one occasion shall not obligate them to increase the Inventory Advance Rate on any other occasion.
"INVENTORY RESERVES": Without duplication, such Reserves as may be established from time to time by the Collateral Agent in the Collateral Agent's reasonable,
good faith discretion with respect to the determination of the saleability, at retail, of the Eligible Inventory or which reflect such other factors as affect the market value of the Eligible Inventory. The Collateral Agent shall furnish the Lead Borrower with notice two (2) Business Days prior to imposing or changing any Inventory Reserve (unless a Specified Event of Default then exists and is continuing, in which event no prior notice shall be required). Without limiting the rights of the Collateral Agent to establish or modify Inventory Reserves, the initial Inventory Reserves on the Effective Date shall be the following:
(a) Shrinkage.
(b) Consigned Inventory.
(c) Damaged Goods.
"INVESTMENT PROPERTY": Has the meaning given that term in the UCC.
"ISSUER": The issuer of any L/C or Banker's Acceptance. The Issuer shall be NCB or such other Revolving Credit Lender (or Affiliate of a Revolving Credit Lender) as the Lead Borrower (with the consent of the Administrative Agent, which consent shall not be unreasonably withheld) may select.
"L/C": Any letter of credit issued pursuant to this Agreement. Without limitation, Existing L/Cs shall be deemed to be L/Cs issued under this Agreement and shall be entitled to all of the benefits hereof.
"L/C LANDING COSTS": To the extent not included in the Stated Amount of an L/C or a Banker's Acceptance, customs, duty, freight, and other out-of-pocket costs and expenses which will be expended to "land" the Inventory, the purchase of which is supported by such L/C or Banker's Acceptance.
"L/C FEES": The fees payable in respect of L/Cs pursuant to Section 2.18.
"LEAD ARRANGER": NCB.
"LEAD BORROWER": Defined in the Preamble.
"LEASE": Any lease or other agreement, no matter how styled or structured, pursuant to which a Borrower is entitled to the use or occupancy of any space.
"LEASEHOLD INTEREST": Any interest of a Borrower as lessee under any Lease.
"LENDERS' SPECIAL COUNSEL": A single counsel, selected by the Majority Lenders following the occurrence of an Event of Default, to represent the interests of the Revolving Credit Lenders in connection with the enforcement, attempted enforcement, or preservation of any rights and remedies under this, or any other
Loan Document, as well as in connection with any "workout", forbearance, or restructuring of the credit facility contemplated hereby.
"LETTER-OF-CREDIT RIGHT": Has the meaning given that term in UCC and also refers to any right to payment or performance under an L/C, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance.
"LIABILITIES": Includes, without limitation, the following:
(a) All and each of the following, arising under this Agreement or under any of the other Loan Documents, whether now existing or hereafter arising:
(i) Any and all direct and indirect liabilities, debts, and obligations of each Borrower to any Agent or any Revolving Credit Lender, each of every kind, nature, and description.
(ii) Each obligation to repay any loan, advance, indebtedness, note, obligation, overdraft, or amount now or hereafter owing by any Borrower to each Agent or any Revolving Credit Lender (including all future advances whether or not made pursuant to a commitment by the Agent or any Revolving Credit Lender), whether or not any of such are liquidated, unliquidated, primary, secondary, secured, unsecured, direct, indirect, absolute, contingent, or of any other type, nature, or description, or by reason of any cause of action which any Agent or any Revolving Credit Lender may hold against any Borrower.
(iii) All notes and other obligations of each Borrower now or hereafter assigned to or held by any Agent or any Revolving Credit Lender, each of every kind, nature, and description.
(iv) All interest, fees, and charges and other amounts which may be charged by any Agent or any Revolving Credit Lender to any Borrower and/or which may be due from any Borrower to any Agent or any Revolving Credit Lender from time to time.
(v) All reasonable costs and expenses incurred or paid by any Agent or any Revolving Credit Lender in respect of any agreement between any Borrower and any Agent or any Revolving Credit Lender or instrument furnished by any Borrower to any Agent or any Revolving Credit Lender
(including, without limitation, Costs of Collection, reasonable attorneys' fees, and all court and litigation costs and expenses).
(vi) Any and all covenants of each Borrower to or with any Agent or any Revolving Credit Lender and any and all obligations of each Borrower to act or to refrain from acting in accordance with any agreement between that Borrower and any Agent or any Revolving Credit Lender or instrument furnished by that Borrower to any Agent or any Revolving Credit Lender.
(vii) Each of the foregoing as if each reference to the "any Agent or any Revolving Credit Lender" were to each Affiliate of each Agent.
(b) Any and all direct or indirect liabilities, debts, and obligations of each Borrower to any Agent or any Affiliate of any Agent, each of every kind, nature, and description owing on account of any service or accommodation provided to, or for the account of any Borrower pursuant to this or any other Loan Document, including cash management services, Hedge Agreements, and the issuances of L/C's and Banker's Acceptances.
"LIBOR BUSINESS DAY": Any day which is both a Business Day and a day on which the London interbank market in which NCB participates is open for dealings in United States Dollar deposits.
"LIBOR LOAN": Any Revolving Credit Loan which bears interest at a LIBOR Rate.
"LIBOR MARGIN": The Applicable Margin for LIBOR Loans.
"LIBOR OFFER RATE": For any Interest Period for LIBOR Loans, the quotient (rounded upwards, if necessary, to the next 1/100 of 1%) of: (x) the per annum rate of interest determined by the Administrative Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) as of approximately 11:00 a.m. (London time) two LIBOR Business Days prior to the beginning of such Interest Period pertaining to such LIBOR Loan, as provided by Bloomberg's or Reuters (or any similar company or service that provides rate quotations comparable to those currently provided by such companies as the rate in the London interbank market) as the rate in the London interbank market for deposits in U.S. Dollars in immediately available funds with a maturity comparable to such Interest Period divided by (y) a number equal to 1.00 minus the Eurocurrency Reserve Percentage. In the event that such rate quotation is not available for any reason, then the rate (for purposes of clause (x) hereof) shall be the rate, determined by the Administrative Agent as of approximately 11:00 a.m. (London time) two LIBOR Business Days prior to the beginning of such Interest
Period pertaining to such LIBOR Loan, to be the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the per annum rates at which deposits in U.S. Dollars in immediately available funds in an amount comparable to NCBC's Revolving Credit Commitment Percentage of such LIBOR Loan and with a maturity comparable to such Interest Period are offered to the prime banks by leading banks in the London interbank market. The LIBOR Offer Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Percentage.
"LIBOR RATE": That per annum rate which is the aggregate of the LIBOR Offer Rate plus the LIBOR Margin.
"LIQUIDATION": The exercise, by the Collateral Agent, of those rights accorded to the Collateral Agent under the Loan Documents as a creditor of the Borrowers following and on account of the occurrence and continuance of an Event of Default looking towards the realization on the Collateral. Derivations of the word "Liquidation" (such as "Liquidate") are used with like meaning in this Agreement.
"LOAN ACCOUNT": Is defined in Section 2.9.
"LOAN COMMITMENT": With respect to each Revolving Credit Lender, that respective Revolving Credit Lender's Revolving Credit Dollar Commitment.
"LOAN DOCUMENTS": This Agreement, the Facility Guarantee, the Facility Guarantors Collateral Documents, and each other instrument or document from time to time executed and/or delivered in connection with the arrangements contemplated hereby or in connection with any transaction with any Agent or any Affiliate of any Agent related to this Agreement, including, without limitation, any transaction which arises out of any cash management, depository, investment, banker's acceptance, letter of credit, interest rate protection, Hedge Agreement, or other services provided by any Agent or any Affiliate of any Agent, as each may be amended from time to time.
"LOAN PARTY OR LOAN PARTIES": Collectively, the Borrowers and the Facility Guarantors.
"MAJORITY LENDERS": (a) If there are two or fewer Revolving Credit Lenders who are not Delinquent Revolving Credit Lenders: All Revolving Credit Lenders who are not Delinquent Revolving Credit Lenders.
(b) If there are three or more Revolving Credit Lenders who are not Delinquent Revolving Credit Lenders: Revolving Credit Lenders (other than Delinquent Revolving Credit Lenders) holding at least 51% of the Revolving Credit Commitment Percentages of the Revolving Credit Dollar Commitments of Revolving Credit Lenders who are not Delinquent Revolving Credit Lenders.
"MATERIAL ACCOUNTING CHANGE": Any change in GAAP applicable to accounting periods subsequent to the Borrowers' fiscal year most recently completed prior to the execution of this Agreement, which change has a material effect on the Borrowers' Consolidated financial condition or operating results, as reflected on financial statements and reports prepared by or for the Borrowers and their Subsidiaries, when compared with such condition or results as if such change had not taken place.
"MATERIAL ADVERSE EFFECT": A material adverse effect on (a) the business, operations, property, assets, or financial condition of the Loan Parties taken as a whole, or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or any of the material rights or remedies of the Agent or the Revolving Credit Lenders hereunder or thereunder.
"MATURITY DATE": July 5, 2010.
"NCB": National City Bank, a national banking association.
"NCBC": National City Business Credit, Inc., an Ohio corporation.
"NET INCOME": The net income (or loss) of the Borrowers on a consolidated
basis for such period taken as a single accounting period determined in
conformity with GAAP; provided, that there shall be excluded (i) the income
(or loss) of any Person in which any other Person (other than the
Borrowers) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to the Borrowers by such
Person during such period, (ii) the income (or loss) of any Person accrued
prior to the date it becomes a Borrower or is merged into or consolidated
with a Borrower or that Person's assets are acquired by a Borrower, and
(iii) the income of any Subsidiary of the Borrowers to the extent that the
declaration or payment of dividends or similar distributions of that income
by that Subsidiary is not at the time permitted by operation of the terms
of the charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary.
"NOMINEE": A business entity (such as a corporation or limited partnership) formed by the Collateral Agent to own or manage any Post Foreclosure Asset.
"OPERATING ACCOUNT": Is defined in Section 8.3.
"OVERLOAN": A loan, advance, or providing of credit support (such as the issuance of any L/C) to the extent that, immediately after its having been made, DSW Availability is less than zero.
"PARENT": Retail Ventures, Inc., an Ohio corporation.
"PARTICIPANT": Is defined in Section 20.18, hereof.
"PAYMENT INTANGIBLE": As defined in the UCC and also any general intangible under which the Account Debtor's primary obligation is a monetary obligation.
"PERMITTED ACQUISITION": (i) Any Acquisition the cash consideration for which is less than $3,000,000 in the aggregate in any fiscal year of the Borrowers and their Subsidiaries and which satisfies the conditions set forth in clauses (f), (g), (h), and (i) below, and (ii) any other Acquisition in which each of the following conditions are satisfied:
(a) No Default or Event of Default then exists or would arise from the consummation of such Acquisition.
(b) Such Acquisition shall have been approved by the Board of Directors of the Person (or similar governing body if such Person is not a corporation) which is the subject of such Acquisition and such Person shall not have announced that it will oppose such Acquisition or shall not have commenced any action which alleges that such Acquisition will violate applicable law.
(c) The Lead Borrower shall have furnished the Collateral Agent with ten (10) days prior notice of such intended Acquisition and shall have furnished the Collateral Agent with a current draft of the acquisition agreement and other acquisition documents, a summary of any due diligence undertaken by the Borrowers in connection with such Acquisition, appropriate financial statements of the Person which is the subject of such Acquisition, pro forma projected financial statements for the twelve month period following such Acquisition after giving effect to such Acquisition (including balance sheets, cash flows and income statements by month for the acquired Person, individually, and on a consolidated basis with all Loan Parties), and such other information as the Collateral Agent may reasonably require, each of which shall be reasonably satisfactory to the Collateral Agent.
(d) The structure of the Acquisition shall be acceptable to the Collateral Agent in its reasonable judgment. If an Acquisition of capital stock or other equity interests, after consummation of such Acquisition, a Borrower shall own directly or indirectly a majority of the equity interests in the Person being acquired and shall control a majority of any voting interests, and/or shall otherwise Control the Person being acquired.
(e) The Collateral Agent shall have received (i) the results of appraisals of the assets (or the assets of the Person) to be acquired in such Acquisition and of a commercial finance examination of the Person which is (or whose assets are) being acquired, and (ii) such other due diligence as the Collateral Agent may reasonably require, all of the results of the foregoing to be reasonably satisfactory to the Collateral Agent.
(f) Any assets acquired shall be utilized in, and if the Acquisition involves a merger, consolidation or stock acquisition, the Person which is the subject of such Acquisition shall be engaged in, only those businesses permitted under Section 5.19, below.
(g) If the Person which is the subject of such Acquisition is a Subsidiary of a Borrower, such Subsidiary shall have executed such documents as may be necessary to be joined as a "Borrower" or "Facility Guarantor" hereunder, as determined by the Collateral Agent, and the Collateral Agent shall have received a first priority security and mortgage interest (subject to Permitted Encumbrances) in such Subsidiary's capital stock, inventory, accounts, equipment, real estate, leaseholds, and other property of the same nature as constitutes Collateral under this Agreement in order to secure the Liabilities.
(h) The total consideration paid for all Acquisitions (whether in cash, tangible property, notes or other property (other than capital stock of the Parent)) after the Effective Date, shall not exceed in the aggregate the sum of $30,000,000.
(i) Excess Availability immediately prior to such Acquisition, immediately after giving effect thereto, and projected Excess Availability on a pro forma projected basis for the twelve months immediately following such Acquisition, shall not be less than $40,000,000.
"PERMITTED DISPOSITION": Shall mean any of the following:
(a) Licenses of intellectual property or licensed or leased departments of a Loan Party or any of its Subsidiaries in the ordinary course of business or to another Loan Party;
(b) Leases or subleases of Leases, to the extent at any point in time such Lease or subleases have anticipated minimum fixed annual rental payments of not more than $3,000,000 in the aggregate;
(c) Sales, assignments, transfers, conveyances or other dispositions of any or all of the property specified in EXHIBIT 1.7 hereof; provided that in connection with a sale or similar disposition of any such property, if a Loan Party receives a note or similar obligations as all or part of the consideration therefor, such Loan Party shall secure such note or obligation with a mortgage or similar Lien on such property and pledge such note or other obligation to the Collateral Agent as security for the Liabilities pursuant to the terms of the Loan Documents;
(d) Sales of Inventory and Equipment in connection with store closures permitted in accordance with the provisions of Section 5.4(c) hereof, provided that all sales of Inventory in connection with store closings (1) after the occurrence and during the continuance of an Event of Default, or (2) consisting of more than fifteen (15) retail stores at the same time, shall be in accordance with
liquidation agreements and with liquidators reasonably acceptable to the Collateral Agent;
(e) the sale, lease or transfer of any property to any Loan Party; and
(f) (i) the sale of any property, land or building (including any related receivables or other intangible assets) to any Person which is not a Subsidiary of the Borrowers, or (ii) the sale of the entire capital stock (or other equity interests) and Indebtedness of any Subsidiary owned by a Loan Party to any Person which is not a Subsidiary of a Borrower, or (iii) the consummation of any other asset sale with a Person who is not a Subsidiary of a Borrower, provided that, in each case ((i)-(iii)):
A. the consideration for such transaction represents fair value, and at least 90% of such consideration consists of cash, provided that in connection with a sale or similar disposition of any such Property, if a Loan Party receives a note or similar obligations as all or part of the consideration therefor, such Loan Party shall secure such note or obligation with a mortgage or similar Lien on such Property and pledge such note or other obligation to the Collateral Agent as security for the Liabilities pursuant to the terms of the Loan Documents;
B. the aggregate consideration for all such transactions completed in any fiscal year does not exceed $500,000,
C. the aggregate consideration for all such transactions completed after the Effective Date does not exceed $1,500,000, and
D. other than in connection with a transaction, the aggregate consideration for which is equal to an amount less than $500,000, at least five (5) Business Days prior to the date of completion of such transaction such Loan Party shall have delivered to the Agent an officer's certificate executed on behalf of such Loan Party by an Authorized Officer of such Loan Party, which certificate shall contain a description of the proposed transaction, the date such transaction is scheduled to be consummated, the estimated purchase price or other consideration for such transaction, financial information pertaining to compliance with the preceding clause (A), and which shall (if requested by the Agent) include a certified copy of the draft or definitive documentation pertaining thereto.
"PERMITTED ENCUMBRANCES": Shall mean any of the following:
(a) Encumbrances for taxes not yet delinquent or which are being contested in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of the Borrowers in accordance with GAAP, and provided further that, no notice of tax lien has been filed with respect thereto;
(b) Encumbrances in respect of property or assets imposed by law in the ordinary course of business, such as carrier's, warehousemen's, mechanics', materialmen's, repairmen's, landlord's or similar Encumbrances arising in the ordinary course of business which (i) are not overdue in accordance with customary business practices and consistent with the applicable Loan Party's prior practices, and do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Loan Parties, or (ii) are being contested in good faith by a Loan Party, by appropriate proceedings diligently instituted and conducted and without danger of any material risk to the Collateral and adequate reserves or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor;
(c) Encumbrances, pledges or deposits in connection with workers' compensation, unemployment insurance and other types of social security;
(d) Deposits to secure the performance of tenders, bids, sales, trade and government contracts, leases, statutory obligations, surety, appeal, and supersedeas bonds, warranty, advance payment, customs, performance and return-of-money bonds and other obligations of a like nature in the ordinary course of business (exclusive of obligations in respect of the payment of borrowed money) whether pursuant to statutory requirements, common law or consensual arrangements;
(e) Easements, rights of way, leases, zoning or deed restrictions, licenses, covenants, building, restrictions, minor defects or irregularities in title and other similar real estate encumbrances incurred in the ordinary course of business that in the aggregate do not materially interfere with the conduct of the business of the Loan Parties; defects and irregularities in titles, survey exceptions, encumbrances, easements or reservations of others for rights-of-way, roads, pipelines, railroad crossings, services, utilities or other similar purposes; outstanding mineral rights or reservations (including rights with respect to the removal of material resource) which do not materially diminish the value of the surface estate, assuming usage of such surface estate similar to that being carried on by any Loan Party as of the effective date;
(f) Any interest or title of a lessor under any lease entered into by any Loan Party in the ordinary course of business not in violation of the Loan Documents;
(g) Any interest or title of any lessee under any leases or subleases of real property of a Loan Party not in violation of the requirements of the Loan
Documents, provided that all such Encumbrances do not in the aggregate materially detract from the value of such Loan Party's property or materially impair the use thereof in the operation of such Loan Party's business;
(h) Encumbrances arising from financing statements regarding property subject to Capital Leases not in violation of the requirements of the Loan Documents, provided that such Encumbrances are only in respect of the property subject to, and secure only, the respective lease;
(i) Rights of consignors of goods to a Loan Party as consignee;
(j) Encumbrances arising from judgments, decrees or attachments in existence less than 30 days after the entry thereof, with respect to which execution has been stayed and with respect to which payment in full above any applicable deductible is covered by insurance or a bond, or in circumstances not constituting an Event of Default under section 11.10(a);
(k) Encumbrances created by this Agreement or the other Loan Documents;
(l) Encumbrances (i) listed on EXHIBIT 4.5(A), annexed hereto, or
(ii) arising out of the refinancing, extension, renewal or refunding
of any Indebtedness secured by any such Encumbrances, provided that
the principal amount of such Indebtedness is not increased and such
Indebtedness is not secured by any additional assets;
(m) Encumbrances which are placed upon Equipment or improvements to real property (including the associated real property) used in the ordinary course of business of a Loan Party or any Subsidiary (i) at the time of (or within 90 days after) the acquisition of such Equipment or the completion of such improvements by such Loan Party or any such Subsidiary to secure Indebtedness incurred to pay or finance all or a portion of the purchase price or other cost thereof, provided that the Encumbrance on the Equipment so acquired or the real property so improved does not encumber any other asset of such Loan Party or any such Subsidiary; or (ii) are existing on Equipment or real property at the time acquired by a Loan Party or any Subsidiary or on assets of a Person at the time such Person first becomes a Subsidiary of the Borrower; provided that (A) any such Encumbrances were not created at the time of or in contemplation of the acquisition of such assets or Person by a Loan Party or any Subsidiaries; (B) in the case of any such acquisition of a Person, any such Encumbrance attaches only to the Equipment or real estate, as applicable, of such Person; and (C) in the case of any such acquisition of Equipment or real estate by a Loan Party or any Subsidiary, any such Encumbrance attaches only to the property and assets so acquired and not to any other property or assets of such Loan Party or any such Subsidiary; provided that the Encumbrances outstanding from time to time under
this clause (m) shall not secure any Indebtedness other than Permitted Indebtedness described in clause (c) of such definition; and
(n) Encumbrances securing Indebtedness assumed in connection with, or continuing to exist after, but not incurred in connection with, or contemplation of, a Permitted Acquisition, which Encumbrances were in effect prior to the consummation of the Permitted Acquisition, provided that such Encumbrances may not extend to any Accounts, Inventory, or General Intangibles of the Loan Parties or of the Person so acquired.
The inclusion of the foregoing as "Permitted Encumbrances" shall not limit or impair the right of the Collateral Agent to impose Reserves on account thereof in accordance with the provisions of this Agreement.
"PERMITTED INDEBTEDNESS": Shall mean any of the following:
(a) Indebtedness incurred under this Agreement and the other Loan Documents including any Indebtedness on account of the Revolving Credit.
(b) Indebtedness on account of Equipment or improvements to real
property acquired in compliance with the requirements of subparagraph
(m) of the definition of Permitted Encumbrances, the incurrence of
which would not otherwise be prohibited by this Agreement; provided
that such Indebtedness shall not exceed $10,000,000 in the aggregate
at any time outstanding for all Loan Parties and, with respect to the
Parent only, shall not exceed $5,000,000 in the aggregate outstanding
at any time;
(c) (i) Indebtedness consisting of all obligations of a Loan Party or any Subsidiary as lessee under Capital Leases, and
(ii) Indebtedness consisting of all obligations of a Loan Party or any Subsidiary under any lease (i) which is accounted for by the lessee as an operating lease and (ii) under which the lessee is intended to be the "owner" of the leased property for Federal income tax purposes;
provided that (A) at the time of any incurrence thereof after the date hereof, and after giving effect thereto, no Event of Default shall have occurred and be continuing or would result therefrom; and (B) the aggregate outstanding principal amount (using the obligations in lieu of principal amount, in the case of any Capital Lease, or present value, based on the implicit interest rate, in lieu of principal amount, in the case of any lease described above in part (ii)) of Indebtedness permitted by this clause (d) shall not exceed $10,000,000 in the aggregate principal amount outstanding at any time for all Loan Parties and, with respect to the Parent only, shall not exceed $5,000,000 in the aggregate principal amount outstanding at any time.
(d) Indebtedness of the Loan Parties and any Subsidiary under Hedge Agreements other than for speculative purposes with any Revolving Credit Lender or an Affiliate of a Revolving Credit Lender.
(e) The Indebtedness listed on EXHIBIT 4.6, annexed hereto;
(f) Indebtedness to sellers in connection with Permitted Acquisitions;
(g) Intercompany indebtedness between and among the Loan Parties (other than the Parent) pursuant to loans and advances permitted in accordance with Subsection 5.17(f), below, and intercompany Indebtedness due to the Parent by any other Loan Party to the extent permitted hereunder;
(h) Indebtedness with respect to indemnities, warranties, statutory obligations, and surety, appeal and supersedeas bonds incurred in the ordinary course of business;
(i) Indebtedness in respect of overdraft protections and otherwise in connection with deposit accounts;
(j) Indebtedness arising out of the refinancing, extension, renewal or refunding of any Indebtedness permitted under this Agreement, provided that the principal amount of such Indebtedness is not increased from the amount outstanding at the time of such refinancing;
(k) Indebtedness owed by the Parent to any of the other Loan
Parties in an amount not to exceed $5,000,000 (less amounts paid under
Section 5.16(a) hereof) in the aggregate at any time outstanding; and
(l) Intercompany Indebtedness between and among the Loan Parties as evidenced by the Intercompany Notes.
"PERMITTED INVESTMENTS": Shall mean each of the following:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing not more than one year from the date of acquisition thereof;
(b) investments in commercial paper maturing not more than one year from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from Standard & Poors or from Moody's Investment Services, Inc.;
(c) investments in certificates of deposit, banker's acceptances and time deposits maturing not more than one year from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any financial institution organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above (without regard to the limitation on maturity contained in such clause) and entered into with a financial institution satisfying the criteria described in clause (c) above;
(e) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poors or from Moody's Investment Services, Inc.;
(f) investments in money market funds, substantially all the assets of which are comprised of securities of the types described in clauses (a) through (e) above;
(g) investments acquired by a Loan Party or any of its Subsidiaries (i) in exchange for any other investment held by such Loan Party or any such Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other investment, or (ii) as a result of a foreclosure by such Loan Party or any of its Subsidiaries with respect to any secured investment or other transfer of title with respect to any secured investment in default;
(h) investments by a Loan Party in the capital of any wholly-owned subsidiary of such Loan Party, including without limitation, any Permitted Acquisitions, provided that such Loan Party has complied with the provisions of Section 5.21 hereof with respect to such Subsidiary;
(i) to the extent not permitted by the foregoing clauses, existing investments in any Subsidiaries (and any increases thereof attributable to increases in retained earnings);
(j) to the extent not permitted by the foregoing clauses, the existing investments described on EXHIBIT 1.6 hereto;
(k) investments of a Loan Party and any Subsidiary in Hedge Agreements other than for speculative purposes;
(l) investments of any Person which are outstanding at the time such Person becomes a Subsidiary of a Loan Party as a result of a Permitted Acquisition, but not any increase in the amount thereof unless otherwise permitted by this Agreement; and
(m) any other investments (whether in the form of cash or contribution of property, and if in the form of a contribution of property, such property shall be valued for purposes of this clause at the fair value thereof) in any corporation, partnership, limited liability company, joint venture or other business entity, which is not itself a Subsidiary of a Borrower or owned or Controlled by any director, officer or employee of a Borrower or any of its Subsidiaries, not otherwise permitted by the foregoing clauses, made after the Effective Date, shall be permitted to be incurred if (i) no Event of Default shall have occurred and be continuing, or would result therefrom, and (ii) the aggregate cumulative amount of such investments (together with any loans and advances permitted under Sections 5.6 and 5.17) does not exceed $6,000,000;
provided that, except for Excluded Property and loans to officers and directors, all such Permitted Investments are subject to a perfected Encumbrance in favor of the Collateral Agent.
"PERSON": Any natural person, and any corporation, limited liability company, trust, partnership, joint venture, or other enterprise or entity.
"POST FORECLOSURE ASSET": All or any part of the Collateral, ownership of which is acquired by the Collateral Agent or a Nominee on account of the "bidding in" at a disposition as part of a Liquidation or by reason of a "deed in lieu" type of transaction.
"PROTECTIVE OVERADVANCES": Revolving Credit Loans which are OverLoans, but as to which each of the following conditions is satisfied: (a) when aggregated with all other Revolving Credit Loans, SwingLine Loans, Protective OverAdvances and the Stated Amount of L/Cs and Banker's Acceptances, the Revolving Credit Ceiling is not exceeded; and (b) when aggregated with all other Protective OverAdvances, such Revolving Credit Loans do not aggregate more than $7,500,000; (c) such Protective OverAdvances shall not remain outstanding for more than forty-five (45) days in any period of one hundred eighty (180) consecutive days, and (d) such Revolving Credit Loans are made or undertaken in the Administrative Agent's reasonable, good faith discretion (or as directed by the Collateral Agent) to protect and preserve the interests of the Revolving Credit Lenders. Overadvances on account of circumstances beyond the control of the Agent (such as a drop in collateral value) shall not be deemed "Protective Overadvances" and shall not be subject to the limitations contained herein.
"PROCEEDS": Includes, without limitation, "Proceeds" as defined in the UCC.
"RECEIPTS": All cash, cash equivalents, money, checks, credit card slips, receipts and other Proceeds from any sale of the Collateral.
"RECEIVABLES COLLATERAL": That portion of the Collateral which consists of Accounts, Payment Intangibles, Chattel Paper, Instruments, Documents of Title, Documents, Investment Property, Payment Intangibles, Letter-of-Credit Rights, bankers' acceptances, and all other rights to payment.
"RELATED BUSINESS": Any business or enterprise consisting of any of the following:
(a) asset maximization services.
(b) asset valuation services.
"RELEASE": Any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, seeping, migrating, dumping or disposing of any Hazardous Material (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Material) into the indoor or outdoor environment, including, without limitation, the movement of Hazardous Materials through or in the ambient air, soil, surface or ground water, or property, which is in violation of Environmental Laws.
"REGISTER": Is defined in Section 17.2(c).
"REQUIREMENTS OF LAW": As to any Person:
(a) Applicable Law.
(b) That Person's organizational documents.
(c) That Person's by-laws and/or other instruments which deal with corporate or similar governance, as applicable.
"RESERVES": The following: Availability Reserves and Inventory Reserves.
"REVOLVING CREDIT": Is defined in Section 2.1.
"REVOLVING CREDIT CEILING": $150,000,000.00.
"REVOLVING CREDIT DOLLAR COMMITMENT": As set forth on EXHIBIT 2.22, annexed hereto (as such amounts may change in accordance with the provisions of this Agreement).
"REVOLVING CREDIT LENDERS": Each Revolving Credit Lender to which reference is made in the Preamble of this Agreement and any other Person who becomes a "Revolving Credit Lender" in accordance with the provisions of this Agreement.
"REVOLVING CREDIT LOANS": Loans made under the Revolving Credit, except that where the term "Revolving Credit Loan" is used with reference to available interest rates applicable to the loans under the Revolving Credit, it refers to so much of the unpaid principal balance of the Loan Account as bears the same rate of interest for the same Interest Period. (See Section 2.12(d)).
"REVOLVING CREDIT NOTE": Is defined in Section 2.10.
"REVOLVING CREDIT COMMITMENT PERCENTAGE": As set forth on EXHIBIT 2.22, annexed hereto (as such amounts may change in accordance with the provisions of this Agreement).
"SEC": The Securities and Exchange Commission.
"SENIOR NON-CONVERTIBLE FACILITY": The credit facility set forth in the Senior Subordinated Convertible Loan Agreement dated as of March 15, 2000, amended from time to time prior to the Effective Date and as amended and restated June 11, 2002, in the present principal amount of $75,000,000.00, and as most recently amended and restated on the Effective Date.
"SPECIFIED EVENT OF DEFAULT": An Event of Default arising under any of the following sections of this Agreement:
(a) Section 11.1.
(b) Section 11.2.
(c) Section 11.3 (with respect to Sections 5.16, 5.17, and 5.20, and Article 8 only).
(d) Section 11.5 (with respect to a breach of Sections 4.5 and 5.26 only).
(e) Section 11.6.
(f) Section 11.11.
(g) Section 11.12.
(h) Section 11.15.
"STATED AMOUNT": The maximum amount for which an L/C or Banker's Acceptance may be honored.
"SUBSIDIARY": Any corporation, association, partnership, limited liability company, trust, or other business entity of which the designated parent shall at any time own
directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes or Controlling interests) of the outstanding voting interests.
"SUPERMAJORITY LENDERS": Revolving Credit Lenders (other than Delinquent Revolving Credit Lenders) holding 66-2/3% or more of the Revolving Credit Commitment Percentages (calculated without regard to any Revolving Credit Commitment Percentage of any Delinquent Revolving Credit Lender).
"SUPPORTING OBLIGATION": Has the meaning given that term in the UCC and also refers to a Letter-of-Credit Right or secondary obligation which supports the payment or performance of an Account, Chattel Paper, a Document, a General Intangible, an Instrument, or Investment Property.
"SWINGLINE": The facility pursuant to which the SwingLine Lender may advance Revolving Credit Loans aggregating up to the SwingLine Loan Ceiling.
"SWINGLINE LENDER": NCBC.
"SWINGLINE LOAN CEILING": $20,000,000.00 (subject to increase as provided in Section 16.4(e)).
"SWINGLINE LOANS": Defined in Section 2.8.
"TERMINATION DATE": The earliest of (a) the Maturity Date; or (b) the date
of the occurrence of any event described in Section 11.12, below; or (c)
the date designated as the Termination Date in the Administrative Agent's
notice to the Lead Borrower setting the Termination Date on account of the
occurrence of any Event of Default other than as described in Section
11.12, below; or (d) that date designated as the Termination Date, thirty
(30) days irrevocable written notice of which is provided by the Lead
Borrower to the Administrative Agent.
"TRANSFER": Wire transfer pursuant to the wire transfer system maintained by the Board of Governors of the Federal Reserve Board, or as otherwise may be agreed to from time to time by the Administrative Agent making such Transfer and the subject Revolving Credit Lender. Wire instructions may be changed in the same manner that Notice Addresses may be changed (Section 18.1), except that no change of the wire instructions for Transfers to any Revolving Credit Lender shall be effective without the consent of the Administrative Agent.
"UCC": The Uniform Commercial Code as in effect from time to time in the State of Ohio.
"UNANIMOUS CONSENT": Consent of Revolving Credit Lenders (other than Delinquent Revolving Credit Lenders) holding 100% of the Loan Commitments (other than Loan Commitments held by a Delinquent Revolving Credit Lender).
"UNDERWRITING FEE": Is defined in Section 2.13.
"UNRESTRICTED SUBSIDIARY": Those Subsidiaries of the Lead Borrower described on EXHIBIT 1.5 hereto.
"UNUSED LINE FEE": As defined in Section 2.14.
ARTICLE 2 - THE REVOLVING CREDIT:
2.1. ESTABLISHMENT OF REVOLVING CREDIT
(a) The Revolving Credit Lenders hereby establish a revolving line of credit (the "REVOLVING CREDIT") in the Borrowers' favor pursuant to which each Revolving Credit Lender, subject to, and in accordance with, this Agreement, acting through the Administrative Agent, shall make loans and advances and otherwise provide financial accommodations to and for the account of the Borrowers as provided herein.
(b) Loans, advances, and financial accommodations under the Revolving Credit shall be made with reference to the DSW Borrowing Base and shall be subject to DSW Availability. The DSW Borrowing Base and DSW Availability shall be determined by the Administrative Agent by reference to Borrowing Base Certificates furnished as provided in Section 6.4, below, and shall be subject to the following:
(i) Such determination shall take into account such Reserves as the Collateral Agent may determine as being applicable thereto.
(ii) The Cost of Eligible Inventory will be determined in a manner consistent with current tracking practices, based on the Borrowers' stock ledgers inventory.
(c) The commitment of each Revolving Credit Lender to provide such loans, advances, and financial accommodations is subject to Section 2.22.
(d) The proceeds of borrowings under the Revolving Credit shall be used for the Borrowers' working capital and general corporate purposes (including, intercompany loans), all solely to the extent permitted by this Agreement. No proceeds of a borrowing under the Revolving Credit may be used, nor shall any be requested, with a view towards the accumulation of any general fund or funded reserve of the Borrowers other than in the ordinary course of the Borrowers' business and consistent with the provisions of this Agreement.
2.2. ADVANCES IN EXCESS OF BORROWING BASE (OVERLOANS).
(a) Except as provided in Section 16.3(a), no Revolving Credit Lender has any obligation to any Borrower to make any loan or advance, or otherwise to provide any credit to or for the benefit of any Borrower where the result of such loan, advance, or credit is an OverLoan.
(b) The Revolving Credit Lenders' obligations, among themselves, are subject to (among other provisions of this Agreement) Section 13.3(a) (which relates to each Revolving Credit Lender's making amounts available to the Administrative Agent) and 16.3(a) (which relates to Protective OverAdvances).
(c) The Revolving Credit Lenders' providing of an OverLoan on any one occasion does not affect the obligations of each Borrower hereunder (including each Borrower's obligation to immediately repay any amount which otherwise constitutes an OverLoan) nor obligate the Revolving Credit Lenders to do so on any other occasion.
2.3. RISKS OF VALUE OF COLLATERAL. The Agent's reference to a given asset in connection with the making of loans, credits, and advances and the providing of financial accommodations under the Revolving Credit and/or the monitoring of compliance with the provisions hereof shall not be deemed a determination by any Agent or any Revolving Credit Lender relative to the actual value of the asset in question. All risks concerning the value of the Collateral are and remain upon the Borrowers. All Collateral secures the prompt, punctual, and faithful performance of the Liabilities whether or not relied upon by the Administrative Agent in connection with the making of loans, credits, and advances and the providing of financial accommodations under the Revolving Credit.
2.4. COMMITMENT TO MAKE REVOLVING CREDIT LOANS AND SUPPORT LETTERS OF CREDIT. Subject to the provisions of this Agreement, the Revolving Credit Lenders shall make a loan or advance under the Revolving Credit and the Administrative Agent shall endeavor to have an L/C or Banker's Acceptance issued for the account of one or more of the Loan Parties, in each instance if duly and timely requested by the Lead Borrower as provided herein provided that:
(a) No OverLoan is then outstanding and none will result therefrom.
(b) No Borrower is then in Default and none will thereby become in Default.
2.5. REVOLVING CREDIT LOAN REQUESTS.
(a) Requests for loans and advances under the Revolving Credit or for
the continuance or conversion of an interest rate applicable to a Revolving
Credit Loan may be requested by the Lead Borrower by written or telephonic
notice (in the case of telephonic notice, promptly confirmed in writing if so
requested by the Administrative Agent). Such notice of borrowing shall be
substantially in the form of EXHIBIT 2.5 hereto, signed by the Lead Borrower and
transmitted to the Administrative Agent by telecopier. Each such notice shall be
irrevocable and shall specify (i) the proposed Borrower, (ii) the amount of the
proposed borrowing and the date thereof (which shall be a Business Day) and
(iii) whether the borrowing then being requested is to be a borrowing of Base
Margin Loans or LIBOR Loans and, if LIBOR Loans, the Interest Period with
respect thereto. If no election is made as to the Type of Loan or no election of
Interest Period is specified in any such notice for a borrowing of LIBOR Loans,
such notice shall be deemed a request for borrowing of Base Margin Loans. The
Administrative Agent may rely on any telephonic request for a borrowing to the
same extent that the Administrative Agent may rely on any telephonic request for
a borrowing to the same extent that the Administrative Agent
may rely on a written request. The Borrowers shall bear all risks related to the giving of borrowing requests telephonically.
(b) Subject to the provisions of this Agreement, the Lead Borrower may, on behalf of any Borrower, request a Revolving Credit Loan and elect an interest rate and Interest Period to be applicable to that Revolving Credit Loan by giving notice to the Administrative Agent by no later than the following:
(i) If such Revolving Credit Loan is to be or is to be converted to a Base Margin Loan: By 2:00 p.m. on the Business Day on which the subject Revolving Credit Loan is to be made or is to be so converted (provided that if notice is furnished after 12:00 noon on any Business Day, the Revolving Credit Loan so requested shall be deemed a request for a SwingLine Loan). Base Margin Loans requested by the Lead Borrower, other than those resulting from the conversion of a LIBOR Loan, shall not be less than $250,000 and in increments of $10,000 in excess of such minimum.
(ii) If such Revolving Credit Loan is to be, or is to be continued as, or converted to, a LIBOR Loan: By 2:00 p.m. three (3) LIBOR Business Days before the commencement of any new Interest Period or the end of the then applicable Interest Period. LIBOR Loans and conversions to LIBOR Loans shall each be not less than $3,000,000 and in increments of $1,000,000 in excess of such minimum.
(iii) Any LIBOR Loan which matures while any Borrower is in Default shall be converted, at the option of the Administrative Agent, to a Base Margin Loan notwithstanding any notice from the Lead Borrower that such Loan is to be continued as a LIBOR Loan.
(iv) LIBOR Loans may not be converted or continued as LIBOR Loans
at any time other than the end of the Interest Period applicable thereto
unless the Borrowers shall pay, upon demand, any amounts due pursuant to
Section 2.11(f) hereof.
(c) Any request for a Revolving Credit Loan or for the continuance or conversion of an interest rate applicable to a Revolving Credit Loan which is made after the applicable deadline therefor, as set forth above, shall be deemed to have been made at the opening of business on the then next Business Day or LIBOR Business Day, as applicable.
(d) The Lead Borrower may, on behalf of any Loan Party, request that the Administrative Agent cause the issuance by the Issuer of L/Cs or Banker's Acceptances for the account of the Borrowers as provided in Section 2.17.
(e) The Administrative Agent may rely on any request for a loan or advance, or other financial accommodation under the Revolving Credit which the Administrative Agent, in good faith, believes to have been made by a Person duly authorized to act on behalf of the Lead Borrower and may decline to make any such requested loan or advance, or issuance, or to provide any such financial accommodation pending the Administrative Agent's being furnished
with such documentation concerning that Person's authority to act as may be satisfactory to the Administrative Agent.
(f) A request by the Lead Borrower for loan or advance, or other financial accommodation under the Revolving Credit shall be irrevocable and shall constitute certification by each Borrower that as of the date of such request, each of the following is true and correct:
(i) There has been no material adverse change in the Borrowers' financial condition from the most recent financial information furnished any Agent or any Revolving Credit Lender pursuant to this Agreement.
(ii) Each representation which is made herein or in any of the Loan Documents is then true and complete in all material respects as of and as if made on the date of such request except to the extent that any of the same relates expressly to a different date.
(iii) Unless accompanied by a written Certificate of the Lead Borrower's President or its Chief Financial Officer describing (in reasonable detail) the facts and circumstances of any Default then existing and the steps (if any) being taken to remedy such condition, that no Default has occurred and is continuing.
2.6. SUSPENSION OF REVOLVING CREDIT. If, at any time or from time to time, any Borrower is in Default:
(a) The Administrative Agent may, and at the direction of the SuperMajority Lenders shall, suspend the Revolving Credit immediately, in which event, neither the Administrative Agent nor any Revolving Credit Lender shall be obligated, during such suspension, to make any loans or advance to any Borrower, or to provide any financial accommodation hereunder or to seek the issuance of any L/C or of any Banker's Acceptance for the account of any Loan Party. Nothing contained herein shall limit the right of the Administrative Agent to make Protective OverAdvances or the obligation of the Revolving Credit Lenders with respect to SwingLine Loans, Protective OverAdvances, L/Cs and Banker's Acceptances during such suspension period.
(b) The Administrative Agent may, and at the direction of the SuperMajority Lenders shall, suspend the right of the Lead Borrower to request any LIBOR Loan or to convert any Base Margin Loan to a LIBOR Loan.
2.7. MAKING OF REVOLVING CREDIT LOANS
(a) A loan or advance under the Revolving Credit shall be made by the transfer of the proceeds of such loan or advance to the Operating Account of the applicable Borrower. The proceeds of any Revolving Credit Loan shall be made available before 3:00 p.m. on the date requested in accordance with Section 2.5 hereof.
(b) A loan or advance shall be deemed to have been made under the Revolving Credit (and the Borrowers shall be indebted to the Administrative Agent and the Revolving Credit Lenders for the amount thereof immediately) at the following:
(i) The Administrative Agent's initiation of the transfer of the proceeds of such loan or advance in accordance with the Lead Borrower's instructions (if such loan or advance is of funds requested by the Lead Borrower).
(ii) The charging of the amount of such loan to the Loan Account (in all other circumstances).
(c) Absent gross negligence, bad faith or willful misconduct, there shall not be any recourse to or liability of the Administrative Agent or any Revolving Credit Lender, on account of:
(i) Any delay in the making of any loan or advance requested under the Revolving Credit.
(ii) Any delay by any bank or other depository institution in treating the proceeds of any such loan or advance as collected funds.
(iii) Any delay in the receipt, and/or any loss, of funds which constitute a loan or advance under the Revolving Credit, the wire transfer of which was properly initiated by the Administrative Agent in accordance with wire instructions provided to the Administrative Agent by the Lead Borrower.
2.8. SWINGLINE LOANS.
(a) For ease of administration, Base Margin Loans may be made by the SwingLine Lender (in the aggregate, the "SWINGLINE LOANS") in accordance with the procedures set forth in this Agreement for the making of loans and advances under the Revolving Credit. The aggregate unpaid principal balance of the SwingLine Loans shall not, as to all Borrowers, at any one time be in excess of the lesser of (i) the SwingLine Loan Ceiling, or (ii) DSW Availability. The SwingLine Lender shall not make a SwingLine Loan if the SwingLine Lender has received notice from the Administrative Agent that the Administrative Agent has suspended, or the Administrative Agent has received written notice from the SuperMajority Lenders instructing the Administrative Agent to suspend, the Revolving Credit in accordance with the terms hereof. Absent such notification, the SwingLine Lender (x) shall not otherwise be required to determine whether the conditions precedent to such SwingLine Loan have been satisfied or whether the requested borrowing would cause DSW Availability to be exceeded, and (y) shall be entitled in all cases to have each Revolving Credit Lender make Revolving Credit Loans in settlement of such SwingLine Loans in accordance with the provisions of Section 13.2 hereof.
(b) The aggregate unpaid principal balance of SwingLine Loans shall bear interest at the rate applicable to Base Margin Loans (or a money market based rate quoted by the
Agent and accepted by the Lead Borrower) and shall be repayable as a loan under the Revolving Credit.
(c) The Borrowers' obligation to repay SwingLine Loans shall be evidenced by a Note in the form of EXHIBIT 2.8(C), annexed hereto, executed by the Borrowers, and payable to the SwingLine Lender. Neither the original nor a copy of that Note shall be required, however, to establish or prove any Liability. Upon receipt of an affidavit of an officer of, and a customary indemnity from, a SwingLine Lender as to the loss, theft, destruction or mutilation of the SwingLine Note, the Borrowers will issue in lieu thereof a replacement SwingLine Note in the same principal amount thereof and of like tenor.
(d) For all purposes of this Loan Agreement, the SwingLine Loans and the Borrowers' obligations to the SwingLine Lender constitute Revolving Credit Loans and are secured as "Liabilities".
(e) SwingLine Loans shall be subject to periodic settlement with the Revolving Credit Lenders as provided in this Agreement.
2.9. THE LOAN ACCOUNT.
(a) An account ("LOAN ACCOUNT") shall be opened on the books of the Administrative Agent in which a record shall be kept of all loans and advances made under the Revolving Credit (including, without limitation, Swingline Loans). The Loan Account shall also contain separate entries for loans and advances made to each Borrower.
(b) The Administrative Agent shall also keep a record (either in the Loan Account or elsewhere, as the Administrative Agent may from time to time elect) of all interest, fees, service charges, costs, expenses, and other debits owed to each Agent and each Revolving Credit Lender on account of the Liabilities from each Borrower and of all credits against such amounts so owed.
(c) All credits against the Liabilities shall be conditional upon final payment to the Administrative Agent for the account of the Agent or Revolving Credit Lender entitled thereto of the items giving rise to such credits. The amount of any item credited against the Liabilities which is charged back against any Agent or any Revolving Credit Lender or is disgorged for any reason or is not so paid shall be a Liability and shall be added to the Loan Account, whether or not the item so charged back or not so paid is returned.
(d) Except as otherwise provided herein, all fees, service charges, costs, and expenses for which any Borrower is obligated hereunder are payable on demand.
(e) The Administrative Agent, without the request of the Lead Borrower, may advance under the Revolving Credit any interest, fee, service charge, or other payment to which any Agent or any Revolving Credit Lender is entitled from any Borrower pursuant hereto and may charge the same to the Loan Account notwithstanding that an OverLoan may result thereby; provided that the Administrative Agent shall not charge the Loan Account for any third-party
expenses incurred by the Agent (such as fees for attorneys, appraisers and commercial finance examinations) without first having furnished the Lead Borrower with a copy of the invoice therefor two (2) Business Days prior to the date that the Loan Account is to be so charged.. Any such advance shall be deemed a Base Margin Loan. Such action on the part of the Administrative Agent shall not constitute a waiver of the Administrative Agent's rights and each Borrower's obligations under Section 2.11(b). Any amount which is added to the principal balance of the Loan Account as provided in this Section 2.9(e) shall bear interest at the interest rate then and thereafter applicable to Base Margin Loans. The Administrative Agent shall promptly furnish the Lead Borrower with a detailed statement itemizing any amounts so charged to the Loan Account.
(f) Any statement rendered by the Administrative Agent or any
Revolving Credit Lender to the Lead Borrower concerning the Liabilities shall be
considered correct and accepted by each Borrower and shall, absent manifest
error, be conclusively binding upon each Borrower unless the Lead Borrower
provides the Administrative Agent with written objection thereto within twenty
(20) days from the receipt by the Lead Borrower of such statement, which written
objection shall indicate, with particularity, the reason for such objection. The
Loan Account and the Administrative Agent's books and records concerning the
loan arrangement contemplated herein and the Liabilities shall be prima facie
evidence and proof of the items described therein.
2.10. THE REVOLVING CREDIT NOTES. The Borrowers' obligation to repay loans and advances under the Revolving Credit, with interest as provided herein, shall be evidenced by Notes (each, a "REVOLVING CREDIT NOTE") in the form of EXHIBIT 2.10, annexed hereto, executed by each Borrower, one payable to each Revolving Credit Lender. Neither the original nor a copy of any Revolving Credit Note shall be required, however, to establish or prove any Liability. Upon receipt of an affidavit of an officer of, and a customary indemnity from, a Revolving Credit Lender as to the loss, theft, destruction or mutilation of the Revolving Credit Note, the Borrowers will issue in lieu thereof a replacement Revolving Credit Note in the same principal amount thereof and of like tenor.
2.11. PAYMENT OF THE LOAN ACCOUNT.
(a) The Borrowers may repay all or any portion of the principal balance of the Loan Account from time to time until the Termination Date.
(b) Each Borrower, without notice or demand from the Administrative Agent or any Revolving Credit Lender, shall immediately pay the Administrative Agent that amount, from time to time, which is necessary so that there is no OverLoan outstanding.
(c) Subject to Section 8.4, during the continuance of a Cash Control Event, the Borrowers shall repay the Revolving Credit:
(i) in an amount equal to the proceeds realized from the sale, refinancing, or other disposition of, or realization upon, any Collateral; and
(ii) in accordance with the provisions of Article 8 hereof.
All amounts prepaid under this Section 2.11 may be reborrowed under the Revolving Credit, subject to and in accordance with, the terms of this Agreement.
(d) The Borrowers shall repay the then entire unpaid balance of the Loan Account and all other Liabilities on the Termination Date.
(e) The Administrative Agent shall endeavor to cause the application of payments (if any), pursuant to Sections 2.11(a) and 2.11(b) against LIBOR Loans then outstanding in such manner as results in the least cost to the Borrowers, but shall not have any affirmative obligation to do so nor liability on account of the Administrative Agent's failure to have done so. In no event shall action or inaction taken by the Administrative Agent excuse any Borrower from any indemnification obligation under Section 2.11(f).
(f) The Borrowers shall indemnify the Administrative Agent and each Revolving Credit Lender and hold the Administrative Agent and each Revolving Credit Lender harmless from and against any loss, cost or expense (including loss of anticipated profits and amounts payable by the Administrative Agent or such Revolving Credit Lender on account of "breakage fees" (so-called)) which the Administrative Agent or such Revolving Credit Lender may sustain or incur (including, without limitation, by virtue of acceleration after the occurrence of any Event of Default) as a consequence of the following:
(i) Failure by any Borrower to pay any of the principal amount of or any interest on any LIBOR Loan as and when due and payable, including any such loss or expense arising from interest or fees payable by such Revolving Credit Lender in order to maintain its LIBOR Loans.
(ii) Failure by any Borrower to make a borrowing or conversion after the Lead Borrower has given (or is deemed to have given) a request for a Revolving Credit Loan or a request to convert a Revolving Credit Loan from one applicable interest rate to another.
(iii) The making of any payment on a LIBOR Loan or the making of any conversion of any such Loan to a Base Margin Loan on a day that is not the last day of the applicable Interest Period with respect thereto.
(g) Upon at least two (2) Business Days' prior written notice to the Administrative Agent, the Borrowers may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Revolving Credit Dollar Commitments. Each such reduction shall be in the principal amount of $5,000,000 or any integral multiple thereof. Each such reduction or termination shall (i) be applied ratably to the Revolving Credit Dollar Commitments of each Revolving Credit Lender and (ii) be irrevocable when given. At the effective time of each such termination, the Borrowers shall pay to the Administrative Agent for application as provided herein any amount by which the unpaid balance of the Loan Account and aggregate undrawn Stated Amount of all then outstanding L/Cs and Banker's Acceptances outstanding on such date exceeds the amount to which the Revolving Credit Dollar
Commitments are so reduced. Any such reduction or termination of the Revolving Credit Dollar Commitments may not be reinstated.
2.12. INTEREST ON REVOLVING CREDIT LOANS.
(a) Each Revolving Credit Loan shall bear interest at the Base Margin Rate unless timely notice is given (as provided in Section 2.5) that the subject Revolving Credit Loan (or a portion thereof) is, or is to be converted to, a LIBOR Loan.
(b) Each Revolving Credit Loan which consists of a LIBOR Loan shall bear interest at the applicable LIBOR Rate.
(c) Subject to, and in accordance with, the provisions of this Agreement, the Lead Borrower may cause all or a part of the unpaid principal balance of the Loan Account to bear interest at the Base Margin Rate or the LIBOR Rate as specified from time to time by the Lead Borrower by notice to the Administrative Agent.
(d) For ease of reference and administration, each part of the Loan Account which bears interest at the same rate of interest and for the same Interest Period is referred to herein as if it were a separate "Revolving Credit Loan".
(e) The Lead Borrower shall not select, renew, or convert any interest rate for a Revolving Credit Loan such that, in addition to interest at the Base Margin Rate, there are more than seven (7) Interest Periods for LIBOR Loans in the aggregate for all Borrowers applicable to the Revolving Credit Loans at any one time.
(f) The Borrowers shall pay accrued and unpaid interest on each Revolving Credit Loan to its Borrower in arrears as follows:
(i) On the applicable Interest Payment Date for that Revolving Credit Loan.
(ii) On the Termination Date and on the End Date.
(iii) Following the occurrence of any Event of Default, with such frequency as may be determined by the Administrative Agent.
(g) Following the occurrence of any Event of Default (and whether or not any Agent exercises its rights on account thereof), all Revolving Credit Loans shall bear interest, at the option of the Administrative Agent or at the instruction of the SuperMajority Lenders, at a rate which is the aggregate of the applicable rate (including the Applicable Margin) for Base Margin Loans and/or LIBOR Loans, as applicable, plus two percent (2%) per annum.
2.13. UNDERWRITING FEE; COLLATERAL MONITORING FEE. In addition to any other fee or expense to be paid by the Borrowers on account of the Revolving Credit, the Borrowers shall pay the Administrative Agent the "UNDERWRITING FEE", THE "STRUCTURING FEE" and the "COLLATERAL MONITORING FEE" at the times and in the amounts as set forth the Fee Letter.
2.14. UNUSED LINE FEE. In addition to any other fee to be paid by the Borrowers on account of the Revolving Credit, the Borrowers shall pay the Administrative Agent, for the account of the Revolving Credit Lenders, the "UNUSED LINE FEE" (so referred to herein) of 0.25% per annum of the average difference, during the month just ended (or relevant period with respect to the payment being made on the Termination Date) between the Revolving Credit Ceiling and the aggregate of the unpaid principal balance of the Loan Account and the undrawn Stated Amount of L/Cs and Banker's Acceptances outstanding during the relevant period. The Unused Line Fee shall be paid in arrears, on the first day of each month after the execution of this Agreement and on the Termination Date.
2.15. CONCERNING FEES. The Borrowers shall not be entitled to any credit, rebate or repayment of any fee earned by the Administrative Agent or any Revolving Credit Lender pursuant to this Agreement or any Loan Document notwithstanding any termination of this Agreement or suspension or termination of the Administrative Agent's and any Revolving Credit Lender's respective obligation to make loans and advances hereunder.
2.16. AGENT'S AND REVOLVING CREDIT LENDERS' DISCRETION.
(a) Each reference in the Loan Documents to the exercise of reasonable, good faith discretion or the like by any Agent or any Revolving Credit Lender shall be to such Person's exercise of its judgment, in good faith, based upon such information of which that Person then has actual knowledge.
(b) The burden of establishing the failure of any Agent or any Revolving Credit Lender to have acted in a reasonable manner in such Person's exercise of such discretion shall be the Borrowers'.
2.17. PROCEDURES FOR ISSUANCE OF L/CS AND BANKER'S ACCEPTANCES.
(a) The Lead Borrower may request (either directly, or as provided in
Section 2.21(a) through Retail Ventures Imports, Inc.) that an Issuer cause the
issuance of L/Cs or Banker's Acceptances for the account of any Loan Party.
Requests for L/Cs and Banker's Acceptances shall be given by the Lead Borrower
to the Administrative Agent and the Issuer not later than 2:00 p.m. three (3)
Business Days prior to the specified date for the issuance of the requested L/C
or Banker's Acceptance. Requests for L/Cs and Banker's Acceptances may be
requested by the Lead Borrower by written or telephonic notice (in the case of
telephonic notice, promptly confirmed in writing if so requested by the
Administrative Agent or the Issuer). Each such notice shall be irrevocable and
shall specify with respect to each L/C and Banker's Acceptance requested (i) the
Borrower which is to be the account party for whose benefit the L/C or Banker's
Acceptance is being issued, (ii) the face amount of the proposed L/C or Banker's
Acceptance, which shall be denominated in dollars and the intended date of
issuance thereof (which shall be a Business Day), (iii) the beneficiary, and
(iv) the terms (including the anticipated expiry date) of the L/C or Banker's
Acceptance. The Administrative Agent and the Issuer may rely on any telephonic
request for the issuance of a L/C or Banker's Acceptance to the same extent that
the Administrative Agent and the Issuer may rely on a written request. The
Borrowers shall bear all risks related to the giving of requests for the
issuance of L/Cs or
Banker's Acceptances telephonically. Notwithstanding anything to the contrary contained in this Agreement, no L/C or Banker's Acceptance shall be issued by any Issuer which is not also the Administrative Agent unless such Issuer shall have received notice from the Administrative Agent that the conditions to such issuance have been met. Any Issuer shall notify the Administrative Agent in writing on each Business Day of all L/Cs or Bankers Acceptances issued on the prior Business Day by such Issuer.
(b) The Administrative Agent will endeavor to cause the issuance of any L/C or Banker's Acceptance so requested by the Lead Borrower from and including the Effective Date until the thirtieth (30th) Business Day prior to the Maturity Date, provided that, at the time that the request is made, the Revolving Credit has not been suspended as provided in Section 2.6 and if so issued:
(i) The aggregate Stated Amount of all L/Cs and Banker's Acceptances then outstanding, does not exceed $50,000,000;
(ii) The expiry of the L/C or Banker's Acceptance is not later than the earlier of thirty (30) days prior to the Maturity Date or the following:
(A) As to standby L/C's, one (1) year from initial issuance (or in the case of renewal or extension thereof, one year after such renewal or extension), provided that each standby L/C may, upon the request of the Lead Borrower, include a provision whereby, subject to the approval of the Issuer, such standby L/C may be renewed for additional consecutive periods of twelve (12) months or less (but not beyond the date that is thirty Business Days prior to the Maturity Date) unless the Issuer notifies the beneficiary thereof at least 30 days prior to the then applicable expiration date that such L/C will not be renewed.
(B) As to documentary L/C's, ninety (90) days from issuance.
(C) As to Banker's Acceptances, ninety (90) days from issuance.
(iii) If, notwithstanding the foregoing, the Administrative Agent causes the issuance of an L/C or Banker's Acceptance, the expiry of which is later than the Maturity Date, it shall be 105% cash collateralized at its issuance; and
(iv) An OverLoan will not result from the issuance of the subject L/C or Banker's Acceptance.
(c) Concurrently with requesting the issuance of a L/C or a Banker's Acceptance, the applicable Borrower shall execute and deliver to the Issuer in respect of such requested L/C or Banker's Acceptance a reimbursement or similar agreement in the Issuer's then standard form of application for and reimbursement agreement with respect to letters of credit and banker's acceptances; provided however that in the event of any conflict between the
provisions of such reimbursement agreement and this Agreement, the provisions of this Agreement shall govern.
(d) Absent gross negligence, bad faith or willful misconduct, there shall not be any recourse to, nor liability of, the Administrative Agent or any Revolving Credit Lender on account of
(i) Any delay or refusal by an Issuer to issue an L/C or a Banker's Acceptance;
(ii) Any action or inaction of an Issuer on account of or in respect to, any L/C or any Banker's Acceptance.
(e) Immediately upon the issuance of any L/C or any Banker's Acceptance by the Issuer (or the amendment of a L/C or Banker's Acceptance increasing the amount thereof), and without any further action on the part of the Issuer, the Issuer shall be deemed to have sold to each Revolving Credit Lender, and each such Revolving Credit Lender shall be deemed unconditionally and irrevocably to have purchased from the Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Revolving Credit Lender's Revolving Credit Commitment Percentage, in such L/C and Banker's Acceptance, each drawing thereunder and the obligations of the Borrowers under this Agreement and the other Loan Documents with respect thereto. In consideration thereof, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent for the account of the Issuer its Revolving Credit Commitment Percentage of each disbursement made by the Issuer with respect to a L/C or Banker's Acceptance which is not reimbursed by the Borrowers. Each Revolving Credit Lender acknowledges and agrees that its obligations hereunder are absolute and unconditional and shall not be effected by any event or circumstance whatsoever, including the existence of a Default or the suspension of the Revolving Credit. Any action taken or omitted by the Issuer under or in connection with a L/C or Banker's Acceptance, if taken or omitted in the absence of gross negligence, actual bad faith, or willful misconduct, shall not create for the Issuer any resulting liability to any Revolving Credit Lender.
(f) The Borrowers shall reimburse the Issuer for the amount of any honoring of a drawing under an L/C or Banker's Acceptance on the same day on which such honoring takes place in immediately available funds in U.S. dollars. The Administrative Agent, without the request of any Borrower, may advance under the Revolving Credit (and charge to the Loan Account) the amount of any honoring of any L/C or Banker's Acceptance and other amount for which any Borrower, the Issuer, or the Revolving Credit Lenders become obligated on account of, or in respect to, any L/C or Banker's Acceptance. Such advance shall be a Base Margin Loan and shall be made whether or not any Borrower is in Default or such advance would result in an OverLoan. Such action shall not constitute a waiver of the Administrative Agent's rights under Section 2.11(b) hereof.
2.18. FEES FOR L/CS AND BANKER'S ACCEPTANCES.
(a) The applicable Borrowers shall pay the Administrative Agent, for the account of the Revolving Credit Lenders, on the first day of each calendar month, in arrears, a fee (each, an "L/C Fee") equal to the following per annum percentages of the average Stated Amount of the following categories of L/Cs outstanding during the subject month:
(i) As to standby L/Cs, the Applicable Margin for LIBOR Loans.
(ii) As to documentary L/Cs, fifty percent (50%) of the Applicable Margin for LIBOR Loans.
(iii) After the occurrence and during the continuance of an Event of Default, at the option of the Administrative Agent (or at the instruction of the SuperMajority Lenders), the L/C Fee shall be increased for any L/Cs which from time to time are not cash collateralized in the amounts required in accordance with the provisions of this Agreement by an amount equal to two percent (2%) per annum.
(b) The applicable Borrowers shall pay the Administrative Agent, for the account of the Revolving Credit Lenders, on the first day of each month, in arrears, a fee (each, a "Banker's Acceptance Fee") equal to fifty percent (50%) of the Applicable Margin for LIBOR Loans of the average Stated Amount of the Banker's Acceptances outstanding during the subject month. After the occurrence and during the continuance of an Event of Default, at the option of the Administrative Agent (or at the instruction of the SuperMajority Lenders), the Banker's Acceptance Fee shall be increased for any Banker's Acceptances which from time to time are not cash collateralized in the amounts required in accordance with the provisions of this Agreement by an amount equal to two percent (2%) per annum.
(c) In addition to the fees to be paid as provided in Subsections 2.18(a) and 2.18(b), above, the Borrowers shall pay to the Administrative Agent (or to the Issuer, if so requested by Administrative Agent), on demand, all issuance, processing, negotiation, amendment, and administrative fees and other amounts charged by the Issuer on account of, or in respect to, any L/C or Banker's Acceptance issued.
(d) If any change in Applicable Law shall either:
(i) impose, modify or deem applicable any reserve, special deposit or similar requirements against letters of credit heretofore or hereafter issued by any Issuer or with respect to which any Revolving Credit Lender or any Issuer has an obligation to lend to fund drawings under any L/C or any Banker's Acceptance; or
(ii) impose on any Issuer any other condition or requirements relating to any such letters of credit or banker's acceptance;
and the result of any event referred to in Section 2.18(d)(i) or 2.18(d)(ii), above, shall be to increase the cost to any Revolving Credit Lender or to any Issuer of issuing or maintaining any L/C or Banker's Acceptance (which increase in cost shall be the result of such Issuer's reasonable allocation among that Revolving Credit Lender's or Issuer's letter of credit customers
of the aggregate of such cost increases resulting from such events), then, upon demand by the Administrative Agent and delivery by the Administrative Agent to the Lead Borrower of a certificate of an officer of the subject Revolving Credit Lender or the subject Issuer describing such change in law, executive order, regulation, directive, or interpretation thereof, its effect on such Revolving Credit Lender or such Issuer, and the basis for determining such increased costs and their allocation, the Borrowers shall immediately pay to the Administrative Agent, from time to time as specified by the Administrative Agent, such amounts as shall be sufficient to compensate the subject Revolving Credit Lender or the subject Issuer for such increased cost. Any Revolving Credit Lender's or any Issuer's determination of costs incurred under Section 2.18(d)(i) or 2.18(d)(ii), above, and the allocation, if any, of such costs among the Borrowers and other letter of credit customers of such Revolving Credit Lender or such Issuer, if done in good faith and made on an equitable basis and in accordance with such officer's certificate, shall, absent manifest error, be presumed to be accurate.
2.19. CONCERNING L/C'S AND BANKER'S ACCEPTANCES.
(a) None of the Issuer, the Issuer's correspondents, any Revolving Credit Lender, the Administrative Agent, or any advising, negotiating, or paying bank with respect to any L/C or Banker's Acceptance shall be responsible in any way for:
(i) The performance by any beneficiary under any L/C or Banker's Acceptance of that beneficiary's obligations to any Borrower.
(ii) The form, sufficiency, correctness, genuineness, authority of any Person signing; falsification; or the legal effect of; any documents called for under any L/C or Banker's Acceptance if (with respect to the foregoing) such documents on their face appear to be in order.
(b) The Issuer may honor, as complying with the terms of any L/C or any Banker's Acceptance and of any drawing thereunder, any drafts or other documents otherwise in order, but signed or issued by an administrator, executor, conservator, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, or other legal representative of the party authorized under such L/C or Banker's Acceptance to draw or issue such drafts or other documents.
(c) The Issuer may reject any drafts and documents presented under any L/C or any Banker's Acceptance which are discrepant in any manner, notwithstanding any prior course of dealing by the Issuer in honoring drafts under L/Cs or Banker's Acceptances.
(d) Unless otherwise agreed to, in the particular instance, each Borrower hereby authorizes any Issuer to:
(i) Select an advising bank, if any.
(ii) Select a paying bank, if any.
(iii) Select a negotiating bank.
(e) All directions, correspondence, and funds transfers relating to any L/C or any Banker's Acceptance are at the risk of the Borrowers. The Issuer shall have discharged the Issuer's obligations under any L/C or Banker's Acceptance which, or the drawing under which, includes payment instructions, by the initiation of the method of payment called for in, and in accordance with, such instructions (or by any other commercially reasonable and comparable method). None of the Administrative Agent, any Revolving Credit Lender, or the Issuer shall have any responsibility for any inaccuracy, interruption, error, or delay in transmission or delivery by post, telegraph or cable, or for any inaccuracy of translation.
(f) The Administrative Agent's, each Revolving Credit Lender's, and the Issuer's rights, powers, privileges and immunities specified in or arising under this Agreement are in addition to any heretofore or at any time hereafter otherwise created or arising, whether by statute or rule of law or contract.
(g) Except to the extent otherwise expressly provided hereunder or agreed to in writing by the Issuer and the Lead Borrower, documentary L/Cs will be governed by the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce, Publication No. 500, and standby L/Cs will be governed by International Standby Practices ISP98 (adopted by the International Chamber of Commerce on April 6, 1998) and any respective subsequent revisions thereof.
(h) The obligations of the Borrowers under this Agreement with respect to L/Cs and Banker's Acceptances are absolute, unconditional, and irrevocable and shall be performed strictly in accordance with the terms hereof under all circumstances, whatsoever including, without limitation, the following:
(i) Any lack of validity or enforceability or restriction, restraint, or stay in the enforcement of this Agreement, any L/C, any Banker's Acceptance, or any other agreement or instrument relating thereto.
(ii) Any Borrower's consent to any amendment or waiver of, or consent to the departure from, any L/C or any Banker's Acceptance.
(iii) The existence of any claim, set-off, defense, or other right which any Borrower may have at any time against the beneficiary of any L/C or Banker's Acceptance.
(iv) Any good faith honoring of a drawing under any L/C or Banker's Acceptance, which drawing possibly could have been dishonored based upon a strict construction of the terms of the L/C or Banker's Acceptance.
2.20. CHANGED CIRCUMSTANCES.
(a) The Administrative Agent may advise the Lead Borrower that the Administrative Agent has made the good faith determination (which determination shall be final and conclusive) of any of the following:
(i) Adequate and fair means do not exist for ascertaining the rate for LIBOR Loans.
(ii) The continuation of or conversion of any Revolving Credit Loan to a LIBOR Loan has been made impracticable or unlawful by the occurrence of a contingency that materially and adversely affects the applicable market or the compliance by the Administrative Agent or any Revolving Credit Lender in good faith with any Applicable Law.
(iii) The indices on which the interest rates for LIBOR Loans are based shall no longer represent the effective cost to the Administrative Agent or any Revolving Credit Lender for U.S. dollar deposits in the interbank market for deposits in which it regularly participates.
(b) In the event that the Administrative Agent advises the Lead Borrower of an occurrence described in Section 2.20(a), then, until the Administrative Agent notifies the Lead Borrower that the circumstances giving rise to such notice no longer apply:
(i) The obligation of the Administrative Agent or each Revolving Credit Lender to make loans of the type affected by such changed circumstances or to permit the Lead Borrower to select the affected interest rate as otherwise applicable to any Revolving Credit Loans shall be suspended.
(ii) Any notice which the Lead Borrower had given the Administrative Agent with respect to any LIBOR Loan, the time for action with respect to which has not occurred prior to the Administrative Agent's having given notice pursuant to Section 2.20(a), shall be deemed at the option of the Administrative Agent to not having been given.
2.21. DESIGNATION OF LEAD BORROWER AS BORROWERS' AGENT.
(a) Each Borrower hereby irrevocably designates and appoints the Lead Borrower as that Borrower's agent to obtain loans and advances under the Revolving Credit, the proceeds of which shall be available to each Borrower for those uses as those set forth in Section 2.1(d) and to request the issuance of L/Cs and Banker's Acceptances for such Borrower. The Borrowers further irrevocably designate and appoint Retail Ventures Imports, Inc. as their agent to request the issuance of L/Cs and Banker's Acceptances for such Borrower (to the extent that the Lead Borrower does not make such request). As the disclosed principal for its agent, each Borrower shall be obligated to each Agent and each Revolving Credit Lender on account of loans and advances so made to, and L/Cs and Banker's Acceptances so issued for it under the Revolving Credit as if made directly by the Revolving Credit Lenders to that Borrower,
notwithstanding the manner by which such loans and advances are recorded on the books and records of the Lead Borrower and of any Borrower.
(b) Each Borrower recognizes that credit available to it under the Revolving Credit is in excess of and on better terms than it otherwise could obtain on and for its own account and that one of the reasons therefor it is joining in the credit facility contemplated herein with all other Borrowers. Consequently, each Borrower hereby assumes and agrees to fully, faithfully, and punctually discharge all Liabilities of all of the Borrowers and hereby guarantees the payment and performance of all Liabilities of all other Borrowers. In any action or proceeding with respect to any Borrower involving any Applicable Law, including, without limitation, state or federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of such Borrower as a guarantor hereunder would otherwise be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability hereunder, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by such Borrower, any Lender, the Agent or any other Person, be automatically limited and reduced to the highest amount which is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding after taking into account such Borrower's right of indemnification and contribution from each other Borrower under Section 20.23(d) hereof.
(c) The proceeds of each loan and advance provided under the Revolving Credit which is requested by the Lead Borrower shall be deposited into the Operating Account of the applicable Borrower. Neither the Administrative Agent nor any Revolving Credit Lender shall have any obligation to see to the application of such proceeds.
2.22. REVOLVING CREDIT LENDERS' COMMITMENTS.
(a) Subject to Section 17.1 (which provides for assignments and assumptions of commitments), each Revolving Credit Lender's "REVOLVING CREDIT COMMITMENT PERCENTAGE", and "REVOLVING CREDIT DOLLAR COMMITMENT" (respectively so referred to herein) is set forth on EXHIBIT 2.22, annexed hereto.
(b) The obligations of each Revolving Credit Lender are several and not joint. No Revolving Credit Lender shall have any obligation to make any loan under the Revolving Credit in excess of either of the following:
(i) That Revolving Credit Lender's Revolving Credit Commitment Percentage of the subject loan or advance or of DSW Availability.
(ii) Any loan which, when aggregated with all other loans made by that Revolving Credit Lender under the Revolving Credit and then outstanding, exceed that Revolving Credit Lender's Revolving Credit Dollar Commitment.
(c) No Revolving Credit Lender shall have any liability to the Borrowers on account of the failure of any other Revolving Credit Lender to provide any loan or advance under
the Revolving Credit nor any obligation to make up any shortfall which may be created by such failure.
(d) The Revolving Credit Dollar Commitments, Revolving Credit Commitment Percentages, and identities of the Revolving Credit Lenders may be changed, from time to time by the reallocation or assignment of Revolving Credit Dollar Commitments and Revolving Credit Commitment Percentages amongst the Revolving Credit Lenders or with other Persons who determine to become "Revolving Credit Lenders", provided, however unless an Event of Default has occurred and is continuing (in which event, no consent of any Borrower is required) any assignment to a Person (other than to another Lender or to any domestic Affiliate of any Lender) shall be subject to the prior consent of the Lead Borrower (not to be unreasonably withheld or delayed), which consent will be deemed given unless the Lead Borrower provides the Administrative Agent with written objection, not more than five (5) Business Days after the Administrative Agent shall have given the Lead Borrower written notice of a proposed assignment), provided that the Lead Borrower's consent shall in no event be required with respect to the following: (i) an assignment to another Revolving Credit Lender; or (ii) an assignment to a transferee of a Revolving Credit Lender's rights in and to a material portion of such Revolving Credit Lender's portfolio of asset based credit facilities.
(e) Upon written notice given the Lead Borrower from time to time by the Administrative Agent, of any assignment or allocation referenced in Section 2.22(d):
(i) Each Borrower shall execute one or more replacement Revolving Credit Notes to reflect such changed Revolving Credit Dollar Commitments, Revolving Credit Commitment Percentages, and identities and shall deliver such replacement Revolving Credit Notes to the Administrative Agent (which promptly thereafter shall deliver to the Lead Borrower the Revolving Credit Notes so replaced) provided however, in the event that a Revolving Credit Note is to be exchanged following its acceleration or the entry of an order for relief under the Bankruptcy Code with respect to any Borrower, the Administrative Agent, in lieu of causing the Borrowers to execute one or more new Revolving Credit Notes, may issue the Administrative Agent's certificate confirming the resulting Revolving Credit Dollar Commitments and Revolving Credit Commitment Percentages.
(ii) Such change shall be effective from the effective date specified in such written notice and any Person added as a Revolving Credit Lender shall have all rights and privileges of a Revolving Credit Lender hereunder thereafter as if such Person had been a signatory to this Agreement and any other Loan Document to which a Revolving Credit Lender is a signatory and any Person removed as a Revolving Credit Lender shall be relieved of any obligations or responsibilities of a Revolving Credit Lender hereunder thereafter.
2.23. PAYMENTS.
(a) The Borrowers shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or
reimbursement of drawings under L/Cs, Banker's Acceptances, or otherwise) prior to 2:00 p.m. on the date when due, in immediately available funds, without setoff or counterclaim. Any amounts received after such time on any date may, in the reasonable, good faith discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 1965 East Sixth Street, Cleveland, Ohio (or such other address as to which the Lead Borrower shall have been advised by the Administrative Agent), except payments to be made directly to the Issuer as expressly provided herein. If any payment under any Loan Document shall be due on a day that is not a Business Day, except with respect to LIBOR Loans, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars.
(b) If and to the extent that any payment owed by the Borrowers to the Administrative Agent, any Revolving Credit Lender or the Issuer is not made when due, each Borrower authorizes the Administrative Agent, the Revolving Credit Lenders and the Issuer, as the case may be, to charge from time to time against any or all of the deposit accounts of the Borrowers any amount so due. Notice of such charge shall be given promptly to the Lead Borrower.
ARTICLE 3 - CONDITIONS PRECEDENT:
As a condition to the effectiveness of this Agreement, the establishment of the Revolving Credit, and the making of the first loan under the Revolving Credit, each of the documents respectively described in Sections 3.1 through and including 3.4, (each in form and substance satisfactory to the Administrative Agent) shall have been delivered to the Administrative Agent, and the conditions respectively described in Sections 3.5 through and including 3.21, shall have been satisfied:
3.1. CORPORATE DUE DILIGENCE.
(a) Certificates of corporate good standing for each Loan Party, respectively issued by the Secretary of State for the state in which that Loan Party is incorporated.
(b) Certificates of due qualification, in good standing, issued by the Secretary(ies) of State of each State for each Borrower reasonably required by the Administrative Agent.
(c) Certificates of each Loan Party's Secretary of the due adoption, continued effectiveness, and setting forth the texts of, each corporate resolution adopted in connection with the establishment of the loan arrangement contemplated by the Loan Documents and attesting to the true signatures of each Person authorized as a signatory to any of the Loan Documents.
3.2. OPINIONS. Opinions of counsel to the Loan Parties in form and substance satisfactory to the Administrative Agent.
3.3. ADDITIONAL DOCUMENTS. Such additional instruments and documents as any Agent or its counsel may reasonably require or request including, without limitation, the documents described on EXHIBIT 3.3 hereto.
3.4. OFFICERS' CERTIFICATES. Certificates executed by the Chief Executive Officer and the Chief Financial Officer of the Lead Borrower in form and substance satisfactory to the Administrative Agent.
3.5. REPRESENTATIONS AND WARRANTIES. Each of the representations made by or on behalf of each Loan Party in this Agreement or in any of the other Loan Documents or in any other report, statement, document, or paper provided by or on behalf of each Loan Party shall be true and complete as of the date as of which such representation or warranty was made.
3.6. MINIMUM DAY ONE AVAILABILITY. After giving effect to the first funding under the Revolving Credit, any charges to the Loan Account made in connection with the establishment of the credit facility contemplated hereby, L/Cs and Banker's Acceptances to be issued at, or immediately subsequent to, such establishment, Excess Availability shall not be less than $60,000,000.00.
3.7. SENIOR NON-CONVERTIBLE FACILITY. The Loan Parties shall have been released from all liabilities and obligations under the Senior Non-Convertible Facility and all collateral security granted by the Loan Parties for the Senior Non-Convertible Facility shall have been released, discharged and terminated to the satisfaction of the Agent.
3.8. DSW INITIAL PUBLIC OFFERING.
The initial public offering of the capital stock of DSW shall have been consummated and proceeds received, all of which shall be satisfactory in form and substance to the Agent.
3.9. REPAYMENT OF EXISTING INDEBTEDNESS. The Administrative Agent shall have received a payoff letter from CCM as agent under the CCM Term Loan Facilities as well as a tender of releases and discharges of all collateral security for the CCM Term Loan Facilities, each in form and substance satisfactory to the Administrative Agent. Such Indebtedness shall be repaid on the Effective Date.
3.10. CONSENTS. All necessary consents and approvals to the transactions contemplated hereby shall have been obtained and shall be satisfactory to the Administrative Agent.
3.11. APPRAISALS AND COMMERCIAL FINANCE EXAMINATIONS. The Collateral Agent shall have received (a) appraisals of the Borrowers' Inventory by a third party appraiser acceptable to the Collateral Agent, and (b) a commercial finance examination with respect to the Lead Borrower and its Subsidiaries, including a review of the Borrowers' books and records, each in form and substance satisfactory to the Collateral Agent.
3.12. FINANCIAL INFORMATION.
The Administrative Agent shall have received such financial information and projections as the Agent may reasonably request, including, without limitation, audited financial statements for each of fiscal years 2001, 2002, 2003 and 2004, monthly and annual financial projections of the Borrowers through January, 2010. All such financial information shall be reasonably satisfactory to the Agent and shall reflect the Borrowers' ability to perform their obligations hereunder.
3.13. MATERIAL AGREEMENTS. The consummation of the transactions contemplated hereby shall not (a) violate any applicable law, statute, rule or regulation or (b) conflict with, or result in a default or event of default under, any material agreement of any Loan Party. There shall not have occurred any default of any material contract or agreement of any Loan Party. The Agent shall be satisfied with the corporate structure and organizational documents of the Borrowers and the Parent.
3.14. LITIGATION. There shall not be pending any litigation or other proceeding, the result of which could reasonably be expected to have a Material Adverse Effect.
3.15. PERFECTION OF ENCUMBRANCES.
(a) The Collateral Agent shall have received results of searches or other evidence reasonably satisfactory to the Collateral Agent (in each case dated as of a date reasonably satisfactory to the Collateral Agent) indicating the absence of Encumbrances, except for Permitted Encumbrances, on the assets of the Loan Parties, except for which termination statements and releases reasonably satisfactory to the Collateral Agent are being tendered concurrently with such extension of credit.
(b) The Collateral Agent shall have received all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create or perfect the first priority Encumbrances intended to be created under the Loan Documents (subject to Permitted Encumbrances having priority over the Encumbrance of the Collateral Agent pursuant to operation of law) and all such documents and instruments shall have been so filed (or provision made therefor), registered or recorded to the satisfaction of the Collateral Agent.
3.16. ALL FEES AND EXPENSES PAID. All fees due at or immediately after the first funding under the Revolving Credit and all costs and expenses incurred by the Agent and the Lead Arranger in connection with the establishment of the credit facility contemplated hereby (including the fees and expenses of counsel to the Agent and the Lead Arranger) shall have been paid in full.
3.17. CASH MANAGEMENT. The Loan Parties shall have established cash management systems reasonably acceptable to the Agent, including, without limitation, compliance with the provisions of Sections 8.1(b), 8.2(b), and 8.3(a).
3.18. INSURANCE. The Agent shall be reasonably satisfied with the insurance maintained by the Loan Parties and the Agent shall have received an endorsement to such
insurance policies naming the Agent as loss payee and/or additional insured and otherwise satisfactory in form and substance to the Agent.
3.19. SEPARATION AND SERVICE AGREEMENTS.
The Agent shall have received an executed copy of, and shall be reasonably satisfied with, the separation and service agreements between the Loan Parties and the Parent and the Parent's other Subsidiaries.
3.20. NO LOAN PARTY IN DEFAULT. No Loan Party is in Default.
3.21. NO ADVERSE CHANGE. Each Agent shall be reasonably satisfied that any financial statements delivered to it fairly present the business and financial condition of the Borrowers and their Subsidiaries, and that there has been no material adverse change in the assets, business, financial condition, or income of the Borrowers and their Subsidiaries since the April, 2005 financial information delivered to the Agent.
3.22. CERTAIN CHANGES.
(a) No material changes in governmental regulations or policies affecting the Loan Parties, the Agents, the Lead Arranger or any Revolving Credit Lender involved in this transaction shall have occurred prior to the Effective Date.
(b) There shall not have occurred prior to the Effective Date any disruption or material adverse change in the financial or capital markets in general that would, in the reasonable opinion of the Administrative Agent, have a material adverse effect on the market for loan syndications or adversely affecting the syndication of the Revolving Credit Loans.
3.23. BENEFIT OF CONDITIONS PRECEDENT. The conditions set forth in this Article 3 are for the sole benefit of the Agent and each Revolving Credit Lender and may be waived by the Administrative Agent in whole or in part without prejudice to the Agent or any Revolving Credit Lender.
No document shall be deemed delivered to the Agents or any Revolving Credit Lender until received and accepted by the Administrative Agent at its offices in Cleveland, Ohio. Under no circumstances shall this Agreement take effect until executed and accepted by the Agents.
ARTICLE 4 - GENERAL REPRESENTATIONS AND WARRANTIES
To induce each Revolving Credit Lender to establish the credit facility contemplated herein and to induce the Revolving Credit Lenders to provide loans and advances under the Revolving Credit (each of which loans shall be deemed to have been made in reliance thereupon) the Loan Parties, in addition to all other representations and warranties made by any Loan Party in any other Loan Document, make those representations and warranties set forth below.
4.1. DUE ORGANIZATION. AUTHORIZATION. NO CONFLICTS
(a) Each Loan Party presently is in good standing as a corporation or other entity under the laws of the State in which it is organized, and, except as described on EXHIBIT 4.1, annexed hereto, is duly qualified and in good standing in every other State in which, by reason of the nature or location of each Loan Parties' assets or operation of each of their respective business, such qualification may be necessary, except where the failure to so qualify would not have a Material Adverse Effect.
(b) Each Loan Party's respective organizational identification number assigned to it by the State of its incorporation and its respective federal employer identification number, as of the Effective Date, is listed on EXHIBIT 4.1, annexed hereto.
(c) Each Loan Party has all requisite power and authority to execute and deliver all Loan Documents to which that Loan Party is a party and has retain all requisite power to perform all Liabilities.
(d) The execution and delivery by each Loan Party of each Loan Document to which it is a party; each Loan Party's consummation of the transactions contemplated by such Loan Documents (including, without limitation, the creation of Collateral Interests by that Loan Party to secure the Liabilities); and each Loan Party's performance under those of the Loan Documents to which it is a party:
(i) Have been duly authorized by all necessary action.
(ii) Do not contravene in any material respect any provision of any Requirement of Law or obligation of that Loan Party.
(iii) Will not result in the creation or imposition of, or the obligation to create or impose, any Encumbrance upon any assets of that Loan Party pursuant to any Requirement of Law or obligation, except pursuant to the Loan Documents.
(e) The Loan Documents have been duly executed and delivered by each Loan Party and are the legal, valid and binding obligations of each Loan Party, enforceable against each Loan Party in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.
4.2. TRADE NAMES.
(a) EXHIBIT 4.2, annexed hereto, is a listing as of the Effective Date, of:
(i) All names under which, to the knowledge of the Lead Borrower, any Loan Party has conducted its business in the past five (5) years.
(ii) All Persons with whom any Loan Party has consolidated or merged, or from whom any Loan Party has acquired in a single transaction or in a series of related transactions substantially all of such Person's assets in the past five (5) years.
4.3. INTELLECTUAL PROPERTY.
(a) Each Loan Party owns and possesses, or has the right to use all material patents, industrial designs, trademarks, trade names, trade styles, brand names, service marks, logos, copyrights, trade secrets, know-how, confidential information, and other intellectual or proprietary property of any third Person necessary for that Loan Party's conduct of that Loan Party's business.
(b) The conduct by each Loan Party of that Loan Party's business does not, to the knowledge of the Loan Parties, presently infringe (nor will any Loan Party conduct its business in the future so as to infringe) the patents, industrial designs, trademarks, trade names, trade styles, brand names, service marks, logos, copyrights, trade secrets, know-how, confidential information, or other intellectual or proprietary property of any third Person, except where such infringement is not reasonably likely to have a Material Adverse Effect.
4.4. LOCATIONS.
(a) The Collateral, and the books, records, and papers of the Loan
Parties pertaining thereto, are kept and maintained solely (i) at those
locations which are listed on EXHIBIT 4.4, annexed hereto (or as supplemented
pursuant to the terms of this Agreement), which Exhibit includes, with respect
to each such location, the name and address of the landlord on the Lease which
covers such location (or an indication that a Loan Party owns the subject
location) and of all service bureaus with which any such records are maintained
or (ii) at such other locations as to which the Lead Borrower has provided ten
(10) days prior written notice to the Administrative Agent of the intended
location of the Collateral, books, records, and papers thereat.
(b) No tangible personal property of any Loan Party is in the care or
custody of any third party or stored or entrusted with a bailee or other third
party, except (i) as otherwise disclosed pursuant to, or permitted by, this
Section 4.4, or (ii) for Inventory in an amount not to exceed $1,000,000 at Cost
in the aggregate at any time in the ordinary course of business.
4.5. ENCUMBRANCES.
(a) The Loan Parties are the owners of the Collateral free and clear of all Encumbrances other than any Permitted Encumbrance.
(b) No Loan Party has possession of any property on consignment to that Loan Party from a third party which is not a Loan Party, except (i) as of the Effective Date, those listed on EXHIBIT 4.5(B), annexed hereto and (ii) those as to which the Loan Parties notify the Administrative Agent in accordance with the provisions of Section 6.3 hereof.
4.6. INDEBTEDNESS. The Loan Parties do not have any Indebtedness other than:
(a) Permitted Indebtedness; and
(b) A Loan Party's guaranty of Permitted Indebtedness of another Loan Party.
4.7. INSURANCE.
(a) EXHIBIT 4.7, annexed hereto, is a schedule of all insurance policies owned by the Loan Parties or under which any Loan Party is the named insured as of the Effective Date. Each of such policies is in full force and effect. To the best of such Loan Party's knowledge, neither the issuer of any such policy nor any Loan Party is in default or violation of any such policy.
4.8. LICENSES Each material license, distributorship, franchise, and similar agreement issued to, or to which any Loan Party is a party is in full force and effect. Each material license agreement to which a Loan Party is a party as of the Effective Date is listed on EXHIBIT 4.8, annexed hereto. No party to any such license or agreement is in default or violation thereof, except where such default or failure is not reasonably likely to have a Material Adverse Effect. No Loan Party has received any notice or threat of cancellation of any such license or agreement.
4.9. LEASES. EXHIBIT 4.9, annexed hereto, is a schedule of all presently effective Capital Leases as of the Effective Date. (EXHIBIT 4.4 includes a list of all other presently effective Leases). Each of such Leases and Capital Leases is in full force and effect. No Loan Party, to the best of its knowledge, is in default or violation of any such Lease or Capital Lease, except where such violation is not reasonably likely to have a Material Adverse Effect. No Loan Party has received any notice or threat of cancellation of any such Lease or Capital Lease, which cancellation (together with all other similar cancellations) is reasonably likely to have a Material Adverse Effect.
4.10. REQUIREMENTS OF LAW. Each Loan Party and each of its Subsidiaries is in compliance with all Requirements of Law except where the failure of such compliance will not have a Material Adverse Effect. No Loan Party has received any notice of any violation of any Requirement of Law (other than of a violation which does not have a Material Adverse Effect), which violation has not been cured or otherwise remedied.
4.11. LABOR RELATIONS.
(a) As of the Effective Date, no Loan Party is a party to any collective bargaining or other labor contract except as listed on EXHIBIT 4.11, annexed hereto.
(b) There is not presently pending and, to any Loan Party's knowledge, there is not threatened any of the following except to the extent any of the following is not reasonably likely to have a Material Adverse Effect:
(i) Any strike, slowdown, picketing, work stoppage, or employee grievance process.
(ii) Except as described on EXHIBIT 4.17 annexed hereto, any proceeding against or affecting any Loan Party relating to the alleged violation of any Applicable Law pertaining to labor relations or before National Labor Relations Board, the Equal Employment Opportunity Commission, or any comparable governmental body, organizational activity, or other labor or employment dispute against or affecting any Loan Party, which, if determined adversely to that Loan Party is reasonably likely to have a Material Adverse Effect on that Loan Party.
(iii) Any lockout of any employees by any Loan Party (and no such action is contemplated by any Loan Party).
(iv) Any application for the certification of a collective bargaining agent.
(c) No event has occurred or circumstance exists which could provide the basis for any work stoppage or other labor dispute which would be reasonably likely to have a Material Adverse Effect.
(d) Each Loan Party:
(i) Has complied with all Applicable Law relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health, and plant closing, except where such non-compliance is not reasonably likely to have a Material Adverse Effect.
(ii) Is not liable for the payment of compensation, damages,
taxes, fines, penalties, or other amounts, however designated, for that
Loan Party's failure to comply with any Applicable Law referenced in
Section 4.11(d)(i) which is reasonably likely to have a Material Adverse
Effect.
4.12. TAXES.
(a) With respect to the Loan Parties' federal, state, and local tax liability and obligations:
(i) To the best of its knowledge, the Lead Borrower, in compliance with all Applicable Law, has properly filed all material returns due to be filed up to the date of this Agreement.
(ii) Except as described on EXHIBIT 4.12:
(A) Currently, no Loan Party has received from any taxing authority any request to perform any examination of or with respect to any Loan Party nor any other written or verbal notice in any way relating to any claimed failure by any Loan Party to comply with all Applicable Law concerning payment
of any taxes or other amounts in the nature of taxes in excess of $500,000 in any one instance.
(B) No agreement exists which waives or extends any statute of limitations applicable to the right of any taxing authority to assert a deficiency or make any other claim for or in respect to federal income taxes.
(C) No issue has been raised in any tax examination of any Loan Party which reasonably could be expected to result in the assertion of a deficiency for any fiscal year open for examination, assessment, or claim by any taxing authority in excess of $500,000 in the aggregate for all Loan Parties.
(b) The Loan Parties have paid, as they become due and payable, all taxes and unemployment contributions and other charges of any kind or nature levied, assessed or claimed against any Loan Party or the Collateral by any Person whose claim could result in an Encumbrance upon any asset of any Loan Party or by any governmental authority except for (i) taxes, contributions and charges which are being contested in good faith by such Loan Party, by appropriate proceedings diligently instituted and conducted, without danger to any material risk to the Collateral, and adequate reserves or appropriate provision, if any, as shall be required in conformity with GAAP, shall have been made therefor, and provided that no Encumbrance has been filed on account thereof, and (ii) taxes, contributions, and other charges which the Loan Parties have inadvertently not paid when due as long as (A) the aggregate amount thereof does not exceed $500,000, and (B) no Encumbrance has been filed on account thereof, and (C) promptly upon the date an Authorized Officer obtains knowledge or should have obtained knowledge thereof, the Borrowers make payment of such taxes, contributions or charges; has properly exercised any trust responsibilities imposed upon any Loan Party by reason of withholding from employees' pay or by reason of any Loan Parties' receipt of sales tax or other funds for the account of any third party; has timely made all contributions and other payments as may be required pursuant to any Employee Benefit Plan now or hereafter established by any Loan Party; and has timely filed all tax and other returns and other reports with each Governmental Authority to whom any Loan Party is obligated to so file, except for such returns or reports which the Loan Parties have inadvertently not paid when due as long as (A) the aggregate amount of taxes, assessments or charges with respect to such returns does not exceed $500,000, and (B) no Encumbrance has been filed on account thereof, and (C) promptly upon the date an Authorized Officer obtains knowledge or should have obtained knowledge thereof, the Borrowers file such returns and/or reports and make payment of any amounts required to be paid on account thereof.
4.13. NO MARGIN STOCK. No Loan Party is engaged in the business of extending credit for the purpose of purchasing or carrying any margin stock (within the meaning of Regulations U, T, and X of the Board of Governors of the Federal Reserve System of the United States).
4.14. INVESTMENT AND HOLDING COMPANY STATUS. No Loan Party is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.
4.15. ERISA.
Except to the extent that such action is not reasonably likely to have a Material Adverse Effect, neither any Loan Party nor any ERISA Affiliate has within the past three (3) years:
(i) Violated or failed to be in full compliance with any Loan Party's Employee Benefit Plan.
(ii) Failed timely to file all reports and filings required by ERISA to be filed by any Loan Party.
(iii) Engaged in any nonexempt "prohibited transactions" or "reportable events" (respectively as described in ERISA).
(iv) Engaged in, or committed, any act such that a tax or penalty reasonably could be imposed upon any Loan Party on account thereof pursuant to ERISA.
(v) Incurred any material accumulated funding deficiency within the meaning of ERISA.
(vi) Terminated any Employee Benefit Plan such that a lien could be asserted against any assets of any Loan Party on account thereof pursuant to ERISA.
(vii) Failed to make any required contribution or payment to, or made a complete or partial withdrawal from, any Employee Benefit Plan which is a multiemployer plan within the meaning of Section 4001(a) of ERISA.
4.16. HAZARDOUS MATERIALS.
(a) Except as set forth on EXHIBIT 4.16(A) hereto, (i) the operations of each Loan Party are in material compliance with all Environmental Laws; (ii) to the best of each Loan Party's knowledge, there has been no Release at any of the properties owned or operated by any Loan Party or a predecessor in interest, or at any disposal or treatment facility which received Hazardous Materials generated by any Loan Party or any predecessor in interest which is reasonably likely to have a Material Adverse Effect; (iii) no Environmental Action has been asserted against any Loan Party or any predecessor in interest nor does any Loan Party have knowledge or notice of any threatened or pending Environmental Action against any Loan Party or any predecessor in interest which is reasonably likely to have a Material Adverse Effect; (iv) no Loan Party has knowledge of any Environmental Actions that have been asserted against any facilities that may have received Hazardous Materials generated by any Loan Party or any predecessor in interest which are reasonably likely to have a Material Adverse Effect; (v) to the best of such Loan Party's knowledge, no property now or formerly owned or operated
by a Loan Party has been used as a treatment or disposal site for any Hazardous Material; (vi) no Loan Party has failed to report to the proper Governmental Authority any Release which is required to be so reported by any Environmental Laws which is reasonably likely to have a Material Adverse Effect; (vii) each Loan Party holds all licenses, permits and approvals required under any Environmental Laws in connection with the operation of the business carried on by it, except for such licenses, permits and approvals as to which a Loan Party's failure to maintain or comply with is not reasonably likely to have a Material Adverse Effect; and (viii) no Loan Party has received any notification pursuant to any Environmental Laws that (A) any work, repairs, construction or Capital Expenditures are required to be made in respect as a condition of continued compliance with any Environmental Laws, or any license, permit or approval issued pursuant thereto or (B) any license, permit or approval referred to above is about to be reviewed, made, subject to limitations or conditions, revoked, withdrawn or terminated, in each case, except as is not reasonably likely to have a Material Adverse Effect.
4.17. LITIGATION. Except as described in EXHIBIT 4.17, annexed hereto, there is not presently pending or threatened by or against any Loan Party any suit, action, proceeding, or investigation which, if determined adversely to any Loan Party, would have a Material Adverse Effect. As of the Effective Date, no Loan Party is the holder of any Commercial Tort Claim other than as described on EXHIBIT 4.17.
4.18. ADEQUACY OF DISCLOSURE.
(a) All quarterly and annual financial statements furnished to the Administrative Agent and to each Revolving Credit Lender by the Loan Parties on a consolidated basis have been prepared in accordance with GAAP consistently applied (provided however, that unaudited financial statements are subject to normal year end adjustments and to the absence of footnotes). All financial statements furnished to the Administrative Agent and to each Revolving Credit Lender by the Loan Parties present fairly the condition of the Loan Parties at the date(s) thereof and the results of operations and cash flows for the period(s) covered (provided however, that unaudited financial statements are subject to normal year end adjustments and to the absence of footnotes). There has been no change in the Consolidated financial condition, results of operations, or cash flows of the Loan Parties since the date(s) of such financial statements, other than changes which are not reasonably likely to have a Material Adverse Effect.
(b) No Loan Party has any material contingent obligation or material obligation under any Lease or Capital Lease which is not noted in the Loan Parties' annual Consolidated financial statements furnished to the Administrative Agent and to each Revolving Credit Lender prior to the execution of this Agreement.
(c) No document, instrument, agreement, or paper given to the Agents or to any Revolving Credit Lender by or on behalf of each Loan Party or any guarantor of the Liabilities in connection with the execution of this Agreement by the Agents and to each Revolving Credit Lender contains any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements therein not misleading. There is no fact known to any Loan Party which has, or which, in the foreseeable future is reasonably likely to have a Material Adverse Effect.
4.19. UNRESTRICTED SUBSIDIARIES. Each of the Unrestricted Subsidiaries is inactive or in the process of being liquidated or dissolved.
4.20. NO BANKRUPTCY FILING. No Loan Party is contemplating, or has any knowledge of any other Person contemplating, taking any of the actions described in Section 11.11 or 11.12 hereof. No Loan Party is contemplating the liquidation of all or a major portion of such Loan Party's assets.
4.21. PATRIOT ACT. Each Borrower is in compliance, in all material respects, with the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Patriot Act"). No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
4.22. FOREIGN ASSET CONTROL REGULATIONS. Neither of the advance of the Loans nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. Section 1 et seq., as amended) (the "Trading With the Enemy Act") or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the "Foreign Assets Control Regulations") or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the "Executive Order") and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore, none of the Borrowers or their Affiliates (a) is or will become a "blocked person" as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) engages or will engage in any dealings or transactions, or be otherwise associated, with any such "blocked person" or in any manner violative of any such order.
ARTICLE 5 - GENERAL COVENANTS
5.1. PAYMENT AND PERFORMANCE OF LIABILITIES. The Loan Parties shall pay each payment Liability when due (or when demanded, if payable on demand) and shall promptly, punctually, and faithfully perform each other Liability.
5.2. MAINTENANCE OF EXISTENCE
(a) Each Loan Party shall remain in good standing as a corporation or other entity under the laws of the state in which it is organized, and shall hereafter remain duly qualified and in good standing in every other state in which, by reason of the nature or location of each Loan Parties' assets or operation of each of their respective business, such qualification may be necessary, except where the failure to so qualify would not have a Material Adverse Effect.
(b) No Loan Party shall change its state of organization; any organizational identification number assigned to that Loan Party by that state; or that Loan Party's federal taxpayer identification number, without the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld.
(c) Except where the failure to observe, maintain, or perform the following is not reasonably likely to have a Material Adverse Effect:
(i) All customary formalities regarding the corporate existence of each Loan Party will be observed.
(ii) In accordance with its present practices, each Loan Party will accurately maintain its organizational documents separate from those of any Affiliate of such Loan Party and any other Person.
5.3. TRADE NAMES.
The Lead Borrower will provide the Administrative Agent with not less than ten (10) days prior written notice (with reasonable particularity) of any change to any Loan Party's name from that under which that Loan Party is conducting its business at the execution of this Agreement and will not effect such change unless each Loan Party is then in compliance with all provisions of this Agreement.
5.4. LOCATIONS.
(a) The Collateral, and the books, records, and papers of the Loan
Parties pertaining thereto, will be kept and maintained solely (i) at those
locations which are listed on EXHIBIT 4.4, annexed hereto (or as supplemented
pursuant to the terms of this Agreement), which Exhibit includes, with respect
to each such location, the name and address of the landlord on the Lease which
covers such location (or an indication that a Loan Party owns the subject
location) and of all service bureaus with which any such records are maintained
or (ii) at such other locations as to which the Lead Borrower has provided ten
(10) days prior written notice to the Administrative Agent of the intended
location of the Collateral, books, records, and papers thereat.
(b) No Loan Party shall remove any of the Collateral from those locations described in Section 4.4(a) except for the following purposes:
(i) To accomplish sales of Inventory in the ordinary course of business.
(ii) To move Inventory or other Collateral from one such location to another such location.
(iii) To utilize such of the Collateral as is removed from such locations in the ordinary course of business.
(c) No Loan Party will:
(i) Alter, modify, or amend any Lease in a manner which is reasonably likely to have a Material Adverse Effect.
(ii) Other than leased departments and similar arrangements with third parties, commit to open or close, or open or close, any location at which any Loan Party maintains, offers for sales, or stores any of the Collateral, in any fiscal year such that the actual number of stores of all Borrowers in the aggregate (A) exceeds by ten (10) the number of stores reflected on the Business Plan for such fiscal year, or (B) is more than ten (10) fewer than the number of stores reflected on the Business Plan for such fiscal year (without giving effect to any new stores which the Business Plan projected to be opened or closed, but which have not in fact been opened or closed)
(d) No tangible personal property of any Loan Party shall hereafter be placed under such care, custody, storage, or entrustment, except (i) as otherwise disclosed pursuant to, or permitted by, this Section 5.5, or (ii) for Inventory in an amount not to exceed $1,000,000 at Cost in the aggregate at any time in the ordinary course of business.
5.5. ENCUMBRANCES.
(a) The Loan Parties shall remain, the owners of the Collateral free and clear of all Encumbrances other than any Permitted Encumbrance.
(b) No Loan Party shall have possession of any property on consignment
to that Loan Party from a third party that is not a Loan Party, except (i) those
listed on EXHIBIT 4.5(B), annexed hereto and (ii) those as to which the Loan
Parties notify the Administrative Agent in accordance with the provisions of
Section 6.3 hereof.
5.6. INDEBTEDNESS. The Loan Parties shall not hereafter have any Indebtedness other than:
(a) Permitted Indebtedness; and
(b) A Loan Party's guaranty of Permitted Indebtedness of another Loan Party.
5.7. INSURANCE.
(a) The Lead Borrower shall provide the Administrative Agent with prompt written notice of any change in the insurance policies owned by the Loan Parties or under which any Loan Party is the named insured from those in effect as of the Effective Date.
(b) The Loan Parties shall have and maintain at all times insurance covering such risks, in such amounts, containing such terms, in such form, for such periods, and written by the companies presently providing such insurance, or such other companies as may be selected by the Lead Borrower and are satisfactory to the Agent (whose consent shall not be unreasonably withheld).
(c) All insurance carried by the Loan Parties shall provide for a minimum of thirty (30) days' prior written notice of cancellation to the Administrative Agent and all such insurance which covers the Collateral shall
(i) Include an endorsement in favor of the Collateral Agent, which endorsement shall provide that the insurance, to the extent of the Collateral Agent' interest therein, shall not be impaired or invalidated, in whole or in part, by reason of any act or neglect of any Loan Party or by the failure of any Loan Party to comply with any warranty or condition of the policy.
(ii) Not include an endorsement in favor of any other Person (other than those Persons intended as beneficiaries of any builder's risk insurance, and the holder of any Permitted Encumbrances).
(d) The Lead Borrower shall furnish the Collateral Agent from time to time, upon request of the Collateral Agent, with certificates or other evidence satisfactory to the Collateral Agent regarding compliance by the Loan Parties with the foregoing requirements.
(e) In the event of the failure by the Loan Parties to maintain insurance as required herein, any Agent, at its option and the Loan Parties' expense, may obtain such insurance at the expense of the Loan Parties, provided, however, an Agent's obtaining of such insurance shall not constitute a cure or waiver of any Event of Default occasioned by the Loan Parties' failure to have maintained such insurance.
5.8. LICENSES The Loan Parties shall (a) with respect to existing licensors and licensees, use its best efforts to, and (b) with respect to license agreements entered into after the Effective Date, shall, cause the licensors and licensees to enter into such tri-party or estoppel agreements as any Agent may reasonably request.
5.9. REQUIREMENTS OF LAW. Each Loan Party shall and shall cause its Subsidiaries to be in compliance with, and shall hereafter comply with and use its assets in compliance with, all Requirements of Law except where the failure of such compliance will not have a Material Adverse Effect.
5.10. LABOR RELATIONS.
The Lead Borrower shall provide the Administrative Agent with prompt written notice of any additional or amended collective bargaining or other labor contract entered into after the Effective Date.
5.11. MAINTAIN PROPERTIES. The Loan Parties shall:
(a) Keep the Collateral in good order and repair (ordinary reasonable wear and tear and insured casualty excepted).
(b) Not suffer or cause the waste or destruction of any material part of the Collateral.
(c) Not use any of the Collateral in violation of any policy of insurance thereon.
(d) Not sell, lease, or otherwise dispose of any of the Collateral, other than the following:
(i) The use of Inventory in compliance with this Agreement.
(ii) The disposal of Equipment which is obsolete, worn out, or damaged beyond repair, or no longer useful in the Loan Parties' businesses.
(iii) Permitted Dispositions.
(iv) The turning over to the Administrative Agent of all Receipts as provided herein.
(v) The use of the Collateral to pay Liabilities arising in the ordinary course.
5.12. TAXES.
The Loan Parties shall: pay, as they become due and payable, all taxes and
unemployment contributions and other charges of any kind or nature levied,
assessed or claimed against any Loan Party or the Collateral by any Person whose
claim could result in an Encumbrance upon any asset of any Loan Party or by any
Governmental Authority, provided, however, that (i) no such taxes, contributions
and charges are required to be paid if being contested in good faith by such
Loan Party, by appropriate proceedings diligently instituted and conducted,
without danger to any material risk to the Collateral, and adequate reserves or
appropriate provision, if any, as shall be required in conformity with GAAP,
shall have been made therefor, and provided that no Encumbrance has been filed
on account thereof, and (ii) the inadvertent failure of a Loan Party to pay any
such taxes, contributions, and other charges when due shall not constitute an
Event of Default hereunder as long as (A) the aggregate amount thereof does not
exceed $500,000, and (B) no Encumbrance has been filed on account thereof, and
(C) promptly upon the date an Authorized Officer obtains knowledge or should
have obtained knowledge thereof, the Borrowers make payment of such taxes,
contributions or charges; properly exercise any trust responsibilities imposed
upon any Loan Party by reason of withholding from employees' pay or by reason of
any Loan Parties' receipt of sales tax or other funds for the account of any
third party; timely make all contributions and other payments as may be required
pursuant to any Employee Benefit Plan now or hereafter established by any Loan
Party; and timely file all tax and other returns and other reports with each
Governmental Authority to whom any Loan Party is obligated to so file, provided
that the inadvertent failure of a Loan Party to file any such returns or reports
when due shall not constitute an Event of Default hereunder as long as (A) the
aggregate amount of taxes, assessments or charges with respect to
such returns does not exceed $500,000, and (B) no Encumbrance has been filed on account thereof, and (C) promptly upon the date an Authorized Officer obtains knowledge or should have obtained knowledge thereof, the Borrowers file such returns and/or reports and make payment of any amounts required to be paid on account thereof.
5.13. NO MARGIN STOCK No part of the proceeds of any borrowing hereunder will be used at any time to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock.
5.14. ERISA.
Neither any Loan Party nor any ERISA Affiliate shall ever engage in any action of the type described in Section 4.15, if as a result thereof, such Loan Party or ERISA Affiliate will, or could reasonably be expected to, incur liability that could reasonably likely have a Material Adverse Effect.
5.15. HAZARDOUS MATERIALS.
(a) Each Loan Party shall, except where a violation or failure is not
reasonably likely to have a Material Adverse Effect: (i) keep any property
either owned or operated by it or any of its Subsidiaries free of any
Environmental Liens; (ii) comply, and cause each of its Subsidiaries to comply,
in all material respects with Environmental Laws and provide to the Collateral
Agent any documentation of such compliance which the Collateral Agent may
reasonably request; (iii) provide the Collateral Agent written notice within
five (5) days of any Release of a Hazardous Material in excess of any reportable
quantity from or onto property at any time owned or operated by it or any of its
Subsidiaries and take any remedial actions required to abate said Release; (iv)
provide the Collateral Agent with written notice within ten (10) days of the
receipt of any of the following: (A) notice that an Environmental Lien has been
filed against any property of any Loan Party or any of its Subsidiaries; (B)
commencement of any Environmental Action or notice that an Environmental Action
will be filed against any Loan Party or any of its Subsidiaries; and (C) notice
of a violation, citation or other administrative order which, to the extent that
any of the foregoing are reasonably likely to have a Material Adverse Effect and
(v) defend, indemnify and hold harmless the Agent and the Revolving Credit
Lenders and their transferees, and their respective employees, agents, officers
and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including, without
limitation, attorney and consultant fees, investigation and laboratory fees,
court costs and litigation expenses) arising out of (A) the generation,
presence, disposal, Release or threatened Release of any Hazardous Materials on,
under, in, originating or emanating from any property at any time owned or
operated by any Loan Party or any of its Subsidiaries (or its predecessors in
interest or title), (B) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to the presence or
Release of such Hazardous Materials, (C) any request for information,
investigation, lawsuit brought or threatened, settlement reached or order by a
Governmental Authority relating to the presence or Release of such Hazardous
Materials, (D) any violation of any Environmental Law and/or (E) any
Environmental Action filed against the Agent or any Revolving Credit Lender, to
the extent that any of the foregoing is reasonably likely to have a Material
Adverse Effect.
(b) No Loan Party shall knowingly or negligently permit the use, handling, generation, storage, treatment, Release or disposal of Hazardous Materials at any property owned or leased by it or any of its Subsidiaries, except in compliance with Environmental Laws and so long as such use, handling, generation, storage, treatment, Release or disposal of Hazardous Materials is not reasonably likely to result in a Material Adverse Effect.
5.16. DIVIDENDS. INVESTMENTS. CORPORATE ACTION. No Loan Party shall:
(a) Pay any cash dividend or make any other distribution in respect of
any class of that Loan Party's capital stock, (other than dividends payable to
another Loan Party or payable solely in the capital stock of such paying Loan
Party). Notwithstanding anything to the contrary contained herein, dividends
(other than dividends payable solely in the capital stock of another Loan Party)
shall only be payable to the Parent by any other Loan Party to the extent not
otherwise in violation of the Loan Documents and in any event in an amount not
to exceed $5,000,000 (less loans and advances to the Parent made under clause
(k) of the definition of Permitted Indebtedness) in the aggregate after the date
hereof.
(b) Own, redeem, retire, purchase, or acquire any of any Loan Party's capital stock; provided that the Loan Parties may make cash payments for any such purposes if:
(i) no Default or Event of Default shall have occurred and be continuing at the time of declaration or payment thereof; and
(ii) after giving effect to the making any such cash payment, the aggregate amount so expended for such purposes subsequent to the Effective Date does not exceed $1,500,000; and
(iii) after giving effect to the making any such cash payment, the aggregate amount so expended for such purposes in any fiscal year of the Borrowers does not exceed $500,000.
(c) Invest in or purchase any stock or securities or rights to purchase any such stock or securities, of any Person other than a Permitted Investment, or a Permitted Acquisition.
(d) Merge or consolidate or be merged or consolidated with or into any other corporation or other entity, other than in connection with a Permitted Acquisition (provided that a Loan Party is the surviving, continuing or resulting corporation) or of one Loan Party into another Loan Party; provided that, if no Default or Event of Default shall have occurred and be continuing or would result therefrom, the following shall be permitted:
(i) The merger, consolidation or amalgamation of any wholly-owned Subsidiary with or into a Borrower or with or into another wholly-owned Subsidiary of a Borrower, so long as in any merger, consolidation or amalgamation involving a Borrower, the Borrower is the surviving, continuing or resulting corporation;
(ii) The liquidation or dissolution of any Unrestricted Subsidiary.
(iii) Any acquisition which is a Permitted Acquisition, provided that all of the applicable conditions contained in the definition of the term Permitted Acquisition are satisfied.
(iv) Notwithstanding the foregoing, the Parent may not merge or consolidate or be merged or consolidated with or into any other Person without the prior written consent of the Administrative Agent.
(e) Subordinate any debts or obligations owed to that Loan Party by any third party to any other debts owed by such third party to any other Person.
(f) Enter into leases of property or assets not constituting Permitted Acquisitions, unless such leases are not otherwise in violation of this Agreement.
(g) Organize or create any Affiliate other than in connection with a Permitted Acquisition.
(h) Acquire any assets other than in the ordinary course and conduct of that Loan Party's business as conducted at the execution of this Agreement, other than in connection with a Permitted Acquisition or as otherwise permitted in this Agreement.
5.17. LOANS. No Loan Party shall make any loans or advances to, nor acquire the Indebtedness of, any Person, provided, however, the foregoing does not prohibit any of the following:
(a) Advance payments made to that Loan Party's suppliers in the ordinary course;.
(b) Advances to that Loan Party's officers, employees, and salespersons with respect to reasonable expenses to be incurred by such officers, employees, and salespersons for the benefit of that Loan Party, which expenses are properly substantiated by the Person seeking such advance and properly reimbursable by that Loan Party;
(c) Loans and advances to employees for business-related moving expenses, costs of replacement homes, business machines or supplies, automobiles and other similar expenses, in each case incurred in the ordinary course of business not to exceed (together with loans and advances under Section 5.17(d) and investments permitted under clause (m) of the definition of Permitted Investments) $6,000,000 in the aggregate outstanding to all employees at any one time;
(d) Loans and advances to that Loan Party's officers, employees, and salespersons in connection with any employment agreements or arrangements, or any stock options or option plans not to exceed $6,000,000 (together with loans and advances under Section 5.17(c) and investments permitted under clause (m) of the definition of Permitted Investments) in the aggregate outstanding to all employees at any one time;
(e) To the extent not permitted by the foregoing clauses, the existing loans and advances, described on EXHIBIT 5.17(E) hereto;
(f) Intercompany loans and advances or other Intercompany Indebtedness
(i) existing on the date hereof and described on EXHIBIT 5.17(F) hereof, (ii)
hereafter made amongst any Loan Parties within the same Borrower, (iii)
hereafter made by any Borrower to any other Borrower, (iv) hereafter made by any
Loan Party to any of its wholly owned Subsidiaries which are also Loan Parties;
and (v) hereafter made to the Parent by any other Loan Party to the extent any
of the same constitutes Permitted Indebtedness under clause (k) of the
definition of Permitted Indebtedness or to any Loan Party by the Parent,
provided that such intercompany loans shall be evidenced by such documentation
as the Collateral Agent may require.
(g) Loans and advances of a Person outstanding at the time such Person becomes a Subsidiary as a result of a Permitted Acquisition, provided that any such loans or advances were not made at the time of or in contemplation of the acquisition of such Person by a Loan Party or any Subsidiaries.
(h) Any other loans and advances to or for the benefit of any Person which (i) is not itself a Loan Party, (ii) are not otherwise permitted by the foregoing clauses, and (iii) are made after the Effective Date, which loans and advances have been approved in advance by the Administrative Agent.
5.18. PROTECTION OF ASSETS. The Administrative Agent, in the Administrative
Agent's reasonable, good faith discretion, and from time to time, may discharge
any tax or Encumbrance on any of the Collateral, or take any other action which
the Administrative Agent may deem reasonably necessary or desirable to repair,
insure, maintain, preserve, collect, or realize upon any of the Collateral. The
Administrative Agent shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken
except where there is a specific finding in a judicial proceeding (in which the
Administrative Agent has had an opportunity to be heard), from which finding no
further appeal is available, that the Administrative Agent had acted in actual
bad faith, in willful misconduct, or in a grossly negligent manner. The Loan
Parties shall pay to the Administrative Agent, on demand, or the Administrative
Agent, in its reasonable, good faith discretion, may add to the Loan Account,
all amounts paid or incurred by the Administrative Agent pursuant to this
Section 5.18.
5.19. LINE OF BUSINESS; CONDUCT OF BUSINESS.
(a) No Loan Party shall engage in any business other than the business in which it is currently engaged or a business reasonably related thereto, or any retail lease department operation.
(b) The Loan Parties shall conduct their business substantially in accordance with the Business Plan, or as otherwise approved by the Administrative Agent pursuant to Section 6.10, below. The foregoing shall not obligate the Borrowers to achieve any specific financial performance and no financial performance covenants are intended to be imposed thereby.
5.20. AFFILIATE TRANSACTIONS.
(a) Except as set forth in that certain confidential side letter from the Lead Borrower to the Administrative Agent and for loans which may be made between Loan Parties permitted pursuant to Section 5.17, above, no Loan Party shall make any payment, nor give any value to any Affiliate except for leases, goods and services with such Affiliate for a price and on terms which shall be in the ordinary course of business at prices and on terms and conditions no less favorable to that Loan Party than those which would have been charged and imposed in an arms length transaction from unrelated third parties, except (i) sales of goods to an Affiliate for use or distribution outside of the United States of America which complies with the any applicable legal requirements of the Internal Revenue Code of 1986 and the Treasury Regulations, each as amended from time to time, provided that such sales shall not exceed $500,000 in the aggregate in any fiscal year of the Borrowers, (ii) loans, advances and other payments to officers and directors as part of their compensation which are entered into in the ordinary course of business and which are not otherwise prohibited under the Loan Documents, (iii) other dividends and distributions to officers, directors and shareholders otherwise permitted under this Agreement, or (iv) transactions between or among the Loan Parties not prohibited hereunder and not involving any other Affiliate.
(b) The Loan Parties shall not (i) without the prior written consent of the Administrative Agent, amend, modify or waive any of the provisions of the instruments, documents or agreements described in the confidential side letter referred to in clause (a) above, the effect of which is to increase the payments or value to be furnished by a Loan Party to any Affiliate (other than for ordinary increases under such instruments, documents and agreements in the ordinary course of business, for which the Loan Parties are presently obligated to make payment in such instrument, document or agreement as in effect on the Effective Date) or which would cause such instruments, documents or agreements to be at prices and on terms and conditions less favorable to that Loan Party than those which would have been charged and imposed in an arms length transaction from unrelated third parties, or (ii) make any payments under such instruments, documents or agreements in advance of the date when due (other than payments made to Affiliates to fund obligations or anticipated claims under workers' compensation, medical plans, employee benefit plans or agreements, and other similar plans, all in accordance with current practices).
(c) The Borrowers shall use their best efforts to cause their Affiliates to execute and deliver to the Agent and the Revolving Credit Lenders such documentation as the Administrative Agent may reasonably require to evidence the Affiliates' agreement with the provisions of this Section 5.20.
5.21. ADDITIONAL SUBSIDIARIES. If any additional Subsidiary is formed or acquired after the Effective Date, the Lead Borrower will notify the Collateral Agent thereof and (a) the Loan Parties will cause such Subsidiary to become a Borrower or Facility Guarantor hereunder, as determined by the Collateral Agent, within three (3) Business Days after such Subsidiary is formed or acquired and promptly take such actions to create and perfect Encumbrances on such Subsidiary's assets to secure the Liabilities as the Collateral Agent or the Majority Lenders shall reasonably request and (b) if any shares of capital stock or Indebtedness of such Subsidiary are
owned by or on behalf of any Loan Party, the Loan Parties will cause such shares and promissory notes evidencing such Indebtedness to be pledged within three (3) Business Days after such Subsidiary is formed or acquired. Nothing contained herein shall be deemed a modification of any other provisions of this Agreement restricting the formation or acquisition of Subsidiaries by the Loan Parties.
5.22. FURTHER ASSURANCES.
(a) No Loan Party will hereafter acquire any asset or any interest in property (other than real property, including Leasehold Interests therein) which is not, immediately upon such acquisition, subject to such a perfected Collateral Interest in favor of the Collateral Agent to secure the Liabilities (subject only to Permitted Encumbrances).
(b) Each Loan Party shall execute and deliver to the Collateral Agent such instruments, documents, and papers, and shall do all such things from time to time hereafter as the Collateral Agent may reasonably request to carry into effect the provisions and intent of this Agreement; to protect and perfect the Collateral Agent' Collateral Interests in the Collateral; and to comply with all applicable statutes and laws, and facilitate the collection of the Receivables Collateral. Each Loan Party shall execute all such instruments as may be reasonably required by the Collateral Agent with respect to the recordation and/or perfection of the Collateral Interests created or contemplated herein.
(c) Each Loan Party hereby designates the Collateral Agent as and for that Loan Party's true and lawful attorney, with full power of substitution, to sign and file any financing statements in order to perfect or protect the Collateral Agent' Collateral Interests in the Collateral.
(d) This Agreement constitutes an authenticated record which authorizes the Collateral Agent to file such financing statements as the Collateral Agent determine as appropriate to perfect or protect the Collateral Interests created by this Agreement.
5.23. ADEQUACY OF DISCLOSURE.
(a) No document, instrument, agreement, or paper hereafter given to the Agents or to any Revolving Credit Lender by or on behalf of each Loan Party or any guarantor of the Liabilities in connection with the execution of this Agreement by the Agents and to each Revolving Credit Lender contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements therein not misleading.
5.24. NO RESTRICTIONS ON LIABILITIES. No Loan Party shall enter into or directly or indirectly become subject to any agreement which prohibits or restricts, in any manner, any Loan Party's:
(a) Creation of, and granting of Collateral Interests in favor of the Collateral Agent.
(b) Incurrence of Liabilities.
5.25. UNRESTRICTED SUBSIDIARIESNo Unrestricted Subsidiary shall, at any time, have assets in excess of $500,000 in the aggregate.
ARTICLE 6 - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:
6.1. MAINTAIN RECORDS. The Loan Parties shall:
(a) At all times, keep proper books of account, in which full, true, and accurate entries shall be made of all of the Loan Parties' financial transactions, all in accordance with GAAP applied consistently with prior periods to fairly reflect the Consolidated financial condition of the Loan Parties at the close of, and its results of operations for, the periods in question.
(b) Timely provide the Administrative Agent with those financial reports, statements, and schedules required by this Article 6 or otherwise, each of which reports, statements and schedules shall be prepared, to the extent applicable, in accordance with GAAP applied consistently with prior periods to fairly reflect the Consolidated financial condition of the Loan Parties at the close of, and the results of operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the Collateral including, without limitation, accurate current stock, cost, and sales records of its Inventory for each Borrower, accurately and sufficiently itemizing and describing the kinds, types, and quantities of Inventory and the cost and selling prices thereof.
(d) At all times, retain (i) Deloitte and Touche, LLP, or such other nationally recognized independent certified public accountants who are reasonably satisfactory to Schottenstein Stores Corporation (as long as it remains in Control of the Borrowers) or (ii) or such other independent certified public accountants who are reasonably satisfactory to Schottenstein Stores Corporation (as long as it remains in Control of the Borrowers) and the Administrative Agent, and instruct such accountants, subject to the terms of such accountants' internal policies, and subject to the confidentiality provisions of this Agreement, to fully cooperate with, and be available to, the Administrative Agent to discuss the Loan Parties' financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such accountants, as may be raised by the Administrative Agent.
(e) Not change any Loan Party's fiscal year.
6.2. ACCESS TO RECORDS.
(a) Each Loan Party shall accord each Agent with reasonable access during normal business hours from time to time as each Agent may require to all properties owned by or over which any Loan Party has control. Each Agent shall have the right, and each Loan Party will permit each Agent from time to time as such Agent may request, to examine, inspect, copy,
and make extracts from any and all of the Loan Parties' books, records, electronically stored data, papers, and files. Each Loan Party shall make that Loan Party's copying facilities available to the Agent.
(b) Each Loan Party hereby authorizes each Agent to:
(i) Inspect, copy, duplicate, review, cause to be reduced to hard copy, run off, draw off, and otherwise use any and all computer or electronically stored information or data which relates to any Loan Party. Each Loan Party shall request full cooperation with each Agent from any service bureau, contractor, accountant, or other Person.
(ii) Verify at any time the Collateral or any portion thereof, including verification with Account Debtors, and/or with each Loan Party's computer billing companies, collection agencies, and accountants.
(c) Any Agent from time to time may designate one or more representatives to exercise such Agent's rights under this Section 6.2 as fully as if such Agent were doing so, provided that the Agent shall not designate a Person which is in a Competitive Business.
6.3. PROMPT NOTICE TO ADMINISTRATIVE AGENT.
(a) The Lead Borrower shall provide the Administrative Agent with written notice promptly upon the occurrence of any of the following events, which written notice shall be with reasonable particularity as to the facts and circumstances in respect of which such notice is being given:
(i) Any change in any Loan Party's President, chief executive officer, chief operating officer, and chief financial officer (without regard to the title(s) actually given to the Persons discharging the duties customarily discharged by officers with those titles).
(ii) Any ceasing of any Loan Party's payment of the debts of that Loan Party generally as they mature, in the ordinary course, to its creditors (other than its ceasing of making of such payments on account of a dispute which, if adversely determined to the Loan Parties is not reasonably likely to have a Material Adverse Effect).
(iii) Any failure by any Loan Party to pay rent at any of that Loan Party's locations, which failure continues for more than three (3) days following the last day on which such rent was payable unless such failure is not reasonably likely to have a Material Adverse Effect.
(iv) Any material adverse change in the business, operations, or financial affairs of any Borrower.
(v) The occurrence of any Default.
(vi) Any intention on the part of any Loan Party to discharge that Loan Party's present independent accountants or any withdrawal or resignation by such independent accountants from their acting in such capacity (as to which, see Subsection 6.1(d)).
(vii) Any litigation which, if determined adversely to any Loan Party, is reasonably likely to have a Material Adverse Effect.
(viii) Any intention of a Borrower to enter into a consignment arrangement or licensing or other similar agreement (whether for intellectual property, leased departments in stores or otherwise) with any other Person (other than a Loan Party).
(ix) Any Material Accounting Changes.
(x) Any event, occurrence or circumstance not specifically described herein which is reasonably likely to have a Material Adverse Effect.
(xi) Any Loan Party's entering into a license agreement after the Effective Date.
(xii) Any Loan Party's entering into a Capital Lease after the Effective Date.
(b) The Lead Borrower shall:
(i) Provide the Administrative Agent, when so distributed, with copies of any materials distributed to all shareholders of the Lead Borrower (qua such shareholders).
(ii) Provide the Administrative Agent:
(A) When filed, copies of all filings with the SEC. Such copies may be provided in electronic format.
(B) When received, copies of all correspondence from the SEC, other than routine general communications from the SEC.
(C) Should any of the information on any of the Exhibits hereto become misleading in any material respect, the Borrower shall promptly advise the Administrative Agent in writing with such revisions or updates as may be necessary or appropriate to update or correct the same; provided however that no such Exhibit shall be deemed to have been amended, modified or superseded by any such correction or update, nor shall any breach of representation or warranty resulting from the inaccuracy or incompleteness of such Exhibit be deemed to
have been cured or waived, unless and until the Administrative Agent, in its discretion shall have accepted in writing such revisions.
(iii) At the request of the Administrative Agent, from time to time, provide the Administrative Agent with copies of all advertising (including copies of all print advertising and duplicate tapes of all video and radio advertising).
(iv) Provide the Administrative Agent, when received by any Loan Party, with a copy of any management letter or similar communications from any independent accountant of any Loan Party.
6.4. WEEKLY REPORTS. Weekly, on Friday of each week (as of the then immediately preceding Saturday) the Lead Borrower shall provide the Administrative Agent with borrowing base certificates (each, a "BORROWING BASE CERTIFICATE") (in the form of EXHIBIT 6.4 annexed hereto, as such form may be revised from time to time by the Administrative Agent), and sales audit reports and flash collateral reports (each in such form as may be specified from time to time by the Collateral Agent). Such reports may be sent to the Administrative Agent by facsimile transmission, provided that the original thereof is forwarded to the Administrative Agent on the date of such transmission.
6.5. MONTHLY REPORTS. Monthly, the Lead Borrower shall provide the Administrative Agent with those financial statements and reports described in EXHIBIT 6.5, annexed hereto, at the times set forth in such exhibit.
6.6. QUARTERLY REPORTS. Quarterly, within forty-five (45) days following the end of each of the Loan Parties' fiscal quarters, the Lead Borrower shall provide the Administrative Agent with the following:
(a) An original counterpart of a management prepared financial statement (which shall be prepared in the same manner and using the same assumptions as set forth in the forecasts furnished to, and approved by, the Administrative Agent pursuant to the provisions of Section 6.10(c) hereof) for the Loan Parties on a consolidated basis, for the fiscal quarter most recently ended, and for the period from the beginning of the Loan Parties' then current fiscal year through the end of the subject quarter, with comparative information for the same period of the previous fiscal year, which statement shall include a balance sheet, statement of operations, and cash flows and comparisons for the corresponding quarter of the then immediately previous year, as well as to the Loan Party's forecast.
(b) The officer's compliance certificate described in Section 6.8.
6.7. ANNUAL REPORTS.
(a) Annually, within ninety (90) days following the end of the Loan Parties' fiscal year, the Lead Borrower shall furnish the Administrative Agent with the following:
(i) An original signed counterpart of the Loan Parties' Consolidated annual financial statement, which statement shall have been prepared by, and bear the unqualified opinion of, the Lead Borrower's independent certified public accountants (i.e. said statement shall be "certified" by such accountants) and shall include, at a minimum (with comparative information for the then prior fiscal year) a balance sheet, statement of operations, statement of changes in shareholders' equity, and cash flows.
(ii) A consolidating annual financial statement for the Loan Parties which shall include (with comparative information for the then prior fiscal year) a balance sheet and statement of operations.
(iii) The officer's compliance certificate described in Section 6.8.
(b) No later than fifteen (15) days prior to the end of each of the Loan Parties' fiscal years, the Lead Borrower shall give written notice to such independent certified accountants (with a copy of such notice, when sent, to the Administrative Agent) that such annual financial statement will be delivered by the Lead Borrower to the Administrative Agent (for subsequent distribution to each Revolving Credit Lender), and that the Lead Borrower has been advised that the Administrative Agent and each Revolving Credit Lender will rely thereon with respect to the administration of, and transactions under, the credit facility contemplated by this Agreement.
6.8. OFFICERS' CERTIFICATES. The Lead Borrower shall cause either the Lead Borrower's Chief Executive Officer, President, Executive Vice President, Chief Financial Officer, Controller, or Treasurer (collectively, an "Authorized Officer"), in each instance, to provide such Person's certificate with the monthly, quarterly and annual financial statements to be provided pursuant to this Agreement, which certificate shall:
(a) Indicate that (i) with respect to the Consolidated financial statement, the subject statement was prepared in accordance with GAAP consistently applied, and (ii) with respect to all financial statements, presents fairly the financial condition of the applicable Loan Parties at the close of, and the results of the applicable Loan Parties' operations and cash flows (where such cash flows are required to be provided) for, the period(s) presented, subject, however to the following:
(A) Usual year end adjustments (this exception shall not be included in the certificate which accompanies such annual statement).
(B) Material Accounting Changes (in which event, such certificate shall include a schedule (in reasonable detail) of the effect of each such Material Accounting Change.
(b) Indicate either that (i) no Default has occurred and is continuing, or (ii) if such an event has occurred, its nature (in reasonable detail) and the steps (if any) being taken or contemplated by the Loan Parties to be taken on account thereof.
6.9. INVENTORIES, APPRAISALS, AND AUDITS.
(a) The Collateral Agent, at the reasonable expense of the Loan Parties, may participate in and/or observe each scheduled physical count of Inventory which is undertaken on behalf of any Loan Party.
(b) The Loan Parties, at their own expense, shall cause not less than
one (1) physical inventory of each of Borrower to be undertaken in each twelve
(12) month period during which this Agreement is in effect conducted by such
inventory takers as are reasonably satisfactory to the Collateral Agent and
following such methodology as may be reasonably satisfactory to the Collateral
Agent.
(i) The Lead Borrower, within forty-five (45) days following the completion of such inventory, shall provide the Collateral Agent with a reconciliation of the results of each such inventory (as well as of any other physical inventory undertaken by any Loan Party) and shall post such results to the Loan Parties' stock ledger and, as applicable to the Loan Parties' other financial books and records.
(ii) The Collateral Agent, in their reasonable, good faith discretion, if any Event of Default has occurred and is continuing, may cause such additional inventories to be taken as the Collateral Agent determine (each, at the expense of the Loan Parties).
(c) The Collateral Agent may obtain appraisals of the Collateral (copies of which, subject to the approval of the appraiser, shall be provided to the Lead Borrower promptly upon receipt thereof), from time to time (in all events, at the Loan Parties' expense) conducted by Hilco Appraisal Services, LLC or such appraisers as are satisfactory to the Collateral Agent. The Collateral Agent may conduct one (1) appraisal (in each event, at the Loan Parties' expense) of the Collateral during any twelve (12) month period during which this Agreement is in effect, but in their reasonable, good faith discretion, during the occurrence and continuance of an Event of Default, may undertake additional such appraisals (likewise at the Loan Party's expense) during such period.
(d) The Collateral Agent may conduct one (1) commercial finance field examinations (in each event, at the Loan Parties' expense) of the Loan Parties' books and records during any twelve (12) month period during which this Agreement is in effect, but in their reasonable, good faith discretion during the occurrence and continuance of an Event of Default, may undertake additional such audits (likewise at the Loan Party's expense) during such period.
(e) Notwithstanding anything to the contrary herein contained, upon the occurrence of any event or circumstance which is reasonably likely to have a material adverse effect on the business, operations, property, assets, or financial condition of any Borrower, the limitations set forth in clauses (c) and (d) on the number of appraisals and commercial finance examinations which the Agent may cause to be undertaken for such Borrower only shall be inapplicable and the Agent may undertake as many appraisals and commercial finance examinations of such Borrower with such frequency as the Agent may deem reasonably
appropriate and necessary (none of which shall be included in determining the number of appraisals and commercial finance examinations the Agent may undertake with respect to other Borrowers).
(f) The Collateral Agent from time to time may undertake "mystery shopping" (so-called) visits to all or any of the Loan Parties' business premises.
6.10. ADDITIONAL FINANCIAL INFORMATION.
(a) In addition to all other information required to be provided pursuant to this Article 6, the Lead Borrower promptly shall provide the Agent with such other and additional information concerning the Loan Parties, the Collateral, the operation of the Loan Parties' business, and the Loan Parties' financial condition, including original counterparts of financial reports and statements, as any Agent may from time to time reasonably request from the Lead Borrower.
(b) The Lead Borrower shall, upon the Administrative Agent's request, provide the Administrative Agent, from time to time hereafter, with updated forecasts of the Loan Parties' anticipated performance and operating results for the current fiscal year. Such forecasts shall be in a format consistent with the format previously provided to the Administrative Agent.
(c) In all events, the Lead Borrower, no sooner than ninety (90) nor later than sixty (60) days prior to the end of each of the Loan Parties' fiscal years, shall provide the Administrative Agent with an updated and extended forecast which shall go out at least through the end of the then next fiscal year and shall include a statement of operations, balance sheet, and statement of cash flow, by month, each Consolidated and each prepared in conformity with GAAP and consistent with the Loan Parties' then current accounting practices.
(d) When available the "Annual Budget", as approved by the Lead Borrowers' Board of Directors, shall be provided to the Administrative Agent. The Annual Budget shall be subject to the approval of the Administrative Agent (whose approval shall not be unreasonably withheld) only if the Annual Budget varies in a material way from the Business Plan for such fiscal year.
(e) Each Loan Party recognizes that all commercial finance examinations, inventories, analysis, financial information, and other materials which the Agent may obtain, develop, or receive with respect to the Loan Parties (other than appraisals and inventories received from third parties) are confidential to the Agent and that, except as otherwise provided herein, no Loan Party is entitled to receipt of any of such commercial finance examinations, inventories, analysis, financial information, and other materials, nor copies or extracts thereof or therefrom.
6.11. INFORMATION DELIVERED PURSUANT TO ARTICLE 6.
All information required to be delivered pursuant to Article 6 may be delivered by and in electronic format.
6.12. FINANCIAL COVENANT.
If the aggregate outstanding Revolving Credit Loans, together with the Stated Amount of all outstanding L/Cs at any time exceeds ninety percent (90%) of the lesser of the Revolving Credit Ceiling or the DSW Borrowing Base, the Loan Parties shall not permit the fixed charge coverage ratio, tested monthly as of the last day of each month, on a trailing twelve month basis, to be less than 1.1:1.0. Such covenant shall be tested unless and until the aggregate outstanding Revolving Credit Loans, together with the Stated Amount of all outstanding L/Cs at any time, for ninety (90) consecutive Business Days is less than ninety percent (90%) of the lesser of the Revolving Credit Ceiling or the DSW Borrowing Base.
ARTICLE 7 - USE OF COLLATERAL:
7.1. USE OF INVENTORY COLLATERAL.
(a) No Loan Party shall engage in any of the following with respect to its Inventory:
(i) Any sale other than for fair consideration in the conduct of the Loan Parties' business in the ordinary course.
(ii) Sales or other dispositions to creditors, except returns in the ordinary course of business.
(iii) Sales or other dispositions in bulk except in the ordinary course of business consistent with past practices.
(iv) Sales in breach of any provision of this Agreement.
(v) Sales other than in connection with Permitted Dispositions.
(b) Without the prior written consent of the Collateral Agent, no sale of Inventory shall be on consignment (other than between Loan Parties), approval, or under any other circumstances such that, with the exception of the Loan Parties' customary return policy applicable to the return of inventory purchased by the Loan Parties' retail customers in the ordinary course, such Inventory may be returned to a Loan Party without the consent of the Collateral Agent.
7.2. INVENTORY QUALITY. All Inventory now owned or hereafter acquired by each Loan Party is and will be of good and merchantable quality, consistent with past practices.
7.3. ADJUSTMENTS AND ALLOWANCES. Each Loan Party may grant such allowances or other adjustments to that Loan Party's Account Debtors as that Loan Party may reasonably deem to accord with sound business practice and which are normal and customary extensions
and adjustments in the ordinary course of business, provided, however, the authority granted the Loan Parties pursuant to this Section 7.3 may be limited or terminated by the Administrative Agent at any time in the Administrative Agent's reasonable, good faith discretion after the occurrence and during the continuance of an Event of Default.
7.4. VALIDITY OF ACCOUNTS.
(a) Except for adjustments and disputes in the ordinary course of business, the amount of each Account shown on the books, records, and invoices of the Loan Parties represented as owing by each Account Debtor is the correct amount actually owing by such Account Debtor and shall have been fully earned by performance by the Loan Parties.
(b) No Loan Party has any knowledge of any impairment of the validity or collectibility of any of the Accounts, other than returns, reserves, unauthorized use of credit cards, bad checks, adjustments and disputes which occur in the ordinary course of business. The Lead Borrower shall notify the Administrative Agent of any such impairment immediately after any Loan Party becomes aware of any such impairment.
(c) No Loan Party shall post any bond to secure any Loan Party's performance under any agreement to which any Loan Party is a party nor cause any surety, guarantor, or other third party obligee to become liable to perform any obligation of any Loan Party (other than to the Collateral Agent) in the event of any Loan Party's failure so to perform, if, as a result of the surety, guarantor or third party obligee's performance, such Person would obtain a Encumbrance on any Collateral having priority to the Encumbrance of the Collateral Agent.
7.5. NOTIFICATION TO ACCOUNT DEBTORS. The Collateral Agent shall have the right (after the occurrence of a Cash Control Event) to notify any of the Loan Parties' Account Debtors to make payment directly to the Administrative Agent and to collect all amounts due on account of the Collateral.
ARTICLE 8 - CASH MANAGEMENT. PAYMENT OF LIABILITIES:
8.1. DEPOSITORY ACCOUNTS.
(a) Annexed hereto as EXHIBIT 8.1 is a listing of all present DDA's, which listing includes, with respect to each depository of the Loan Parties, the following: (i) the name and address of that depository; (ii) the account number(s) of the account(s) maintained with such depository; and (iii) a contact person at such depository.
(b) The Lead Borrower shall deliver the following to the Administrative Agent, as a condition to the effectiveness of this Agreement:
(i) Notifications, executed on behalf of each Borrower, to each depository institution with which any DDA is maintained (other than any Exempt DDA and the Collection Accounts), in form satisfactory to the Administrative Agent of the
Collateral Agent' interest in such DDA. Such Notifications shall be held in escrow by the Administrative Agent until the occurrence of a Cash Control Event at which time they may be delivered to the applicable depositary institutions.
(ii) A Collection Account Agreement with any depository institution at which a Collection Account is maintained, including those listed on EXHIBIT 8.1.
(c) No Borrower will establish any DDA hereafter (other than an Exempt DDA) unless, contemporaneous with such establishment, the Lead Borrower delivers the following to the Administrative Agent:
(i) A notification for the depository at which such DDA is established if the same would have been required pursuant to Section 8.1(b)(i) if the subject DDA were open at the execution of this Agreement.
(ii) A Collection Account Agreement executed on behalf of the depository at which such DDA is established if the same would have been required pursuant to Section 8.1(b)(ii) if the subject DDA were open at the execution of this Agreement.
8.2. CREDIT CARD RECEIPTS.
(a) Annexed hereto as EXHIBIT 8.2, is a Schedule which describes all arrangements to which any Borrower is a party with respect to the payment to that Borrower of the proceeds of credit card charges for sales by that Borrower.
(b) The Lead Borrower shall deliver to the Administrative Agent, as a condition to the effectiveness of this Agreement, an agreement executed on behalf of each Borrower with each of each Borrower's credit card clearinghouses and processors (in form satisfactory to the Administrative Agent), which agreement provides that, during the existence of a Cash Control Event, payment of all credit card charges submitted by that Borrower to that clearinghouse or other processor and any other amount payable to that Borrower by such clearinghouse or other processor shall be directed to the Administrative Agent's Account or as otherwise designated from time to time by the Administrative Agent. No Borrower shall change such direction or designation except upon and with the prior written consent of the Administrative Agent and no Borrower will enter into any agreements with a new credit card clearinghouse or processor hereafter unless, contemporaneous with such establishment, the Lead Borrower delivers to the Administrative Agent an agreement with such credit card clearinghouse or processor of like terms to those required hereunder on the Effective Date.
8.3. THE ADMINISTRATIVE AGENT'S, COLLECTION, AND OPERATING ACCOUNTS.
(a) The following checking accounts have been or will be established (and are so referred to herein):
(i) The "ADMINISTRATIVE AGENT'S ACCOUNT(S)" (so referred to herein): Established by the Administrative Agent with NCB for each Borrower as more specifically described on EXHIBIT 8.3 hereto.
(ii) The "COLLECTION ACCOUNTS" (so referred to herein):
Established by the Lead Borrower with those financial institutions
described on EXHIBIT 8.3 hereof.
(iii) The "OPERATING ACCOUNTs" (so referred to herein):
Established by each Borrower with NCB as more specifically described on
EXHIBIT 8.3 hereto.
(b) The contents of each DDA and of each Collection Account constitutes Collateral and Proceeds of Collateral. The contents of each Administrative Agent's Account constitutes the Administrative Agent's property.
(c) The Borrowers shall pay all fees and charges of, and maintain such impressed balances as may be required by the depository in which any account is opened as required hereby (even if such account is opened by and/or is the property of the Agent).
8.4. PROCEEDS AND COLLECTIONS.
(a) All Receipts constitute Collateral and proceeds of Collateral.
(b) Absent a Cash Control Event, the Borrowers may collect all Receipts and use such Receipts in the ordinary course of business.
(c) During a Cash Control Event, the Borrowers shall cause all Receipts to be deposited or transferred to the Administrative Agent's Account.
(d) Subject to this Section 8.4, upon notice from the Administrative Agent to the Lead Borrower that a Cash Control Event has occurred:
(i) All Receipts:
(A) Shall be held in trust by the Borrowers for the Collateral Agent.
(B) Shall not be commingled with any of any Borrower's other funds.
(C) Shall be deposited and/or transferred only to a Collection Account or the applicable Administrative Agent's Accounts, and the Borrowers shall not have any authority to withdraw any amounts from such accounts and the Administrative Agent shall have no obligation to deposit such Receipts in the applicable Operating Account.
(ii) The Lead Borrower shall cause the ACH transfer or wire transfer to the Collection Account or the applicable Administrative Agent's Account (except in
those instances in which such transfer is not within the control of the Lead Borrower or any other Borrower), no less frequently than daily (and whether or not there is then an outstanding balance in the Loan Account) of the following:
(A) The then contents of each DDA (other than any Exempt DDA), each such transfer to be net of any minimum balance, not to exceed $2,000.00, as may be required to be maintained in the subject DDA by the bank at which such DDA is maintained.
(B) The proceeds of all credit card charges not otherwise provided for pursuant hereto.
(iii) In the event that, notwithstanding the provisions of this
Section 8.4(d), any of the Borrowers receives or otherwise has dominion and
control of any Receipts, or any proceeds or collections of any Collateral,
such Receipts, proceeds, and collections shall be held in trust by that
Borrower for the Agent and shall not be commingled with any of that
Borrower's other funds or deposited in any account of any Borrower other
than as instructed by the Administrative Agent.
(iv) The Borrowers shall not disburse any funds in the DDAs,
Collection Accounts or other deposit accounts (other than Exempt DDAs and
the Operating Accounts in the ordinary course of business consistent with
past practices) other than in accordance with the provisions of this
Section 8.4.
8.5. PAYMENT OF LIABILITIES.
(a) On each Business Day after the occurrence and during the continuance of a Cash Control Event, the Administrative Agent shall apply the then collected balance of each Administrative Agent's Account (net of fees charged, and of such impressed balances as may be required by the bank at which such Administrative Agent's Account is maintained) First, towards the SwingLine Loans, Second, towards the unpaid balance of the Loan Account, and Third, to all other Liabilities in such order as the Administrative Agent may determine.
(b) The following rules shall apply to deposits and payments under and pursuant to this Section 8.5:
(i) Funds shall be deemed to have been deposited to an Administrative Agent's Account on the Business Day on which deposited, provided that notice of such deposit is available to the Administrative Agent by 1:00PM on that Business Day.
(ii) Funds paid to the Administrative Agent, other than by deposit to an Administrative Agent's Account, shall be deemed to have been received on the Business Day when they are good and collected funds, provided that notice of such payment is available to the Administrative Agent by 1:00PM on that Business Day.
(iii) If notice of a deposit to an Administrative Agent's Account (Section 8.5(b)(i)) or payment (Section 8.5(b)(ii)) is not available to the Administrative Agent until after 1:00PM on a Business Day, such deposit or payment shall be deemed to have been made at 9:00AM on the then next Business Day.
(iv) All deposits to an Administrative Agent's Account and other payments to the Administrative Agent are subject to clearance and collection.
(c) The Administrative Agent shall transfer to the Operating Account of the applicable Borrower any surplus in the Administrative Agent's Account remaining after the application towards the Liabilities referred to in Section 8.5(a), above (less those amounts which are to be netted out, as provided therein) provided, however, in the event that
(i) any Default has occurred and is continuing; and
(ii) one or more L/Cs and Banker's Acceptances are then outstanding,
then the Administrative Agent may, and at the direction of the SuperMajority Lenders shall, establish a funded reserve of up to 105% of the aggregate Stated Amounts of such L/C's and such Banker's Acceptances. Such funded reserve shall either be (i) returned to the applicable Borrower provided that no Borrower is in Default or (ii) applied towards the Liabilities in the manner set forth herein following the occurrence of any Event of Default described in Section 11.12 or acceleration following the occurrence of any other Event of Default.
8.6. THE OPERATING ACCOUNT.
(a) Funds in the Operating Account of each Borrower shall be utilized to fund disbursements made by such Borrower, including, without limitation, from any expense accounts maintained by such Borrower.
(b) After the occurrence and during the continuance of any Event of Default or at any time that Average Excess Availability for any five (5) consecutive Business Days is less than $30,000,000, NCB shall not be obligated to permit any outgoing ACH transfers unless the amount of the proposed transfer is fully prefunded in accordance with the requirements and practices of NCB.
ARTICLE 9 - GRANT OF SECURITY INTEREST:
9.1. GRANT OF SECURITY INTEREST. To secure the Borrowers' prompt, punctual, and faithful performance of all and each of the Liabilities, each Borrower hereby grants to the Collateral Agent, for the ratable benefit of the Revolving Credit Lenders, the Issuer, the Agents, and the Affiliates of each of them, a continuing security interest in and to, and assigns to the Collateral Agent, for the ratable benefit of the Revolving Credit Lenders, the following, and each item thereof, whether now owned or now due, or in which that Borrower has an interest, or hereafter acquired, arising, or to become due, or in which that Borrower obtains an interest, and all products, Proceeds, substitutions, and accessions of or to any of the following, but excluding
the Excluded Property (all of which, together with any other property in which the Collateral Agent may in the future be granted a security interest, is referred to herein as the "COLLATERAL"):
(a) All Accounts.
(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Farm Products.
(g) All Fixtures.
(h) All Chattel Paper.
(i) All Letter-of-Credit Rights.
(j) All Payment Intangibles.
(k) All Supporting Obligations.
(l) The Commercial Tort Claim described on EXHIBIT 4.17 hereto.
(m) All books, records, and information relating to the Collateral and/or to the operation of each Borrowers' business, and all rights of access to such books, records, and information, and all property in which such books, records, and information are stored, recorded, and maintained.
(n) All Leasehold Interests (other than Leasehold Interests in real property).
(o) All Investment Property, Instruments, Documents, Deposit Accounts, money, policies and certificates of insurance, deposits, impressed accounts, compensating balances, cash, or other property.
(p) All insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any of such
proceeds, refunds, and premium rebates arise out of any of the foregoing.
(9.1(a) through 9.1(p)) or otherwise.
(q) All liens, guaranties, rights, remedies, and privileges pertaining to any of the foregoing (9.1(a) through 9.1(p)), including the right of stoppage in transit.
9.2. EXTENT AND DURATION OF SECURITY INTEREST.
(a) The security interest created and granted herein is in addition to, and supplemental of, any security interest previously granted by any Borrower to the Collateral Agent (including, without limitation, under any mortgages and deeds of trust) and shall continue in full force and effect applicable to all Liabilities until
(i) the Termination Date has occurred; and
(ii) all Liabilities have been paid or satisfied in full in cash and satisfactory arrangements with respect to L/Cs and Banker's Acceptances as provided in Section 19.2 hereof have been made; and
(iii) the security interest created herein is specifically terminated in writing by duly authorized officers of the Collateral Agent as provided in Section 19.2(d) hereof.
(b) It is intended that the Collateral Interests created herein extend to and cover all assets of each Borrower, except for Excluded Property.
(c) If a Borrower shall at any time acquire a Commercial Tort Claim, the Lead Borrower shall promptly notify the Administrative Agent in writing of the details thereof and the Borrowers shall take such actions as the Collateral Agent shall request in order to grant to the Collateral Agent, for the ratable benefit of the Revolving Credit Lenders, the Issuer, the Agents, and the Affiliates of each of them, a perfected and first priority security interest therein and in the Proceeds thereof.
ARTICLE 10 - COLLATERAL AGENT AS BORROWERS' ATTORNEY-IN-FACT:
10.1. APPOINTMENT AS ATTORNEY-IN-FACT. Each Borrower hereby irrevocably constitutes and appoints the Collateral Agent (acting through any officer of the Collateral Agent) as that Borrower's true and lawful attorney, with full power of substitution, following the occurrence of an Event of Default, to convert the Collateral into cash at the sole risk, cost, and expense of that Borrower, but for the sole benefit of the Agent and the Revolving Credit Lenders. The rights and powers granted the Collateral Agent by this appointment include but are not limited to the right and power to:
(a) Prosecute, defend, compromise, or release any action relating to the Collateral.
(b) Sign change of address forms to change the address to which each Borrowers' mail is to be sent to such address as the Collateral Agent shall designate (after which copies of all such mail shall be promptly furnished to the Lead Borrower); receive and open each Borrowers' mail; remove any Receivables Collateral and Proceeds of Collateral therefrom and turn over the balance of such mail either to the Lead Borrower or to any trustee in bankruptcy or receiver of the Lead Borrower, or other legal representative of a Borrower whom the Collateral Agent determine to be the appropriate Person to whom to so turn over such mail.
(c) Endorse the name of the relevant Borrower in favor of the Collateral Agent upon any and all checks, drafts, notes, acceptances, or other items or instruments; sign and endorse the name of the relevant Borrower on, and receive as secured party, any of the Collateral, any invoices, schedules of Collateral, freight or express receipts, or bills of lading, storage receipts, warehouse receipts, or other documents of title respectively relating to the Collateral.
(d) Sign the name of the relevant Borrower on any notice to that Borrowers' Account Debtors or verification of the Receivables Collateral; sign the relevant Borrowers' name on any Proof of Claim in Bankruptcy against Account Debtors, and on notices of lien, claims of mechanic's liens, or assignments or releases of mechanic's liens securing the Accounts.
(e) Take all such action as may be necessary to obtain the payment of any letter of credit and/or banker's acceptance of which any Borrower is a beneficiary.
(f) Repair, manufacture, assemble, complete, package, deliver, alter or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any customer of each Borrower.
(g) Use, license or transfer any or all General Intangibles of each Borrower.
10.2. NO OBLIGATION TO ACT. The Collateral Agent shall not be obligated to do any of the acts or to exercise any of the powers authorized by Section 10.1 herein, but if the Collateral Agent elect to do any such act or to exercise any of such powers, they shall not be accountable for more than they actually receive as a result of such exercise of power, and shall not be responsible to any Borrower for any act or omission to act except for any act or omission to act as to which there is a final determination made in a judicial proceeding (in which proceeding the Collateral Agent have had an opportunity to be heard) which determination includes a specific finding that the subject act or omission to act had been grossly negligent or in actual bad faith, or willful misconduct.
ARTICLE 11 - EVENTS OF DEFAULT:
The occurrence of any event described in this Article 11 respectively shall constitute an "EVENT OF DEFAULT" herein. The occurrence of any Event of Default shall also constitute, without notice or demand, a default under all other agreements between the Agent or any Revolving Credit Lender and any Loan Party and instruments and papers heretofore, now, or hereafter given the Agent or any Revolving Credit Lender by any Loan Party in connection with any of the Loan Documents.
11.1. FAILURE TO PAY THE REVOLVING CREDIT. The failure by any Loan Party to pay when due any principal of, interest on, or fees in respect of, the Revolving Credit.
11.2. FAILURE TO MAKE OTHER PAYMENTS. The failure by any Loan Party to pay when due (or upon demand, if payable on demand) any payment Liability other than any
payment liability on account of the principal of, or interest on, or fees in respect of, the Revolving Credit.
11.3. FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD). The failure by any Loan Party to promptly, punctually, faithfully and timely perform, discharge, or comply with any covenant or Liability included in any of the following provisions hereof:
Section _____ Relates to _____:
------------- -----------------
5.6 Indebtedness
5.12 Pay taxes
5.16 Dividends. Investments. Other Corporate Actions
5.17 Loans and Advances
4.18 Affiliate Transactions
5.26 Parent's Line of Business
Article 6 Reporting Requirements (except as set forth in Section 11.4,
below)
Article 8 Cash Management
|
11.4. FINANCIAL REPORTING REQUIREMENTS. The failure by the Borrower to promptly, punctually, faithfully and timely perform, discharge, or comply with the financial reporting requirements included in Section 6.5, subject, however, to the following limited number of grace periods applicable to certain of those requirements:
REQUIRED BY
REPORT / STATEMENT SECTION GRACE PERIOD NUMBER OF GRACE PERIODS
------------------ ----------- --------------------- ------------------------
Weekly Report 6.5 Two (2) Business Days Twice in any twelve (12)
consecutive months
|
11.5. FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD). The failure by any Loan Party, within twenty (20) days following the earlier of any Authorized Officer's knowledge of a breach of any covenant or Liability not described in any of Sections 11.1, 11.2, 11.3, or 11.4 or of its receipt of written notice from the Administrative Agent of the breach of any of such covenants or Liabilities, provided that if such failure cannot be reasonably cured within such twenty (20) day period and the Loan Parties have diligently proceeded, and continue to diligently proceed, to effectuate a cure of such failure, such failure shall not be an Event of Default hereunder unless (a) such failure is not cured within twenty (20) days after the expiration of such initial twenty (20) day period, or (b) such failure, in the reasonable judgment of the Collateral Agent, is reasonably likely to have a Material Adverse Effect.
11.6. MISREPRESENTATION. The determination by the Administrative Agent that any representation or warranty at any time made by any Loan Party to any Agent or any Revolving Credit Lender was not true or complete in all material respects when given.
11.7. ACCELERATION OF OTHER DEBT. BREACH OF LEASE. The occurrence and continuance of any event of default or other event, which with the giving of notice, the passage of time or both, would be an event of default under any Indebtedness of any Loan Party equal to or in excess of One Million Dollars ($1,000,000.00) to any creditor other than the Agent or any Revolving Credit Lender, (whether or not such Indebtedness has been accelerated), or, Leases aggregating more than five percent (5%) of all Leases of the Loan Parties existing from time to time could be terminated due to a default by a Loan Party thereunder (whether or not the subject creditor or lessor takes any action on account of such occurrence).
11.8. DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any breach of any covenant or Liability imposed by, or of any default under, any agreement between any Agent or any Revolving Credit Lender and any Loan Party or instrument given by any Loan Party to any Agent or any Revolving Credit Lender relating to Indebtedness of any Loan Party in excess of $1,000,000 in the aggregate and the expiration, without cure, of any applicable grace period (notwithstanding that the subject Agent or Revolving Credit Lender may not have exercised all or any of its rights on account of such breach or default).
11.9. UNINSURED CASUALTY LOSS. The occurrence of any uninsured loss, theft, damage, or destruction of or to any material portion of the Collateral. For avoidance of doubt, the theft of credit card and other purchase information announced by the Borrower on March 8, 2005 shall not constitute an uninsured casualty loss or Event of Default.
11.10. ATTACHMENT. JUDGMENT. RESTRAINT OF BUSINESS.
(a) The entry of any judgment in excess of Two Million Five Hundred Thousand Dollars ($2,500,000.00) against any Loan Party, which judgment (i) is not covered by insurance (as to which the insurer has not notified the applicable Loan Party of the insurer's reservation of rights) or (ii) is not satisfied, stayed (if a money judgment) or appealed from (with execution or similar process stayed) within thirty (30) days of its entry.
(b) The entry of any order or the imposition of any other process having the force of law, the effect of which is to restrain the conduct by any Borrower of its business in the ordinary course and which is reasonably likely to have a Material Adverse Effect.
11.11. BUSINESS FAILURE. Any act by, against, or relating to any Loan Party, or its property or assets, which act constitutes the determination, by any Loan Party, to initiate a program of substantial or total self-liquidation; application for, consent to, or sufferance of the appointment of a receiver, trustee, or other Person, pursuant to court action or otherwise, over all, or any part of any Loan Party's property; the granting of any trust mortgage or execution of an assignment for the benefit of the creditors of any Loan Party, or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for any Loan Party; the offering by or entering into by any Loan Party of any composition, extension, or any other arrangement seeking relief generally from or extension of the debts of any Loan Party; or the initiation of any judicial or non-judicial proceeding or agreement by, against, or including any Loan Party which seeks or intends to accomplish a reorganization or arrangement with creditors; and/or the initiation by or on behalf of any Loan Party of the liquidation or winding up of all or
any part of any Loan Party's business or operations except that any of the foregoing actions which are commenced against a Loan Party shall not be deemed an Event of Default hereunder as long as such action is timely contested in good faith by that Loan Party by appropriate proceedings and is dismissed within sixty (60) days of the institution of the foregoing.
11.12. BANKRUPTCY. The failure by any Loan Party to generally pay the debts of that Loan Party as they mature; adjudication of bankruptcy or insolvency relative to any Loan Party; the entry of an order for relief or similar order with respect to any Loan Party in any proceeding pursuant to the Bankruptcy Code or any other federal bankruptcy law; the filing of any complaint, application, or petition by any Loan Party initiating any matter in which any Loan Party is or may be granted any relief from the debts of that Loan Party pursuant to the Bankruptcy Code or any other insolvency statute or procedure; the filing of any complaint, application, or petition against any Loan Party initiating any matter in which that Loan Party is or may be granted any relief from the debts of that Loan Party pursuant to the Bankruptcy Code or any other insolvency statute or procedure, which complaint, application, or petition is not timely contested in good faith by that Loan Party by appropriate proceedings or, if so contested, is not dismissed within sixty (60) days of when filed.
11.13. TERMINATION OF GUARANTY. The termination or attempted termination of any Facility Guarantee by any Facility Guarantor.
11.14. CHALLENGE TO LOAN DOCUMENTS.
(a) Any challenge by or on behalf of any Loan Party to the validity of any Loan Document or the applicability or enforceability of any Loan Document strictly in accordance with the subject Loan Document's terms or which seeks to void, avoid, limit, or otherwise adversely affect any security interest created by or in any Loan Document or any payment made pursuant thereto.
(b) Any determination by any court or any other judicial or government authority that any Loan Document is not enforceable strictly in accordance with the subject Loan Document's terms or which voids, avoids, limits, or otherwise adversely affects any security interest created by any Loan Document or any payment made pursuant thereto.
11.15. CHANGE IN CONTROL. Any Change in Control.
ARTICLE 12 - RIGHTS AND REMEDIES UPON DEFAULT:
12.1. ACCELERATION. Upon the occurrence of any Event of Default as
described in Section 11.12, all Indebtedness of the Loan Parties to the
Revolving Credit Lenders shall be immediately due and payable. Upon the
occurrence and continuance of any Event of Default other than as described in
Section 11.12, the Administrative Agent may (and on the issuance of Acceleration
Notice(s) requisite to the causing of Acceleration, the Administrative Agent
shall) declare all Indebtedness of the Borrowers to the Revolving Credit Lenders
to be immediately due and payable and the Agent may exercise all of the Agents'
Rights and Remedies as the applicable Agent from time to time thereafter
determine as appropriate.
12.2. RIGHTS OF ENFORCEMENT. The Collateral Agent shall have all of the rights and remedies of a secured party upon default under the UCC, in addition to which the Collateral Agent shall have all and each of the following rights and remedies:
(a) To give notice to any bank at which any DDA or Collection Account is maintained and in which Proceeds of Collateral are deposited, to turn over such Proceeds directly to the Agent.
(b) To give notice to any customs broker of any of the Borrowers to follow the instructions of the Collateral Agent as provided in any written agreement or undertaking of such broker in favor of the Collateral Agent.
(c) To collect the Receivables Collateral with or without the taking of possession of any of the Collateral.
(d) To take possession of all or any portion of the Collateral.
(e) To sell, lease, or otherwise dispose of any or all of the Collateral, in its then condition or following such preparation or processing as the Collateral Agent deems advisable and with or without the taking of possession of any of the Collateral.
(f) To conduct one or more going out of business sales which include the sale or other disposition of the Collateral.
(g) To apply the Receivables Collateral or the Proceeds of the Collateral towards (but not necessarily in complete satisfaction of) the Liabilities.
(h) To exercise all or any of the rights, remedies, powers, privileges, and discretions under all or any of the Loan Documents.
12.3. SALE OF COLLATERAL.
After the occurrence and during the continuance of an Event of Default:
(a) Any sale or other disposition of the Collateral may be at public or private sale upon such terms and in such manner as the Collateral Agent deem advisable, having due regard to compliance with any statute or regulation which might affect, limit, or apply to the Collateral Agent' disposition of the Collateral.
(b) The Collateral Agent, in the exercise of the Collateral Agent' rights and remedies upon default, may conduct one or more going out of business sales, in the Collateral Agent' own right or by one or more agents and contractors. Such sale(s) may be conducted upon any premises owned, leased, or occupied by any Borrower. The Collateral Agent and any such agents or contractors, in conjunction with any such sale, may augment the Inventory with other goods (all of which other goods shall remain the sole property of the Collateral Agent or such agents or contractors). Any amounts realized from the sale of such goods which constitute augmentations to the Inventory (net of an allocable share of the costs and expenses incurred in
their disposition) shall be the sole property of the Collateral Agent or such agents or contractors and neither any Borrower nor any Person claiming under or in right of any Borrower shall have any interest therein. Upon request of the Lead Borrower, the Collateral Agent shall promptly furnish, or cause to be furnished, to the Lead Borrower a reconciliation of the amounts received from the augmentation of the Inventory and the allocation of costs and expenses thereto.
(c) Unless the Collateral is perishable or threatens to decline speedily in value, or is of a type customarily sold on a recognized market (in which event the Collateral Agent shall provide the Lead Borrower such notice as may be practicable under the circumstances), the Collateral Agent shall give the Lead Borrower at least ten (10) days prior notice, by authenticated record, of the date, time, and place of any proposed public sale, and of the date after which any private sale or other disposition of the Collateral may be made. Each Borrower agrees that such written notice shall satisfy all requirements for notice to that Borrower which are imposed under the UCC or other applicable law with respect to the exercise of the Collateral Agent' rights and remedies upon default.
(d) The Agent and any Revolving Credit Lender may purchase the Collateral, or any portion of it at any sale held under this Article.
(e) The Collateral Agent shall deliver the proceeds of the Collateral Agent' exercise of its rights and remedies upon default to the Administrative Agent for application pursuant to Section 14.6 hereof.
12.4. OCCUPATION OF BUSINESS LOCATION. In connection with the Collateral Agent' exercise of the Collateral Agent' rights under this Article 12, the Collateral Agent may enter upon, occupy, and use any premises owned or occupied by each Borrower, and may exclude each Borrower from such premises or portion thereof as may have been so entered upon, occupied, or used by the Collateral Agent. The Collateral Agent shall not be required to remove any of the Collateral from any such premises upon the Collateral Agent' taking possession thereof, and may render any Collateral unusable to the Borrowers. In no event shall the Collateral Agent be liable to any Borrower for use or occupancy by the Collateral Agent of any premises pursuant to this Article 12, nor for any charge (such as wages for any Borrowers' employees and utilities) incurred in connection with the Collateral Agent' exercise of the Agent's Rights and Remedies.
12.5. GRANT OF NONEXCLUSIVE LICENSE. In connection with the Collateral Agent' exercise of the Collateral Agent' rights under this Article 12, each Borrower hereby grants to the Collateral Agent a royalty free nonexclusive irrevocable license to use, apply, and affix any trademark, trade name, logo, or the like in which any Borrower now or hereafter has rights, such license being with respect to the Collateral Agent' exercise of the rights hereunder including, without limitation, in connection with any completion of the manufacture of Inventory or sale or other disposition of Inventory.
12.6. ASSEMBLY OF COLLATERAL. In connection with the Collateral Agent' exercise of the Collateral Agent' rights under this Article 12, the Collateral Agent may require any Borrower to assemble the Collateral and make it available to the Collateral Agent at the
Borrowers' sole risk and expense at a place or places which are reasonably convenient to both the Collateral Agent and the Lead Borrower.
12.7. RIGHTS AND REMEDIES. The rights, remedies, powers, privileges, and discretions of the Agent hereunder (herein, the "AGENTS' RIGHTS AND REMEDIES") shall be cumulative and not exclusive of any rights or remedies which it would otherwise have. No delay or omission by the Agent in exercising or enforcing any of the Agents' Rights and Remedies shall operate as, or constitute, a waiver thereof. No waiver by the Agent of any Event of Default or of any default under any other agreement shall operate as a waiver of any other default hereunder or under any other agreement. No single or partial exercise of any of the Agents' Rights or Remedies, and no express or implied agreement or transaction of whatever nature entered into between the Agent and any Person, at any time, shall preclude the other or further exercise of the Agents' Rights and Remedies. No waiver by any Agent of any of the Agents' Rights and Remedies on any one occasion shall be deemed a waiver on any subsequent occasion, nor shall it be deemed a continuing waiver. The Agents' Rights and Remedies may be exercised at such time or times and in such order of preference as the Agent may determine. The Agents' Rights and Remedies may be exercised without resort or regard to any other source of satisfaction of the Liabilities.
ARTICLE 13 - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:
13.1. REVOLVING CREDIT FUNDING PROCEDURES. Subject to Section 13.2:
(a) The Administrative Agent shall advise each Revolving Credit Lender, no later than 12:30 p.m. on a date on which any Revolving Credit Loan (other than a SwingLine Loan) is to be made on that date. Such advice, in each instance, may be by telephone or facsimile transmission, provided that if such advice is by telephone, it shall be confirmed in writing. Advice of a Revolving Credit Loan shall include the amount of and interest rate applicable to the subject Revolving Credit Loan.
(b) Subject to that Revolving Credit Lender's Revolving Credit Dollar Commitment, each Revolving Credit Lender, by no later than 3:00 p.m. on the day on which the subject Revolving Credit Loan is to be made, shall Transfer that Revolving Credit Lender's Revolving Credit Commitment Percentage of the subject Revolving Credit Loan to the Administrative Agent in immediately available funds.
13.2. SWINGLINE LOANS.
(a) In the event that, when a Base Margin Rate Revolving Credit Loan is requested, the aggregate unpaid balance of the SwingLine Loan is less than the SwingLine Loan Ceiling, then the SwingLine Lender may advise the Administrative Agent that the SwingLine Lender has determined to include up to the amount of the requested Revolving Credit Loan as part of the SwingLine Loan. In such event, the SwingLine Lender shall Transfer the amount of the requested Revolving Credit Loan to the Administrative Agent.
(b) The SwingLine Loan shall be converted to a Revolving Credit Loan in which all Revolving Credit Lenders participate as follows:
(i) At any time and from time to time, but no less frequently than once during each five (5) Business Day period, the SwingLine Lender may advise the Administrative Agent that all, or any part of the SwingLine Loan is to be converted to a Revolving Credit Loan in which all Revolving Credit Lenders participate.
(ii) At the times set forth in Section 13.4, the then entire unpaid principal balance of the SwingLine Loan shall be converted to a Revolving Credit Loan in which all Revolving Credit Lenders participate.
(iii) At the initiation of a Liquidation, the then entire unpaid principal balance of the SwingLine Loan shall be converted to a Revolving Credit Loan in which all Revolving Credit Lenders participate.
In either such event, the Administrative Agent shall advise each Revolving Credit Lender of such conversion as if, and with the same effect as if such conversion were the making of a Revolving Credit Loan as provided in Section 13.1.
(c) The SwingLine Lender, in separate capacities, may also be the Administrative Agent and a Revolving Credit Lender.
(d) The SwingLine Lender, in its capacity as SwingLine Lender, is not a "Revolving Credit Lender" for any of the following purposes:
(i) Except as otherwise specifically provided in the relevant Section, any distribution pursuant to Section 14.6.
(ii) Determination of whether the requisite Loan Commitments have Consented to action requiring such Consent.
13.3. ADMINISTRATIVE AGENT'S COVERING OF FUNDINGS:
(a) Each Revolving Credit Lender shall make available to the Administrative Agent, as provided herein, that Revolving Credit Lender's Revolving Credit Commitment Percentage of the following:
(i) Each Revolving Credit Loan, up to the maximum amount of that Revolving Credit Lender's Revolving Credit Dollar Commitment of the Revolving Credit Loans.
(ii) Up to the maximum amount of that Revolving Credit Lender's Revolving Credit Dollar Commitment of each drawing under a L/C and Banker's Acceptance (to the extent that such drawing under a L/C or Banker's Acceptance is not "covered" by a Revolving Credit Loan as provided herein).
(b) In all circumstances, the Administrative Agent may:
(i) Assume that each Revolving Credit Lender, subject to Section 13.3(a), timely shall make available to the Administrative Agent that Revolving Credit Lender's Revolving Credit Commitment Percentage of each Revolving Credit Loan, notice of which is provided pursuant to Section 13.1 and shall make available, to the extent not "covered" by a Revolving Credit Loan, that Revolving Credit Lender's Revolving Credit Commitment Percentage of any honoring of an L/C or a Banker's Acceptance.
(ii) In reliance upon such assumption, make available the corresponding amount to the Borrowers (but the Administrative Agent shall not be obligated to make such amount available to the Borrowers until actual receipt thereof from the Revolving Credit Lenders).
(iii) Assume that each Revolving Credit Lender timely shall pay, and shall make available, to the Administrative Agent all other amounts which that Revolving Credit Lender is obligated to so pay and/or make available hereunder or under any of the Loan Documents.
(c) In the event that, in reliance upon any of such assumptions, the Administrative Agent makes available a Revolving Credit Lender's Revolving Credit Commitment Percentage of one or more Revolving Credit Loans, or any other amount to be made available hereunder or under any of the Loan Documents, which amount a Revolving Credit Lender (a "DELINQUENT REVOLVING CREDIT LENDER") fails to provide to the Administrative Agent within one (1) Business Day of written notice of such failure, then:
(i) The amount which had been made available by the Administrative Agent is an "ADMINISTRATIVE AGENT'S COVER" (and is so referred to herein).
(ii) All interest paid by the Borrowers on account of the Revolving Credit Loan or coverage of the subject drawing of a L/C or Banker's Acceptance which consist of the Administrative Agent's Cover shall be retained by the Administrative Agent until the Administrative Agent's Cover, with interest, has been paid.
(iii) The Delinquent Revolving Credit Lender shall pay to the Administrative Agent, on demand, interest at a rate equal to the prevailing Federal Funds Effective Rate on any Administrative Agent's Cover in respect of that Delinquent Revolving Credit Lender.
(iv) The Administrative Agent shall have succeeded to all rights to payment to which the Delinquent Revolving Credit Lender otherwise would have been entitled hereunder in respect of those amounts paid by or in respect of the Borrowers on account of the Administrative Agent's Cover together with interest until it is repaid. Such payments shall be deemed made first towards the amounts in respect of which the Administrative Agent's Cover was provided and only then towards amounts in which the Delinquent Revolving Credit Lender is then participating. For purposes of distributions to be made pursuant to Section 13.4(a) (which relates to ordinary course distributions) or
Section 14.6 (which relates to distributions of proceeds of a Liquidation) below, amounts shall be deemed distributable to a Delinquent Revolving Credit Lender (and consequently, to the Administrative Agent to the extent to which the Administrative Agent is then entitled) at the highest level of distribution (if applicable) at which the Delinquent Revolving Credit Lender would otherwise have been entitled to a distribution.
(v) Subject to Subsection 13.3(c)(iv), the Delinquent Revolving Credit Lender shall be entitled to receive any payments from the Borrowers to which the Delinquent Revolving Credit Lender is then entitled, provided however there shall be deducted from such amount and retained by the Administrative Agent any interest to which the Administrative Agent is then entitled on account of Section 13.3(c)(ii), above.
(d) A Delinquent Revolving Credit Lender shall not be relieved of any obligation of such Delinquent Revolving Credit Lender hereunder (all and each of which shall constitute continuing obligations on the part of any Delinquent Revolving Credit Lender).
(e) A Delinquent Revolving Credit Lender may cure its status as a Delinquent Revolving Credit Lender by paying the Administrative Agent the aggregate of the following:
(i) The Administrative Agent's Cover (to the extent not previously repaid by the Borrowers and retained by the Administrative Agent in accordance with Subsection 13.3(c)(iv), above) with respect to that Delinquent Revolving Credit Lender.
Plus
(ii) The aggregate of the amount payable under Subsection 13.3(c)(iii), above (which relates to interest to be paid by that Delinquent Revolving Credit Lender).
Plus
(iii) All such costs and expenses as may be incurred by the Administrative Agent in the enforcement of the Administrative Agent's rights against such Delinquent Revolving Credit Lender.
13.4. ORDINARY COURSE DISTRIBUTIONS. (This Section 13.4 applies unless the provisions of Section 14.6 (which relates to distributions in the event of a Liquidation) becomes operative).
(a) Weekly, on each Thursday (or more frequently at the Administrative Agent's option) the Administrative Agent and each Revolving Credit Lender shall settle up on amounts advanced under the Revolving Credit and payments received on account of the Revolving Credit (including, without limitation, collected funds received in the Administrative Agent's Accounts and not released to the Operating Accounts as provided herein).
(b) The Administrative Agent shall distribute to the SwingLine Lender and to each Revolving Credit Lender, such Person's respective pro-rata share of payments of interest
and fees on account of the Revolving Credit when actually received and collected by the Administrative Agent. For purposes of calculating interest due to a Revolving Credit Lender, that Revolving Credit Lender shall be entitled to receive interest on the actual amount contributed by that Revolving Credit Lender towards the principal balance of the Revolving Credit Loans outstanding during the applicable period covered by the interest payment made by the Borrowers. Any net principal reductions to the Revolving Credit Loans received by the Administrative Agent in accordance with the Loan Documents during such period shall not reduce such actual amount so contributed, for purposes of calculation of interest due to that Revolving Credit Lender, until the Administrative Agent has distributed to that Revolving Credit Lender its pro-rata share thereof.
(c) No Revolving Credit Lender shall have any interest in, or right to receive any part of, the Underwriting Fee, the Structuring Fee or the Collateral Monitoring Fee to be paid by the Borrowers to the Administrative Agent pursuant to this Agreement.
(d) Any amount received by the Administrative Agent as reimbursement for any cost or expense (including without limitation, reasonable attorneys' fees) shall be distributed by the Administrative Agent to that Person which is entitled to such reimbursement as provided in this Agreement (and if such Person(s) is (are) the Revolving Credit Lenders, pro-rata based upon their respective Revolving Credit Commitment Percentages at the date on which the expense, in respect of which such reimbursement is being made, was incurred).
(e) Each distribution pursuant to this Section 13.4 is subject to
Section 13.3(c), above.
ARTICLE 14 - ACCELERATION AND LIQUIDATION:
14.1. ACCELERATION NOTICES
(a) The Administrative Agent may give the Revolving Credit Lenders an Acceleration Notice at any time following the occurrence of an Event of Default.
(b) The SuperMajority Lenders may give the Administrative Agent an Acceleration Notice at any time following the occurrence of an Event of Default. Such notice may be by multiple counterparts, provided that counterparts executed by the requisite Revolving Credit Lenders are received by the Administrative Agent within a period of five (5) consecutive Business Days.
14.2. ACCELERATION Unless stayed by judicial or statutory process, the Administrative Agent shall Accelerate the Liabilities on account of the Revolving Credit within a commercially reasonable time following:
(a) The Administrative Agent's giving of an Acceleration Notice to the Revolving Credit Lenders as provided in Section 14.1(a).
(b) The Administrative Agent's receipt of an Acceleration Notice from the SuperMajority Lenders, in compliance with Section 14.1(b).
14.3. INITIATION OF LIQUIDATION Unless stayed by judicial or statutory process, a Liquidation shall be initiated by the Administrative Agent within a commercially reasonable time following Acceleration of Liabilities on account of the Revolving Credit.
14.4. ACTIONS AT AND FOLLOWING INITIATION OF LIQUIDATION
(a) At the initiation of a Liquidation:
(i) The unpaid principal balance of the SwingLine Loan (if any) shall be converted, pursuant to Section 13.2(b)(iii), to a Revolving Credit Loan in which all Revolving Credit Lenders participate.
(ii) The Administrative Agent and the Revolving Credit Lenders shall "net out" each Revolving Credit Lender's respective contributions towards the Revolving Credit Loans, so that each Revolving Credit Lender holds that Revolving Credit Lender's Revolving Credit Commitment Percentage of the Revolving Credit Loans and advances.
(b) Following the initiation of a Liquidation, each Revolving Credit Lender shall contribute, towards any L/C and Banker's Acceptance thereafter honored and not immediately reimbursed by the Borrowers, that Revolving Credit Lender's Revolving Credit Commitment Percentage of such honoring.
14.5. COLLATERAL AGENT' CONDUCT OF LIQUIDATION
(a) Any Liquidation shall be conducted by the Collateral Agent, subject to the direction of the SuperMajority Lenders.
(b) The Collateral Agent may establish one or more Nominees to "bid in" or otherwise acquire ownership to any Post Foreclosure Asset.
(c) The Collateral Agent shall manage the Nominee and manage and dispose of any Post Foreclosure Assets with a view towards the realization of the economic benefits of the ownership of the Post Foreclosure Assets and in such regard, the Collateral Agent and/or the Nominee may operate, repair, manage, maintain, develop, and dispose of any Post Foreclosure Asset in such manner as the Collateral Agent determine as appropriate under the circumstances.
(d) The Collateral Agent may decline to undertake or to continue taking a course of action or to execute an action plan (whether proposed by the Collateral Agent or any Revolving Credit Lender) unless indemnified to the Collateral Agent' satisfaction by the Revolving Credit Lenders against any and all liability and expense which may be incurred by the Collateral Agent by reason of taking or continuing to take that course of action or action plan.
(e) Each Revolving Credit Lender shall execute all such instruments and documents not inconsistent with the provisions of this Agreement as the Collateral Agent and/or the Nominee reasonably may request with respect to the creation and governance of any Nominee, the conduct of the Liquidation, and the management and disposition of any Post Foreclosure Asset.
14.6. DISTRIBUTION OF LIQUIDATION PROCEEDS:
(a) The Collateral Agent may establish one or more reasonably funded reserve accounts into which proceeds of the conduct of any Liquidation may be deposited in anticipation of future expenses which may be incurred by the Collateral Agent in the exercise of rights as a secured creditor of the Borrowers and prior claims which the Collateral Agent anticipate may need to be paid.
(b) The Collateral Agent shall distribute the net proceeds of Liquidation to the Administrative Agent for application in accordance with the relative priorities set forth in Section 14.7.
(c) Each Revolving Credit Lender, on the written request of the Collateral Agent and/or any Nominee, not more frequently than once each month, shall reimburse the Collateral Agent and/or any Nominee, pro-rata, for any cost or expense reasonably incurred by the Collateral Agent and/or the Nominee in the conduct of a Liquidation, which amount is not covered out of current proceeds of the Liquidation, which reimbursement shall be paid over to and distributed by the Collateral Agent.
14.7. RELATIVE PRIORITIES TO PROCEEDS OF LIQUIDATION
(a) All distributions of proceeds of a Liquidation shall be net of payment over to the Collateral Agent as reimbursement for all reasonable third party costs and expenses incurred by the Collateral Agent and to Lenders' Special Counsel and to any funded reserve established pursuant to Section 14.6(a).
(b) Subject to the provisions of Section 14.7(c) below, the proceeds of a Liquidation, net of those amounts described in Section 13.3(c)(iv), shall be distributed based on the following priorities:
(i) To the SwingLine Lender, on account of any SwingLine loans not converted to Revolving Credit Loans pursuant to Section 14.4(a)(i); and then
(ii) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit Lender), pro-rata, to the unpaid principal balance of the Revolving Credit; and then
(iii) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit Lender), pro-rata, to accrued interest on the Revolving Credit; and then
(iv) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit Lender), pro-rata, to those fees distributable hereunder to the Revolving Credit Lenders; and then
(v) To the Collateral Agent, an amount equal to 105% of the Stated Amount of all L/Cs and Bankers' Acceptances then outstanding;
(vi) To any Delinquent Revolving Credit Lenders, pro-rata to amounts to which such Delinquent Revolving Credit Lenders otherwise would have been entitled pursuant to Sections 14.7(b)(ii), 14.7(b)(iii), 14.7(b)(iv); and then
(vii) To any other Liabilities, including any obligations due on account of Hedge Agreements.
ARTICLE 15 - THE AGENT:
15.1. APPOINTMENT OF THE AGENT
(a) Each Lender appoints and designates NCBC as the "Administrative Agent" hereunder and under the Loan Documents.
(b) Each Lender appoints and designates NCBC as the "Collateral Agent" hereunder and under the Loan Documents.
(c) Each Revolving Credit Lender authorizes the Agent:
(i) To execute those of the Loan Documents and all other instruments relating thereto to which any Agent is a party.
(ii) To take such action on behalf of the Revolving Credit Lenders and to exercise all such powers as are expressly delegated to such Agent hereunder and in the Loan Documents and all related documents, together with such other powers as are reasonably incident thereto.
15.2. RESPONSIBILITIES OF AGENT
(a) The Agent shall not have any duties or responsibilities to, or any fiduciary relationship with, any Revolving Credit Lender except for those expressly set forth in this Agreement.
(b) No Agent or any of their respective Affiliates shall be responsible to any Revolving Credit Lender for any of the following:
(i) Any recitals, statements, representations or warranties made by any Borrower or any other Person.
(ii) Any appraisals or other assessments of the assets of any Borrower or of any other Person responsible for or on account of the Liabilities.
(iii) The value, validity, effectiveness, genuineness, enforceability, or sufficiency of the Loan Agreement, the Loan Documents or any other document referred to or provided for therein.
(iv) Any failure by any Borrower or any other Person (other than the applicable Agent) to perform its respective obligations under the Loan Documents.
(c) Each Agent may employ attorneys, accountants, and other professionals and agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such attorneys, accountants, and other professionals or agents or attorneys-in-fact selected by the Agent with reasonable care. No such attorney, accountant, other professional, agents, or attorney-in-fact shall be responsible for any action taken or omitted to be taken by any other such Person.
(d) No Agent, or any of their respective directors, officers, or employees shall be responsible for any action taken or omitted to be taken or omitted to be taken by any other of them in connection herewith in reliance upon advice of its counsel nor, in any other event except for any action taken or omitted to be taken as to which a final judicial determination has been or is made (in a proceeding in which such Person has had an opportunity to be heard) that such Person had acted in a grossly negligent manner, in actual bad faith, or in willful misconduct.
(e) No Agent shall have any responsibility in any event for more funds than such Agent actually receives and collects.
(f) Each Agent, in its separate capacity as a Lender, shall have the same rights and powers hereunder as any other Lender.
15.3. CONCERNING DISTRIBUTIONS BY THE AGENT
(a) The Administrative Agent in its reasonable discretion based upon any Agent's determination of the likelihood that additional payments will be received, expenses incurred, and/or claims made by third parties to all or a portion of such proceeds, may delay the distribution of any payment received on account of the Liabilities.
(b) The Administrative Agent may disburse funds prior to determining that the sums which the Agent expects to receive have been finally and unconditionally paid to any Agent. If and to the extent that the Administrative Agent does disburse funds and it later becomes apparent that an Agent did not then receive a payment in an amount equal to the sum paid out, then any Revolving Credit Lender to whom the Administrative Agent made the funds available, on demand from the Administrative Agent, shall refund to the Administrative Agent the sum paid to that Person.
(c) If, in the opinion of the Agent, the distribution of any amount received by the Agent might involve any Agent in liability, or might be prohibited hereby, or might be questioned by any Person, then the Administrative Agent may refrain from making distribution until the Agent's right to make distribution has been adjudicated by a court of competent jurisdiction.
(d) The proceeds of any Revolving Credit Lender's exercise of any right of, or in the nature of, set-off shall be deemed, First, to the extent that a Revolving Credit Lender is entitled to any distribution hereunder, to constitute such distribution and Second, shall be shared with the other Revolving Credit Lenders as if distributed pursuant to (and shall be deemed as distributions under) Section 14.7.
(e) Each Revolving Credit Lender recognizes that the crediting of the Borrowers with the "proceeds" of any transaction in which a Post Foreclosure Asset is acquired is a non-cash transaction and that, in consequence, no distribution of such "proceeds" will be made by the Administrative Agent to any Revolving Credit Lender.
(f) In the event that (x) a court of competent jurisdiction shall adjudge that any amount received and distributed by the Agents is to be repaid or disgorged or (y) those Lenders adversely affected thereby determine to effect such repayment or disgorgement, then each Revolving Credit Lender to which any such distribution shall have been made shall repay, to the Agents which had made such distribution, that Revolving Credit Lender's pro-rata share of the amount so adjudged or determined to be repaid or disgorged.
15.4. DISPUTE RESOLUTION: Any dispute among the Revolving Credit Lenders and/or any Agent concerning the interpretation, administration, or enforcement of the financing arrangements contemplated by this or any other Loan Document or the interpretation or administration of this or any other Loan Document which cannot be resolved amicably shall be resolved in the United States District Court for the District of Ohio, sitting in Cleveland, Ohio, or in the courts of Cuyahoga County, Ohio, to the jurisdiction of which courts each Revolving Credit Lender hereto hereby submits.
15.5. DISTRIBUTIONS OF NOTICES AND OF DOCUMENTS The Administrative Agent will forward to each Revolving Credit Lender, promptly after the Administrative Agent's receipt thereof, a copy of each notice or other document furnished to the Administrative Agent pursuant to this Agreement, including monthly, quarterly, and annual financial statements received from the Lead Borrower pursuant to Article 6 of this Agreement, other than any of the following:
(a) Routine communications associated with requests for Revolving Credit Loans and/or the issuance of L/Cs and Banker's Acceptances.
(b) Routine or nonmaterial communications.
(c) Any notice or document required by any of the Loan Documents to be furnished directly to the Revolving Credit Lenders by the Lead Borrower.
(d) Any notice or document of which the Administrative Agent has knowledge that such notice or document had been forwarded to the Revolving Credit Lenders other than by the Administrative Agent.
15.6. CONFIDENTIAL INFORMATION
(a) Each Revolving Credit Lender will maintain, as confidential, all of the following:
(i) Proprietary approaches, techniques, and methods of analysis which are applied by the Agent in the administration of the credit facility contemplated by this Agreement.
(ii) Proprietary forms and formats utilized by the Agent in providing reports to the Revolving Credit Lenders pursuant hereto, which forms or formats are not of general currency.
(b) Nothing included herein shall prohibit the disclosure of any such information as may be required to be provided by judicial process or by regulatory authorities having jurisdiction over any party to this Agreement.
15.7. RELIANCE BY AGENT Each Agent shall be entitled to rely upon any certificate, notice or other document (including any cable, telegram, telex, or facsimile) reasonably believed by such Agent to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of attorneys, accountants and other experts selected by the Agent. As to any matters not expressly provided for in this Agreement, any Loan Document, or in any other document referred to therein, the Agent shall in all events be fully protected in acting, or in refraining from acting, in accordance with the applicable Consent required by this Agreement. Instructions given with the requisite Consent shall be binding on all Revolving Credit Lenders.
15.8. NON-RELIANCE ON AGENT AND OTHER REVOLVING CREDIT LENDERS
(a) Each Revolving Credit Lender represents to all other Revolving Credit Lenders and to each Agent that such Revolving Credit Lender:
(i) Independently and without reliance on any representation or act by any Agent or by any other Revolving Credit Lender, and based on such documents and information as that Revolving Credit Lender has deemed appropriate, has made such Revolving Credit Lender's own appraisal of the financial condition and affairs of the Borrowers and decision to enter into this Agreement.
(ii) Has relied upon that Revolving Credit Lender's review of the Loan Documents by that Revolving Credit Lender and by counsel to that Revolving Credit Lender as that Revolving Credit Lender deemed appropriate under the circumstances.
(b) Each Revolving Credit Lender agrees that such Revolving Credit Lender, independently and without reliance upon any Agent or any other Revolving Credit Lender, and based upon such documents and information as such Revolving Credit Lender shall deem appropriate at the time, will continue to make such Revolving Credit Lender's own appraisals of the financial condition and affairs of the Borrowers when determining whether to take or not to take any discretionary action under this Agreement.
(c) Each Agent, in the discharge of that Agent's duties hereunder, shall not be required to make inquiry of, or to inspect the properties or books of, any Person.
(d) Except for notices, reports, and other documents and information expressly required to be furnished to the Revolving Credit Lenders by the Administrative Agent hereunder (as to which, see Section 15.5), no Agent shall have any affirmative duty or responsibility to provide any Lender with any credit or other information concerning any Person, which information may come into the possession of the Agent or any Affiliate of any Agent.
(e) Each Revolving Credit Lender, at such Revolving Credit Lender's request, shall have reasonable access to all nonprivileged documents in the possession of any Agent, which documents relate to the Agent's performance of their respective duties hereunder.
15.9. INDEMNIFICATION Without limiting the liabilities of the Borrowers under this Agreement or any of the other Loan Documents, each Revolving Credit Lender shall indemnify each Agent, pro-rata, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including attorneys' reasonable fees and expenses and other out-of-pocket expenditures) which may at any time be imposed on, incurred by, or asserted against such Agent and in any way relating to or arising out of this Agreement or any other Loan Document or any documents contemplated by or referred to therein or the transactions contemplated thereby or the enforcement of any of terms hereof or thereof or of any such other documents, provided, however, no Revolving Credit Lender shall be liable for any of the foregoing to the extent that any of the foregoing arises from any action taken or omitted to be taken by an Agent as to which a final judicial determination has been or is made (in a proceeding in which such Agent has had an opportunity to be heard) that such Agent had acted in a grossly negligent manner, in actual bad faith, or in willful misconduct.
15.10. RESIGNATION OF AGENT
(a) Any Agent may resign at any time by giving 30 days prior written
notice thereof to the Revolving Credit Lenders. Upon receipt of any such notice
of resignation, the SuperMajority Lenders shall have the right to appoint a
successor to such Agent (and if no Event of Default has occurred and is
continuing, with the consent of the Lead Borrower, not to be unreasonably
withheld and, in any event, deemed given by the Lead Borrower if no written
objection is provided by the Lead Borrower to the (resigning) Agent within ten
(10) Business Days notice of such proposed appointment). If a successor Agent
shall not have been so appointed and accepted such appointment within 30 days
after the giving of notice by the resigning Agent, then the resigning Agent may
appoint a successor Agent, which shall be a financial institution having a
combined capital and surplus in excess of $100,000,000. The
consent of the Lead Borrower otherwise required by this Section 15.10(a) shall not be required if an Event of Default has occurred and is continuing.
(b) Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor shall thereupon succeed to, and become vested with, all the rights, powers, privileges, and duties of the (resigning) Agent so replaced, and the (resigning) Agent shall be discharged from the (resigning) Agent's duties and obligations hereunder, other than on account of any responsibility for any action taken or omitted to be taken by the (resigning) Agent as to which a final judicial determination has been or is made (in a proceeding in which the (resigning) Person has had an opportunity to be heard) that such Person had acted in a grossly negligent manner or in bad faith, or in willful misconduct.
(c) After any retiring Agent's resignation, the provisions of this Agreement and of all other Loan Documents shall continue in effect for the retiring Person's benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent.
15.11. LEAD ARRANGER, CO-SYNDICATION AGENTS AND CO-DOCUMENTATION AGENTS.
Notwithstanding the provisions of this Agreement or any of the other Loan Documents, none of the Lead Arranger, the Co-Syndication Agents or the Co-Documentation Agents shall have any powers, rights, duties, responsibilities or liabilities with respect to this Agreement and the other Loan Documents other than confidentiality provisions contained herein.
ARTICLE 16 - ACTION BY AGENT - CONSENTS - AMENDMENTS - WAIVERS:
16.1. ADMINISTRATION OF CREDIT FACILITIES
(a) Except as otherwise specifically provided in this Agreement, each Agent may take any action with respect to the credit facility contemplated by the Loan Documents as the applicable Agent determines to be appropriate, provided, however, no Agent is under any affirmative obligation to take any action which it is not required by this Agreement or the Loan Documents specifically to so take.
(b) Except as specifically provided in the following Sections of this Agreement, whenever a Loan Document or this Agreement provides that action may be taken or omitted to be taken in an Agent's reasonable, good faith discretion, the Agent shall have the sole right to take, or refrain from taking, such action without, and notwithstanding, any vote of the Revolving Credit Lenders:
Actions Described in Section Type of Consent Required ---------------------------- ------------------------ 16.2 Majority Lenders 16.3 SuperMajority Lenders 16.4 Certain Consent 16.5 Unanimous Consent |
16.6 Consent of SwingLine Lender 16.7 Consent of the Agent |
(c) The rights granted to the Revolving Credit Lenders in those sections referenced in Section 16.1(b) shall not otherwise limit or impair any Agent's exercise of its reasonable, good faith discretion under the Loan Documents.
16.2. ACTIONS REQUIRING OR ON DIRECTION OF MAJORITY LENDERS
Except as otherwise provided in this Agreement, the Consent or direction of the Majority Lenders is required for any amendment, waiver, or modification of any Loan Document.
16.3. ACTIONS REQUIRING OR ON DIRECTION OF SUPERMAJORITY LENDERS
The Consent or direction of the SuperMajority Lenders is required as follows:
(a) The SuperMajority Lenders may direct the Administrative Agent to permit Protective OverAdvances to be outstanding for more than 45 consecutive Business Days or more than twice in any twelve month period (the Revolving Credit Lenders recognizing that, except as described in this Section 16.3(a), any loan or advance under the Revolving Credit which results in a Protective OverAdvance may be made by the Administrative Agent in its reasonable, good faith discretion without the Consent of the Revolving Credit Lenders, whether or not a Default exists, and that each Revolving Credit Lender shall be bound thereby).
(b) The SuperMajority Lenders may direct the Administrative Agent to suspend the Revolving Credit, if any Default is then occurring, following which direction, and for as long as a Default is then occurring, the only Revolving Credit Loans which may be made are the following:
(i) Protective OverAdvances not otherwise prohibited as provided in 16.3(a).
(ii) Revolving Credit Loans made to "cover" the honoring of L/C's and Banker's Acceptances.
(iii) Revolving Credit Loans made with Consent of the SuperMajority Lenders.
(c) The SuperMajority Lenders may undertake the following if an Event of Default has occurred and is continuing:
(i) Give the Administrative Agent an Acceleration Notice in accordance with Section 14.1(b).
(ii) Direct the Administrative Agent to increase the rate of interest to the default rate of interest as provided in, and to the extent permitted by, this Agreement.
16.4. ACTION REQUIRING CERTAIN CONSENT The Consent or direction of the following is required for the following actions:
(a) Any forgiveness of all or any portion of any payment Liability:
All Revolving Credit Lenders whose payment Liability is being so forgiven:
(other than any Delinquent Revolving Credit Lender).
(b) Any decrease in any interest rate or fee payable under any of the Loan Documents (other than any fee payable to the Administrative Agent (for which the consent of the Administrative Agent shall be required): All Revolving Credit Lenders adversely affected thereby (other than any Delinquent Revolving Credit Lender).
(c) Any postponement of the scheduled time for payment of any amount payable under any of the Loan Documents: All Revolving Credit Lenders adversely affected thereby (other than any Delinquent Revolving Credit Lender).
(d) Volitional Disgorgement as described in 15.3(f): Each Revolving Credit Lender (other than any Delinquent Revolving Credit Lender) which is adversely affected thereby.
(e) Increase in the SwingLine Ceiling: The consent of the SwingLine Lender and the Majority Lenders.
16.5. ACTIONS REQUIRING OR DIRECTED BY UNANIMOUS CONSENT None of the following may take place except with Unanimous Consent:
(a) Any release of a material portion of the Collateral, but such Consent to such release is not required if any of the following conditions is satisfied:
(i) Such release is otherwise required or provided for in the Loan Documents.
(ii) Such release is being made to facilitate a Liquidation.
(iii) No OverLoan exists immediately after giving effect to the application to the Loan Account of the net proceeds received on account of the transaction in which such release is made.
(b) Any amendment of the Definitions of "DSW Borrowing Base", DSW Availability" or of any definition of any component thereof, such that more credit would be available to a Borrower, based on the same assets, as would have been available to such Borrower immediately prior to such amendment, it being understood, however, that:
(i) The foregoing shall not limit the adjustment by the Collateral Agent of any Reserve or the Inventory Advance Rate in the Collateral Agent' administration of the Revolving Credit as otherwise permitted by this Agreement.
(ii) The foregoing shall not prevent the Administrative Agent, in its administration of the Revolving Credit, from restoring any component of the DSW Borrowing Base which had been lowered by the Administrative Agent back to the value of such component, as stated in this Agreement or to an intermediate value.
(c) Any waiver, amendment, or modification which has the effect of increasing any Revolving Credit Dollar Commitment, Revolving Credit Commitment Percentage, or the Revolving Credit Ceiling, except that no Consent shall be required for any such increase which is the result of the application of the following Sections of this Agreement:
(i) Section 16.10 (which relates to NonConsenting Revolving Credit Lenders).
(ii) Section 17.1 (which relates to assignments and assumptions).
(d) Any release of any Person obligated on account of the Liabilities.
(e) The making of any Revolving Credit Loan which, when made, exceeds Availability and is not a Protective OverAdvance, subject, however, to the following:
(i) No Consent is required in connection with the making of any Revolving Credit Loan to "cover" any honoring of a drawing under any L/C or any Banker's Acceptance.
(ii) Each Lender recognizes that subsequent to the making of a Revolving Credit Loan which does not constitute a Protective OverAdvance, the unpaid principal balance of the Loan Account may exceed the DSW Borrowing Base on account of changed circumstances beyond the control of the Agent (such as a drop in collateral value).
(f) Any amendment which has the effect of modifying the Administrative Agent's right or ability to make Protective OverAdvances.
(g) The waiver of the obligation of the Borrowers to reduce the unpaid principal balance of loans under the Revolving Credit to an amount so that no OverLoan (other than a Protective OverAdvance) is outstanding.
(h) Any amendment of this Article 16.
(i) Any subordination of the Liabilities to any material obligation of any Borrower, unless such subordination is otherwise required pursuant to this or is permitted by this Agreement.
(j) Amendment of any of the following Definitions:
"Majority Lender"
"Maturity Date"
"Protective OverAdvance" "SuperMajority Lenders "Unanimous Consent"
16.6. ACTIONS REQUIRING SWINGLINE LENDER CONSENT No action, amendment, or waiver of compliance with, any provision of the Loan Documents or of this Agreement which affects the SwingLine Lender may be undertaken without the Consent of the SwingLine Lender.
16.7. ACTIONS REQUIRING AGENT'S CONSENT
(a) No action, amendment, or waiver of compliance with, any provision of the Loan Documents or of this Agreement which affects any Agent in its capacity as Agent may be undertaken without the written consent of such Agent.
(b) No action referenced herein which affects the rights, duties, obligations, or liabilities of any Agent shall be effective without the written consent of such Agent.
16.8. MISCELLANEOUS ACTIONS
(a) Notwithstanding any other provision of this Agreement, no single Revolving Credit Lender independently may exercise any right of action or enforcement against or with respect to any Borrower.
(b) Each Agent shall be fully justified in failing or refusing to take action under this Agreement or any Loan Document on behalf of any Revolving Credit Lender unless such Agent shall first
(i) receive such clear, unambiguous, written instructions as such Agent deem appropriate; and
(ii) be indemnified to such Agent's satisfaction by the Revolving Credit Lenders against any and all liability and expense which may be incurred by such Agent by reason of taking or continuing to take any such action, unless such action had been grossly negligent, in willful misconduct, or in bad faith.
(c) The Agent may establish reasonable procedures for the providing of direction and instructions from the Revolving Credit Lenders to the Agent, including its reliance on multiple counterparts, facsimile transmissions, and time limits within which such direction and instructions must be received in order to be included in a determination of whether the requisite Lenders have provided their direction, Consent, or instructions.
16.9. ACTIONS REQUIRING LEAD BORROWER'S CONSENT
(a) The Lead Borrower's consent is required for any amendment of this Agreement, except that each of the following Articles of this Agreement may be amended without the consent of the Lead Borrower:
Article Title of Article
------- ----------------
13 Revolving Credit Fundings and Distributions
14 Acceleration and Liquidation (other than any modifications to the
requisite percentage of Revolving Credit Lenders which may furnish an
Acceleration Notice under Section 14.1(b))
15.1 The Agent (provided that the provisions of Section 15.10(a) relating
to the Lead Borrower's consent to a successor Agent in certain
circumstances may not be amended without the Lead Borrower's consent).
16 Action By Agents - Consents - Amendments - Waivers (other than as
provided in Section 16.9(b))
17 Assignments and Participations (provided that the provisions of
Section 17.1(a)(i) relating to the Lead Borrower's consent to an
assignment in certain circumstances may not be amended without the
Lead Borrower's consent).
|
(b) Subject to Section 16.9(c), the following Sections of Article 16 may not be amended without the consent of the Lead Borrower:
Actions Described in Section Type of Consent Required ---------------------------- ------------------------ 16.3 SuperMajority Lenders 16.5 Unanimous Consent 16.9 Actions Requiring Lead Borrower's Consent |
and further provided that no provision of any Article listed in Section 16.9(a) that (i) obligates any of the Agents to exercise reasonable, good faith discretion, or (ii) imposes liability on any Person for acting in a grossly negligent manner, in actual bad faith or willful misconduct, or (iii) imposes any confidentiality obligation under this Agreement on any Person, may be amended without the consent of the Lead Borrower.
(c) The Lead Borrower's consent to the amendment of those provisions referenced in Section 16.9(b)
(i) Shall be deemed given unless written objection is made, within seven (7) Business Days following the Administrative Agent's giving notice to the Lead Borrower of the proposed amendment; and
(ii) shall not be required following the occurrence of any Event of Default.
16.10. NONCONSENTING REVOLVING CREDIT LENDER
(a) In the event that a Revolving Credit Lender (in this Section 16.10, a "NONCONSENTING REVOLVING CREDIT LENDER") does not provide its Consent to a proposal by an Agent to take action which requires consent under this Article 16, then one or more Revolving Credit Lenders who provided Consent to such action may require the assignment, without recourse and in accordance with the procedures outlined in Section 17.1, below, of the NonConsenting Revolving Credit Lender's Loan Commitment hereunder on fifteen (15) days written notice to the Administrative Agent and to the NonConsenting Revolving Credit Lender.
(b) At the end of such fifteen (15) days, and provided that the NonConsenting Revolving Credit Lender delivers the Revolving Credit Note held by the NonConsenting Revolving Credit Lender to the Administrative Agent (or a lost note affidavit and indemnity reasonably acceptable to the Administrative Agent), the Revolving Credit Lenders who have given such written notice shall Transfer the following to the NonConsenting Revolving Credit Lender:
(i) Such NonConsenting Revolving Credit Lender's pro-rata share of the principal and interest of the Revolving Credit Loans to the date of such assignment.
(ii) All fees distributable hereunder to the NonConsenting Revolving Credit Lender to the date of such assignment.
(iii) Any out-of-pocket costs and expenses for which the NonConsenting Revolving Credit Lender is entitled to reimbursement from the Borrowers.
(c) In the event that the NonConsenting Revolving Credit Lender fails to deliver to the Administrative Agent the Revolving Credit Note held by the NonConsenting Revolving Credit Lender (or a lost note affidavit and indemnity) as provided in Section 16.10(b), then:
(i) The amount otherwise to be Transferred to the NonConsenting Revolving Credit Lender shall be Transferred to the Administrative Agent and held by the Administrative Agent, without interest, to be turned over to the NonConsenting Revolving Credit Lender upon delivery of the Revolving Credit Note held by that NonConsenting Revolving Credit Lender (or a lost note affidavit and indemnity).
(ii) The Revolving Credit Note held by the NonConsenting Revolving Credit Lender shall have no force or effect whatsoever.
(iii) The NonConsenting Revolving Credit Lender shall cease to be a "Revolving Credit Lender".
(iv) The Revolving Credit Lender(s) which have Transferred the amount to the Administrative Agent as described above shall have succeeded to all rights and become subject to all of the obligations of the NonConsenting Revolving Credit Lender as "Revolving Credit Lender".
(d) In the event that more than one (1) Revolving Credit Lender wishes to require such assignment, the NonConsenting Revolving Credit Lender's Loan Commitment hereunder shall be divided among such Revolving Credit Lenders, pro-rata based upon their respective Revolving Credit Commitment Percentages, with the Administrative Agent coordinating such transaction.
(e) The Administrative Agent shall coordinate the retirement of the Revolving Credit Note held by the NonConsenting Revolving Credit Lender and the issuance of Revolving Credit Notes to those Revolving Credit Lenders which "take-out" such NonConsenting Revolving Credit Lender, provided, however, no processing fee otherwise to be paid as provided in Section 17.2(b) shall be due under such circumstances.
ARTICLE 17 - ASSIGNMENTS BY REVOLVING CREDIT LENDERS:
17.1. ASSIGNMENTS AND ASSUMPTIONS:
(a) Except as provided herein, each Revolving Credit Lender (in this
Section 17.1(a), an "ASSIGNING REVOLVING CREDIT LENDER") may assign to one or
more Eligible Assignees (in this Section 17.1(a), each an "ASSIGNEE REVOLVING
CREDIT LENDER") all or a portion of that Revolving Credit Lender's interests,
rights and obligations under this Agreement and the Loan Documents (including
all or a portion of its Revolving Credit Dollar Commitment) and the same portion
of the Revolving Credit Loans at the time owing to it, and of the Revolving
Credit Note held by the Assigning Revolving Credit Lender, provided that:
(i) The Administrative Agent and, subject to the provisions of
Section 2.22(d) hereof, the Lead Borrower, shall have given its prior
written consent to such assignment, which consent shall not be unreasonably
withheld, but need not be given if the proposed assignment would result in
any resulting Revolving Credit Lender's having a Revolving Credit Dollar
Commitment of less than the "minimum hold" amount specified in Section
17.1(a)(iii).
(ii) Each such assignment shall be of a constant, and not a varying, percentage of all the Assigning Revolving Credit Lender's rights and obligations under this Agreement.
(iii) Following the effectiveness of such assignment, the Assigning Revolving Credit Lender's Revolving Credit Dollar Commitment (if not an assignment of all of the Assigning Revolving Credit Lender's Loan Commitment) shall not be less than $5,000,000.00.
17.2. ASSIGNMENT PROCEDURES. (This Section 17.2 describes the procedures to be followed in connection with an assignment effected pursuant to this Article 17 and permitted by Section 17.1).
(a) The parties to such an assignment shall execute and deliver to the Administrative Agent, for recording in the Register, an Assignment and Acceptance substantially in the form of EXHIBIT 17.12, annexed hereto (each, an "ASSIGNMENT AND ACCEPTANCE").
(b) The Assigning Revolving Credit Lender shall deliver to the Administrative Agent, with such Assignment and Acceptance, the Revolving Credit Note held by the subject Assigning Revolving Credit Lender and the Administrative Agent's processing fee of $3,500.00.
(c) The Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register or similar list (the "REGISTER") for the recordation of the names and addresses of the Revolving Credit Lenders and of the Revolving Credit Dollar Commitment and Revolving Credit Commitment Percentage of each Revolving Credit Lender. The Register shall be available for inspection by the Revolving Credit Lenders at any reasonable time and from time to time upon reasonable prior notice. In the absence of manifest error, the entries in the Register shall be conclusive and binding on all Revolving Credit Lenders. The Administrative Agent and the Revolving Credit Lenders may treat each Person whose name is recorded in the Register as a "Revolving Credit Lender" hereunder for all purposes of this Agreement.
(d) The Assigning Revolving Credit Lender and Assignee Revolving Credit Lender, directly between themselves, shall make all appropriate adjustments in payments for periods prior to the effective date of an Assignment and Assumption.
17.3. EFFECT OF ASSIGNMENT.
(a) From and after the effective date specified in an Assignment and Acceptance which has been executed, delivered, and recorded (which effective date the Administrative Agent may delay by up to five (5) Business Days after the delivery of such Assignment and Acceptance):
(i) The Assignee Revolving Credit Lender:
(A) Shall be a party to this Agreement and the Loan Documents (and to any amendments thereof) as fully as if the Assignee Revolving Credit Lender had executed each..
(B) Shall have the rights of a Revolving Credit Lender hereunder to the extent of the Revolving Credit Dollar Commitment and Revolving Credit Commitment Percentage assigned by such Assignment and Acceptance.
(ii) The Assigning Revolving Credit Lender shall be released from the Assigning Revolving Credit Lender's obligations under this Agreement and the Loan Documents to the extent of the Loan Commitment assigned by such Assignment and Acceptance.
(iii) The Administrative Agent shall undertake to obtain and distribute replacement Revolving Credit Notes to the subject Assigning Revolving Credit Lender and Assignee Revolving Credit Lender.
(b) By executing and delivering an Assignment and Acceptance, the parties thereto confirm to and agree with each other and with all parties to this Agreement as to those matters which are set forth in the subject Assignment and Acceptance.
ARTICLE 18 - NOTICES:
18.1. NOTICE ADDRESSES. All notices, demands, and other communications made in respect of any Loan Document (other than a request for a loan or advance or other financial accommodation under the Revolving Credit) shall be made to the following addresses, each of which may be changed upon seven (7) days written notice to all others given by certified mail, return receipt requested:
If to the Administrative Agent:
National City Business Credit, Inc.
1965 E. Sixth Street
Cleveland, Ohio 44114
Attention: Joseph Kwasny
Fax: (216) 222-9555
With a copy to:
Riemer & Braunstein LLP
Three Center Plaza
Boston, Massachusetts 02108
Attention: David S. Berman, Esquire
Fax: (617) 880-3456
If to the Lead Borrower
And All Borrowers:
DSW Inc.
4150 East Fifth Avenue
Columbus, Ohio 43219
Attention: Douglas Probst, Chief Financial Officer
Fax: (614) 443-0972
With a copy to:
Schottenstein Stores Corporation
1800 Moler Road
Columbus, Ohio 43207
Attention: Irwin A. Bain, Esquire Fax: (614) 443-0972
With a copy to:
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
Columbus, Ohio 43215
Attention: John B. Weimer, Esquire
Fax: (614) 719-5086
18.2. NOTICE GIVEN.
(a) Except as otherwise specifically provided herein, notices shall be deemed made and correspondence received, as follows (all times being local to the place of delivery or receipt):
(i) By certified mail, return receipt requested: the date when actually received.
(ii) By recognized overnight express delivery: the Business Day following the day when sent.
(iii) By Hand: If delivered on a Business Day after 9:00 AM and no later than three (3) hours prior to the close of customary business hours of the recipient, when delivered. Otherwise, at the opening of the then next Business Day.
(iv) By Facsimile transmission (which must include a header on which the party sending such transmission is indicated): If sent on a Business Day after 9:00 AM and no later than three (3) hours prior to the close of customary business hours of the recipient, one (1) hour after being sent. Otherwise, at the opening of the then next Business Day.
18.3. WIRE INSTRUCTIONS. NOTICE GIVEN. Subject to change in the same manner that a notice address may be changed (as to which, see Section 18.1), wire transfers to the Administrative Agent shall be made in accordance with the following wire instructions:
National City Bank.
ABA Number: 041000124
Account Name: National City Business Credit, Inc.
Account Number: 3790116
Reference: DSW
ARTICLE 19 - TERM:
19.1. TERMINATION OF REVOLVING CREDIT. The Revolving Credit shall remain in effect (subject to suspension as provided in Section 2.6 hereof) until the Termination Date.
19.2. ACTIONS ON TERMINATION.
(a) On the Termination Date, the Borrowers shall pay the Administrative Agent (whether or not then due), in immediately available funds, all Liabilities including, without limitation: the following:
(i) The entire balance of the Loan Account (including the unpaid principal balance of the Revolving Credit Loans, and the SwingLine Loan).
(ii) Any then remaining installments of the Collateral Monitoring Fee.
(iii) Any payments due on account of the indemnification obligations included in Section 2.11(f).
(iv) Any accrued and unpaid Unused Line Fee.
(v) All unreimbursed costs and expenses of each Agent and of Lenders' Special Counsel for which each Borrower is responsible.
(vi) All other Liabilities.
(b) On the Termination Date, the Borrowers shall also shall make such arrangements concerning any L/Cs and Banker's Acceptances then outstanding as are reasonably satisfactory to the Administrative Agent.
(c) Until such payment (Section 19.2(a)) and arrangements concerning L/Cs and Banker's Acceptances (Section 19.2(b)), all provisions of this Agreement, other than those included in Article 2 which place any obligation on the Administrative Agent or any Revolving Credit Lender to make any loans or advances or to provide any financial accommodations to any Borrower shall remain in full force and effect until all Liabilities shall have been paid in full.
(d) On the Termination Date, and upon satisfaction by the Loan Parties of the terms of Section 19.2(a) and (b), above, the Collateral Agent shall release the Collateral Interests granted the Collateral Agent by the Borrowers hereunder, which may be upon such conditions and indemnifications as the Collateral Agent may reasonably require.
ARTICLE 20 - GENERAL:
20.1. PROTECTION OF COLLATERAL. No Agent has any duty as to the collection or protection of the Collateral beyond the safe custody of such of the Collateral as may come into the possession of such Agent.
20.2. PUBLICITY. Subject to the prior approval of the Lead Borrower (which approval shall not be unreasonably withheld or delayed), the Administrative Agent may issue a "tombstone" notice of the establishment of the credit facility contemplated by this Agreement and may make reference to each Borrower (and may utilize any logo or other distinctive symbol associated with each Borrower) in connection with any advertising, promotion, or marketing
(including reference in any "case study" of the creditor facility contemplated hereby) undertaken by the Administrative Agent.
20.3. CONFIDENTIALITY. Each of the Agents, the Issuer, the Lead Arranger,
the Revolving Credit Lenders, the SwingLine Lender, and any Person subject to
this Section 20.3 by the terms of this Agreement (or behalf of itself, and each
of its directors, officers, and employees) agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) to any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement and any actual or prospective
counterparty or advisors to any swap or derivative transactions relating to the
Loan Parties and the Liabilities (subject to an agreement executed for the
benefit of the Lead Borrower which contains provisions substantially the same as
those of this Section 20.3, (g) with the consent of the Loan Parties or (h) to
the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes legally available to the
Agents, the Issuer, the Lead Arranger or any Revolving Credit Lender on a
nonconfidential basis from a source other than the Loan Parties. For the
purposes of this Section, the term "Information" means all information received
from the Loan Parties relating to their business, other than any such
information that is available to the Agents, the Issuer, the Lead Arranger or
any Revolving Credit Lender on a nonconfidential basis prior to disclosure by
the Loan Parties, provided that, in the case of information received from the
Loan Parties after the date hereof, such information is identified at the time
of delivery as confidential or of the type of information, such as business
plans or financial information as is customarily confidential. Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information that is of a similar nature. The confidentiality
provisions contained in this Agreement shall survive the termination, assignment
or invalidation of this Agreement, or of any of the rights and obligations
contained herein or therein.
20.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the Borrowers and their respective representatives, successors, and assigns and shall enure to the benefit of each Agent and each Revolving Credit Lender and their respective successors and assigns, provided, however, no trustee or other fiduciary appointed with respect to any Borrower shall have any rights hereunder. In the event that any Agent or any Revolving Credit Lender assigns or transfers its rights under this Agreement, the assignee shall thereupon succeed to and become vested with all rights, powers, privileges, and duties of such assignor hereunder and such assignor shall thereupon be discharged and relieved from its duties and obligations hereunder.
20.5. SEVERABILITY. Any determination that any provision of this Agreement or any application thereof is invalid, illegal, or unenforceable in any respect in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality, or enforceability of any other provision of this Agreement.
20.6. AMENDMENTS. COURSE OF DEALING.
(a) This Agreement and the other Loan Documents incorporate all discussions and negotiations between each Borrower and each Agent and each Revolving Credit Lender, either express or implied, concerning the matters included herein and in such other instruments, any custom, usage, or course of dealings to the contrary notwithstanding. No such discussions, negotiations, custom, usage, or course of dealings shall limit, modify, or otherwise affect the provisions hereof or thereof. No failure by any Agent or any Revolving Credit Lender to give notice to the Lead Borrower of any Borrower's having failed to observe and comply with any warranty or covenant included in any Loan Document shall constitute a waiver of such warranty or covenant or the amendment of the subject Loan Document. No change made by any Agent to the manner by which Borrowing Base is determined shall obligate the Agent to continue to determine Borrowing Base in that manner.
(b) Each Borrower may undertake any action otherwise prohibited hereby, and may omit to take any action otherwise required hereby, upon and with the express prior written consent of the Administrative Agent. Subject to Article 16, no consent, modification, amendment, or waiver of any provision of any Loan Document shall be effective unless executed in writing by or on behalf of the party to be charged with such modification, amendment, or waiver (and if such party is the Administrative Agent then by a duly authorized officer thereof). Any modification, amendment, or waiver provided by the Administrative Agent shall be in reliance upon all representations and warranties theretofore made to the Administrative Agent by or on behalf of the Borrowers (and any guarantor, endorser, or surety of the Liabilities) and consequently may be rescinded in the event that any of such representations or warranties was not true and complete in all material respects when given.
20.7. POWER OF ATTORNEY. In connection with all powers of attorney included in this Agreement (which may be exercised only after the occurrence and during the continuance of an Event of Default), each Borrower hereby grants unto the Administrative Agent (acting through any of its officers) full power to do any and all things necessary or appropriate in connection with the exercise of such powers as fully and effectually as that Borrower might or could do, hereby ratifying all that said attorney shall do or cause to be done by virtue of this Agreement. No power of attorney set forth in this Agreement shall be affected by any disability or incapacity suffered by any Borrower and each shall survive the same. All powers conferred upon each Agent by this Agreement, being coupled with an interest, shall be irrevocable until this Agreement is terminated by a written instrument executed by a duly authorized officer of each Agent. The Administrative Agent, as agent for the Borrowers under any power of attorney included in this Agreement and the other Loan Documents, is not a fiduciary for any Borrower, but instead, in exercising any one or more rights with respect to such powers of attorney, may do so for the sole and exclusive benefit of the Revolving Credit Lenders, and not for the benefit of any Borrower. The Borrowers acknowledge and agree that the provisions of Title 20,
Pennsylvania Consolidated Statutes Section 5601 et seq., as amended (including, without limitation, Act 39 of 1999) shall not be applicable to any one or more powers of attorney contained in any Loan Document previously, concurrently or in the future executed and delivered by the Borrowers.
20.8. APPLICATION OF PROCEEDS. The proceeds of any collection, sale, or disposition of the Collateral, or of any other payments received hereunder, shall be applied towards the Liabilities in such order and manner as the Administrative Agent determines in its sole reasonable, good faith discretion, consistent, however, with Sections 14.6 and 14.7 and any other applicable provisions of this Agreement. The Borrowers shall remain liable for any deficiency remaining following such application.
20.9. INCREASED COSTS. If, after the date hereof, as a result of any change in any Requirement of Law, or change of the interpretation or application thereof by any court or by any governmental or other authority or entity charged with the administration thereof, whether or not having the force of law, which:
(a) subjects any Revolving Credit Lender to any taxes or changes the basis of taxation, or increases any existing taxes, on payments of principal, interest or other amounts payable by any Borrower to any Agent or any Revolving Credit Lender under this Agreement (except for taxes on any Agent or any Revolving Credit Lender based on net income or capital imposed by the jurisdiction in which the principal or lending offices of such Agent or that Revolving Credit Lender are located);
(b) imposes, modifies or deems applicable any reserve, cash margin, special deposit or similar requirements against assets held by, or deposits in or for the account of or loans by or any other acquisition of funds by the relevant funding office of any Revolving Credit Lender;
(c) imposes on any Revolving Credit Lender any other condition with respect to any Loan Document; or
(d) imposes on any Revolving Credit Lender a requirement to maintain or allocate capital in relation to the Liabilities;
and the result of any of the foregoing, in such Revolving Credit Lender's reasonable opinion, is to increase the cost to that Revolving Credit Lender of making or maintaining any loan, advance or financial accommodation or to reduce the income receivable by that Revolving Credit Lender in respect of any loan, advance or financial accommodation by an amount which that Revolving Credit Lender deems to be material, then upon written notice from the Administrative Agent, from time to time, to the Lead Borrower (such notice to set out in reasonable detail the facts giving rise to and a summary calculation of such increased cost or reduced income), the Borrowers shall forthwith pay to the Administrative Agent, for the benefit of the subject Revolving Credit Lender, upon receipt of such notice, that amount which shall compensate the subject Revolving Credit Lender for such additional cost or reduction in income.
20.10. REPLACEMENT OF REVOLVING CREDIT LENDER. If (a) any Revolving Credit
Lender incurs increased costs and requests compensation under Section 2.18(d) or
Section 20.9, (b) any Revolving Credit Lender is a Delinquent Revolving Credit
Lender, then the Lead Borrower may
(a) request such Revolving Credit Lender or Issuer to use reasonable efforts to designate a different lending office for funding or booking its loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches, or Affiliates, if in the judgment of such Revolving Credit Lender or Issuer, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.18(d) or Section 20.9 hereof, and (ii) would not subject such Revolving Credit Lender or Issuer to any unreimbursed cost or expense, and would not otherwise be disadvantageous to such Revolving Credit Lender or Issuer. The Lead Borrower shall pay all reasonable costs and expenses incurred by such Revolving Credit Lender or Issuer in connection with any such designation of assignment; and
(b) at its sole expense and effort, upon notice to such Revolving Credit Lender and the Administrative Agent, require such Revolving Credit Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Article 17), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Revolving Credit Lender, if a Revolving Credit Lender accepts such assignment), provided that (i) if such assignee is not an existing Revolving Credit Lender, the Lead Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Revolving Credit Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Credit Loans and participations in unreimbursed drawings under L/Cs and Banker's Acceptances and SwingLine Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Lead Borrower (in the case of all other amounts) and (iii) such assignment will result in a reduction in such compensation, payments or costs. A Revolving Credit Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Revolving Credit Lender or otherwise, the circumstances entitling the Lead Borrower to require such assignment and delegation cease to apply.
20.11. COSTS AND EXPENSES OF THE AGENT AND ISSUER.
(a) The Borrowers shall pay from time to time on demand all Costs of Collection and all reasonable costs, expenses, and disbursements (including reasonable attorneys' fees and expenses) which are incurred by each Agent or the Issuer in connection with the preparation, negotiation, execution, and delivery of this Agreement and of any other Loan Documents, and all other reasonable costs, expenses, and disbursements which may be incurred in connection with or in respect to the credit facility contemplated hereby or which otherwise are incurred with respect to the Liabilities.
(b) The Borrowers shall pay from time to time on demand all reasonable costs and expenses (including reasonable attorneys' fees and expenses) incurred, following the
occurrence of any Event of Default, by the Revolving Credit Lenders to Lenders' Special Counsel.
(c) Each Borrower authorizes the Administrative Agent to pay all such fees and expenses and in the Administrative Agent's reasonable, good faith discretion, to add such fees and expenses to the Loan Account.
(d) The undertaking on the part of each Borrower in this Section 20.11
shall survive payment of the Liabilities and/or any termination, release, or
discharge executed by any Agent in favor of any Borrower, other than a
termination, release, or discharge which makes specific reference to this
Section 20.11.
20.12. COPIES AND FACSIMILES. Each Loan Document and all documents and papers which relates thereto which have been or may be hereinafter furnished any Agent or any Revolving Credit Lender may be reproduced by that Revolving Credit Lender or by any Agent by any photographic, microfilm, xerographic, digital imaging, or other process, and such Person making such reproduction may destroy any document so reproduced. Any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made in the regular course of business). Any facsimile which bears proof of transmission shall be binding on the party which or on whose behalf such transmission was initiated and likewise shall be so admissible in evidence as if the original of such facsimile had been delivered to the party which or on whose behalf such transmission was received.
20.13. OHIO LAW. This Agreement and all rights and obligations hereunder, including matters of construction, validity, and performance, shall be governed by the law of State of Ohio.
20.14. CONSENT TO JURISDICTION.
(a) Each Borrower agrees that any legal action, proceeding, case, or controversy against any Borrower with respect to any Loan Document may be brought in the courts of Franklin County, Ohio or in the United States District Court, District of Ohio, sitting in Columbus, Ohio, as the Administrative Agent may elect in the Administrative Agent's sole reasonable, good faith discretion. By execution and delivery of this Agreement, each Borrower, for itself and in respect of its property, accepts, submits, and consents generally and unconditionally, to the jurisdiction of the aforesaid courts.
(b) Each Borrower WAIVES any objection based on forum non conveniens and any objection to venue of any action or proceeding instituted under any of the Loan Documents and consents to the granting of such legal or equitable remedy as is deemed appropriate by the Court.
(c) Nothing herein shall affect the right of any Agent to bring legal actions or proceedings in any other competent jurisdiction.
(d) Each Borrower agrees that any action commenced by any Borrower asserting any claim arising under or in connection with this Agreement or any other Loan Document shall be brought solely in the courts of Franklin County, Ohio or in the United States District Court, District of Ohio, sitting in Columbus, Ohio, and that such Courts shall have exclusive jurisdiction with respect to any such action.
20.15. INDEMNIFICATION. Each Borrower shall indemnify, defend, and hold
each Agent, the Issuer, and each Revolving Credit Lender and any Participant and
any of their respective employees, officers, agents, Subsidiaries, and
Affiliates (each, an "INDEMNIFIED PERSON") harmless of and from any claim
brought or threatened against any Indemnified Person by any Borrower, any
guarantor or endorser of the Liabilities, or any other Person (as well as from
reasonable attorneys' fees, expenses, and disbursements in connection therewith)
on account of the relationship of the Borrowers or of any guarantor or endorser
of the Liabilities, including all costs, expenses, liabilities, and damages as
may be suffered by any Indemnified Person in connection with (x) the Collateral;
(y) the occurrence of any Event of Default; or (z) the exercise of any rights or
remedies under any of the Loan Documents (each of claims which may be defended,
compromised, settled, or pursued by the Indemnified Person with counsel of the
Lender's selection, but at the expense of the Borrowers) other than any claim as
to which a final determination is made in a judicial proceeding (in which the
Agent and any other Indemnified Person has had an opportunity to be heard),
which determination includes a specific finding that the Indemnified Person
seeking indemnification had acted in a grossly negligent manner or in actual bad
faith or in willful misconduct. This indemnification shall survive payment of
the Liabilities and/or any termination, release, or discharge executed by any
Agent in favor of the Borrowers, other than a termination, release, or discharge
duly executed on behalf of the Agent which makes specific reference to this
Section 20.15.
20.16. RULES OF CONSTRUCTION. The following rules of construction shall be applied in the interpretation, construction, and enforcement of this Agreement and of the other Loan Documents:
(a) Unless otherwise specifically provided for herein (and then only to the extent so provided), interest and any fee or charge which is stated as a per annum percentage shall be calculated based on a 360 day year and actual days elapsed with respect to LIBOR Loans and on a 365/366 day year and actual days elapsed with respect to Base Margin Loans.
(b) Words in the singular include the plural and words in the plural include the singular.
(c) Unless otherwise specifically provided for herein or in a specific Loan Document (and then only to the extent so provided), as between the parties hereto or to any Loan Document, the definitions of the following terms, as included in the UCC, are deemed to be as follows for purposes of the performance of obligations arising under or in respect of any Loan Document:
(i) "Authenticate" means "signed".
(ii) "Record" means written information in a tangible form.
(d) Titles, headings (indicated by being underlined or shown in SMALL CAPITALS) and any Table of Contents are solely for convenience of reference; do not constitute a part of the instrument in which included; and do not affect such instrument's meaning, construction, or effect.
(e) The words "includes" and "including" are not limiting.
(f) Text which follows the words "including, without limitation" (or similar words) is illustrative and not limitational.
(g) Text which is shown in italics (except for parenthesized italicized text), shown in BOLD, shown IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to be conspicuous.
(h) The words "may not" are prohibitive and not permissive.
(i) Any reference to a Person's "knowledge" (or words of similar import) are to such Person's knowledge assuming that such Person has undertaken reasonable and diligent investigation with respect to the subject of such "knowledge" (whether or not such investigation has actually been undertaken).
(j) Terms which are defined in one section of any Loan Document are used with such definition throughout the instrument in which so defined.
(k) The term "Dollars" and the symbol "$" each refers to United States Dollars.
(l) Unless limited by reference to a particular Section or provision, any reference to "herein", "hereof", or "within" is to the entire Loan Document in which such reference is made.
(m) References to "this Agreement" or to any other Loan Document is to the subject instrument as amended to the date on which application of such reference is being made.
(n) Except as otherwise specifically provided, all references to time are to Cleveland, Ohio time.
(o) In the determination of any notice, grace, or other period of time prescribed or allowed hereunder:
(i) Unless otherwise provided (A) the day of the act, event, or default from which the designated period of time begins to run shall not be included and the last day of the period so computed shall be included unless such last day is not a Business Day, in which event the last day of the relevant period shall be the then next Business Day and (B) the period so computed shall end at 5:00 PM on the relevant Business Day.
(ii) The word "from" means "from and including".
(iii) The words "to" and "until" each mean "to, but excluding".
(iv) The word "through" means "to and including".
(p) The Loan Documents shall be construed and interpreted in a harmonious manner and in keeping with the intentions set forth in Section 20.17 hereof, provided, however, in the event of any inconsistency between the provisions of this Agreement and any other Loan Document, the provisions of this Agreement shall govern and control.
20.17. AGENT'S CONSENT. Unless otherwise explicitly provided herein, any Agent's consent to any action of any Borrower which is prohibited unless such consent is given may be given or refused by such Agent in its sole reasonable, good faith discretion and without reference to Section 2.16 hereof.
20.18. PARTICIPATIONS: Each Revolving Credit Lender may sell participations to one or more financial institutions (each, a "PARTICIPANT") in that Revolving Credit Lender's interests herein provided that no such participation shall include any provision which accords that Participant with any rights, vis a vis any Agent, with respect to any requirement herein for approval by a requisite number or proportion of the Revolving Credit Lenders. No such sale of a participation shall relieve a Revolving Credit Lender from that Revolving Credit Lender's obligations hereunder nor obligate any Agent to any Person other than a Revolving Credit Lender.
20.19. RIGHT OF SET-OFF. Any and all deposits or other sums at any time credited by or due to any Borrower from any Agent or any Revolving Credit Lender or any Participant or from any Affiliate of any of the foregoing, and any cash, securities, instruments or other property of any Borrower in the possession of any of the foregoing (other than in Exempt DDA accounts), whether for safekeeping or otherwise (regardless of the reason such Person had received the same) shall at all times constitute security for all Liabilities and for any and all obligations of each Borrower to such Agent and such Revolving Credit Lender or any Participant or such Affiliate, and (a) after the occurrence and during the continuance of an Event of Default, or (b) after the service of process upon any Agent or any Revolving Credit Lender or any Participant seeking to attach, by trustee, mesne, or other process, any funds of any Loan Party on deposit with, or assets of any Loan Party in the possession of, such Agent or that Revolving Credit or such Participant, in excess of Five Hundred Thousand Dollars ($500,000.00), may be applied or set off against the Liabilities and against such obligations at any time, whether or not such are then due and whether or not other collateral is then available to the Agent or that Revolving Credit Lender.
20.20. PLEDGES TO FEDERAL RESERVE BANKS: Nothing included in this Agreement shall prevent or limit any Revolving Credit Lender, to the extent that such Revolving Credit Lender is subject to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act (12 U.S.C. Section 341) from pledging all or any portion of that Lender's interest and rights under this Agreement, provided, however, neither such pledge nor the enforcement thereof
shall release the pledging Revolving Credit Lender from any of its obligations hereunder or under any of the Loan Documents.
20.21. MAXIMUM INTEREST RATE. Regardless of any provision of any Loan Document, neither any Agent nor any Revolving Credit Lender shall be entitled to contract for, charge, receive, collect, or apply as interest on any Liability, any amount in excess of the maximum rate imposed by Applicable Law. Any payment which is made which, if treated as interest on a Liability would result in such interest's exceeding such maximum rate shall be held, to the extent of such excess, as additional collateral for the Liabilities as if such excess were "Collateral."
20.22. WAIVERS.
(a) Each Borrower (and all guarantors, endorsers, and sureties of the Liabilities) make each of the waivers included in Section 20.22(b), below, knowingly, voluntarily, and intentionally, and understands that each Agent and each Revolving Credit Lender, in establishing the facilities contemplated hereby and in providing loans and other financial accommodations to or for the account of the Borrowers as provided herein, whether not or in the future, is relying on such waivers.
(b) EACH BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY WAIVES THE FOLLOWING:
(i) Except as otherwise specifically required hereby, notice of non-payment, demand, presentment, protest and all forms of demand and notice, both with respect to the Liabilities and the Collateral.
(ii) Except as otherwise specifically required hereby, the right to notice and/or hearing prior to any Agent's exercising of the Agent's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH ANY AGENT OR ANY REVOLVING CREDIT LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST ANY AGENT OR ANY REVOLVING CREDIT LENDER OR IN WHICH ANY AGENT OR ANY REVOLVING CREDIT LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN ANY BORROWER OR ANY OTHER PERSON AND EACH AGENT AND EACH REVOLVING CREDIT LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).
(iv) Any defense, counterclaim, set-off, recoupment, or other basis on which the amount of any Liability, as stated on the books and records of any Agent, could be reduced or claimed to be paid otherwise than in accordance with the tenor of and written terms of such Liability.
(v) Any claim to consequential, special, or punitive damages.
20.23. ADDITIONAL WAIVERS.
(a) The Liabilities are the joint and several obligations of each Loan Party. To the fullest extent permitted by applicable law, the obligations of each Loan Party hereunder shall not be affected by (i) the failure of any Agent or any Revolving Credit Lender to assert any claim or demand or to enforce or exercise any right or remedy against any other Loan Party under the provisions of this Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement, any other Loan Document, or any other agreement, including with respect to any other Borrower of the Liabilities, or (iii) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Collateral Agent or any Revolving Credit Lender.
(b) The obligations of each Loan Party hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Liabilities), including any claim of waiver, release, surrender, alteration or compromise of any of the Liabilities, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Liabilities or otherwise. Without limiting the generality of the foregoing, the obligations of each Loan Party hereunder shall not be discharged or impaired or otherwise affected by the failure of any Agent or any Revolving Credit Lender to assert any claim or demand or to enforce any remedy under this Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Liabilities, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Loan Party or that would otherwise operate as a discharge of any Loan Party as a matter of law or equity (other than the indefeasible payment in full in cash of all the Liabilities).
(c) To the fullest extent permitted by applicable law, each Loan Party waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Liabilities or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than the indefeasible payment in full in cash of all the Liabilities. Each Agent and the Revolving Credit Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Liabilities, make any other accommodation with any other Loan Party, or exercise any other right or remedy available to them against any other Loan Party, without affecting or impairing in any way the liability of any Loan Party hereunder except to the extent that all the Liabilities have been indefeasibly paid in full in cash. Pursuant to applicable law, each Loan Party waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party against any other Loan Party, as the case may be, or any security.
(d) Upon payment by any Loan Party of any Liabilities, all rights of such Loan Party against any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Liabilities, as more particularly set forth in an Indemnity, Subrogation and Contribution Agreement to be entered into amongst the Loan Parties. In addition, any indebtedness of any Loan Party now or hereafter held by any other Loan Party is hereby subordinated in right of payment to the prior payment in full of the Liabilities. None of the Loan Parties will demand, sue for, or otherwise attempt to collect any such indebtedness. If any amount shall erroneously be paid to any Loan Party on account of (a) such subrogation, contribution, reimbursement, indemnity or similar right or (b) any such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the Agent and the Revolving Credit Lenders and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Liabilities, whether matured or unmatured, in accordance with the terms of the Loan Documents.
20.24. PATRIOT ACT NOTICES. Each Lender hereby notifies the Borrowers that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of each Borrower and other information that will allow such Lender to identify such Borrower in accordance with the Patriot Act.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as a sealed instrument as of the day and year first above written.
DSW INC.
("LEAD BORROWER")
By: /s/ James A. McGrady
------------------------------------
Name: James A. McGrady
Title: Vice President
|
"OTHER BORROWERS":
DSW SHOE WAREHOUSE, INC.
By: /s/ James A. McGrady
------------------------------------
Name: James A. McGrady
Title: Chief Financial Officer
|
DSW-1
NATIONAL CITY BUSINESS CREDIT, INC.
(ADMINISTRATIVE AGENT, COLLATERAL AGENT,
SWINGLINE LENDER AND REVOLVING CREDIT
LENDER)
By: /s/ Joseph L. Kwasny
------------------------------------
Name: Joseph L. Kwasny
Title: Director
|
DSW-2
NATIONAL CITY BANK
(ISSUER AND LEAD ARRANGER)
By: /s/ Joseph L. Kwasny
------------------------------------
Name: Joseph L. Kwasny
Title: Senior Vice President
|
DSW-3
THE CIT GROUP/BUSINESS CREDIT, INC.
(CO-SYNDICATION AGENT AND REVOLVING
CREDIT LENDER)
By: /s/ Manual Borges
------------------------------------
Name: Manual Borges
Title: Vice President
|
DSW-4
BANK OF AMERICA, N.A. (CO-SYNDICATION
AGENT AND REVOLVING CREDIT LENDER)
By: /s/ James Ward
------------------------------------
Name: James Ward
Title: Managing Director
|
DSW-5
GENERAL ELECTRIC CAPITAL CORPORATION
(CO-DOCUMENTATION AGENT AND REVOLVING
CREDIT LENDER)
By: /s/ Stephen Metivier
------------------------------------
Name: Stephen Metivier
Title: Vice President
|
DSW-6
WELLS FARGO RETAIL FINANCE, LLC
(CO-DOCUMENTATION AGENT AND REVOLVING
CREDIT LENDER)
By: /s/ Cory Lofts
------------------------------------
Name: Cory Lofts
Title: Vice President account Executive
|
DSW-7
LASALLE BANK NATIONAL ASSOCIATION
(REVOLVING CREDIT LENDER)
By: /s/ Sara H. Dekuiper
------------------------------------
Name: Sara H. Dekuiper
Title: Assistant Vice President
|
DSW-8
HSBC BUSINESS CREDIT (USA) INC.
(REVOLVING CREDIT LENDER)
By: /s/ Dan Bueno
------------------------------------
Name: Dan Bueno
Title: Vice President
|
DSW-9
Exhibit 10.23
DSW INC.
2005 EQUITY INCENTIVE PLAN
1.00 PURPOSE AND EFFECTIVE DATE
1.01 Purpose. This Plan is intended to foster and promote the long-term financial success of the Company and Related Entities and to materially increase shareholder value by [1] providing Consultants, Employees and Eligible Directors an opportunity to acquire an ownership interest in the Company and [2] enabling the Company and Related Entities to attract and retain the services of outstanding Consultants, Employees and Eligible Directors upon whose judgment, interest and special efforts the successful conduct of the Group’s business is largely dependent.
1.02 Effective Date. This Plan is effective on the date it is approved by the Board subject to approval by the Company’s shareholders. Any Award granted before shareholder approval will be null and void if the shareholders do not approve the Plan within the period just described.
2.00 DEFINITIONS
When used in this Plan, the following terms have the meanings given to them in this section unless another meaning is expressly provided elsewhere in this document or clearly required by the context. When applying these definitions and any other word, term or phrase used in this Plan, the form of any word, term or phrase will include any and all of its other forms.
Act. The Securities Exchange Act of 1934, as amended, or any successor statute of similar effect even if the Company is not subject to the Act.
Affiliated SAR. An SAR that is granted in conjunction with an Option and which is always deemed to have been exercised at the same time that the related Option is exercised. The deemed exercise of an Affiliated SAR will not reduce the number of shares of Stock subject to the related Option, except to the extent of the exercise of the related Option.
Annual Meeting. The annual meeting of the Company’s shareholders.
Annual Retainer. The annual cash retainer and any other fees paid to each Eligible Director for service as a member of the Board and as a member of any Board committee.
Annual Retainer Deferral Form. The form each Eligible Director must complete to defer all or a portion of his or her Annual Retainer.
Award. Any Incentive Stock Option, Nonstatutory Stock Option, Performance Share, Performance Unit, Restricted Stock, Restricted Stock Unit, Stock Appreciation Right and Stock Unit granted under the Plan.
Award Agreement. The written or electronic agreement between the Company and each Participant that describes the terms and conditions of each Award and the manner in which it will
be settled if earned. If there is a conflict between the terms of this Plan and the terms of the Award Agreement, the terms of this Plan will govern.
Beneficiary. The person a Participant designates to receive (or to exercise) any Plan benefits (or rights) that are unpaid (or unexercised) when he or she dies. A Beneficiary may be designated only by following the procedures described in Section 15.02; neither the Company nor the Committee is required to infer a Beneficiary from any other source.
Board. The Company’s board of directors.
Cause. Unless the Committee specifies otherwise in the Award Agreement, with respect to any Participant and subject to any cure provision included in any written agreement between the Participant and the Company:
[1] A material failure to substantially perform his or her position or duties;
[2] Engaging in illegal or grossly negligent conduct that is materially injurious to the Company or any Related Entity;
[3] A material violation of any law or regulation governing the Company or any Related Entity;
[4] Commission of a material act of fraud or dishonesty which has had or is likely to have a material adverse effect upon the Company’s (or any Related Entity’s) operations or financial conditions;
[5] A material breach of the terms of any other agreement (including any employment agreement) with the Company or any Related Entity.; or
[6] A breach of any term of this Plan or Award Agreement.
If a Participant Terminates (or is Terminated) for any reason other than Cause and the Company subsequently discovers an act, failure or event that, if known before the Participant’s Termination would have justified a Termination for Cause and that act, event or failure was actively concealed by the Participant and could not have been discovered through reasonable diligence before the Participant Terminated, that Participant will be retroactively treated as having been Terminated for Cause.
Change in Control. The earliest of any of the following events to occur after completion of the initial public offering of the Company’s stock which is the subject of the Registration Statement:
[1] During any period consisting of 12 consecutive calendar months beginning after completion of the initial public offering of the Company’s stock which is the subject of the Registration Statement, the members of the Board specified in the Registration Statement (“Incumbent Directors”) cease for any reason other than death to constitute at least a majority of the members of the Board, provided [a] that any director whose election, or nomination for election by the Company’s shareholders, was approved by a
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vote of at least a majority of the then Incumbent Directors also will be treated as an Incumbent Director unless that person was nominated for election to the Board (or otherwise became a member of the Board) in connection with an actual or threatened election contest relating to the election or removal of Board members or other threatened or actual solicitation of proxies of consent by or in behalf of any “person,” including a “group” [as those terms are used in Act §§13(d) and 14(d)(2)], [b] this element of this definition will not apply if the Company reorganizes into an entity that does not have a board of directors or analogous governing body and that reorganization is not a Change in Control under another element of this definition and [c] if the Company becomes a subsidiary of another entity (i.e., another entity owns, directly or indirectly, more than 50 percent of the total combined voting power of all classes of Stock) in a transaction that is not a Change in Control under another element of this definition, subpart [1] of this definition will be applied by reference to changes to the board of directors of the parent entity (or of the ultimate parent entity).
[2] Any “person, ” including a “group” [as these terms are used in Act §§13(d) and 14(d)(2)] becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of 30 percent or more of the combined voting power of the Company and of securities of the Company sufficient to elect a majority of the members of the Board but disregarding the effect of [a] any acquisition by a person who on the Effective Date is the beneficial owner of 30 percent or more of the combined voting power of the Company, [b] any acquisition directly from the Company, including a public offering of securities, [c] any acquisition by the Company or any Related Entity, [d] any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Entity or [e] any acquisition through a transaction described in subpart [3], [4] or [5] of this definition, [f] any acquisition by Retail Ventures, Inc. or any corporation, partnership or other form of unincorporated entity of which Retail Ventures, Inc. owns, directly or indirectly, 50 percent or more of the total combined voting power of all classes of stock, if the entity is a corporation, or of the capital or profits interest, if the entity is a partnership or another form of unincorporated entity, [g] any acquisition by Schottenstein Stores Corporation (the persons identified in subparts [a], [c], [f] and [g] of this subpart being sometimes referred to as “Permitted Acquirers”), [h] any acquisition by any one or more of the trusts established for the benefit of any of Jay L. Schottenstein, Susan S. Diamond, Ann Desche, Lori Schottenstein, Geraldine Schottenstein or any of their respective spouses, children or lineal descendants or any person controlled by any such trust or trusts, [i] any acquisition by an entity that files SEC Form 13-G in connection with its ownership of Stock unless and until that entity files SEC Form 13-D in connection with its ownership of Stock or [j] any acquisition by Cerberus Partners, Ltd. unless, at the time of the acquisition, the Permitted Acquirers, as defined in subpart [2][g] of this definition and the trusts described in subpart [2][h] of this definition, directly or indirectly, own less than 10 percent of the voting power of the Company’ stock.
[3] The completion of a transaction or a series of related transactions effecting [a] the merger or other business combination of the Company with or into another entity other than a Permitted Acquirer in which the shareholders of the Company immediately before the effective date of such merger or other business combination own less than 50 percent
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of the voting power in such entity; or [b] the sale or other disposition of all or substantially all of the assets of the Company except a sale or other disposition to [i] an entity in which the shareholders of the Company immediately before the sale or disposition own more than 50 percent of the voting power of such entity after that transaction or [ii] a Permitted Acquirer.
[4] Liquidation or dissolution of the Company other than a liquidation or dissolution into an entity [a] in which the shareholders of the Company before the effective date of the liquidation or dissolution own more than 50 percent of the voting power of such entity after the liquidation or dissolution or [b] which is a Permitted Acquirer.
[5] Any other transaction or event that the Board, in its sole discretion, decides will have as material an effect on the Company as any transaction or event described in subparts [1] through [4] of this definition but which is not otherwise described in this section.
However, and regardless of any other provision of this Plan or element of this definition, a Change in Control will not occur solely as a result of the initial public offering of the Company’s stock which is the subject of the Registration Statement or of any event directly related to that initial public offering.
Change in Control Price. The highest price per share of Stock offered in conjunction with any transaction resulting in a Change in Control (as determined in good faith by the Committee if any part of the offered price is payable other than in cash) or, in the case of a Change in Control occurring solely by reason of events not related to a transfer of Stock, the highest Fair Market Value of a share of Stock on any of the 30 consecutive trading days ending on the last trading day before the Change in Control occurs.
Code. The Internal Revenue Code of 1986, as amended or superseded after the Effective Date and any applicable rulings or regulations issued under the Code.
Committee.
[1] In the case of any Award to Eligible Directors, the entire Board;
[2] In the case of Award granted to Participants other than Eligible Directors before the Company becomes a “publicly held corporation” as defined in Code §162(m)(2), the entire Board; or
[2] In the case of Awards made to Participants other than Eligible Directors after the Company becomes a “publicly held corporation” as defined in Code §162(m)(2), the Board’s Compensation Committee which also constitutes a “compensation committee” within the meaning of Treas. Reg. §1.162-27(c)(4). The Committee will be comprised of at least two persons [a] each of whom is [i] an outside director, as defined in Treas. Reg. §1.162-27(e)(3)(i) and [ii] a “non-employee” director within the meaning of Rule 16b-3 under the Act and [b] none of whom may receive remuneration from the Company or any Related Entity in any capacity other than as a director, except as permitted under Treas. Reg. §1.162-27(e)(3)(ii).
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Company. DSW Inc., an Ohio corporation, and any and all successors to it.
Consultant. Any person, other than an Employee or an Eligible Director, who provides significant services to the Company or any Related Entity.
Covered Officer. Those Employees whose compensation is subject to limited deductibility under Code §162(m) as of the last day of any calendar year ending with or within any Performance Period.
Disability. Unless the Committee specifies otherwise in the Award Agreement:
[1] With respect to an Incentive Stock Option, as defined in Code §22(e)(3).
[2] With respect to any Award subject to Code §409A, the Participant is [a] unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment arising before Termination which can be expected to result in death or can be expected to last for a continuous period of not less than 12 continuous months beginning before Termination; or [b] by reason of any readily determinable physical or mental impairment arising before Termination which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months beginning before Termination, receiving income replacement benefits for a period of not less than 3 months beginning before Termination under an accident and health plan covering employees of the Participant’s employer; or
[3] With respect to any Award not described in subpart [1] or [2] of this definition, the Participant’s inability, with a reasonable accommodation, to perform his or her duties on a full-time basis for a period of more than six-consecutive calendar months due to a physical or mental infirmity arising before Termination.
Eligible Director. A person who, on an applicable Grant Date [1] is an elected member of the Board or of a Related Board (or has been appointed to the Board or to a Related Board to fill an unexpired term and will continue to serve at the expiration of that term only if elected by shareholders) and [2] is not an Employee. For purposes of applying this definition, an Eligible Director’s status will be determined as of the Grant Date applicable to each affected Award.
Employee. Any person who, on any applicable date, is a common law employee of the Company or any Related Entity. A worker who is classified as other than a common law employee but who is subsequently reclassified as a common law employee of the Company for any reason and on any basis will be treated as a common law employee only from the date that reclassification occurs and will not retroactively be reclassified as an Employee for any purpose of this Plan.
Exercise Price. The price at which a Participant may exercise an Award.
Fair Market Value. The value of one share of Stock on any relevant date, determined under the following rules:
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[1] If the Stock is traded on an exchange, the reported “closing price” on the relevant date, if it is a trading day, otherwise on the next trading day;
[2] If the Stock is traded over-the-counter with no reported closing price, the mean between the lowest bid and the highest asked prices on that quotation system on the relevant date if it is a trading day, otherwise on the next trading day; or
[3] If neither subparts [1] nor [2] of this definition apply, the fair market value as determined by the Committee in good faith and, with respect to Incentive Stock Options, consistent with rules prescribed under Code §422.
Freestanding SAR. An SAR that is not associated with an Option and is granted under Section 10.00.
Grant Date. The later of [1] the date the Committee establishes the terms of an Award or [2] the date specified in the Award Agreement.
Group. The Company and all Related Entities. The composition of the Group will be determined as of any relevant date.
Incentive Stock Option. Any Option granted under Section 6.00 that, on the Grant Date, meets the conditions imposed under Code §422 and is not subsequently modified in a manner inconsistent with Code §422.
Nonstatutory Stock Option. Any Option granted under Section 6.00 that is not an Incentive Stock Option.
Option. The right granted to a Participant to purchase a share of Stock at a stated price for a specified period of time. Subject to Section 6.00, an Option may be either [1] an Incentive Stock Option or [2] a Nonstatutory Stock Option.
Participant. Any Consultant, Employee or Eligible Director to whom an outstanding Award has been granted.
Performance-Based Award. An Award granted subject to Section 11.00.
Performance Criteria. The criteria described in Section 11.02.
Performance Period. The period over which the Committee will determine if applicable Performance Criteria have been met.
Performance Share. An Award granted under Section 9.00.
Performance Unit. An Award granted under Section 9.00.
Plan. The DSW Inc. 2005 Equity Incentive Plan.
Plan Year. The Company’s fiscal year.
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Registration Statement. The Form S-1 Registration Statement filed with the Securities and Exchange Commission on March 14, 2005 (Registration #333-123289), as amended at the time it is declared effective by the Securities and Exchange Commission.
Related Board. The board of directors of any incorporated Related Entity or the governing body of any unincorporated Related Entity.
Related Entity. Any corporation, partnership or other form of unincorporated entity [1] of which the Company owns, directly or indirectly, 50 percent or more of the total combined voting power of all classes of stock, if the entity is a corporation, or of the capital or profits interest, if the entity is a partnership or another form of unincorporated entity or [2] which owns 50 percent or more of the total combined voting power of all classes of the Stock.
Restricted Stock. An Award granted under Section 8.01.
Restricted Stock Unit. An Award granted under Section 8.02.
Restriction Period. The period over which the Committee will determine if a Participant has met conditions placed on Restricted Stock or Restricted Stock Units.
Retirement. Unless the Committee specifies otherwise in the Award Agreement, the date:
[1] An Employee Terminates on or after reaching age 65 and completing at least five years of service; or
[2] An Eligible Director Terminates as a Board or a Related Board member after completing one full term as a member of the Board or the board of directors of a Related Entity after reaching age 65.
[3] For purposes of applying this definition:
[a] No consultant will be deemed to have “Retired” regardless of the circumstances surrounding his or her Termination;
[b] A Participant’s status as an Employee or an Eligible Director will be determined as of the Grant Date applicable to each affected Award; and
[c] An Eligible Director serving on the Board and/or one or more Related Boards may Retire from one board while continuing to serve as a member of other Group boards (or governing bodies). In this case, the Eligible Director’s Retirement will affect only Awards granted with respect to his or her service on the board (or other governing body) from which he or she is Retiring.
Stock. The Class A common stock, without par value, issued by the Company or any security issued by the Company in substitution, exchange or in place of these shares.
Stock Appreciation Right (or “SAR”). An Award granted under Section 10.00 that is a Tandem SAR, an Affiliated SAR or a Freestanding SAR.
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Stock Unit. A right to receive payment of the Fair Market Value of a share of Stock as provided in Section 7.00.
Tandem SAR. An SAR that is associated with an Option and which expires when that Option expires or is exercised, as described in Section 10.00.
Termination or Terminated.
[1] Unless the Committee specifies otherwise in the Award Agreement:
[a] Cessation of the employee-employer relationship between an Employee and the Company and all Related Entities for any reason;
[b] A Participant who is an Employee of a Related Entity at a Grant Date [i] will not be treated as having Terminated solely because his or her employer ceases to be a Related Entity and that individual continues to be employed by the former Related Entity (in which case the former employee will be treated as having Terminated or not Terminated under this definition as if the former Related Entity had remained a Related Entity) but [ii] will be treated as having Terminated if (and to the extent that) his or her Award is replaced by the former Related Entity following procedures and principles described in Code §424 within 90 days after the disaffiliation;
[c] With respect to a Participant who is a Consultant, a cessation of the service relationship between the Consultant and the Company and all Related Entities, unless there is a simultaneous reengagement of the Consultant by the Company or a Related Entity;
[d] With respect to a Participant who is an Eligible Director, cessation of his or her service on the Board or a Related Board for any reason.
[2] For purposes of this definition:
[a] An Eligible Director serving on the Board and/or one or more Related Boards may Terminate from one board while continuing to serve as a member of other Related Boards. In this case, the Eligible Director’s Termination will affect only Awards granted with respect to his or her Terminating board membership.
[b] With respect to any Award (including an Incentive Stock Option granted to an Employee) a Termination will not have occurred while the Employee is absent from active employment for a period of not more than three months (or, if longer, the period during which reemployment rights are protected by law, contract or written agreement, including the Award Agreement, between the Participant and the Company) due to illness, military service or other leave of absence approved by the Committee.
[c] Subject to other rules described in the Plan and the Award Agreement, an Employee whose status changes from an Employee to a Consultant will not be
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treated as having Terminated. In these circumstances, the former Employee will be treated as having Terminated under rules applicable to Consultants.
3.00 PARTICIPATION
3.01 Participation.
[1] Consistent with the terms of the Plan and subject to Section 3.02, the Committee will [a] decide which Consultants, Employees and Eligible Directors will be granted Awards; and [b] specify the type of Award to be granted and the terms upon which an Award will be granted and may be earned.
[2] The Committee may establish different terms and conditions [a] for each type of Award, [b] for each Participant receiving the same type of Award; and [c] for the same Participants for each Award the Participant receives, whether or not those Awards are granted at different times.
[3] The Committee (or the Board, as appropriate) also may amend the Plan and the Award Agreements without any additional consideration to affected Participants to the extent necessary to avoid penalties arising under Code §409A, even if those amendments reduce, restrict or eliminate rights granted under the Plan or Award Agreement (or both) before those amendments.
[4] Unless permitted by Code 409A, no Award subject to Code §409A will be granted under this Plan to any person who is performing services only for an entity that is not an affiliate of the Company within the meaning of Code §414(b) and (c).
3.02 Conditions of Participation. By accepting an Award, each Participant agrees:
[1] To be bound by the terms of the Award Agreement and the Plan and to comply with other conditions imposed by the Committee; and
[2] That the Committee (or the Board, as appropriate) may amend the Plan and the Award Agreements without any additional consideration to the extent necessary to avoid penalties arising under Code §409A, even if those amendments reduce, restrict or eliminate rights granted under the Plan or Award Agreement (or both) before those amendments.
4.00 ADMINISTRATION
4.01 Committee Duties. The Committee is responsible for administering the Plan and has all powers appropriate and necessary to that purpose. Consistent with the Plan’s objectives, the Committee may adopt, amend and rescind rules and regulations relating to the Plan, to the extent appropriate to protect the Company’s and the Group’s interests and has complete discretion to make all other decisions (including whether a Participant has incurred a Disability) necessary or advisable for the administration and interpretation of the Plan. Any action by the Committee will be final, binding and conclusive for all purposes and upon all persons.
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4.02 Delegation of Ministerial Duties. In its sole discretion, the Committee may delegate any ministerial duties associated with the Plan to any person (including Employees) that it deems appropriate. However, the Committee may not delegate any duties it is required to discharge under Code §162(m).
4.03 Award Agreement. At the time an Award is made, the Committee will prepare and deliver an Award Agreement to each affected Participant. The Award Agreement:
[1] Will describe [a] the type of Award and when and how it may be exercised or earned and [b] any Exercise Price associated with each Award.
[2] To the extent different from the terms of the Plan, will describe [a] any conditions that must be met before the Award may be exercised or earned, [b] any objective restrictions placed on Awards and any performance related conditions and Performance Criteria that must be met before those restrictions will be released and [c] any other applicable terms and conditions affecting the Award.
4.04 Restriction on Repricing. Regardless of any other provision of this Plan, neither the Company nor the Committee may “reprice” (as defined under rules issued by the exchange on which the Stock then is traded) any Award without the prior approval of the shareholders.
5.00 STOCK SUBJECT TO PLAN
5.01 Number of Shares of Stock. Subject to Section 5.03, the number of shares of Stock issued under the Plan may not be larger than 4,600,000 of which up to 4,600,000 may be issued through Incentive Stock Options. The shares of Stock to be delivered under the Plan may consist, in whole or in part, of treasury Stock or authorized but unissued Stock not reserved for any other purpose.
5.02 Unfulfilled Awards. Any Stock subject to an Award that, for any reason, is forfeited, cancelled, terminated, relinquished, exchanged or otherwise settled without the issuance of Stock or without payment of cash equal to the difference between the Award’s Fair Market Value and its Exercise Price (if any) may again be granted under the Plan and, in the discretion of the Committee and subject to the limits described in Section 5.01, may be subject to a subsequent Award. Any decision by the Committee under this section will be final and binding on all Participants.
5.03 Adjustment in Capitalization. If, after the Effective Date, there is a Stock dividend or Stock split, recapitalization (including payment of an extraordinary dividend), merger, consolidation, combination, spin-off, distribution of assets to shareholders, exchange of shares, or other similar corporate change affecting Stock, the Committee will appropriately adjust [1] the number of Awards that may or will be granted to Participants during a Plan Year, [2] the aggregate number of shares of Stock available for Awards under Section 5.01 or subject to outstanding Awards (as well as any share-based limits imposed under this Plan), [3] the respective Exercise Price, number of shares and other limitations applicable to outstanding or subsequently granted Awards and [4] any other factors, limits or terms affecting any outstanding or subsequently granted Awards.
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5.04 Limits on Awards to Covered Officers. During any Plan Year, no Covered Officer may receive [1] Options and Stock Appreciation Rights covering more than 500,000 shares (adjusted as provided in Section 5.03), including Awards that are cancelled [or deemed to have been cancelled under Treas. Reg. §1.162-27(e)(2)(vi)(B)] during each Plan Year granted, [2] other Awards covering more than 100,000 share (adjusted as provided in Section 5.03), including Awards that are cancelled [or deemed to have been cancelled under Treas. Reg. §1.162-27(e)(2)(vi)(B)] during each Plan Year granted or [3] receive more than $3,000,000 in cash settlement of Awards.
6.00 OPTIONS
6.01 Grant of Options. At any time during the term of this Plan, the Committee may grant [1] Incentive Stock Options or Nonstatutory Stock Options to Employees and [2] Nonstatutory Stock Options to Consultants and Eligible Directors.
6.02 Exercise Price. Except as required to implement Section 6.06, each Option will bear an Exercise Price at least equal to Fair Market Value on the Grant Date. However, the Exercise Price associated with an Incentive Stock Option will be at least 110 percent of the Fair Market Value of a share of Stock on the Grant Date with respect to any Incentive Stock Options issued to an Employee who, on the Grant Date, owns [as defined in Code §424(d)] Stock possessing more than 10 percent of the total combined voting power of all classes of Stock (or the combined voting power of any Related Entity), determined under rules issued under Code §422.
6.03 Exercise of Options. Subject to any terms, restrictions and conditions specified in the Plan, the Award Agreement and unless specified otherwise in the Award Agreement:
[1]
Options granted to Employees and Consultants will be exercisable according to the
following schedule:
Number of Full Years Beginning After
Cumulative Percentage
Grant Date
Vested
1 but fewer than 2
20 percent
2 but fewer than 3
40 percent
3 but fewer than 4
60 percent
4 but fewer than 5
80 percent
5 or more
100 percent
Regardless of the vesting schedule just described but subject to Section 12.00 and the terms of the Award Agreement, Options that are not exercisable at Termination will be fully and immediately exercisable if the Employee Terminates because of death, Retirement or Disability or the Consultant Terminates because of death or Disability but will be forfeited if the Employee or Consultant Terminates for any other reason.
[2] Options granted to Eligible Directors will be exercisable:
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[a] 12 complete consecutive calendar months beginning after the Grant Date, if the Eligible Director has not then Terminated; and
[b] Will be fully and immediately exercisable if the Eligible Director Terminates because of death, Retirement or Disability but will be forfeited if the Eligible Director Terminates for any other reason.
[3] However:
[a] Any Option to purchase a fraction of a share of Stock will automatically be converted to an Option to purchase an additional whole share.
[b] Unless the Committee specifies otherwise in the Award Agreement, no Participant may exercise Options for fewer than the smaller of [i] 100 shares of Stock or [ii] the full number of shares of Stock for which Options are then exercisable.
[c] No Option may be exercised more than ten years after it is granted (five years in the case of an Incentive Stock Option granted to an Employee who owns [as defined in Code §424(d)] on the Grant Date Stock possessing more than 10 percent of total combined voting power of all classes of Stock or the combined voting power of any Related Entity, determined under rules issued under Code §422).
6.04 Incentive Stock Options. Notwithstanding anything in the Plan to the contrary:
[1] No provision of this Plan relating to Incentive Stock Options will be interpreted, amended or altered, nor will any discretion or authority granted under the Plan be exercised, in a manner that is inconsistent with Code §422 or, without the consent of any affected Participant, to cause any Incentive Stock Option to fail to qualify for the federal income tax treatment afforded under Code §421.
[2] The aggregate Fair Market Value of the Stock (determined as of the Grant Date) with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all option plans of the Company and all Related Entities of the Company) will not exceed $100,000 [or other amount specified in Code §422(d)], determined under rules issued under Code §422.
[3] No Incentive Stock Option will be granted to any person who is not an Employee on the Grant Date.
[4] An Incentive Stock Option granted to an Employee who, without Terminating, [a] becomes a Consultant after the Grant Date or [b] is no longer an Employee because he or she is employed by an entity that no longer is a Related Entity, [c] will be treated as a Nonstatutory Stock Option beginning at the end of the third month after the former Employee becomes a Consultant or the date the former Employee’s employer no longer is a Related Entity, whichever is applicable.
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6.05 Exercise of and Payment for Options. Unless the Committee specifies otherwise in the Award Agreement, the Exercise Price associated with each Option must be paid in cash. However, the Committee may, in its discretion, develop and extend to some or all Participants, other procedures through which Participants may pay the Exercise Price, including a cashless exercise and allowing a Participant to tender Stock he or she already has owned for at least six months before the exercise date, either by actual delivery of the previously owned Stock or by attestation, valued at its Fair Market Value on the exercise date, as partial or full payment of the Exercise Price. A Participant may exercise an Option only by sending to the Committee a completed exercise notice (in the form prescribed by the Committee) along with payment of the Exercise Price. As soon as administratively feasible after those steps are taken, the Committee will issue to the Participant the appropriate shares certificates.
6.06 Substitution of Options. In the Committee’s discretion, persons who become Employees as a result of a transaction described in Code §424(a) or Employees holding options issued by a former Related Entity at the occurrence of a transaction described in Code §424(a) may receive Options in exchange for options granted by their former employer or the former Related Entity subject to the rules and procedures prescribed under Code §424.
6.07 Transferability of Stock. Unless the Committee specifies otherwise in the Award Agreement or as otherwise specifically provided in the Plan, Stock acquired through an Option will be transferable, subject to applicable federal securities laws, the requirements of any national securities exchange or system on which shares of Stock are then listed or traded or any blue sky or state securities laws.
7.00 STOCK UNITS
7.01 Granting Stock Units.
[1] Each Eligible Director may elect to receive all or a portion of his or her Annual Retainer in cash or Stock Units by returning to the Committee an Annual Retainer Deferral Form specifying [a] the portion (stated in 25 percent increments) of the Annual Retainer to be converted to Stock Units, [b] the date Stock Units are to be settled and [c] the period (which may not be longer than 10 years) over which the value of Stock Units is to be distributed.
[2] Each Eligible Director that has followed the procedur e described in Section 7.03 to receive Stock Units in lieu of all or a portion of his or her Annual Retainer will receive a number of Stock Units calculated by dividing the dollar amount of Annual Retainer to be received in Stock Units by the Fair Market Value of a share of Stock on the first trading day following the date of the Annual Meeting for which the deferred value of the Annual Retainer otherwise would have been paid, rounded to the next highest whole share of Stock.
7.02 Settling Stock Units.
[1] Stock Units always will be settled in shares of Stock unless the Award Agreement specifies another form of settlement.
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[2] All Stock Units will be settled as of [a] the date the Eligible Director ceases to be a member of the Board or [b] the date the Eligible Director specifies on an Annual Retainer Deferral Form.
[3] If Stock Units are to be settled in cash, the amount distributed will be calculated by multiplying the number of Stock Units to be settled in cash by Fair Market Value.
[4] If Stock Units are to be settled in shares of Stock, the number of shares of Stock distributed will equal the whole number of Stock Units to be settled in Stock, with the Fair Market Value of any fractional share of Stock distributed in cash.
[5] If an Eligible Director dies before all of his or her Stock Units have been settled, the value of any unpaid Stock Units will be paid in a lump sum in cash to his or her Beneficiary.
7.03 Election Procedures. To be effective, a completed Annual Retainer Deferral Form must be delivered to the Committee not later than:
[1] The first day of the calendar year for which the Annual Retainer is earned and otherwise would have been paid in cash; or
[2] Not later than 30 days after the Eligible Director first becomes eligible to make an election under this section, although an election under this subpart will apply only to the portion of the Annual Retainer attributable to services performed after the date of that election.
Once filed, elections made on an Annual Retainer Deferral Form may be revoked or changed by filing a subsequent Annual Retainer Deferral Form with the Committee. However, that revocation or change will be effective only with respect to any Annual Retainer to be earned for any calendar year beginning after the effective date of the revocation or change. Also, the Committee will adopt rules relating to changes in the time and manner in which Stock Units may be settled.
8.00 RESTRICTED STOCK/RESTRICTED STOCK UNITS
8.01 Restricted Stock. Subject to the terms of this Plan, the Committee may grant Restricted Stock to Participants at any time during the term of this Plan under terms and conditions that the Committee specifies in the Award Agreement and the terms of the Plan.
[1] Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the end of the applicable Restriction Period. At the Committee’s sole discretion, all shares of Restricted Stock will:
[a] Be held by the Company as escrow agent during the Restriction Period; or
[b] Be issued to the Participant in the form of certificates bearing a legend describing the restrictions imposed on the shares.
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[2] Restricted Stock will be:
[a] Forfeited (or if shares were issued to the Participant for a cash payment, those shares will be resold to the Company for the amount paid), if all restrictions have not been met at the end of the Restriction Period, and again become available under the Plan; or
[b] Released from escrow and distributed (or any restrictions described in the certificate removed) as soon as practicable after the last day of the Restriction Period, if all restrictions have then been met.
[3] During the Restriction Period, and unless the Award Agreement provides otherwise, each Participant to whom Restricted Stock has been issued as described in Section 8.01[1][b]:
[a] May exercise full voting rights associated with that Restricted Stock; and
[b] Will be entitled to receive all dividends and other distributions paid with respect to that Restricted Stock; provided, however, that if any dividends or other distributions are paid in shares of Stock, those shares will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were issued.
8.02 Restricted Stock Units. Subject to the terms of this Plan, the Committee may grant Restricted Stock Units to Participants at any time during the term of this Plan under terms and conditions that the Committee specifies in the Award Agreement and to the terms of the Plan.
[1] Restricted Stock Units may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated.
[2] Restricted Stock Units will be:
[a] Forfeited, if all restrictions have not been met at the end of the Restriction Period, and again become available under the Plan; or
[b] Settled in shares of Stock unless the Award Agreement specifies another form of settlement.
[3] If Restricted Stock Units are settled, [a] in shares of Stock, the number of shares of Stock distributed will be equal to the number of Restricted Stock Units to be settled, [b] in cash, the amount distributed will be equal to the number of Restricted Stock Units to be settled multiplied by the Fair Market Value of a share of Stock on the settlement date or [c] in a combination of shares of Stock or cash, the number of shares of Stock distributed and the amount of cash distributed will be computed under subpart 8.02[3][b] and [c].
[4] During the Restriction Period, Participants may not exercise any voting rights associated with the shares of Stock underlying his or her Restricted Stock Units or to
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receive any dividends or other distributions otherwise payable with respect to the shares of Stock underlying his or her Restricted Stock Units.
8.03 Vesting.
Subject to any terms, restrictions and conditions specified in the Plan or the Award
Agreement and unless specified otherwise in the Award Agreement, time-based restrictions imposed on
Restricted Stock or Restricted Stock Units will lapse under the following schedule:
Number of Full Years Beginning
Cumulative Percentage
After Grant Date
Vested
Fewer than 4
0 percent
4 or more
100 percent
Also, and unless the Committee specifies otherwise in the Award Agreement, restrictions that have not lapsed at Termination will fully and immediately lapse if the Participant Terminates because of death, Retirement or Disability but will be forfeited if the Participant Terminates for any other reason.
9.00. PERFORMANCE SHARES AND PERFORMANCE UNITS
9.01 Generally. Any Award may be granted [1] to Covered Officers in a manner that qualifies as “performance-based compensation” under Code §162(m) or [2] to Employees who are not Covered Employees or to Consultants in a manner determined by the Committee. Subject to any terms, restrictions and conditions specified in the Plan and the Award Agreement, the granting or vesting of Performance-Based Awards will, in the Committee’s sole discretion, be based on achieving performance objectives derived from one or more of the Performance Criteria.
9.02 Earning Performance Shares and Performance Units. Except as otherwise provided in the Plan or the Award Agreement, as of the end of each Performance Period, the Committee will certify to the Board the extent to which each Participant has or has not met his or her Performance Criteria and Performance Shares or Performance Units will be:
[1] Forfeited, to the extent that Performance Criteria have not been met at the end of the Performance Period, and again become available to be granted under the Plan; or
[2] Valued and distributed, in a single lump sum, to Participants, in the form of cash, Stock or a combination of both (as specified by the Committee in the Award Agreement) as soon as practicable after the last day of the Performance Period to the extent that related Performance Criteria have been met.
9.03 Rights Associated with Performance Shares and Performance Units. During the Performance Period, and unless the Award Agreement provides otherwise:
[1] Participants may not exercise voting rights associated with their Performance Shares or Performance Units; and
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[2] All dividends and other distributions paid with respect to any Performance Shares or Performance Units will be held by the Company as escrow agent during the Performance Period. At the end of the Performance Period, these dividends will be distributed to the Participant or forfeited as provided in Section 9.02. No interest or other accretion will be credited with respect to any dividends held in this escrow account. If any dividends or other distributions are paid in shares of Stock, those shares will be subject to the same restrictions on transferability and forfeitability as the shares of Stock with respect to which they were issued.
10.00 STOCK APPRECIATION RIGHTS
10.01 SAR Grants. Subject to the terms of the Plan, the Committee may grant Affiliated SARs, Freestanding SARs and Tandem SARs (or a combination of each) to Employees or Consultants at any time during the term of this Plan.
10.02 Exercise Price. Unless the Committee specifies otherwise in the Award Agreement, the Exercise Price specified in the Award Agreement will:
[1] In the case of an Affiliated SAR, not be less than 100 percent of the Fair Market Value of a share of Stock on the Grant Date;
[2] In the case of a Freestanding SAR, not be less than 100 percent of the Fair Market Value of a share of Stock on the Grant Date; and
[3] In the case of a Tandem SAR, not be less than the Exercise Price of the related Option.
10.03 Exercise of Affiliated SARs. Affiliated SARs will be deemed to be exercised on the date the related Option is exercised. However:
[1] An Affiliated SAR will expire no later than the date the related Option expires;
[2] The value of the payout with respect to the Affiliated SAR will not be more than the Exercise Price of the related Option; and
[3] An Affiliated SAR may be exercised only if the Fair Market Value of the shares of Stock subject to the related Option is larger than the Exercise Price of the related Option.
10.04 Exercise of Freestanding SARs. Freestanding SARs will be exercisable subject to the terms specified in the Award Agreement.
10.05 Exercise of Tandem SARs. Tandem SARs may be exercised with respect to all or part of the shares of Stock subject to the related Option by surrendering the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the shares of Stock for which its related Option is then exercisable. However:
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[1] A Tandem SAR will expire no later than the date the related Option expires or is exercised;
[2] The value of the payout with respect to the Tandem SAR will not be more than 100 percent of the difference between the Exercise Price of the related Option and the Fair Market Value of a share of Stock subject to the related Option at the time the Tandem SAR is exercised; and
[3] A Tandem SAR may be exercised only if the Fair Market Value of a share of Stock subject to the Option is larger than the Exercise Price of the related Option.
10.06 Settling SARs.
[1] A Participant exercising a Tandem SAR or a Freestanding SAR will receive an amount equal to:
[a] The difference between the Fair Market Value of a share of Stock on the exercise date and the Exercise Price multiplied by
[b] The number of shares of Stock with respect to which the Tandem SAR or Freestanding SAR is exercised.
[2] Tandem SARs and Freestanding SARs always will be settled in shares of Stock unless the Award Agreement specifies another form of settlement.
[3] A Participant will not receive any cash or other amount when exercising an Affiliated SAR. Instead, the value of the Affiliated SAR being exercised will be applied to reduce (but not below zero) the Exercise Price of the related Option.
At the discretion of the Committee, the value of any Tandem SAR or Freestanding SAR being exercised will be settled in cash, shares of Stock or any combination of both.
11.00 PERFORMANCE-BASED AWARD
11.01 Generally. Any Restricted Stock, Restricted Stock Units or Stock Units granted under the Plan to [1] Covered Officers may be granted in a manner that qualifies as “performance-based compensation” under Code §162(m) or [2] Employees who are not Covered Officers or who are Consultants, in a manner determined by the Committee. As determined by the Committee in its sole discretion, either the granting or vesting of Performance-Based Awards will be based on achieving performance objectives derived from one or more of the Business Criteria over the Performance Period established by the Committee.
11.02 Performance Criteria.
[1] The Performance Criteria upon which the payment or vesting of an Award to a Covered Officer that is intended to qualify as “performance-based compensation” under Code §162(m) will be based on one or more (or a combination of) the following Performance Criteria and may be applied solely with reference to the Company (and/or
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any Related Entity) or relatively between the Company (and/or any Related Entity) and one or more unrelated entities:
[a] Net earnings or net income (before or after taxes);
[b] Earnings per share;
[c] Net sales or revenue growth;
[d] Net operating profit;
[e] Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue);
[f] Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment);
[g] Earnings before or after taxes, interest, depreciation, and/or amortization;
[h] Gross or operating margins;
[i] Productivity ratios;
[j] Share price (including, but not limited to, growth measures and total shareholder return);
[k] Expense targets;
[l] Margins;
[m] Operating efficiency;
[n] Market share;
[o] Customer satisfaction;
[p] Working capital targets; and
[q] Economic value added (net operating profit after tax minus the sum of capital multiplied by the cost of capital).
[2] Performance Criteria upon which the payment or vesting of an Award to Participants who are not Covered Officers may be based on one or more (or a combination of) the Performance Criteria listed in Section 11.02[1] or on other factors the Committee believes are relevant and appropriate.
[3] Different Performance Criteria may be applied to individual Participants or to groups of Participants and, as specified by the Committee, may be based on the results achieved [a] separately by the Company or any Related Entity , [b] any combination of
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the Company and Related Entities , or [c] any combination of segments, products or divisions of the Company and Related Entities.
[4] The Committee:
[a] Will make appropriate adjustments to Performance Criteria to reflect the effect on any Performance Criteria of any stock dividend or stock split affecting Stock, recapitalization (including, without limitation, the payment of an extraordinary dividend), merger, consolidation, combination, spin-off, distribution of assets to shareholders, exchange of shares or similar corporate change. Also, the Committee will make a similar adjustment to any portion of a Performance Criteria that is not based on Stock but which is affected by an event having an effect similar to those just described.
[b] May make appropriate adjustments to Performance Criteria to reflect a substantive change in a Participant’s job description or assigned duties and responsibilities.
[5] Performance Criteria will be established in an Award Agreement [a] as soon as administratively practicable after established but [b] in the case of Covered Officers, no later than the earlier of [i] 90 days after the beginning of the applicable Performance Period; or [ii] the expiration of 25 percent of the applicable Performance Period.
11.03 Earning Awards. Subject to any terms, restrictions and conditions specified in the Plan or the Award Agreement, as of the end of each Performance Period, the Committee will certify to the Board the extent to which each Participant has or has not met his or her Performance Criteria. Performance-Based Awards will be:
[1] Forfeited, if Performance Criteria have not been met at the end of the Performance Period; or
[2] Subject to Section 5.04, valued and distributed as soon as practicable after the last day of the Performance Period to the extent that related Performance Criteria have been met.
12.00 TERMINATION/BUY OUT
12.01 Retirement. Unless otherwise specified in the Award Agreement or this Plan, all Awards that are exercisable when a Participant Retires may be exercised at any time before the earlier of [1] the expiration date specified in the Award Agreement or [2] one year (three months in the case of Incentive Stock Options) beginning on the Retirement date (or any shorter period specified in the Award Agreement).
12.02 Death or Disability. Unless otherwise specified in the Award Agreement or this Plan, all Awards that are exercisable when a Participant Terminates because of death or Disability may be exercised by the Participant or the Participant’s Beneficiary at any time before the earlier of [1] the expiration date specified in the Award Agreement or [2] one year beginning on the date
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of death or Termination because of Disability (or any shorter period specified in the Award Agreement).
12.03 Termination for Cause. Unless otherwise specified in the Award Agreement or this Plan, all Awards that are outstanding (whether or not then exercisable) if a Participant Terminates (or is deemed to have been Terminated for Cause) will be forfeited.
12.04 Termination for any Other Reason. Unless otherwise specified in the Award Agreement or this Plan or subsequently, any Awards that are outstanding when a Participant Terminates for any reason not described in Sections 12.01 through 12.03 and which are then exercisable, or which the Committee has, in its sole discretion, decided to make exercisable, may be exercised at any time before the earlier of [1] the expiration date specified in the Award Agreement or [2] 90 days beginning on the Termination date (or any shorter period specified in the Award Agreement) and all Awards that are not then exercisable will terminate on the Termination date.
12.05 Expiration of Options in Connection with Termination Associated with Merger, Etc. Regardless of any other provision of this Plan (and unless otherwise provided in an Award Agreement or this Plan), Options held by a Participant who Terminates in connection with a transaction described in Code §424 will expire immediately upon the date of Termination but only if and to the extent that another party to that transaction will grant substitute options in exchange for the Options to be cancelled and otherwise comply with the rules and procedures prescribed under the provisions of Code §424 governing that substitution. In all other cases, Options held by a Participant who Terminates in connection with a transaction described in Code §424, will expire as otherwise provided in this Plan and the Award Agreement.
12.06 Buy Out of Awards.
[1] At any time before a Change in Control or the commencement of activity that may reasonably be expected to result in a Change in Control, the Committee, in its sole discretion and without the consent of the affected Participant, may cancel any or all outstanding Awards held by that Participant, whether or not exercisable, by providing to that Participant written notice (“Buy Out Notice”) of its intention to exercise the rights reserved in this section. If a Buy Out Notice is given, in the case of an Option, the Company also will pay to each affected Participant the difference between [a] the Fair Market Value of the Stock underlying each exercisable Option (or portion of an Option) to be cancelled and [ b] the Exercise Price associated with each exercisable Option to be cancelled. With respect to any Award other than an Option, the Company will pay to each affected Participant the Fair Market Value of the Stock subject to the Award. However, unless otherwise specified in the Award Agreement, no payment will be made with respect to any Awards that are not exercisable or are subject to a restriction when cancelled under this section. The Company will complete any buy out made under this section as soon as administratively possible after the date of the Buy Out Notice. At the Committee’s option, payment of the buy out amount may be made in cash, in whole shares of Stock or partly in cash and partly in shares of Stock. The number of whole shares of Stock, if any, included in the buy out amount will be determined by dividing the
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amount of the payment to be made in shares of Stock by the Fair Market Value as of the date of the Buy Out Notice.
[2] At any time before a Change in Control or the commencement of activity that may reasonably be expected to result in a Change in Control, the Committee, in its sole discretion, may offer to buy for cash or by substitution of another Award any or all outstanding Awards held by any Participant, whether or not exercisable, by providing to that Participant written notice (“Buy Out Offer”) of its intention to exercise the rights reserved in this section and other information, if any, required to be included under applicable security laws. If a Buy Out Offer is given, the Company also will transfer to each Participant accepting the offer the value (determined under procedures adopted by the Committee) of the Award to be purchased or exchanged. The Company will complete any buy out made under this section as soon as administratively possible after the date of the Buy Out Offer and the shares of Stock subject to the Awards purchased will be recredited as provided in Section 5.02.
13.00 CHANGE IN CONTROL
13.01 Accelerated Vesting and Settlement. Subject to Section 13.02 on the date of any Change in Control:
[1] [a] Each Option outstanding on the date of a Change in Control (whether or not exercisable) will be cancelled in exchange [i] for cash equal to the excess of the Change in Control Price over the Exercise Price associated with the cancelled Option or, [ii] at the Committee’s discretion, for whole shares of Stock with a Fair Market Value equal to the excess of the Change in Control Price over the Exercise Price associated with the cancelled Option and the Fair Market Value of any fractional share of Stock will be distributed in cash, and [b] all related Affiliated and Tandem SARs will be cancelled.
[2] All Performance Criteria associated with Performance Shares or Performance Units will be deemed to have been met on the date of the Change in Control, all Performance Periods accelerated to the date of the Change in Control and all outstanding Performance Shares and Performance Units (including those subject to the acceleration described in this subpart) will be distributed in a single lump sum cash payment;
[3] All Freestanding SARs will be deemed to be exercisable and will be liquidated in a single lump sum cash payment;
[4] All Stock Units will be distributed immediately in the form provided in the Annual Retainer Deferral Form; and
[5] All restrictions then imposed Restricted Stock or Restricted Stock Units will lapse.
13.02 Effect of Code §280G. Unless otherwise specified in the Award Agreement or in another written agreement between the Participant and the Company or a Related Entity executed simultaneously with or before any Change in Control, if the sum (or value) of the payments described in Section 13.01 constitute an “excess parachute payments” as defined in
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Code §280G(b)(1) when combined with all other parachute payments attributable to the same Change in Control, the Company or other entity making the payment (“Payor”) will reduce the Participant’s benefits under this Plan so that the Participant’s total “parachute payment” as defined in Code §280G(b)(2)(A) under this and all other agreements will be $1.00 less than the amount that otherwise would generate an excise tax under Code §4999. If the reduction described in the preceding sentence applies, within 10 business days of the effective date of the event generating the payments (or, if later, the date of the Change in Control), the Payor will apprise the Participant of the amount of the reduction (“Notice of Reduction”). Within 10 business days of receiving that information, the Participant may specify how and against which benefit or payment source, (including benefits and payment sources other than this Plan) the reduction is to be applied (“Notice of Allocation”). The Payor will be required to implement these directions within 10 business days of receiving the Notice of Allocation. If the Payor has not received a Notice of Allocation from the Participant within 10 business days of the date of the Notice of Reduction or if the allocation provided in the Notice of Allocation is not sufficient to fully implement the reduction described in this section, the Payor will apply the reduction described in this section proportionately based on the amounts otherwise payable under Section 13.01 or, if a Notice of Allocation has been returned that does not sufficiently implement the reduction described in this section, on the basis of the reductions specified in the Notice of Allocation.
14.00 AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
The Board or the Committee may terminate, suspend or amend the Plan at any time without shareholder approval except to the extent that shareholder approval is required to satisfy applicable requirements imposed by [1] Rule 16b-3 under the Act, or any successor rule or regulation, [2] applicable requirements of the Code or [3] any securities exchange, market or other quotation system on or through which the Company’s securities are listed or traded. Also, no Plan amendment may [4] result in the loss of a Committee member’s status as a “non-employee director” as defined in Rule 16b-3 under the Act, or any successor rule or regulation, with respect to any employee benefit plan of the Company, [5] cause the Plan to fail to meet requirements imposed by Rule 16b-3 or [6] without the consent of the affected Participant (and except as specifically provided otherwise in this Plan or the Award Agreement) adversely affect any Award granted before the amendment, modification or termination. However, nothing in this section will restrict the Committee’s right to exercise the discretion retained in Section 12.06 or the right to amend the Plan and any Award Agreements without any additional consideration to affected Participants to the extent necessary to avoid penalties arising under Code §409A, even if those amendments reduce, restrict or eliminate rights granted under the Plan or Award Agreement (or both) before those amendments.
15.00 MISCELLANEOUS
15.01 Assignability. Except as described in this section, an Award may not be transferred except by will or the laws of descent and distribution and, during the Participant’s lifetime, may be exercised only by the Participant, the Participant’s guardian or legal representative. However, with the permission of the Committee, a Participant or a specified group of Participants may transfer Awards (other than Incentive Stock Options) to a revocable inter vivos trust, of which the Participant is the settlor, or may transfer Awards (other than an Incentive Stock Option) to
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any member of the Participant’s immediate family, any trust, whether revocable or irrevocable, established solely for the benefit of the Participant’s immediate family, any partnership or limited liability company whose only partners or members are members of the Participant’s immediate family or an organization described in Code §501(c)(3) (“Permissible Transferees”). Any Award transferred to a Permissible Transferee will continue to be subject to all of the terms and conditions that applied to the Award before the transfer and to any other rules prescribed by the Committee. A Permissible Transferee [other than an organization described in Code §501(c)(3)] may not retransfer an Award except by will or the laws of descent and distribution and then only to another Permissible Transferee.
15.02 Beneficiary Designation. Each Participant may name a Beneficiary or Beneficiaries (who may be named contingently or successively) to receive or to exercise any vested Award that is unpaid or unexercised at the Participant’s death. Each designation made will revoke all prior designations made by the same Participant, must be made on a form prescribed by the Committee and will be effective only when filed in writing with the Committee. If a Participant has not made an effective Beneficiary designation, the deceased Participant’s Beneficiary will be his or her surviving spouse or, if none, the deceased Participant’s estate. The identity of a Participant’s designated Beneficiary will be based only on the information included in the latest beneficiary designation form completed by the Participant and will not be inferred from any other evidence.
15.03 No Guarantee of Continuing Services. Nothing in the Plan may be construed as:
[1] Interfering with or limiting the right of the Company or any Related Entity to Terminate any Employee’s employment at any time;
[2] Conferring on any Participant any right to continue as an Employee or director of the Company or any Related Entity;
[3] Guaranteeing that any Employee will be selected to be a Participant; or
[4] Guaranteeing that any Participant will receive any future Awards.
15.04 Tax Withholding.
[1] The Company will withhold from other amounts owed to the Participant, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state and local withholding tax requirements on any Award, exercise or cancellation of an Award or purchase of Stock. If these amounts are not to be withheld from other payments due to the Participant (or if there are no other payments due to the Participant), the Company will defer payment of cash or issuance of shares of Stock until the earlier of:
[a] Thirty days after the settlement date; or
[b] The date the Participant remits the required amount.
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[2] If the Participant has not remitted the required amount within 30 days after the settlement date, the Company will permanently withhold from the value of the Awards to be distributed the minimum amount required to be withheld to comply with applicable federal, state and local income, wage and employment taxes and distribute the balance to the Participant.
[3] In its sole discretion, which may be withheld for any reason or for no reason, the Committee may permit a Participant to elect, subject to conditions the Committee establishes, to reimburse the Company for this tax withholding obligation through one or more of the following methods:
[a] By having shares of Stock otherwise issuable under the Plan withheld by the Company (but only to the extent of the minimum amount that must be withheld to comply with applicable state, federal and local income, employment and wage tax laws);
[b] By delivering to the Company previously acquired shares of Stock that the Participant has owned for at least six months;
[c] By remitting cash to the Company; or
[d] By remitting a personal check immediately payable to the Company.
15.05 Indemnification. Each individual who is or was a member of the Committee or of the Board will be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be made a party or in which he or she may be involved by reason of any action taken or not taken under the Plan as a Committee or Board member and against and from any and all amounts paid, with the Company’s approval, by him or her in settlement of any matter related to or arising from the Plan as a Committee or Board member or paid by him or her in satisfaction of any judgment in any action, suit or proceeding relating to or arising from the Plan against him or her as a Committee or Board member, but only if he or she gives the Company an opportunity, at its own expense, to handle and defend the matter before he or she undertakes to handle and defend it in his or her own behalf. The right of indemnification described in this section is not exclusive and is independent of any other rights of indemnification to which the individual may be entitled under the Company’s organizational documents, by contract, as a matter of law or otherwise. The foregoing right of indemnification is not exclusive and is independent of any other rights of indemnification to which the person may be entitled under the Company’s organizational documents, by contract, as a matter of law or otherwise.
15.06 No Limitation on Compensation. Nothing in the Plan is to be construed to limit the right of the Company to establish other plans or to pay compensation to its employees or directors, in cash or property, in a manner not expressly authorized under the Plan.
15.07 Requirements of Law. The grant of Awards and the issuance of shares of Stock will be subject to all applicable laws, rules and regulations and to all required approvals of any governmental agencies or national securities exchange, market or other quotation system. Also,
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no shares of Stock will be issued under the Plan unless the Company is satisfied that the issuance of those shares of Stock will comply with applicable federal and state securities laws. Certificates for shares of Stock delivered under the Plan may be subject to any stock transfer orders and other restrictions that the Committee believes to be advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange or other recognized market or quotation system upon which the Stock is then listed or traded, or any other applicable federal or state securities law. The Committee may cause a legend or legends to be placed on any certificates issued under the Plan to make appropriate reference to restrictions within the scope of this section.
15.08 Term of Plan. The Plan will be effective upon its adoption by the Board and approval by the affirmative vote of the Company’s shareholders under applicable rules and procedures described in Code §§162(m) and 422. Subject to Section 14.00, the Plan will continue until the tenth anniversary of the date it is adopted by the Board or approved by the Company’s shareholders, whichever is earliest.
15.09 Governing Law. The Plan, and all agreements hereunder, will be construed in accordance with and governed by the laws (other than laws governing conflicts of laws) of the State of Ohio.
15.10 No Impact on Benefits. Plan Awards are incentives designed to promote the objectives described in Section 1.00. Also, Awards are not compensation for purposes of calculating a Participant’s rights under any employee benefit plan that does not specifically require the inclusion of Awards in calculating benefits.
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Exhibit 10.24
DSW INC.
2005 CASH INCENTIVE COMPENSATION PLAN
l.00 PURPOSE AND EFFECTIVE DATE
1.01 Purpose: This Plan is intended to foster and promote the financial success of the Company and Related Entities and to increase shareholder value by [1] providing Participants an opportunity to earn incentive compensation if specified objectives are met and [2] enabling the Company to attract and retain the services of outstanding employees upon whose judgment, interest and special efforts the successful conduct of the Company’s business is largely dependent.
1.02 Effective Date: This Plan is effective on the date it is approved by the Board subject to approval by the Company’s shareholders. Any Award granted before shareholder approval will be null and void if the shareholders do not approve the Plan within the period just described.
2.00 DEFINITIONS
When used in this Plan, the following terms have the meanings given to them in this section unless another meaning is expressly provided elsewhere in this document or clearly required by the context. When applying these definitions and any other word, term or phrase used in this Plan, the form of any word, term or phrase will include any and all of its other forms.
Act. The Securities Exchange Act of 1934, as amended or any successor statute of similar effect even if the Company is not subject to the Act.
Award. A grant made under this Plan consisting of an opportunity to earn a cash bonus if terms and conditions specified in the Award Agreement are met.
Award Agreement. The written or electronic agreement between the Company and each Participant that describes the terms and conditions that must be met if an Award is to be earned. If there is a conflict between the terms of this Plan and the terms of the Award Agreement, the terms of the Plan will govern.
Award Date. The later of [1] the date the Committee establishes the terms of an Award or [2] the date specified in the Award Agreement.
Board. The Company’s board of directors.
Cause. Unless the Committee specifies otherwise in the Award Agreement, with respect to any Participant and subject to any cure provision included in any written agreement between the Participant and the Company:
[1] A material failure to substantially perform his or her position or duties;
[2] Engaging in illegal or grossly negligent conduct that is materially injurious to the Company or any Related Entity;
[3] A material violation of any law or regulation governing the Company or any Related Entity;
[4] Commission of a material act of fraud or dishonesty which has had or is likely to have a material adverse effect upon the Company’s (or any Related Entity’s) operations or financial conditions;
[5] A material breach of the terms of any other agreement (including any employment agreement) with the Company or any Related Entity; or
[6] A breach of any term of this Plan or Award Agreement.
If a Participant Terminates (or is Terminated) for any reason other than Cause and the Company subsequently discovers an act, failure or event that, if known before the Participant’s Termination would have justified a Termination for Cause and that act, event or failure was actively concealed by the Participant and could not have been discovered through reasonable diligence before the Participant Terminated, that Participant will be retroactively treated as having been Terminated for Cause.
Change in Control. The earliest of any of the following events to occur after the completion of the initial public offering of the Company’s stock which is the subject of the Registration Statement:
[1] During any period consisting of 12-consecutive calendar months beginning after completion of the initial public offering of the Company’s stock which is the subject of the Registration Statement, the members of the Board specified in the Registration Statement (“Incumbent Directors”) cease for any reason other than death to constitute at least a majority of the members of the Board, provided [a] that any director whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the then Incumbent Directors also will be treated as an Incumbent Director unless that person was nominated for election to the Board (or otherwise became a member of the Board) in connection with an actual or threatened election contest relating to the election or removal of Board members or other threatened or actual solicitation of proxies of consent by or in behalf of any “person,” including a “group” [as those terms are used in Act §§13(d) and 14(d)(2)], [b] this element of this definition will not apply if the Company reorganizes into an entity that does not have a board of directors or analogous governing body and that reorganization is not a Change in Control under another element of this definition and [c] if the Company becomes a subsidiary of another entity (i.e., another entity owns, directly or indirectly, more than 50 percent of the total combined voting power of all classes of Stock) in a transaction that is not a Change in Control under another element of this definition, subpart [1] of this definition will be applied by reference to changes to the board of directors of the parent entity (or of the ultimate parent entity).
2
[2] Any “person,” including a “group” [as these terms are used in Act §§13(d) and 14(d)(2)] becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of 30 percent or more of the combined voting power of the Company and of securities of the Company sufficient to elect a majority of the members of the Board but disregarding the effect of [a] any acquisition by a person who on the Effective Date is the beneficial owner of 30 percent or more of the combined voting power of the Company, [b] any acquisition directly from the Company, including a public offering of securities, [c] any acquisition by the Company or any Related Entity, [d] any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Entity or [e] any acquisition through a transaction described in subpart [3], [4] or [5] of this definition, [f] any acquisition by Retail Ventures, Inc. or any corporation, partnership or other form of unincorporated entity of which Retail Ventures, Inc. owns, directly or indirectly, 50 percent or more of the total combined voting power of all classes of stock, if the entity is a corporation, or of the capital or profits interest, if the entity is a partnership or another form of unincorporated entity, [g] any acquisition by Schottenstein Stores Corporation (the persons identified in subparts [a], [c], [f] and [g] of this subpart being sometimes referred to as “Permitted Acquirers”) [h] any acquisition by any one or more of the trusts established for the benefit of any of Jay L. Schottenstein, Susan S. Diamond, Ann Desche, Lori Schottenstein, Geraldine Schottenstein or any of their respective spouses, children or lineal descendants or any person controlled by any such trust or trusts, [i] any acquisition by an entity that files SEC Form 13-G in connection with its ownership of Stock unless and until that entity files SEC Form 13-D in connection with its ownership of Stock or [j] any acquisition by Cerberus Partners, Ltd/ unless, at the time of the acquisition, the Permitted Acquirers, as defined in subpart [2][g] of this definition and the trusts described in subpart [2][h] of this definition, directly or indirectly, own less than 10 percent of the voting power of the Company’s stock.
[3] The completion of a transaction or a series of related transactions effecting [a] the merger or other business combination of the Company with or into another entity other than a Permitted Acquirer in which the shareholders of the Company immediately before the effective date of such merger or other business combination own less than 50 percent of the voting power in such entity; or [b] the sale or other disposition of all or substantially all of the assets of the Company except a sale or other disposition to [i] an entity in which the shareholders of the Company immediately before the sale or disposition own more than 50 percent of the voting power of such entity after that transaction or [ii] a Permitted Acquirer.
[4] Liquidation or dissolution of the Company other than a liquidation or dissolution into an entity [a] in which the shareholders of the Company before the effective date of the liquidation or dissolution own more than 50 percent of the voting power of such entity after the liquidation or dissolution or [b] which is a Permitted Acquirer.
[5] Any other transaction or event that the Board, in its sole discretion, decides will have as material an effect on the Company as any transaction or event described in
3
subparts [1] through [4] of this definition but which is not otherwise described in this section.
However, and regardless of any other provision of this Plan or element of this definition, a Change in Control will not occur solely as a result of the initial public offering of the Company’s stock which is the subject of the Registration Statement or of any event directly related to that initial public offering.
Code. The Internal Revenue Code of 1986, as amended or superseded after the Effective Date and any applicable rulings or regulations issued under the Code.
Committee. The Board’s Compensation Committee which also constitutes a “compensation committee” within the meaning of Treas. Reg. §1.162-27(c)(4). The Committee will be comprised of at least two persons [1] each of whom is [a] an outside director, as defined in Treas. Reg. §1.162-27(e)(3)(i) and [b] a “non-employee” director within the meaning of Rule 16b-3 under the Act and [2] none of whom may receive remuneration from the Company or any Related Entity in any capacity other than as a director, except as permitted under Treas. Reg. §1.162-27(e)(3)(ii).
Company. DSW Inc. an Ohio corporation, and any and all successors to it.
Covered Officer. Those employees whose compensation is subject to limited deductibility under Code §162(m) as of the last day of any calendar year ending with or within any Performance Period.
Disability. Unless the Committee specifies otherwise in the Award Agreement, the Participant’s inability with a reasonable accommodation, to perform his or her duties on a full-time basis for a period of more than six-consecutive calendar months beginning before Termination due to a physical or mental infirmity.
Employee. Any person who, on any applicable date, is a common law employee of the Company or any Related Entity. A worker who is classified as other than a common law employee but who is subsequently reclassified as a common law employee of the Company for any reason and on any basis will be treated as a common law employee only from the date that reclassification occurs and will not retroactively be reclassified as an Employee for any purpose of this Plan.
Participant. Any Employee to whom an Award has been granted.
Performance Criteria. The criteria described in Section 5.01.
Performance Period. The period over which the Committee will determine if applicable Performance Criteria have been met.
Plan. The DSW Inc. 2005 Cash Incentive Compensation Plan.
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Registration Statement. The Form S-1 Registration Statement filed with the Securities and Exchange Commission on March 14, 2005 (Registration #333-123289), as amended at the time it is declared effective by the Securities Exchange Commission.
Related Entity. Any corporation, partnership or other form of unincorporated entity [1] of which the Company owns, directly or indirectly, 50 percent or more of the total combined voting power of all classes of stock, if the entity is a corporation, or of the capital or profits interest, if the entity is a partnership or another form of unincorporated entity or [2] which owns 50 percent or more of the total combined voting power of all classes of the Stock.
Retirement. The date a Participant Terminates on or after reaching age 65 and completing at least five years of service.
Stock. The Class A common stock, without par value, issued by the Company or any security issued by the Company in substitution, exchange or in place of these shares.
Termination or Terminated. Unless the Committee specifies otherwise in the Award Agreement, [1] cessation of the employee-employer relationship between a Participant and the Company and all Related Entities for any reason or [2] with respect to a Participant who is an Employee of a Related Entity, a severance or diminution of the Company’s direct or indirect ownership after which that entity is no longer a Related Entity and after which that person is not an Employee of the Company or any entity that then is a Related Entity. However, [3] a Termination will not have occurred while the Participant is absent from active employment for a period of not more than three months (or, if longer, the period during which reemployment rights are protected by law, contract or written agreement, including the Award Agreement, between the Participant and the Company) due to illness, military service or other leave of absence approved by the Committee and [4] in the Committee’s discretion, a Termination will not have occurred for the duration of a pending Performance Period if a Participant’s status is changed from Employee to a consultant or independent contractor during a Performance Period established before that status change occurred.
3.00 PARTICIPATION
3.01 Participation.
[1] Consistent with the terms of the Plan and subject to Section 3.02, the Committee will [a] decide which Employees will be granted Awards; and [b] specify the type of Award to be granted and the terms upon which an Award will be granted and may be earned.
[2] The Committee may establish different terms and conditions [a] for each Award, [b] for each Participant receiving the same type of Award; and [c] for the same Participants for each Award the Participant receives.
[3] The Committee (or the Board, as appropriate) also may amend the Plan and the Award Agreements without any additional consideration to affected Participants to the
5
extent necessary to avoid penalties arising under Code §409A, even if those amendments reduce, restrict or eliminate rights granted under the Plan or Award Agreement (or both) before those amendments.
[4] Unless permitted by Code §409A, no Award subject to Code §409A will be granted under this Plan to any person who is performing services only for an entity that is not an affiliate of the Company within the meaning of Code §414(b) and (c).
3.02 Conditions of Participation. By accepting an Award, each Participant agrees:
[1] To be bound by the terms of the Award Agreement and the Plan and to comply with other conditions imposed by the Committee; and
[2] That the Committee (or the Board, as appropriate) may amend the Plan and the Award Agreements without any additional consideration to the extent necessary to avoid penalties arising under Code §409A, even if those amendments reduce, restrict or eliminate rights granted under the Plan or Award Agreement (or both) before those amendments.
4.00 ADMINISTRATION
4.01 Committee Duties. The Committee is responsible for administering the Plan and has all powers appropriate and necessary to that purpose. Consistent with the Plan’s objectives, the Committee may adopt, amend and rescind rules and regulations relating to the Plan, to the extent appropriate to protect the Company’s and any Related Entity’s interests and has complete discretion to make all other decisions (including whether a Participant has incurred a Disability) necessary or advisable for the administration and interpretation of the Plan. Any action by the Committee will be final, binding and conclusive for all purposes and upon all persons.
4.02 Delegation of Ministerial Duties. In its sole discretion, the Committee may delegate any ministerial duties associated with the Plan to any person (including Employees) that it deems appropriate. However, the Committee may not delegate any duties it is required to discharge under Code §162(m).
4.03 Award Agreement. At the time an Award is made, the Committee will prepare and deliver an Award Agreement to each affected Participant. The Award Agreement:
[1] Will describe the Award and when and how it may be earned;
[2] To the extent different from the terms of the Plan, will describe [a] any conditions that must be met before the Award may be earned, including Performance Criteria and [b] any other applicable terms and conditions affecting the Award.
5.00 AWARDS
5.0l Performance Criteria.
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[1] The Performance Criteria upon which the payment of an Award to a Covered Officer that is intended to qualify as “performance-based compensation” under Code §162(m) will be based on one or more (or a combination of) the following Performance Criteria and may be applied solely with reference to the Company (and/or any Related Entity) or relatively between the Company (and/or any Related Entity) and one or more unrelated entities:
[a] Net earnings or net income (before or after taxes);
[b] Earnings per share;
[c] Net sales or revenue growth;
[d] Net operating profit;
[e] Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue);
[f] Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment);
[g] Earnings before or after taxes, interest, depreciation, and/or amortization;
[h] Gross or operating margins;
[i] Productivity ratios;
[j] Share price (including, but not limited to, growth measures and total shareholder return);
[k] Expense targets;
[l] Margins;
[m] Operating efficiency;
[n] Market share;
[o] Customer satisfaction;
[p] Working capital targets; and
[q] Economic value added (net operating profit after tax minus the sum of capital multiplied by the cost of capital).
[2] Performance Criteria upon which the payment of an Award to Participants who are not Covered Officers may be based on one or more (or a combination of) the
7
Performance Criteria listed in Section 5.01 or on other factors the Committee believes are relevant and appropriate.
[3] Different Performance Criteria may be applied to individual Participants or to groups of Participants and, as specified by the Committee, may be based on the results achieved [a] separately by the Company or any Related Entity , [b] any combination of the Company and Related Entities , or [c] any combination of segments, products or divisions of the Company and Related Entities.
[4] The Committee:
[a] Will make appropriate adjustments to Performance Criteria to reflect the effect on any Performance Criteria of any stock dividend or stock split affecting Stock, recapitalization (including, without limitation, the payment of an extraordinary dividend), merger, consolidation, combination, spin-off, distribution of assets to shareholders, exchange of shares or similar corporate change. Also, the Committee will make a similar adjustment to any portion of a Performance Criteria that is not based on Stock but which is affected by an event having an effect similar to those just described.
[b] May make appropriate adjustments to Performance Criteria to reflect a substantive change in an Participant’s job description or assigned duties and responsibilities.
[5] Performance Criteria will be established in an Award Agreement [a] as soon as administratively practicable after established but [b] in the case of Covered Officers, no later than the earlier of [i] 90 days after the beginning of the applicable Performance Period; or [ii] the expiration of 25 percent of the applicable Performance Period.
5.02 Earning Awards. Subject to any terms, restrictions and conditions specified in the Plan or the Award Agreement, as of the end of each Performance Period, the Committee will certify to the Board the extent to which each Participant has or has not met his or her Performance Criteria. Awards will be:
[1] Forfeited, if Performance Criteria have not been met at the end of the Performance Period; or
[2] Subject to Section 5.04, valued and distributed, in a single lump sum cash payment, in the form specified in the Award Agreement as soon as practicable after the last day of the Performance Period to the extent that related Performance Criteria have been met.
5.03 Maximum Award. The maximum Award that any Covered Officer may earn in any single calendar year is $3,000,000.
5.04 Deferral of Distribution. Each Participant may direct the Company to defer payment of all or any portion of his or her Award by electing to have that amount [1] credited to his or her
8
account under any nonqualified deferred compensation plan [as defined in Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended] maintained by the Company and designated by the Committee as an appropriate repository for these deferrals or any successor plan and [2] distributed under the terms of that plan. This election must be made at a time and in a manner that complies with Code §409A.
5.05 Effect of Termination.
[1] Termination Other Than For Death or Disability. Except in the case of a Termination on account of death or Disability, no Award will be paid to a Participant who Terminates before the end of a Performance Period.
[2] Termination Because of Death or Disability. A prorated Award will be paid to a Participant (or to his or her Beneficiary) who Terminates on account of death or Disability but only if the Performance Criteria applicable to that Performance Period are met at the end of that Performance Period. The amount paid will equal the Award the Disabled or dead Participant would have received had his or her employment not Terminated before the end of the Performance Period multiplied by the number of days between the beginning of the Performance Period during which the Termination occurred on account of death or Disability and divided by the total number of days in that Performance Period. This amount, if any, will be paid at the same time and in the same manner as the Award would have been paid if the Disabled or dead Participant had not Terminated.
6.00 CHANGE IN CONTROL
6.01 Accelerated Vesting and Settlement. Subject to Section 6.02, on the date of any Change in Control, all Performance Criteria will be deemed to have been met on the date of the Change in Control, all Performance Periods will be accelerated to the date of the Change in Control and all Awards will be distributed in full as of the date of the Change in Control.
6.02 Effect of Code §280G. Unless otherwise specified in the Award Agreement or in another written agreement between the Participant and the Company or a Related Entity executed simultaneously with or before any Change in Control, if the sum (or value) of the payments described in Section 6.01 constitute an “excess parachute payments” as defined in Code §280G(b)(1) when combined with all other parachute payments attributable to the same Change in Control, the Company or other entity making the payment (“Payor”) will reduce the Participant’s benefits under this Plan so that the Participant’s total “parachute payment” as defined in Code §280G(b)(2)(A) under this and all other agreements will be $1.00 less than the amount that otherwise would generate an excise tax under Code §4999. If the reduction described in the preceding sentence applies, within 10 business days of the effective date of the event generating the payments (or, if later, the date of the Change in Control), the Payor will apprise the Participant of the amount of the reduction (“Notice of Reduction”). Within 10 business days of receiving that information, the Participant may specify how and against which benefit or payment source (including benefits and payment sources other than this Plan) the reduction is to be applied (“Notice of Allocation”). The Payor will be required to implement
9
these directions within 10 business days of receiving the Notice of Allocation. If the Payor has not received a Notice of Allocation from the Participant within 10 business days of the date of the Notice of Reduction or if the allocation provided in the Notice of Allocation is not sufficient to fully implement the reduction described in this section, the Payor will apply the reduction described in this section proportionately based on the amounts otherwise payable under Section 6.01 or, if a Notice of Allocation has been returned that does not sufficiently implement the reduction described in this section, on the basis of the reductions specified in the Notice of Allocation.
7.00 AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
The Board or the Committee may terminate, suspend or amend the Plan at any time without shareholder approval except to the extent that shareholder approval is required to satisfy applicable requirements imposed by [1] Rule 16b-3 under the Act, or any successor rule or regulation, [2] applicable requirements of the Code or [3] any securities exchange, market or other quotation system on or through which the Company’s securities are listed or traded. Also, no Plan amendment may [4] result in the loss of a Committee member’s status as a “non-employee director” as defined in Rule 16b-3 under the Act, or any successor rule or regulation, with respect to any employee benefit plan of the Company, [5] cause the Plan to fail to meet requirements imposed by Rule 16b-3 or [6] without the consent of the affected Participant (and except as specifically provided otherwise in this Plan or the Award Agreement) adversely affect any Award granted before the amendment, modification or termination. However, nothing in this section will restrict the Committee’s right to amend the Plan and any Award Agreements without any additional consideration to affected Participants to the extent necessary to avoid penalties arising under Code §409A, even if those amendments reduce, restrict or eliminate rights granted under the Plan or Award Agreement (or both) before those amendments.
8.00 MISCELLANEOUS
8.01 Assignability. Except as described in this section, an Award may not be transferred except by will or the laws of descent and distribution.
8.02 Beneficiary Designation. Each Participant may name a Beneficiary or Beneficiaries (who may be named contingently or successively) to receive or to exercise any Award that becomes payable on account of or after the Participant’s death. Each designation made will revoke all prior designations made by the same Participant, must be made on a form prescribed by the Committee and will be effective only when filed in writing with the Committee. If a Participant has not made an effective Beneficiary designation, the deceased Participant’s Beneficiary will be his or her surviving spouse or, if none, the deceased Participant’s estate. The identity of a Participant’s designated Beneficiary will be based only on the information included in the latest beneficiary designation form completed by the Participant and will not be inferred from any other evidence.
8.03 No Guarantee of Continuing Services. Nothing in the Plan may be construed as:
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[1] Interfering with or limiting the right of the Company or any Related Entity to Terminate any Employee’s employment at any time;
[2] Conferring on any Participant any right to continue as an Employee of the Company or any Related Entity;
[3] Guaranteeing that any Employee will be selected to be a Participant; or
[4] Guaranteeing that any Participant will receive any future Awards.
8.04 Tax Withholding. The Company will withhold from the Award or from other amounts owed to the Participant an amount sufficient to satisfy federal, state and local withholding tax requirements on any Award.
8.05 Indemnification. Each individual who is or was a member of the Committee or of the Board will be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be made a party or in which he or she may be involved by reason of any action taken or not taken under the Plan as a Committee or Board member and against and from any and all amounts paid, with the Company’s approval, by him or her in settlement of any matter related to or arising from the Plan as a Committee or Board member or paid by him or her in satisfaction of any judgment in any action, suit or proceeding relating to or arising from the Plan against him or her as a Committee or Board member, but only if he or she gives the Company an opportunity, at its own expense, to handle and defend the matter before he or she undertakes to handle and defend it in his or her own behalf. The right of indemnification described in this section is not exclusive and is independent of any other rights of indemnification to which the individual may be entitled under the Company’s organizational documents, by contract, as a matter of law or otherwise. The foregoing right of indemnification is not exclusive and is independent of any other rights of indemnification to which the person may be entitled under the Company’s organizational documents, by contract, as a matter of law or otherwise.
8.06 No Limitation on Compensation. Nothing in the Plan is to be construed to limit the right of the Company to establish other plans or to pay compensation to its employees or directors, in cash or property, in a manner not expressly authorized under the Plan.
8.07 Requirements of Law. The grant of Awards and the issuance of shares of Stock will be subject to all applicable laws, rules and regulations and to all required approvals of any governmental agencies or national securities exchange, market or other quotation system.
8.08 Governing Law. The Plan, and all agreements hereunder, will be construed in accordance with and governed by the laws (other than laws governing conflicts of laws) of the State of Ohio.
8.09 No Impact on Benefits. Plan Awards are incentives designed to promote the objectives described in Section 1.00. Also, Awards are not compensation for purposes of calculating a
11
Participant’s rights under any employee benefit plan that does not specifically require the inclusion of Awards in calculating benefits.
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Exhibit 10.45
LEASE
LANDLORD: JLP-HARVARD PARK, LLC
1798 FREBIS AVENUE
COLUMBUS OH 43206-0410
TENANT: DSW INC.
4150 EAST FIFTH AVENUE
COLUMBUS, OHIO 43219
PREMISES: Approximately 20,000 square feet at
Chagrin Highlands, Warrensville, Ohio
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TABLE OF CONTENTS
Page
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SECTION 1. PREMISES..................................................... 3
SECTION 2. LANDLORD'S AND TENANT'S WORK................................. 3
SECTION 3. TERM......................................................... 5
SECTION 4. MINIMUM RENT................................................. 6
SECTION 5. PERCENTAGE RENT.............................................. 7
SECTION 6. TITLE ENCUMBRANCES; LANDLORD REPRESENATATIONS,
WARRANTIES AND COVENANTS................................................. 8
SECTION 7. RIGHT TO REMODEL............................................. 10
SECTION 8. UTILITIES.................................................... 10
SECTION 9. GLASS........................................................ 11
SECTION 10. PERSONAL PROPERTY............................................ 11
SECTION 11. RIGHT TO MORTGAGE............................................ 11
SECTION 12. SUBLEASE OR ASSIGNMENT....................................... 11
SECTION 13. COMMON AREAS................................................. 12
SECTION 14. OPERATION OF COMMON AREAS.................................... 12
SECTION 15. COMMON AREA MAINTENANCE, TENANT'S SHARE...................... 13
SECTION 16. EMINENT DOMAIN............................................... 15
SECTION 17. TENANT'S TAXES............................................... 15
SECTION 18. RISK OF GOODS................................................ 15
SECTION 19. USE AND OCCUPANCY............................................ 15
SECTION 20. NUISANCES.................................................... 18
SECTION 21. WASTE AND REFUSE REMOVAL..................................... 18
SECTION 22. DAMAGE AND DESTRUCTION OF PREMISES........................... 18
SECTION 23. LANDLORD REPAIRS............................................. 19
SECTION 24. TENANT'S REPAIRS............................................. 19
SECTION 25. COVENANT OF TITLE AND PEACEFUL POSSESSION.................... 20
SECTION 26. TENANT'S AND LANDLORD'S INSURANCE; INDEMNITY................. 21
SECTION 27. REAL ESTATE TAXES............................................ 23
SECTION 28. TENANT'S INSURANCE CONTRIBUTION.............................. 24
SECTION 29. FIXTURES..................................................... 25
SECTION 30. SURRENDER.................................................... 25
SECTION 31. HOLDING OVER................................................. 25
SECTION 32. NOTICE....................................................... 25
SECTION 33. DEFAULT...................................................... 25
SECTION 34. WAIVER OF SUBROGATION........................................ 28
SECTION 35. LIABILITY OF LANDLORD; EXCULPATION........................... 28
SECTION 36. RIGHTS CUMULATIVE............................................ 28
SECTION 37. MITIGATION OF DAMAGES........................................ 29
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SECTION 38. SIGNS........................................................ 29 SECTION 39. ENTIRE AGREEMENT............................................. 29 SECTION 40. TENANT'S PROPERTY............................................ 29 SECTION 41. BINDING UPON SUCCESSORS...................................... 30 SECTION 42. HAZARDOUS SUBSTANCES......................................... 30 SECTION 43. TRANSFER OF INTEREST......................................... 31 SECTION 44. ACCESS TO PREMISES........................................... 31 SECTION 45. HEADINGS..................................................... 31 SECTION 46. NON-WAIVER................................................... 31 SECTION 47. SHORT FORM LEASE............................................. 31 SECTION 48. ESTOPPEL CERTIFICATE......................................... 31 SECTION 49. TENANT'S REIMBURSEMENT....................................... 32 SECTION 50. TENANT'S TERMINATION RIGHT................................... 32 SECTION 51. NO BROKER.................................................... 32 SECTION 52. UNAVOIDABLE DELAYS........................................... 32 SECTION 53. TIMELY EXECUTION OF LEASE.................................... 33 SECTION 54. ACCORD AND SATISFACTION...................................... 33 SECTION 55. WAIVER OF JURY TRIAL......................................... 33 SECTION 56. LEASEHOLD FINANCING.......................................... 33 |
LIST OF EXHIBITS:
EXHIBIT "A" SITE PLAN EXHIBIT "B" LEGAL DESCRIPTION EXHIBIT "C" LANDLORD'S WORK EXHIBIT "D" TENANT'S WORK EXHIBIT "E" EXISTING USE EXCLUSIVES AND PROHIBITED USES EXHIBIT "F" SIGNAGE EXHIBIT "G" TENANT IMPROVEMENTS EXHIBIT "H" LANDLORD'S WAIVER EXHIBIT "I" RECOGNITION AND NON-DISTURBANCE AGREEMENT (FEE MORTGAGEE) |
LEASE
THIS AGREEMENT OF LEASE, made this 7th day of April, 2006, by and between JLP-HARVARD PARK, LLC, an Ohio limited liability company (hereinafter referred to as "Landlord"), with offices at 1798 Frebis Avenue, Columbus, Ohio 43206-3764, and DSW INC., an Ohio corporation (hereinafter referred to as "Tenant") with offices at 4150 East Fifth Avenue, Columbus, Ohio 43219.
WITNESSETH:
SECTION 1. PREMISES
(a) Landlord, in consideration of the rents to be paid and covenants and agreements to be performed by Tenant, does hereby lease unto Tenant premises comprised of approximately 20,000 square feet of leasable space (the "Premises") in the shopping center owned by Landlord containing approximately 230,000 square feet of leasable space on approximately 25 acres and commonly known as Chagrin Highlands, in the City of Cleveland, County of Cuyahoga and State of Ohio (the "Center"). The location, size, and area of the Premises and of the Center as of the Commencement Date (defined below) will be substantially as shown on Exhibit "A" attached hereto and made a part hereof (the "Site Plan"). A legal description of the Center is attached hereto as Exhibit "B" and made a part hereof.
(b) The square footage specified in Section 1(a) shall be certified to
Tenant by Landlord's architect prior to the Rent Commencement Date (defined in
Section 3(b) below). Tenant shall have ninety (90) days from the receipt of such
certification to verify or object to Landlord's measurement. If Tenant objects
to Landlord's measurement within said ninety (90) day period, the parties shall
work together in good faith to resolve the differing square footage
calculations. In computing the square footage of the Premises, the Premises
shall be measured from the exterior surface of exterior walls and the middle of
interior walls, excluding the square footage of any mechanical and utility
rooms, escalators, elevators, stairs and any other common area space located
within the Premises. If the square footage of the Premises as verified and
confirmed by Tenant pursuant to this Section 1(b) is less than the size
specified in Section 1(a), Base Rent (defined in Section 4(a) below) and other
charges shall be proportionately adjusted, but the foregoing shall not be
construed as permitting a material variance in dimensions or area.
(c) Landlord covenants that the Center is or shall be developed in
accordance with the Site Plan and that it shall be used as a retail shopping
center throughout the term of this Lease. Landlord shall not take or consent to
any action which materially adversely affects access to, visibility of, parking
for or use of the Premises. Notwithstanding the foregoing, no modification or
replacement to the Center shall (i) reduce the ratio of parking spaces (for
standard size American cars) to gross leasable area of buildings in the Center
below five (5) spaces per 1,000 square feet of leasable space, (ii) alter or
make any changes, including any reduction or rearrangement of parking spaces, to
that portion of the Center indicated on the Site Plan as the "Protected Area",
(iii) interfere with truck access to the loading doors of the Premises, (iv)
materially adversely interfere with customer access to the Premises, (v)
materially adversely interfere with the visibility of the Premises from the
roads providing direct access to the Center, or (vi) result in the construction
of any buildings in the area designated "No Build Area" on the Site Plan. In
performing any construction work, repairs or maintenance in the Center permitted
under this Lease after Tenant has taken physical possession of the Leased
Premises, Landlord shall use good faith, commercially reasonable efforts to
prevent any interference with parking for, access to or visibility or use of the
Premises or the business of Tenant or any subtenant or licensee of Tenant.
SECTION 2. LANDLORD'S AND TENANT'S WORK
(a) Prior to delivery of possession of the Premises to Tenant, Landlord shall construct, at its expense, the improvements to the Premises described on Exhibit "C" attached hereto and made a part hereof consistent with plans and specifications approved by Tenant as set forth in Section 2(e) below (the "Landlord's Work"). Landlord agrees to deliver the Premises to Tenant with Landlord's Work substantially completed (as defined in Section 2(c)) between July
15, 2006 and September 15, 2006 (the "Delivery Period"). Landlord shall give
Tenant notice (the "Estimated Delivery Notice") no later than April 1, 2006 of
the status of Landlord's construction and the estimated date that Landlord shall
deliver the Premises to Tenant with Landlord's Work substantially completed (the
"Estimated Delivery Date"). Landlord may revise the Estimated Delivery Date any
time prior to May 1, 2006 (the "Final Delivery Notice Date"), by which time
Landlord shall have given Tenant a final notice (the "Final Delivery Notice") of
a firm delivery date (the "Final Delivery Date") upon which the Landlord's Work
shall be substantially completed and the Leased Premises delivered to Tenant.
Upon the sending of the Final Delivery Notice, Landlord shall have no further
right to modify the Final Delivery Date. Neither the Estimated Delivery Date nor
the Final Delivery Date shall be (y) earlier than (i) thirty (30) days after the
date Tenant receives the Estimated Delivery Notice or the Final Delivery Notice,
as applicable, or (ii) the first day of the Delivery Period or (z) later than
the last day of the Delivery Period. If Landlord does not provide a Final
Delivery Notice on or before the earlier of the Final Delivery Notice Date and
thirty (30) days prior to the Estimated Delivery Date or if the date provided
for in such Final Delivery Notice does not comply with the requirements of this
Section 2, the Estimated Delivery Date shall be deemed to be the Final Delivery
Date, provided such date complies with the requirements of this Section 2. If
Landlord does not provide an Estimated Delivery Date on or before the Final
Delivery Notice Date or if such date does not comply with the requirements of
this Section 2, then the Final Delivery Date shall be deemed to be the last day
of the Delivery Period.
(b) In the event that the Premises and Landlord's Work are not substantially completed and delivered to Tenant on or before the Final Delivery Date, the Base Rent due hereunder shall be adjusted so that, after the Rent Commencement Date, Tenant shall receive a credit against Base Rent thereafter due Landlord equal to one (1) day of Base Rent for each day after the Final Delivery Date until delivery of the Premises is made to Tenant consistent with the terms of this Lease, including substantial completion of the Landlord's Work. Tenant shall not be obligated to accept possession of the Premises prior to the later of (a) substantial completion of Landlord's Work, (b) the first day of the Delivery Period and (c) the Final Delivery Date. Time is of the essence regarding all dates set forth in this Section 2.
(c) For purposes of this Lease, the Landlord's Work shall be deemed
"substantially completed" when (i) all of the Landlord's Work has been completed
except for "punch list items" that do not affect the Tenant's use of or the
appearance of the Premises or Tenant's ability to perform Tenant's Work (as
defined in Section 2(f) below), (ii) Landlord has satisfied the requirements of
Section 2(g), and (iii) Tenant has been furnished with a fully executed
non-disturbance agreement from the holder(s) of any then existing Mortgages,
which agreement is consistent with Section 11 of this Lease. Landlord shall
complete the punch list items within thirty (30) days of the date Tenant
notifies Landlord of same. Upon performance of such punch list, Tenant shall
promptly acknowledge Landlord's completion thereof. Punch list items shall not
be deemed completed until an authorized representative of Tenant has provided
Landlord written acknowledgment of same. Landlord agrees that any and all work
performed by Landlord after delivery of the Leased Premises to Tenant shall not
unreasonably interfere with Tenant's performance of Tenant's Work, and Landlord
shall be responsible for any and all costs resulting from any such unreasonable
interference.
(d) Actual possession of the Premises shall have been delivered to Tenant water-tight, free of Hazardous Substances, in a good, structurally sound condition, with all of Landlord's Work substantially completed, which substantial completion shall be evidenced by Landlord's architect to Tenant.
(e) The Landlord's Work and Tenant's Work shall be performed (i) in a good and workmanlike manner and in accordance with plans and specifications approved by the other party, which approval shall not be unreasonably withheld or delayed and (ii) in compliance with all applicable governmental codes, laws, ordinances and regulations.
(f) Landlord and Tenant agree that they shall conduct a joint walk through of the Premises approximately two (2) weeks prior to the Final Delivery Date to ascertain the status of Landlord's construction. Tenant agrees to provide, at its expense, upon delivery of the Premises to Tenant, the improvements to the Premises described on Exhibit "D" attached hereto and made a part hereof (the "Tenant's Work").
(g) Completion of Construction of Leased Premises. Prior to the Final Delivery Date, Landlord shall satisfy the following conditions:
1. Landlord shall furnish Tenant with a temporary certificate of occupancy and other necessary approvals which must be issued by the appropriate governmental authorities prior to the commencement of Tenant's Work and the occupancy and use of the Premises as contemplated. Landlord agrees to provide a permanent certificate of occupancy prior to Tenant's merchandising and, if required by the issuing authority, the setting of fixtures for the Premises, and otherwise as soon as available in the ordinary course of the issuing authority's practice.
2. The architect engaged by Landlord shall execute a certificate of completion that the Premises has been constructed in a good and workmanlike manner in accordance with the plans and specifications approved by Tenant and the other requirements for Landlord's Work hereunder.
3. Tenant shall have been furnished with a fully executed original of a commercially reasonable non-disturbance and attornment agreement pursuant to Section 11 hereof.
4. Tenant shall have been notified no later than sixty (60) days prior to the Final Delivery Date of all applicable local governmental authority code requirements, if any, for the installation of Tenant's fixtures at the Premises and for low voltage electrical work in connection with the installation of Tenant's music, telephone and security systems at the Premises.
5. Tenant shall have been furnished with a list of all subcontractors who performed work on the Premises, along with direct contact information for, the work discipline of, and the work performed by each.
6. Tenant shall have been furnished with two (2) copies of all contractors', subcontractors' and suppliers' warranties relating to the Premises.
7. Tenant shall have been furnished with two (2) copies of all operations and maintenance manuals relating to materials and systems used or installed in the construction of the Premises.
8. Tenant shall have been furnished with two (2) copies of the record drawings for the construction of the Premises, marked to reflect actual locations of all components of the Premises.
(h) In addition to any guarantees provided to Tenant elsewhere in this Lease, Landlord hereby unconditionally guarantees all of Landlord's Work against defective workmanship and materials for one (1) year from the Commencement Date (as defined in Section 3(a)).
(i) Landlord shall perform any additional work not required to be performed by Tenant under this Lease in order for Landlord to obtain a permanent certificate of occupancy for the Premises, whether such work relates to the Premises or other portions of the Center.
SECTION 3. TERM
(a) The "Commencement Date" of this Lease shall be the later of (i) the date actual, physical possession of the Premises is delivered to Tenant with the Landlord's Work substantially completed and (ii) the Final Delivery Date.
(b) The initial term (the "Initial Term") of the Lease shall commence on the earlier of (i) the date on which the Tenant opens for business in the Premises, and (ii) sixty (60) days after the Commencement Date (the "Rent Commencement Date") and end on the last day of the fifteenth (15th) full Lease Year. The term "Lease Year" shall mean a period of twelve (12) consecutive calendar months. The first Lease Year during the term hereof shall commence on the first day of the first February following the Rent Commencement Date. Each subsequent
Lease Year shall begin on the anniversary of the first Lease Year. The period from the Rent Commencement Date to the first day of the first February following the Rent Commencement Date (the "Initial Period") shall be a partial Lease Year.
(c) If the Commencement Date has not occurred on or before September 15, 2006, then unless Tenant otherwise elects, the Commencement Date shall not occur and Tenant shall not be obligated to accept delivery of the Leased Premises until January 2, 2007. If for any reason, the Commencement Date has not occurred by March 1, 2007, Tenant shall have the right and option to either (i) terminate this Lease or (ii) elect that the Commencement Date not occur, and, thereby defer delivery of the Leased Premises, until June 15, 2007. The remedies set forth in this paragraph shall be in addition to any and all other rights and remedies provided for Tenant in the Lease or available to Tenant in law or at equity.
(d) Tenant shall have three (3) consecutive separate options to extend the term of this Lease for successive renewal terms of five (5) Lease Years each. Tenant may exercise each such renewal option by giving written notice to Landlord at least one hundred eighty (180) days prior to the end of the then current term or renewal term.
(e) The Initial Term and any renewal terms are hereinafter collectively referred to as the "term".
(f) Beginning on the date of this Lease and ending on the Commencement Date, Tenant, its employees and agents shall have the right to enter the Premises or any part thereof at reasonable times during regular business hours for the purpose of making such inspections as Tenant may deem reasonably necessary. In consideration of Tenant's right to inspect the Premises, Tenant agrees to indemnify, defend and hold Landlord harmless from any and all loss, damage, claims, costs, demands or expenses (including reasonable attorney's fees) resulting from such entry on the Premises by Tenant or its agents.
(g) From the date upon which the Premises are delivered to Tenant for its
work until the Commencement Date of the lease term, Tenant shall observe and
perform all of its obligations under this Lease (except Tenant's obligation to
operate and pay Base Rent, percentage rent and Tenant's Proportionate Share
(defined in Section 15(c) below) of "Maintenance Costs" (defined and provided
for in Section 15(b) hereof Real Estate Taxes (defined and provided for in
Section 27(b) hereof) and insurance (provided for in Section 28 hereof). In the
event Tenant fails to open for business within one hundred twenty (120) days
after the date possession of the Premises has been delivered to Tenant,
Landlord, in addition to any and all other available remedies, may require
Tenant to pay to Landlord, in addition to all other rent and charges herein, as
liquidated damages and not as a penalty, an amount equal to one-three hundred
sixty five thousandths (1/365) of the annual Base Rent for each day such failure
to open continues.
SECTION 4. MINIMUM RENT
(a) From and after the Rent Commencement Date, Tenant covenants and agrees to pay on a monthly basis during the term "Base Rent" in the following amounts to Landlord at the address listed above or such other place as Landlord may by thirty (30) days' prior written notice to Tenant direct:
ANNUAL RENT ANNUAL
LEASE YEAR (BASED ON 12 MONTHS) MONTHLY RENT PER SQUARE FOOT
---------- -------------------- ------------ ---------------
1-5 (initial) $18.00 $30,000.00 $360,000.00
6-10 (initial) $19.80 $33,000.00 $396,000.00
11-15 (initial) $21.78 $36,300.00 $435,600.00
16-20 (option) $23.96 $39,933.33 $479,200.00
21-25 (option) $26.35 $43,916.67 $527,000.00
26-30 (option) $28.99 $48,316.67 $579,800.00
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The monthly installments of Base Rent payable under this Section 4 shall be paid in advance on or before the first day of each calendar month from and after the Rent Commencement Date during the term hereof without notice or demand therefor and without any offsets or deductions whatsoever except as otherwise provided in this Lease. Base Rent for any partial month shall be prorated based upon a thirty (30) day month. Base Rent for any Initial Period shall be the same as the Base Rent for the first Lease Year. As used in this Lease, "Rent" shall mean Base Rent in addition to all other sums due and owing from Tenant to Landlord under this Lease.
(b) In the event any sums required under this Lease to be paid are not received when due, then all such amounts shall bear interest from the due date thereof until the date paid at the rate of interest equal to two percent (2%) over the prime rate in effect from time to time as established by National City Bank, Columbus, Ohio (the "Interest Rate"), and shall be due and payable by Tenant without notice or demand, Tenant shall pay the foregoing interest thereon in addition to all default remedies of Landlord pursuant to Section 33 below.
(c) Notwithstanding anything herein contained to the contrary, Tenant shall initially pay to Landlord as additional Rent, simultaneously with the payment of Base Rent, payable in equal monthly installments, the estimated monthly amount of Tenant's Proportionate Share of Maintenance Costs (provided for in Section 15 hereof), Real Estate Taxes (provided for in Section 27 hereof) and insurance (provided for in Section 28 hereof).
SECTION 5. PERCENTAGE RENT
(a) Beginning with the first Lease Year, Tenant shall pay to Landlord, in
addition to Base Rent, upon the conditions and at the times hereinafter set
forth, percentage rent equal to two percent (2%) of Tenant's gross sales (as
hereinafter defined) in excess of the number obtained by dividing (a) Base Rent
for the applicable lease year by (b) the number .04. The annual percentage rent
shall be paid by Tenant to Landlord within ninety (90) days after the end of
each Lease Year. Each such payment shall be accompanied by a statement signed by
an authorized representative of Tenant setting forth Tenant's gross sales for
such Lease Year. For purposes of permitting verification by Landlord of the
gross sales reported by Tenant, Landlord shall have the right, not more than one
(1) time per Lease Year, upon not less than five (5) business days notice to
Tenant, to audit during normal business hours in Tenant's corporate office,
Tenant's books and records relating to Tenant's gross sales for a period of two
(2) years after the end of each Lease Year. Landlord agrees that no contingency
fee auditor shall be employed by Landlord for the purpose of conducting any such
audit. If such an audit reveals that Tenant has understated its gross sales by
more than three percent (3%) for any Lease Year, Tenant, in addition to paying
the additional percentage rent due, shall pay the reasonable cost of the audit
within thirty (30) days of Tenant's receipt of Landlord's demand for the same
and copies of all bills or invoices on which such cost is based.
(b) Each Lease Year shall constitute a separate accounting period, and the computation of percentage rental due for any one period shall be based on the gross sales for such Lease Year.
(c) The term "gross sales" as used in this Lease is hereby defined to mean the gross dollar aggregate of all sales or rental or manufacture or production of merchandise and all services, income and other receipts whatsoever of all business conducted in, at or from any part of the Premises, whether for cash, credit, check, charge account, gift or merchandise certificate purchased or for other disposition of value regardless of collection. Should any departments, divisions or parts of Lessee's business be conducted by any subleases, concessionaires, licensees, assignees or others, then there shall be included in Lessee's gross sales, all "gross sales" of such department, division or part, whether the receipts be obtained at the Premises or elsewhere in the same manner as if such business had been conducted by Lessee. Gross sales shall exclude the following: (i) all credit, refunds, and allowances granted to customers; (ii) all excise taxes, sales taxes, and other taxes levied or imposed by any governmental authority upon or in connection with such sales; (iii) bulk sales of goods in connection with the sale of Tenant's business; (iv) sales of fixtures, furniture, equipment and other items not made in the ordinary course of business; (v) salvage sales of damaged merchandise; (vi) discount sales made to employees of the Tenant and Tenant's subsidiaries and affiliated corporations, if any; (vii) exchanges of merchandise between Tenant's warehouse or other stores and other similar movements of
merchandise; (viii) returns to suppliers; (ix) the proceeds from vending machines and coin operated telephones and commissions on such proceeds to the extent such proceeds and commissions are less than five percent (5%) of Gross Sales exclusive of such proceeds and commissions; (x) uncollectible customer charges and bad checks; (xi) disallowed credit card amounts and credit card service charges or fees retained by the credit card company; (xii) delivery charges; and (xiii) customer credit insurance.
(d) The percentage rental, if any, shall be paid within ninety (90) days after the end of each lease year, accompanied by a statement in writing signed by Tenant setting forth its gross sales from the sale of all items for such lease year. Tenant shall keep at its principal executive offices, where now or hereafter located, true and accurate accounts of all receipts from the Premises. Landlord, its agents and accountants, shall have access to such records at any and all times during regular business hours for the purpose of examining or auditing the same. Tenant shall also furnish to Landlord any and all reasonable supporting data relating to gross sales and any deductions therefrom as Landlord may reasonably require. Landlord agrees to keep any information obtained therefrom confidential, except as may be required for Landlord's tax returns, or in the event of litigation or arbitration where such matters are material.
(e) Tenant shall at all times maintain accurate records which shall be available for Landlord's inspection at any reasonable time.
(f) If Landlord, for any reason, questions or disputes any statement of percentage rental prepared by Tenant, then Landlord, at its own expense, may employ such non-contingency fee accountants as Landlord may select to audit and determine the amount of gross sales for the period or periods covered by such statements. If the report of the accountants employed by Landlord shall show any additional percentage rental payable by Tenant, then Tenant shall pay to Landlord such additional percentage rental plus interest at one (1) point over the prime rate, commencing on the date such percentage rentals should have been paid, within thirty (30) days after such report has been forwarded to Tenant, unless Tenant shall, within said thirty (30) day period, notify Landlord that Tenant questions or disputes the correctness of such report. In the event that Tenant questions or disputes the correctness of such report, the accountants employed by Tenant and the accountants employed by Landlord shall endeavor to reconcile the question(s) or dispute(s) within thirty (30) days after the notice from Tenant questioning or disputing the report of Landlord's accountants. In the event that it is finally determined by the parties that Tenant has understated percentage rent for any Lease year by three percent (3%) or more, Tenant shall pay the cost of the audit. Furthermore, if Tenant's gross sales cannot be verified due to the insufficiency or inadequacy of Tenant's records, then Tenant shall pay the cost of the audit. The cost of any audit resulting from failure to report percentage rent after written notification of default shall be at the sole cost of Tenant.
SECTION 6. TITLE ENCUMBRANCES; LANDLORD REPRESENATATIONS, WARRANTIES AND COVENANTS
(a) Tenant's rights under this Lease are subject and subordinate to those title matters set forth in Landlord's owner's title policy issued by Chicago Title Insurance Company, being Policy No. 24510646, dated September 15, 2005, a copy of which has been provided to Tenant, specifically including but not limited to the terms and conditions of a certain Declaration of Covenants, Conditions and Restrictions for Chagrin Highlands, dated May 4, 1999, executed by the City of Cleveland, Ohio, as Declarant and filed for record on May 5, 1999 and recorded as Cuyahoga County Recorder's AFN 19990551070, as subsequently supplemented and amended (collectively, the "Declaration"). Tenant agrees that it shall abide by the terms and conditions of the Declaration.
(b) Landlord covenants, represents and warrants to Tenant that: (i) the Declaration has not been modified, amended or terminated; (ii) the Declaration is currently in full force and effect; (iii) to its actual knowledge as of the date hereof, no default under the Declaration exists thereunder beyond any applicable notice and cure period; and (iv) the Declaration is, and shall remain, superior in lien to all mortgages and related liens affecting the Center and all other land which is encumbered by the Declaration. Tenant shall comply with the terms and conditions of the Declaration to the extent same affects the Premises (it being agreed that Tenant shall not be obligated to expend any sums in connection with such compliance).
(c) Landlord shall, during the term: (i) perform and observe all of the terms, covenants, provisions and conditions of the Declaration on Landlord's part to be performed and observed; (ii) defend, indemnify and hold harmless Tenant from and against and all claims, demands, causes of action, suits, damages, liabilities and expenses of any nature arising out of or in connection with the enforcement of, or a claimed breach by, Landlord of any covenant, term, condition or provision of the Declaration; and (iii) diligently enforce, at its sole expense, the covenants, agreements and obligations of the Declaration. Tenant shall, during the term, defend, indemnify and hold harmless Landlord from and against and all claims, demands, causes of action, suits, damages, liabilities and expenses of any nature arising out of or in connection with the enforcement of, or a claimed breach by, Tenant of any covenant, term, condition or provision of the Declaration.
(d) Whenever, pursuant to the Declaration, the consent or approval of Landlord shall be required by or requested, and such consent or approval could diminish the rights or increase the obligations of Tenant thereunder or under this Lease, or could adversely affect Tenant's use or occupancy of the Premises, or the conduct of Tenant's business therein, such consent or approval shall not be granted without the prior written consent of Tenant, which consent may be withheld in its sole and absolute discretion.
(e) Landlord shall not amend, or modify the Declaration if such amendment or modification could diminish the rights or increase the obligations of Tenant thereunder of under this Lease, or could adversely affect Tenant's use or occupancy of the Premises or the conduct of Tenant's business therein, nor shall Landlord terminate the Declaration.
(f) Landlord shall obtain any third-party approvals required under Article VIII of the Declaration for the performance of Landlord's Work (including, without limitation, Tenant's elevations and signage, as shown on Exhibit "F" hereto), Tenant's Work and the operation of Tenant's business in the Premises.
(g) Landlord further represents, warrants and/or covenants:
1. That it has the right to enter into this Lease and that the person(s) signing this Lease on its behalf has authority to enter into this Lease and to bind Landlord to the terms, covenants and conditions contained herein.
2. That it has good and marketable fee simple title to the Premises and the Center is free and clear of all easements, restrictions, liens and encumbrances except as described in Section 6(a) above.
3. That the Premises, including without limitation, the roof and HVAC system, are or as of the Commencement Date shall be, in good condition and repair.
4. That the Premises is, or as of the Commencement Date shall be, properly zoned for use by the Tenant as a retail footwear location and there are no restrictive covenants or other title encumbrances which restrict in any way the use of the Premises as a retail footwear location.
5. That Landlord has, or as of the Commencement Date shall have, obtained all necessary approvals and permits from appropriate governmental authorities for the development of the Center in accordance with the Site Plan and for the construction and occupancy of the Premises by Tenant as a retail footwear location.
6. That Landlord has not entered into, and shall not hereafter prior to the expiration or termination of this Lease enter into, any leases, agreements or restrictive covenants that would prohibit or interfere with the use of the Premises by the Tenant as a retail footwear location.
7. In the event the legal description of the Center described on Exhibit "B" hereto indicates that the Center is composed of more than one (1) parcel or lot, there exists no strips or gores between such parcels or lots which are not owned by Landlord.
8. No third-party consents or approvals are required in order for Landlord to enter into this Lease, or for the performance of Landlord's Work.
9. The Center now has, and on the Commencement Date shall have, access to and from Richmond Road and Harvard Road, as shown on the Site Plan, for the passage of vehicular traffic.
10. As of the date of this Lease, there are no sign ordinances, restrictive covenants, uniform sign plans or other signage restrictions which would prevent the Premises from having the signage (including, without limitation, the square foot area and size of letters) as depicted on Exhibit "F" hereof.
SECTION 7. RIGHT TO REMODEL
(a) Tenant may, at Tenant's expense, make repairs and alterations to the interior non-structural portions of the Premises and remodel the interior of the Premises, excepting structural and exterior changes, in such manner and to such extent as may from time to time be deemed necessary by Tenant for adapting to the Premises to the requirements and uses of Tenant and for the installation of its fixtures, appliances and equipment. Any structural or exterior alteration may only be made by Tenant with the prior written approval of Landlord, which approval may be granted or withheld in Landlord's sole discretion. All plans for any structural alterations shall be submitted to Landlord for endorsement of its approval prior to commencement of work. Upon Landlord's request, Tenant shall be obligated, if it remodels and/or alters the Premises, to restore the Premises upon vacating the same. Tenant will indemnify and save harmless the Landlord from and against all mechanics liens or claims by reason of repairs, alterations or improvements which may be made by Tenant to the Premises. Inasmuch as any such alterations, additions or other work in or to the Premises may constitute or create a hazard, inconvenience or annoyance to the public and other tenants in the Center, Tenant shall, if so directed in writing by Landlord, erect barricades, temporarily close the Premises, or affected portion thereof, to the public or take whatever measures are necessary to protect the building containing the Premises, the public and the other tenants of the Center for the duration of such alterations, additions or other work. If Landlord determines, in its sole judgment, that Tenant has failed to take any of such necessary protective measures, and Tenant fails to cure same within ten (10) days after notice thereof, Landlord may do so and Tenant shall reimburse Landlord for the cost thereof within ten (10) days after Landlord bills Tenant therefor.
(b) All such work, including Tenant's Work pursuant to Exhibit "D" shall be
performed lien free by Tenant. In the event a mechanic's lien is filed against
the premises or the Center, Tenant shall discharge or bond off same within ten
(10) days from the filing thereof. If Tenant fails to discharge said lien,
Landlord may bond off or pay same without inquiring into the validity or merits
of such lien, and all sums so advanced shall be paid on demand by Tenant as
additional rent.
SECTION 8. UTILITIES
(a) Prior to the Commencement Date, Landlord shall provide, at Landlord's expense, by separate meter, electric, water, sewer, and other utilities to the Premises sufficient to meet Tenant's requirements. Landlord shall further provide, or cause to be provided, all such utility services to the Premises during the term of this Lease. Tenant agrees to be responsible and pay for all public utility services rendered or furnished to the Premises during the term hereof, including, but not limited to, heat, water, gas, electric, steam, telephone service and sewer services, together with all taxes, levies or other charges on such utility services when the same become due and payable. Tenant shall be responsible for all utility services and costs inside the premises. Landlord shall not be liable for the quality or quantity of or interference involving such utilities unless due directly to Landlord's negligence.
(b) During the term hereof, whether the Premises are occupied or unoccupied, Tenant agrees to maintain heat sufficient to heat the Premises so as to avert any damage to the Premises on account of cold weather.
(c) Tenant agrees to be responsible for its rubbish removal from the
Premises. Tenant shall be permitted to maintain and operate, at no extra charge:
(i) a trash compactor in the
portion of the Common Areas designated on Site Plan as "Trash Compactor Pad"; and (ii) a trash container(s) in the portion(s) of the Common Areas designated on Site Plan as "Trash Container Pad". Tenant, at its sole cost and expense, shall keep the trash compactor and containers neat and clean and repair any damage caused by use and storage of such compactor and containers.
SECTION 9. GLASS
The Tenant shall maintain the glass part of the Premises, promptly replacing any breakage and fully saving the Landlord harmless from any loss, cost or damage resulting from such breakage or the replacement thereof.
SECTION 10. PERSONAL PROPERTY
The Tenant further agrees that all personal property of every kind or description that may at any time be in or on the Premises shall be at the Tenant's sole risk, or at the risk of those claiming under the Tenant, and that the Landlord shall not be liable for any damage to said property or loss suffered by the business or occupation of the Tenant caused in any manner whatsoever.
SECTION 11. RIGHT TO MORTGAGE
(a) Landlord reserves the right to subject and subordinate this Lease at all times to the lien of any deed of trust, mortgage or mortgages now or hereafter placed upon Landlord's interest in the Premises; provided, however, that no default by Landlord, under any deed of trust, mortgage or mortgages, shall affect Tenant's rights under this Lease, so long as Tenant performs the obligations imposed upon it hereunder and is not in default hereunder, and Tenant attorns to the holder of such deed of trust or mortgage, its assignee or the purchaser at any foreclosure sale. Any such subordination shall be contingent upon Tenant receiving a commercially reasonable subordination, non-disturbance and attornment agreement ("SNDA"). It is a condition, however, to the subordination and lien provisions herein provided, that Landlord shall procure from any such mortgagee an agreement in writing, which shall be delivered to Tenant or contained in an SNDA, providing in substance that so long as Tenant shall faithfully discharge the obligations on its part to be kept and performed under the terms of this Lease and is not in default under the terms hereof, its tenancy will not be disturbed nor this Lease affected by any default under such mortgage. The parties acknowledge that the SNDA attached hereto as Exhibit "I" is commercially reasonable. Landlord represents and warrants that, as of the date of this Lease and the Commencement Date, there are no mortgages, ground leases or other encumbrances that could dispossess Tenant's leasehold interest hereunder (collectively, "Mortgages") on Landlord's fee title to the Center. Landlord agrees that Tenant's obligations under this Lease shall be contingent upon Tenant entering into an SNDA with the holder of such Mortgage on or before the Commencement Date.
(b) Wherever notice is required to be given to Landlord pursuant to the terms of this Lease, Tenant will likewise give such notice to any mortgagee of Landlord's interest in the Premises upon notice of such mortgagee's name and address from Landlord. Furthermore, such mortgagee shall have the same rights to cure any default on the part of Landlord that Landlord would have had.
SECTION 12. SUBLEASE OR ASSIGNMENT
(a) Tenant may assign Tenant's interest in this Lease or sublet all or any portion of the Premises to a nationally or regionally recognized retailer without Landlord's consent. Any other assignment or subletting not specifically provided for in this Section 12 shall be subject to Landlord's prior written consent, which consent shall not be unreasonably withheld. Landlord's review of the proposed assignee or subtenant shall be limited to business reputation, business experience, a retail use compatible with then existing tenant mix of the Center, and financial ability to perform its obligations under this Lease or the proposed sublease, as the case may be. In any such event, Tenant shall remain fully and primarily liable hereunder. Tenant's right to assign or sublet shall be subject to any then existing exclusives or primary use exclusives for tenants leasing more than 15,000 square feet of space in the Center.
Tenant may, without the consent of Landlord, (i) grant licenses and/or
concessions within the Premises or (ii) assign or sublet all or any portion of
the Premises to (a) any parent, affiliate or subsidiary corporation of Tenant;
(b) a transferee or successor by merger, consolidation or acquisition of Tenant
or its parent or subsidiary; or (c) a transferee with a good business reputation
who is acquiring all or substantially all of the stores of Tenant in the State
of Ohio or the assets of Tenant, its parent or subsidiary. Any such assignee or
sublessee shall be bound by the terms of this Lease. Tenant shall deliver to
Landlord in the ordinary course of its business an instrument whereby the
assignee or entity succeeding to Tenant's interest hereunder agrees to be bound
by the terms of this Lease.
(b) Landlord may assign Landlord's interest in this Lease without the
consent of Tenant (a) to any entity to which Landlord transfers its fee interest
in the Premises provided such entity (i) agrees in writing to be bound by all
the terms of this Lease and (ii) such assignment is pursuant to a bona fide
arm's length transaction not designed to reduce Landlord's liability or to
otherwise exempt Landlord from any provision of this Lease or (b) subject to
Section 12, as security for any indebtedness undertaken by Landlord.
SECTION 13. COMMON AREAS
Landlord grants to Tenant and its customers, agents, employees, licensees, invitees and subtenants, a non-exclusive easement in common with the other tenants of the Center for the use of all Common Areas. Landlord hereby covenants and agrees that Landlord shall not grant any party other than tenants of the Center and their customers, agents, employees, licensees, invitees and subtenants a right to utilize the parking areas in the Center, and Landlord shall use commercially reasonable efforts to restrict the use of the parking areas to such parties. "Common Areas" means all areas and facilities in the Center provided and so designated by Landlord and made available by Landlord in the exercise of good business judgment for the common use and benefit of tenants of the Center and their customers, employees and invitees. Common Areas shall include (to the extent the same are constructed), but not be limited to, the parking areas, sidewalks, landscaped areas, corridors, stairways, boundary walls and fences, incinerators, truckways, service roads, and service areas not reserved for the exclusive use of Tenant or other tenants.
SECTION 14. OPERATION OF COMMON AREAS
(a) From and after the Commencement Date, Landlord, at its cost and expense, shall operate the Center and maintain the Common Areas and the Center in a clean and safe condition and repair so that Tenant and its customers, guests, invitees, licensees, officers and employees can use and enjoy the same. The obligations of Landlord pursuant hereto shall include, without limitation, the maintenance of the Center and any pylon structure(s) (excluding therefrom Tenant's advertising panels), regular cleaning of the Common Areas, removal of trash and debris from the Common Areas, repairing the asphalt and concrete portions of the Common Areas (including potholes, curbs and sidewalks), repairing common utility lines and facilities, repairing storm drains, repairing parking lot lights, maintaining the landscaped portion of the Common Areas (including regular grass cutting), maintaining floodlights and other necessary means of illumination sufficient to illuminate the Common Areas during twilight and evening hours that Tenant's store is open for business and in operation, prompt removal of snow and ice on every occasion where safety of the Common Areas or access to the Premises is impeded, and periodic restriping of the parking area. Landlord shall at all times have exclusive control of the Common Areas and may at any time and from time to time: (i) promulgate, modify and amend reasonable rules and regulations for the use of the Common Areas, which rules and regulations shall be binding upon Tenant upon delivery of a copy thereof to Tenant; (ii) temporarily close any part of the Common Areas, including but not limited to closing the streets, sidewalks, road or other facilities to the extent necessary to prevent a dedication thereof or the accrual of rights of any person or of the public therein; (iii) exclude and restrain anyone from the use or occupancy of the Common Areas or any part thereof except bona fide customers and suppliers of the tenants of the Center who use said areas in accordance with the rules and regulations established by Landlord; and (iv) engage others to operate and maintain all or any part of the Common Areas, on such terms and conditions as Landlord shall, in its sole judgment, deem reasonable and proper; and (v) make such changes in the Common Areas as in its opinion are in the best interest of the Center, including but not limited to changing the location of walkways, service areas, driveways,
entrances, existing automobile parking spaces and other facilities, changing the
direction and flow of traffic and establishing prohibited areas; provided,
however, that any such change shall be subject to the terms and conditions of
Section 1(c) of this Lease.
(b) Tenant shall keep all Common Areas free of obstructions created or permitted by Tenant. Tenant shall permit the use of the Common Areas only for normal parking and ingress and egress by its customers and suppliers to and from the Premises. If in Landlord's opinion unauthorized persons are using any of the Common Areas by reason of Tenant's occupancy of the Premises, Landlord shall have the right at any time to remove any such unauthorized persons from said areas or to restrain unauthorized persons from said areas. Landlord, Tenant, and others constructing improvements or making repairs or alterations in the Center shall have the right to make reasonable use of portions of the Common Areas.
(c) Throughout the term, Landlord shall keep the Common Areas fully lighted and open to the customers of the Center seven (7) days a week from dusk until 11:00 p.m. Monday through Saturday and until 7:00 p.m. on Sunday ("Normal Hours"). Upon request of Tenant, Landlord shall keep the Common Areas lighted for as long as after Normal Hours as Tenant shall request, provided Tenant shall pay for a share of the reasonable cost of said requested lighting, which share shall be equal to the product of (i) such costs, and (ii) a fraction, the numerator of which shall be the number of square feet of leasable space within the Premises and the denominator of which shall be the aggregate number of square feet of leasable space of all premises within the Center (including the Premises) open later than Normal Hours (excluding, however, those tenants and occupants who separately control and pay for their own Common Area lighting). In addition to the foregoing, Landlord shall provide for low level security lighting from one (1) hour after the close of business in the Premises until dawn.
SECTION 15. COMMON AREA MAINTENANCE, TENANT'S SHARE
(a) Tenant shall initially pay to Landlord as additional rental,
simultaneously with the payment of Base Rent called for under Section 4(a), the
estimated monthly amount of Tenant's Proportionate Share of the "Maintenance
Costs" (as defined in Section 15(c) below) for the operation and maintenance of
the Common Areas as set forth in Section 4(c), One and 10/100 Dollars ($1.10)
per square foot, payable in equal monthly installments of One Thousand Eight
Hundred Thirty-Three and 33/100 Dollars ($1,833.33) as the estimated monthly
amount of Tenant's Proportionate Share of the "Maintenance Costs" (as defined in
Section 15(b) below) for the operation and maintenance of the common areas.
(b) The Maintenance Costs for the common areas shall be computed on an accrual basis, under generally accepted accounting principles, and shall include all costs of operating, maintaining, repairing and replacing the common areas, including by way of example but not limitation: (i) cost of labor (including worker's compensation insurance, employee benefits and payroll taxes); (ii) materials, and supplies used or consumed in the maintenance or operation of the common area; (iii) the cost of operating and repairing of the lighting; (iv) cleaning, painting, removing of rubbish or debris, snow and ice, private security services, and inspecting the common areas; (v) the cost of repairing and/or replacing paving, curbs, walkways, markings, directional or other signs; landscaping, and drainage and lighting facilities; (vi) rental paid for maintenance of machinery and equipment; and (vii) a reasonable allowance to Landlord for Landlord's supervision, which allowance shall not in an accounting year exceed ten percent (10%) of the total of all Maintenance Costs (excluding insurance costs) for such accounting year (all of the foregoing are collectively referred to herein as "Maintenance Costs"). Notwithstanding the foregoing, the following shall be excluded, deducted or credited from Maintenance Costs when computing Tenant's Proportionate Share of same: (a) Net recoveries received by Landlord from tenants as a result of any act, omission, default or negligence or as the result of breaches by tenants of the provisions of their leases and/or other amounts received by Landlord from third parties, which recoveries and/or amounts reimburse Landlord for or reduce Maintenance Costs; (b) Gross revenues from charges, if any, made for the use of the parking facilities and other Common Areas or facilities of the Center (including, without limitation, the sale or rental of advertising space); (c) The cost of the land underlying and the construction of the Center, whether initially or in connection with any replacement or expansion thereof and whether mandated by law or otherwise, including, without limitation, costs of correcting (I) defective
conditions in the Center resulting from defects in or inadequacy of the initial
design or construction of the same, or (II) code violations, including the
payment of fines or citations in connection therewith; (d) The depreciation or
amortization of the Center or any part thereof or any equipment or other
property used in connection therewith; (e) the initial cost of the installation
of the parking areas or facilities or the amortization or depreciation of such
initial cost; (f) The cost of providing or performing improvements, work or
repairs to or within (I) any portion of the premises of any other tenants or
occupants in the Center, (II) any other building which is not part of the Common
Areas or (III) any portion of the Center the use of which is not available to
Tenant; (g) Any reserves for future expenditures or liabilities which would be
incurred subsequent to the then current accounting year; (h) Any bad debt loss,
rent loss or reserves for bad debt or rent loss; (i) Legal fees, audit fees,
leasing commissions, advertising expenses and other costs incurred in connection
with (I) the original development or original leasing of the Center, (II) the
future re-leasing of the Center, (III) any advertising or promotion of the
Center or any part thereof, and (IV) disputes with other tenants or third
parties; (j) Costs of repairing or restoring any portion of the Center damaged
or destroyed by any casualty or peril whether insured, uninsured or uninsurable;
(k) Costs in connection with the cleanup or removal of hazardous materials; (l)
The cost of compliance with the Americans with Disabilities Act of 1990, as
amended, and all regulations promulgated pursuant thereto; (m) Net recoveries
from insurance policies taken out by Landlord to the extent that the proceeds
reimburse Landlord for expenses which have previously been included or which
would otherwise be included in Maintenance Costs; (n) Costs associated with
repairs or improvements the need for which arose prior to the date of this
Lease; (o) Costs of a capital nature, including all capital improvements,
alterations, repairs and/or replacements (for purposes of this Lease, "costs of
a capital nature" shall mean the cost of any item or service the useful life of
which exceeds 36 months); (p) Costs relating to the negligence of Landlord or
its contractors, agents or employees or the payment of any claims or damages
relating to the same; (r) Any insurance costs.
(c) Landlord shall maintain accurate and detailed records of all Maintenance Costs for the common areas in accordance with generally accepted accounting principles. For purposes of this Lease, "Tenant's Proportionate Share" shall be the product of the applicable cost or expense multiplied by a fraction, the numerator of which shall be the gross leasable area (expressed in square feet) of the Premises and the denominator of which shall be the gross leasable area (expressed in square feet) of all leasable space in the Center. Tenant's Proportionate Share of that portion of the Center owned by Landlord is estimated to be 8.69%, during the first Lease Year.
(d) The actual amount of Tenant's Proportionate Share of all Maintenance Costs shall be computed by Landlord within one hundred eighty (180) days after the end of each accounting year (which Landlord may change from time to time). At this time Landlord shall furnish to Tenant a statement showing in reasonable detail the actual Maintenance Costs incurred during such accounting year and Tenant's Proportionate Share thereof (prorated for any partial Lease year, with appropriate adjustments to reflect any change in the floor area of the premises or the gross leasable area of a building occurring during such accounting year). Any excess payments from Tenant shall be applied to the next installments of the Maintenance Costs hereunder, or refunded by Landlord. Any underpayments by Tenant shall be paid to Landlord within thirty (30) days after receipt of such reconciliation statement. Tenant's estimated monthly Maintenance Cost hereunder may be adjusted by written notice from Landlord. Notwithstanding anything contained in this Section 15 to the contrary, Landlord and Tenant agree that the actual amount of Tenant's Proportionate Share of Maintenance Costs, excluding costs for snow and ice removal, shall not increase by more than five percent (5%) in any lease year over the previous Lease Year, and that Tenant's Proportionate Share of Maintenance Costs for the first lease year, excluding costs for snow and ice removal and common area utilities, shall not exceed One and 25/100 Dollars ($1.25) per square foot.
(e) If Tenant, for any reason in the exercise of good business judgment, questions or disputes any statement of Maintenance Costs prepared by Landlord, then Tenant, at its own expense, may employ such accountants as Tenant may select to review Landlord's books and records solely with respect to Maintenance Costs during the prior two Lease years and to determine the amount of Maintenance Costs for the period or periods covered by such statements. If the report of the accountants employed by Tenant shall show any overcharge paid by Tenant, then Tenant shall receive a credit from Landlord for such difference. Any
underpayment shall be paid by Tenant. Tenant agrees that no contingency fee
auditors shall be employed by Tenant for the purpose of conducting any such
audit. In the event that Landlord questions or disputes the correctness of such
report, the accountants employed by Tenant and the accountants employed by
Landlord shall endeavor to reconcile the question(s) or dispute(s) within thirty
(30) days after the notice from Tenant questioning or disputing the report of
Landlord's accountants. In the event that it is finally determined by the
parties that Landlord has overstated Maintenance Costs for any Lease year by
three percent (3%) or more, Landlord shall pay the reasonable cost of the audit.
Furthermore, if Landlord's Maintenance Costs cannot be verified due to the
insufficiency or inadequacy of Landlord's records, then Landlord shall pay the
cost of the audit.
SECTION 16. EMINENT DOMAIN
(a) In the event the entire premises or any part thereof shall be taken or condemned either permanently or temporarily for any public or quasi-public use or purpose by any competent authority in appropriation proceedings or by any right of eminent domain, the entire compensation or award therefore, including leasehold, reversion and fee, shall belong to the Landlord and Tenant hereby assigns to Landlord all of Tenant's right, title and interest in and to such award.
(b) In the event that only a portion of the Premises, not exceeding twenty percent (20%) of same, shall be so taken or condemned, and the portion of the Premises not taken can be repaired within ninety (90) days from the date of which possession is taken for the public use so as to be commercially fit for the operation of Tenant's business, the Landlord at its own expense shall so repair the portion of the Premises not taken and there shall be an equitable abatement of rent for the remainder of the term and/or extended terms. The entire award paid on account thereof shall be paid to the Landlord. If the portion of the Premises not taken cannot be repaired within ninety (90) days from the date of which possession is taken so as to be commercially fit for the operation of Tenant's business, then this Lease shall terminate and become null and void from the time possession of the portion taken is required for public use, and from that date on the parties hereto shall be released from all further obligations hereunder except as herein stated and Tenant shall have no claim for any compensation on account of its leasehold interest. No other taking, appropriation or condemnation shall cause this Lease to be terminated. Any such appropriation or condemnation proceedings shall not operate as or be deemed an eviction of Tenant or a breach of Landlord's covenant of quiet enjoyment and Tenant shall have no claim for any compensation on account of its leasehold interest.
(c) In the event that more than twenty percent (20%) of the Premises shall
at any time be taken by public or quasi-public use or condemned under eminent
domain, then at the option of the Landlord or Tenant upon the giving of thirty
(30) days written notice (after such taking or condemnation), this Lease shall
terminate and expire as of the date of such taking and any prepaid rental shall
be prorated as of the effective date of such termination.
SECTION 17. TENANT'S TAXES
Tenant further covenants and agrees to pay promptly when due all taxes assessed against Tenant's fixtures, furnishings, equipment and stock-in trade placed in or on the Premises during the term of this Lease.
SECTION 18. RISK OF GOODS
All personal property, goods, machinery, and merchandise in said Premises shall be at Tenant's risk if damaged by water, fire, explosion, wind or accident of any kind, and Landlord shall have no responsibility therefore or liability for any of the foregoing and Tenant hereby releases Landlord from such liability.
SECTION 19. USE AND OCCUPANCY
(a) Tenant agrees to initially open and operate a DSW for the retail sales of shoes and other footwear in the Premises, fully staffed and stocked and equivalent to other DSW stores operated by Tenant in the State of Ohio. The Premises during the term of this Lease shall be
occupied for the operating and conducting therein of a retail shoe store or any other lawful retail purpose. Any use other than a retail shoe store shall be consistent with the then existing character of the Center, and shall not violate those exclusives and prohibited uses set forth on Exhibit "E" attached hereto and made a part hereof, which are the exclusives and prohibited uses in effect for the Center as of the date hereof, for so long as and to the extent said exclusives and prohibited uses are still in full force and effect, as well as exclusives and prohibited uses hereafter granted for (i) tenants leasing more than 15,000 square feet of space elsewhere within the Center and (ii) Ulta(3) Cosmetics, for so long as and to the extent said exclusives are still in full force and effect.
(b) For so long as Tenant is continuously and regularly operating its business in the Premises, Landlord will not lease any space within the Center or permit any space within the Center (to the extent Landlord has control) to be used by any person, persons, partnership or entity who devotes five percent (5%) or more of its selling area to the sale of footwear (the "Exclusive Use"). The foregoing limitation shall not apply to typical shoe departments found in department stores, junior department stores, general merchandise and discount stores, and clothing retailers, such as Filene's Basement, Marshalls, TJ Maxx and similar type stores so long as such shoe departments are consistent with the typical shoe departments of each such retailer. Any portion of the Center which is sold by Landlord during the term shall contain a deed restriction incorporating the foregoing Exclusive Use.
Landlord acknowledges that in the event of a breach or an attempted or prospective breach of this Section 19(b), Tenant's remedies at law would be inadequate. Therefore, in any such event, if such breach is not cured within thirty (30) days after written notice from Tenant to Landlord, Tenant shall be entitled, at its option and without limitation of any other remedy permitted by law or equity or by this Lease, (i) to elect to pay in lieu of Base Rent and percentage rent due under this Lease two percent (2%) of Tenant's gross sales calculated according to Tenant's standard procedures in accordance with generally accepted accounting principles, (ii) to cancel this Lease on one hundred eighty (180) days written notice to Landlord, and/or (iii) to full and adequate relief by temporary or permanent injunction. Notwithstanding the foregoing, the remedy of lease cancellation shall not be applicable if the violation of this Section 19(b) is due to the breach of another tenant's lease and Landlord is, in Tenant's good faith judgment, diligently pursuing appropriate legal proceedings to halt the violation and such violation is so halted within sixty (60) days of Landlord's receipt of Tenant's notice.
(c) Tenant shall at all times conduct its operations on the Premises in a lawful manner and shall, at Tenant's expense, comply with all laws, rules, orders, ordinances, directions, regulations, and requirements of all governmental authorities, now in force or which may hereafter be in force, which shall impose any duty upon Landlord or Tenant with respect to the business of Tenant and the use, occupancy or alteration of the Premises. Tenant shall comply with all requirements of the Americans with Disabilities Act, and shall be solely responsible for all alterations within the Premises in connection therewith. Tenant covenants and agrees that the Premises shall not be abandoned or left vacant and that only minor portions of the Premises shall be used for office or storage space in connection with Tenant's business conducted in the Premises.
Without being in default of this Lease, Tenant shall have the right to
cease operating (go dark) at any time and for whatever reason after the first
(1st) lease year. Notwithstanding the foregoing, Tenant's right to vacate (go
dark), shall not release or excuse the Tenant from any obligations or
liabilities, including the payment of minimum rent and additional rent and other
charges, under this Lease without the express written consent of Landlord. In
the event Tenant fails to (i) open and operate within ninety (90) days after
delivery of the Premises or (ii) operate for one hundred twenty (120) or more
consecutive days, Landlord shall have the right, effective upon thirty (30) days
prior written notice to Tenant, to terminate the Lease as Landlord's sole
remedy, provided that if Tenant recommences operating fully stocked in
substantially all of the premises within such thirty (30) days, Landlord's
termination shall be null and void. In the event Tenant fails to open and
operate as provided above or shall cease operating as provided above, Landlord's
sole remedy on account thereof shall be limited to the right to elect to
recapture the premises and terminate the Lease, whereupon there shall be no
further liability of the parties hereunder. Such termination shall be effective
upon written notice to Tenant any time prior to Tenant reopening for business in
the Premises. Provided, however, in the event Landlord has not
so elected to recapture, Tenant shall have right to notify Landlord of Tenant's intention to reopen for business in the Premises within sixty (60) days, followed by Tenant's actually reopening for business fully stocked in substantially all of the Premises within such sixty (60) day period, which notice and actual reopening shall toll Landlord's right to recapture.
(d) Landlord and Tenant agree that no space in the Center, including the Premises, shall be used as a bowling alley, deep discount retailer, theater showing either film, television or the like or live entertainment, health club, games/amusement room, indoor playground, adult bookstore, flea market, bingo parlor, bar, tavern or cocktail lounge (except if incidental to a restaurant as permitted below), restaurant (except as permitted below), adult book or adult video store (defined for the purposes hereof as a store devoting ten percent (10%) or more of its floor space to offering books and/or video materials for sale or for rent which are directed to or restricted to adult customers due to sexually explicit subject matter or for any other reason making it inappropriate for general use), adult theater or "strip-tease" establishment, automotive maintenance or automotive repair facility, warehouse, car wash, pawn shop, check cashing service, establishment selling second hand goods, flea market, entertainment or recreational facility (as defined below), training or educational facility (as defined below); the renting, leasing, selling or displaying of any boat, motor vehicle or trailer; industrial or manufacturing purposes; a carnival, circus or amusement park; a gas station, facility for the sale of paraphernalia for use with illicit drugs, funeral home, blood bank or mortuary, gambling establishment, banquet hall, auditorium or other place of public assembly, second-hand or surplus store, gun range; the sale of fireworks; a veterinary hospital or animal raising facility; the storage of goods not intended to be sold from the Center; a video rental store (except as permitted below), karate center, central laundry or dry cleaning plant, supermarket or any facility which is illegal or dangerous, constitutes a nuisance, emits offensive odors, fumes, dust or vapors or loud noise or sounds or is inconsistent with community oriented shopping centers. For the purposes of this Section 19(d), the phrase "entertainment or recreational facility" shall include, without limitation, a movie or live theater or cinema, bowling alley, skating rink, gym, health spa or studio, dance hall or night club, billiard or pool hall, massage parlor, health club, game parlor or video arcade (which shall be defined as any store containing more than five (5) electronic games) or any other facility operated solely for entertainment purposes (such as a "laser tag" or "virtual reality" theme operation), except for a "Curves" or similar operation provided the same is not located immediately adjacent to the Premises. For the purposes of this Section 19(d), the phrase "training or educational facility" shall include, without limitation, a beauty school, nail salon, barber college, reading room, place of instruction or any other operation catering primarily to students or trainees as opposed to customers. Notwithstanding the foregoing, Landlord may lease any premises in the Center for use as (i) a restaurant located no closer than one hundred feet (100') from the exterior walls of the Premises, (ii) a specialty grocery store or specialty supermarket (such as a Wild Oats) located no closer than one hundred feet (100') from the exterior walls of the Premises, and (iii) a national video rental store which has a prohibition against the rental or sale of adult videos and which is located no closer than one hundred feet (100') from the exterior walls of the Premises. The total floor area of all restaurants and medical, dental, professional and business offices located within the Center shall not exceed fifteen percent (15%) of the gross leasable area of the Center. Any portion of the Center which is sold by Landlord during the term shall contain a deed restriction incorporating the foregoing restrictions.
Landlord acknowledges that in the event of a breach or an attempted or
prospective breach of this Section 19(d), Tenant's remedies at law would be
inadequate. Therefore, in any such event, if such breach is not cured within
sixty (60) days after written notice from Tenant to Landlord, Tenant shall be
entitled, at its option and without limitation of any other remedy permitted by
law or equity or by this Lease, (i) to elect to pay in lieu of Base Rent and
percentage rent due under this Lease two percent (2%) of Tenant's gross sales
calculated according to Tenant's standard procedures in accordance with
generally accepted accounting principles, and/or (ii) to full and adequate
relief by temporary or permanent injunction. Notwithstanding the foregoing, the
remedy of lease cancellation shall not be applicable if the violation of this
Section 19(d) is due to the breach of another tenant's lease and Landlord is, in
Tenant's good faith judgment, diligently pursuing appropriate legal proceedings
to halt the violation and such violation is so halted within one hundred twenty
(120) days of Landlord's receipt of Tenant's notice.
(e) Landlord and Tenant agree that (a) no auction, fire or going-out-of-business sales shall be conducted in the Center except a going-out-of-business sale conducted during the last thirty (30) days of an existing retail operation, (b) no exterior identification signs attached to any building in the Center shall be (i) flashing, moving or audible signs or (ii) signs employing exposed neon tubes, exposed ballast boxes or exposed transformers, and (c) no sidewalk sales shall be allowed in the Center.
SECTION 20. NUISANCES
Tenant shall not perform any acts or carry on any practice which may injure the Premises or be a nuisance or menace to other tenants in the Center.
SECTION 21. WASTE AND REFUSE REMOVAL
Tenant covenants that it will use, maintain and occupy said Premises in a careful, safe, lawful and proper manner and will not commit waste therein. Landlord or its agent shall have access at all reasonable times to the Premises for purposes of inspecting and examining the condition and maintenance of the Premises. Tenant agrees to remove all refuse from the Premises in a timely, clean and sanitary manner. Tenant shall provide a refuse collection container at the rear of the Premises to accommodate Tenant's refuse and Tenant shall routinely clean up around trash containers. Tenant shall contract with a licensed and insured refuse collection contractor to timely remove refuse therefrom and the location of the container shall be approved by Landlord.
SECTION 22. DAMAGE AND DESTRUCTION OF PREMISES
(a) Landlord shall at all times during the term of this Lease carry property insurance on the building containing the Premises, including the "Structural Portions" (defined in Section 24(a) below) and common utility lines up to the point they serve individual tenant's premises. Landlord shall be under no obligation to maintain insurance on any improvements installed by or for the benefit of Tenant's use of the premises or otherwise owned by Tenant. Landlord may elect to self-insure its obligations hereunder and/or use whatever deductibles as Landlord deems appropriate, in its sole discretion.
(b) If the Premises shall be damaged, destroyed, or rendered untenantable, in whole or in part, by or as the result or consequence of fire or other casualty during the term hereof, Landlord shall repair and restore the same to a good tenantable condition with reasonable dispatch. During such period of repair, the rent herein provided for in this Lease shall abate (i) entirely in case all of the Premises are untenantable; and (ii) proportionately if only a portion of the Premises is untenantable and Tenant is able to economically conduct its business from the undamaged portion of the Premises. The abatement shall be based upon a fraction, the numerator of which shall be the square footage of the damaged and unusable area of the Premises and the denominator shall be the total square footage of the Premises. Said abatement shall cease at such time as the Premises shall be restored to a tenantable condition.
(c) In the event the Premises, because of such damage or destruction, are not repaired and restored to a tenantable condition with reasonable dispatch within one hundred fifty (150) days from the date of receipt of insurance proceeds for such damage or destruction, Tenant or Landlord may, at their option, terminate this Lease within sixty (60) days following such one hundred fifty (150) day period but prior to the repair and restoration of same by giving prior written notice to the other party and thereupon Landlord and Tenant shall be released from all future liability and obligations under this Lease.
(d) If one-third (1/3) or more of the ground floor area of the Premises are damaged or destroyed during the last two (2) years of the original or any extended term of this Lease, Landlord shall have the right to terminate this Lease by written notice to Tenant within sixty (60) days following such damage or destruction, unless Tenant shall, within thirty (30) days following receipt of such notice, offer to extend the term of this Lease for an additional period of five (5) years from the date such damage or destruction is repaired and restored. If Tenant makes said offer to extend, Landlord and Tenant shall determine the terms and conditions of said extension within thirty (30) days thereafter or Tenant's offer shall not be deemed to prevent Landlord from
canceling this Lease. If such terms and conditions have been mutually agreed to by the parties, then Landlord shall accept Tenant's offer and shall repair and restore the Premises with reasonable dispatch thereafter.
(e) If Landlord is required or elects to repair and restore the Premises as herein provided, Tenant shall repair or replace its stock in trade, trade fixtures, furniture, furnishings and equipment and other improvements including floor coverings, and if Tenant has closed, Tenant shall promptly reopen for business. Anything contained in this Section 22 to the contrary notwithstanding, Landlord's restoration and repair obligations under Section 22 shall in no event include restoration or repair of Tenant's Work or improvements.
SECTION 23. LANDLORD REPAIRS
(a) Landlord shall keep in good order, condition, and repair, maintain and
replace, as necessary, the following: (i) structural portions of the Premises;
(ii) downspouts; (iii) gutters; (iv) the roof of the Building of which the
Premises forms a part; and (v) any utility and other systems or lines serving
the Premises but located outside of the Premises, except (as to all items) for
damage caused by any negligent act or omission of Tenant or its customers,
employees, agents, invitees, licensees or contractors, which shall be repaired
or replaced as necessary, at the sole cost and expense of Tenant. "Structural
Portions" shall mean only the following: (vi) foundations; (vii) exterior walls
except for interior faces); (viii) concrete slabs; (ix) the beams and columns
bearing the main load of the roof; and (x) the floors (but not floor coverings).
(b) Notwithstanding the provisions of Section 23(a) above, Landlord shall not be obligated to repair the following: (i) the exterior or interior of any doors, windows, plate glass, or showcases surrounding the Premises or the store front or (ii) damage to Tenant's improvements or personal property caused by any casualty, burglary, break-in, vandalism, acts of terrorism, war or act of G-d. Landlord shall, in any event, have ten (10) days after notice from Tenant stating the need for repairs to complete same, or commence and proceed with due diligence to complete same. Landlord shall be obligated to replace all HVAC components as and when necessary so long as Tenant has fulfilled its obligations under Section 24(a)(ii) below. Except as specifically set forth herein, Tenant expressly hereby waives the provisions of any law permitting repairs by a tenant at Landlord's expense.
(c) The provisions of this Section 23 shall not apply in the case of damage
or destruction by fire or other casualty or a taking under the power of eminent
domain in which events the obligations of Landlord shall be controlled by
Section 22 and Section 16 respectively.
(d) Landlord shall assign to Tenant all warranties covering all matters required by the terms hereof to be repaired and maintained by Landlord.
(e) If Landlord fails to make any of the repairs required to be made under this Lease within thirty (30) days after written notice from Tenant, Tenant, in addition to any other rights it may have hereunder or at law or in equity, shall have the right to make said repairs on behalf of Landlord and to bill Landlord for the reasonable cost thereof. Landlord shall have thirty (30) days to reimburse Tenant. In the event of an emergency or if any such repairs are immediately necessary for the proper use and enjoyment of the Premises, no prior thirty (30) days notice shall be required, Tenant, after diligent effort to first notify Landlord, forthwith make said repairs on behalf of Landlord and bill Landlord for the reasonable cost thereof. Tenant has not received reimbursement for any repairs permitted to be made under this Section 23(e) within such thirty (30) day period, Tenant shall have the right to deduct the cost of repairs from Rent otherwise due Landlord.
SECTION 24. TENANT'S REPAIRS
(a) Tenant shall keep and maintain, at Tenant's expense, all and every
other part of the Premises in good order, condition and repair, including, by
way of example but not limitation: (i) all leasehold improvements; (ii) all HVAC
unit(s), equipment and systems (including all components thereof) serving the
Premises; (iii) interior plumbing and sewage facilities; (iv) all interior
lighting; (v) electric signs; (vi) all interior walls; (vii) floor coverings;
(viii) ceilings; (ix) appliances and equipment; (x) all doors, exterior
entrances, windows and
window moldings; (xi) plate glass; (xii) signs and showcases surrounding and within the Premises; (xiii) the store front; (xiv) sprinkler systems including supervisory alarm service in accordance with National Fire Protection Association standards and current local and state fire protection standards to ensure property operation.
(b) Sprinkler systems, if any, located in Tenant's area shall be maintained in accordance with National Fire Protection Association standards to ensure proper operation. Sprinkler control valves (interior and exterior) located in Tenant's area shall be monitored by supervisory alarm service. In the event local or state codes do not require alarm systems, Tenant shall provide alarm service on all sprinkler systems to detect water flow and tampering with exterior and interior main control valves of the sprinkler system servicing Tenant's premises. Moreover, it shall be Tenant's responsibility to contact Chuck Seall, Commercial Property Manager at 1798 Frebis Avenue, Columbus, Ohio 43206-3764 at (614) 445-8461, in the event the sprinkler system in the Premises is ever shut off for any reason, and advise same of any damage occasioned or caused by the actions of Tenant, its agents, invitees, or employees, and/or as a result of Tenant's repair obligations hereunder. In the event fifty percent (50%) or more of the total number of sprinkler heads require replacement at any one time as part of ordinary maintenance, but excluding repairs or replacements that arise from (x) repairs, installations alterations, or improvements made by or for Tenant or anyone claiming under Tenant, or (y) the fault or misuse of Tenant or anyone claiming under Tenant, such cost shall be fifty percent (50%) borne by Landlord and fifty percent (50%) borne by Tenant. Tenant, at Tenant's sole cost and expense, shall replace all sprinkler heads due to repairs, installations, alterations, or improvements made by or for Tenant or anyone claiming under Tenant, the fault or misuse of Tenant or anyone claiming under Tenant, painting or environmental exposure from Tenant's operations. All other costs of maintaining the sprinkler system in the Premises shall be paid by Tenant.
(c) If Landlord deems any repair which Tenant is required to make hereunder to be necessary, Landlord may demand that Tenant make such repair immediately. If Tenant refuses or neglects to make such repair and to complete the same with reasonable dispatch, Landlord may make such repair and Tenant shall, on demand, immediately pay to Landlord the cost of said repair, together with annual interest at the Interest Rate. Landlord shall not be liable to Tenant for any loss or damage that may accrue to Tenant's stock or business by reason of such work or its results.
(d) Neither Tenant nor any of its contractors are permitted access to or permitted to perform alterations of any kind to the roof of the Premises.
(e) Tenant shall pay promptly when due the entire cost of work in the Premises undertaken by Tenant under this Lease (including, but not limited to, Tenant's Work and/or alterations permitted under Section 7 of this Lease) so that the Premises and the Center shall at all times be free of liens for labor and materials arising from such work; to procure all necessary permits before undertaking any such work; to do all of such work in a good and workmanlike manner, employing materials of good quality; to perform such work only with contractors previously reasonably approved of in writing by Landlord; to comply with all governmental requirements; and save Landlord and its agents, officers, employees, contractors and invitees harmless and indemnified from all liability, injury, loss, cost, damage and/or expense (including reasonable attorneys' fees and expenses) in respect of any injury to, or death of, any person, and/or damage to, or loss or destruction of, any property occasioned by or growing out of any such work.
SECTION 25. COVENANT OF TITLE AND PEACEFUL POSSESSION
Subject to the provisions of Section 11 hereof, Landlord shall, on or before the date on which Tenant is permitted to install its merchandise and fixtures in the Premises, have good and marketable title to the Premises in fee simple and the right to make this Lease for the term aforesaid. At such time, Landlord shall put Tenant into complete and exclusive possession of the Premises, and if Tenant shall pay the rental and perform all the covenants and provisions of this Lease to be performed by the Tenant, Tenant shall, during the term hereby demised, freely, peaceably, and quietly enjoy and occupy the full possession of the Premises and the common facilities of the Center, subject, however, to the terms and conditions of this Lease.
SECTION 26. TENANT'S AND LANDLORD'S INSURANCE; INDEMNITY
(a) Tenant's Commercial General Liability Insurance. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Tenant shall, at Tenant's sole cost and expense, provide and maintain or cause to be provided and maintained a commercial general liability policy (including coverage for product and contractual liability), naming Tenant as an insured (and naming Landlord as an additional insured, said additional insured's coverage under Tenant's commercial general liability policy to be primary), protecting Tenant, the business operated by Tenant, and any additional insureds (including Landlord) against claims for bodily injury (including death) and property damage occurring within the Premises. Such insurance shall afford protection to the limits of not less than One Million Dollars ($1,000,000.00) per occurrence and Five Hundred Thousand Dollars ($500,000.00) with respect to property damage for fire legal liability. Tenant may use commercially reasonable deductibles Tenant customarily carries in the conduct of its business; however, Tenant shall be responsible for all such deductibles or self-insured retention level. All liability policies shall be written on an occurrence form.
(b) Worker's Compensation. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Tenant shall, at Tenant's sole cost and expense, provide and maintain or cause to be provided and maintained workers' compensation insurance (meeting the requirements of the state workers' compensation laws) and employer liability insurance covering all of Tenant's employees at the Premises. Tenant shall also use good faith efforts to ensure all contractors, sub-contractors, vendors, leased employees, and temporary employees are properly insured for workers' compensation.
(c) Tenant's Umbrella. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Tenant shall, at Tenant's sole cost and expense, provide and maintain or cause to be provided and maintained an umbrella liability insurance policy with a Ten Million Dollar ($10,000,000.00) policy limits, which umbrella policy (or policies) shall list the commercial general liability, product liability, contractual liability and employer liability policies required hereunder, and any other liability policy or policies carried by, or for the benefit of, Tenant as underlying policies. Said umbrella liability insurance policy shall also name Landlord as an additional insured (said additional insured's coverage under Tenant's umbrella liability policy to be primary). All liability policies shall be written on an occurrence form.
(d) Tenant's Property Insurance. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Tenant shall, at Tenant's sole cost and expense, provide and maintain or cause to be provided and maintained a property insurance policy insuring Tenant's contents, fixtures, equipment and personal property located within the Premises and/or owned by Tenant for all the hazards and perils normally covered by the Causes of Loss-Special Form. Said property insurance policy shall include endorsements for coverage against: (i) earthquake and flood (including, but not limited to, mud slide, flood hazard or fault area(s), as designated on any map prepared or issued for such purpose by any governmental authority); and (ii) increased costs of construction and demolition due to law and ordinance. The foregoing property coverage shall be provided in amounts sufficient to provide one hundred percent (100%) of the full replacement cost of Tenant's contents, fixtures, equipment and personal property located within the Premises and/or owned by Tenant. If for any reason the Causes of Loss-Special Form is not customarily used in the insurance industry, then the property insurance policy then in effect shall at least provide coverage for the following perils: fire, lightning, windstorm and hail, explosion, smoke, aircraft and vehicles, riot and civil commotion, vandalism and malicious mischief, sprinkler leakage, sinkhole and collapse, volcanic action, earthquake or earth movement, and flood, and increased costs of construction and demolition due to law, ordinance and inflation. The property insurance policy required to be maintained by Tenant under this Section 26(d) shall: (y) not provide coverage for Tenant's Improvements (defined in Section 45 below), which Tenant's Improvements shall be insured by Landlord as required under Section 26(a);
(e) Landlord's Property Insurance. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Landlord shall, at Landlord's sole cost and expense, provide and maintain or cause to be provided and maintained a property insurance policy insuring all buildings (and building additions) and other improvements in the Center, Tenant's
store building, and Tenant Improvements (but excluding those items insured by
Tenant as required under Section 26(d)) for all the hazards and perils normally
covered by the Causes of Loss-Special Form. Said property insurance policy shall
include endorsements for coverage against: (i) earthquake and flood (including,
but not limited to, mud slide, flood hazard or fault area(s), as designated on
any map prepared or issued for such purpose by any governmental authority); and
(ii) increased costs of construction and demolition due to law and ordinance.
The foregoing property coverage shall be provided in amounts sufficient to
provide one hundred percent (100%) of the full replacement cost of all buildings
(and building additions) and other improvements in the Center, Tenant's store
building, and Tenant Improvements (but excluding those items insured by Tenant
as required under Section 26(d)). If for any reason the Causes of Loss-Special
Form is not customarily used in the insurance industry, then the property
insurance policy then in effect shall at least provide coverage for the
following perils: fire, lightning, windstorm and hail, explosion, smoke,
aircraft and vehicles, riot and civil commotion, vandalism and malicious
mischief, sprinkler leakage, sinkhole and collapse, volcanic action, earthquake
or earth movement, and flood, and increased costs of construction and demolition
due to law, ordinance and inflation. Neither Tenant nor any of its affiliates or
subtenants shall be liable to Landlord for any loss or damage (including loss of
income), regardless of cause, resulting from fire, flood, act of G-d or other
casualty.
(f) Landlord's Commercial General Liability Insurance. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Landlord shall, at Landlord's sole cost and expense, provide and maintain or cause to be provided and maintained a commercial general liability policy (including coverage for contractual liability), naming Landlord as an insured (and naming Tenant as an additional insured, said additional insured's coverage under Landlord's commercial general liability policy to be primary), protecting Landlord, the business operated by Landlord, and any additional insureds (including Tenant) against claims for bodily injury (including death) and property damage occurring upon, in or about the Center (other than the Premises and those areas insured by other tenants at the Center), including Common Areas. Such insurance shall afford protection to the limits of not less than One Million Dollars ($1,000,000.00) per occurrence and Five Hundred Thousand Dollars ($500,000.00) with respect to property damage for fire legal liability. All liability policies shall be written on an occurrence form. Landlord may use commercially reasonable deductibles Landlord customarily carries in the conduct of its business; however, Landlord shall be responsible for all such deductibles or self-insured retention levels.
(g) Landlord's Umbrella. Commencing as of the Commencement Date, and thereafter throughout the term of this Lease, Landlord shall, at Landlord's sole cost and expense, provide and maintain or cause to be provided and maintained an umbrella liability insurance policy with a Ten Million Dollar ($10,000,000.00) minimum annual aggregate, which umbrella policy (or policies) shall list Landlord's commercial general liability and contractual liability policies required hereunder, and any other liability policy or policies carried by, or for the benefit of, Landlord as underlying policies. Said umbrella liability policy shall also name Tenant as an additional insured (said additional insured's coverage under Landlord's umbrella liability policy to be primary). All liability policies shall be written on an occurrence form.
(h) All insurance provided for in this Section 26 shall be effected under standard form policies issued by insurers of recognized responsibility authorized to do business in the state in which the Premises are located; provided, however, that Landlord or Tenant may self-insure any of the amounts herein stated pursuant to a bona fide self-insurance retention program so long as the amounts so self-insured by such party do not exceed ten percent (10%) of such party's net worth as computed in accordance with generally accepted accounting principles consistently applied by such party.
(i) Prior to the Commencement Date, and thereafter during the term hereof
within fifteen (15) days after request therefor by either party, and within
fifteen (15) days after each policy renewal date, Tenant and Landlord shall
furnish the other party with certificates of insurance evidencing all insurance
coverage required herein. All such certificates shall: (i) evidence the
continuous existence during the term hereof of the insurance required hereunder;
(ii) include attachment of an additional insured endorsement; (iii) name any and
all non-standard exclusions or limitations; and (iv) contain a provision that
the insurance carrier shall not cancel or modify the insurance coverage without
giving at least ten (10) days prior written notice thereof
to both Landlord and Tenant at their last known address as provided for herein. Current certificates of insurance shall be delivered to both Landlord and Tenant in time sufficient to assure that both Landlord and Tenant shall always possess certificates of insurance evidencing current insurance coverage. All insurance carriers shall be licensed to do business in the state in which the Premises is located and shall have a Best's Key Rating Guide rating of A- VIII.
(j) Landlord and Tenant shall neither do nor suffer anything to be done whereby any of the insurance required by the provisions of this Section 26 shall or may be invalidated in whole or in part. Landlord shall not permit or suffer to be done in any part of the Center any activities which shall increase the rate of any insurance to be maintained by Tenant over that rate normal and customary for Tenant's type of business or which shall increase the rate on any insurance maintained by Landlord for which Tenant is required to reimburse Landlord pursuant to Section 28 hereof. Should such occur, Landlord shall pay, without reimbursement from Tenant, all costs and expenses of such insurance over the base rate. Tenant shall not permit or suffer to be done in any part of the Premises any activities which shall increase the rate of any insurance to be maintained by Landlord over the base rate. Should such occur, Tenant shall pay all costs and expenses of such insurance over the base rate.
(k) Notwithstanding anything to the contrary hereinabove contained, Tenant or Landlord, may, at its option, include any of the insurance coverage hereinabove set forth in general or blanket policies of insurance. All insurance required hereunder shall be consistent with sound insurance practices.
(l) Tenant and Landlord shall cooperate with each other in connection with the collection of any insurance monies that may be due in the event of loss and Landlord shall execute and deliver to Tenant such proofs of loss and other instruments which may be required for the purpose of obtaining the recovery of any such insurance monies.
(m) Tenant Indemnity. Subject to Section 34 of this Lease, Tenant shall indemnify Landlord, Landlord's agents, employees, officers or directors, against all damages, claims and liabilities arising from any alleged products liability or from any accident or injury whatsoever caused to any person, firm or corporation during the demised term in the Premises, unless such claim arises from a breach or default in the performance by Landlord of any covenant or agreement on its part to be performed under this Lease or, to the extent not required to be insured hereunder, the negligence of Landlord. The indemnification herein provided shall include all reasonable costs, counsel fees, expenses and liabilities incurred in connection with any such claim or any action or proceeding brought thereon.
(n) Landlord Indemnity. Subject to Section 34 of this Lease, Landlord shall indemnify Tenant, Tenant's officers, directors, employees and agents against all damages, claims and liabilities arising from any accident or injury whatsoever caused to any person, firm or corporation during the demised term in the Center (excluding therefrom the Premises), unless such claim arises from a breach or default in the performance by Tenant of any covenant or agreement on Tenant's part to perform under this Lease or, to the extent not required to be insured hereunder, the negligence of Tenant. The indemnification herein provided shall include all reasonable costs, counsel fees, expenses and liabilities incurred in connection with any such claim or any action or proceeding brought thereon.
SECTION 27. REAL ESTATE TAXES
(a) Tenant shall pay Tenant's Proportionate Share (as defined in Section
15(c) above) of any "Real Estate Taxes" (defined in Section 27(b) below) imposed
upon the Center that become due and payable during each lease year included
within the period commencing with the Commencement Date and ending with the
expiration of the term of this Lease. Tenant shall initially pay to landlord as
additional rental, simultaneously with the payment of Base Rent called for under
Section 4(a), the estimated monthly amount of Tenant's Proportionate Share of
Real Estate Taxes as set forth in Section 4(c) of Two and 50/100 Dollars ($2.50)
per square foot, payable in equal monthly installments of Four Thousand One
Hundred Sixty-Six and 67/100 Dollars ($4,166.67) as the estimated amount of
Tenant's Proportionate Share of Real Estate Taxes. Within one hundred twenty
(120) days after the end of each accounting year (which Landlord may change from
time to time), Landlord shall provide Tenant with an annual
reconciliation of Real Estate Taxes and a statement of the actual amount of
Tenant's Proportionate Share thereof. Any excess payments from Tenant shall be
applied to the next installments of Real Estate Taxes hereunder, or refunded by
Landlord. Any underpayments by Tenant shall be paid to Landlord within thirty
(30) days after receipt of such reconciliation statement. Tenant's estimated
monthly installment of Real Estate Taxes payable hereunder may be adjusted by
written notice from Landlord.
(b) For the purpose of this Lease, the term "Real Estate Taxes" shall include any special and general assessments, water and sewer rents and other governmental impositions imposed upon or against the Center of every kind and nature whatsoever, extraordinary as well as ordinary, foreseen and unforeseen and each and every installment thereof, which shall or may during the lease term be levied, assessed or imposed upon or against such Center and of all expenses, including reasonable attorneys' fees, administrative hearing and court costs incurred in contesting or negotiating the amount, assessment or rate of any such real estate taxes, minus any refund received by Landlord.
(c) Notwithstanding any provision of this Lease to the contrary, Tenant shall not be obligated to pay for any assessment for special improvements heretofore installed or in the process of installation in connection with the initial development of the Center, and Landlord hereby agrees to pay for the same.
(d) The real estate taxes for any lease year shall be the real estate taxes
that become due and payable during such lease year. If any lease year shall be
greater than or less than twelve (12) months, or if the real estate tax year
shall be changed, an appropriate adjustment shall be made. If there shall be
more than one taxing authority, the real estate taxes for any period shall be
the sum of the real estate taxes for said period attributable to each taxing
authority. If, upon the assessment day for real estate taxes for any tax year
fully or partly included within the term of this Lease, a portion of such
assessment shall be attributable to buildings in the process of construction, a
fair and reasonable adjustment shall be made to carry out the intent of this
Section 27.
(e) Upon request, Landlord shall submit to Tenant true copies of the real estate tax bill for each tax year or portion of a tax year included within the term of this Lease and shall bill Tenant for the amount to be paid by Tenant hereunder. Said bill shall be accompanied by a computation of the amount payable by Tenant and such amount shall be paid by Tenant within thirty (30) days after receipt of said bill.
(f) Should the State of Ohio or any political subdivision thereof or any governmental authority having jurisdiction thereof, impose a tax and/or assessment (other than an income or franchise tax) upon or against the rentals payable hereunder, in lieu of or in addition to assessments levied or assessed against the Premises, or Center, then such tax and/or assessment shall be deemed to constitute a tax on real estate for the purpose of this Section 27.
SECTION 28. TENANT'S INSURANCE CONTRIBUTION
Tenant shall pay as additional rent, Tenant's Proportionate Share (as defined in Section 15(c) above) of the premiums for the insurance maintained by Landlord on all buildings and improvements, as well as liability insurance, for the Center, including the Common Areas, as set forth above in Section 28, for each Lease Year during the term of this Lease. The premiums for the first and last Lease Years shall be prorated. Tenant shall pay Tenant's Proportionate Share of such premiums annually upon demand for such payment by Landlord. Tenant's Proportionate Share thereof shall be paid by Tenant within thirty (30) days after Landlord's demand therefore. Tenant shall initially pay to Landlord as additional rental, simultaneously with the payment of Base Rent called for under Section 4(a), the estimated monthly amount of Tenant's Proportionate Share of such insurance premiums as set forth in Section 4(c), of 15/100 Dollars ($0.15) per square foot of space in the Premises, payable in equal monthly installments of Two Hundred Fifty Dollars ($250.00) as the estimated amount of Tenant's Proportionate Share of such insurance premiums. Within one hundred twenty (120) days after the end of each accounting year (which Landlord may change from time to time), Landlord shall provide Tenant with a reconciliation of the premiums for the insurance maintained by Landlord hereunder and a statement of the actual amount of Tenant's Proportionate Share thereof. Any excess payments
from Tenant shall be applied to the next installments of insurance premiums payable by Tenant hereunder, or refunded by Landlord. Any underpayments by Tenant shall be paid to Landlord within thirty (30) days after receipt of such reconciliation statement. Tenant's monthly installment of insurance premiums payable hereunder may be adjusted by written notice from Landlord.
SECTION 29. FIXTURES
Provided that Tenant shall repair any damage caused by removal of its property and provided that the Tenant is not in default under this Lease, Tenant shall have the right to remove from the Premises all of its signs, shelving, electrical, and other fixtures and equipment, window reflectors and backgrounds and any and all other trade fixtures which it has installed in and upon the Premises.
SECTION 30. SURRENDER
The Tenant covenants and agrees to deliver up and surrender to the Landlord the physical possession of the Premises upon the expiration of this Lease or its termination as herein provided in as good condition and repair as the same shall be at the commencement of the initial term, loss by fire and/or ordinary wear and tear excepted, and to deliver all of the keys to Landlord or Landlord's agents.
SECTION 31. HOLDING OVER
There shall be no privilege of renewal hereunder (except as specifically set forth in this Lease) and any holding over after the expiration by the Tenant shall be from day to day on the same terms and conditions (with the exception of rental which shall be prorated on a daily basis at one hundred twenty-five percent (125%) the daily rental rate of the most recent expired term) at Landlord's option; and no acceptance of rent by or act or statement whatsoever on the part of the Landlord or his duly authorized agent in the absence of a written contract signed by Landlord shall be construed as an extension of the term or as a consent for any further occupancy.
SECTION 32. NOTICE
Any consent, waiver, notice, demand, request or response thereto or other instrument required or permitted to be given under this Lease shall be given by overnight courier or by certified United States mail, return receipt requested, postage prepaid: (a) if to Landlord, at the address set forth in Section 1; and (b) if to Tenant, at the address set forth in Section 1 with duplicate copies to (i) General Counsel, 4150 E. Fifth Avenue, Columbus, Ohio 43219 and (ii) Randall S. Arndt, Esq., Schottenstein Zox & Dunn, 250 West Street, Columbus, Ohio 43215. Either party may change its address for notices by notice in the manner set forth above, given at least thirty (30) days in advance. All such consents, waivers, notices, demands, requests or other instruments shall be deemed given upon receipt thereof or upon the refusal of the addressee to receive the same.
SECTION 33. DEFAULT
(a) Elements of Default: The occurrence of any one or more of the following events shall constitute a default of this Lease by Tenant:
1. Tenant fails to pay any monthly installment of rent within ten (10) days after the same shall be due and payable, except for the first two (2) times in any consecutive twelve (12) month period, in which event Tenant shall have five (5) days after receipt of written notice of such failure to pay before such failure shall constitute a default;
2. Tenant fails to perform or observe any term, condition, covenant or obligation required to be performed or observed by it under this Lease for a period of twenty (20) days after notice thereof from Landlord; provided, however, that if the term, condition, covenant or obligation to be performed by Tenant is of such nature that the same cannot reasonably be cured within twenty (20) days and if Tenant commences such performance or cure within said twenty (20) day period and thereafter diligently undertakes to complete the same, then such failure shall not be a default hereunder if it is cured within a
reasonable time following Landlord's notice, but in no event later than forty-five (45) days after Landlord's notice.
3. A trustee or receiver is appointed to take possession of substantially all of Tenant's assets in, on or about the Premises or of Tenant's interest in this Lease (and Tenant or any guarantor of Tenant's obligations under this Lease does not regain possession within sixty (60) days after such appointment); Tenant makes an assignment for the benefit of creditors; or substantially all of Tenant's assets in, on or about the Premises or Tenant's interest in this Lease are attached or levied upon under execution (and Tenant does not discharge the same within sixty (60) days thereafter).
4. A petition in bankruptcy, insolvency, or for reorganization or arrangement is filed by or against Tenant or any guarantor of Tenant's obligations under this Lease pursuant to any Federal or state statute, and, with respect to any such petition filed against it, Tenant or such guarantor fails to secure a stay or discharge thereof within sixty (60) days after the filing of the same.
(b) Landlord's Remedies: Upon the occurrence of any event of default, Landlord shall have the following rights and remedies, any one or more of which may be exercised without further notice to or demand upon Tenant:
1. Landlord may re-enter the Premises and cure any default of Tenant, in which event Tenant shall reimburse Landlord for any reasonable out-of-pocket cost and expenses which Landlord may incur to cure such default; and Landlord shall not be liable to Tenant for any loss or damage which Tenant may sustain by reason of Landlord's action.
2. Landlord may terminate this Lease or Tenant's right to possession under this Lease as of the date of such default, without terminating Tenant's obligation to pay rent due hereunder, in which event (A): neither Tenant nor any person claiming under or through Tenant shall thereafter be entitled to possession of the Premises, and Tenant shall immediately thereafter surrender the Premises to Landlord; (B) Landlord may re-enter the Premises and dispose Tenant or any other occupants of the Premises by force, summary proceedings, ejectment or otherwise, and may remove their effects, without prejudice to any other remedy which Landlord may have for possession or arrearages in rent; and (C) notwithstanding a termination of this Lease, Landlord shall use good faith efforts to re-let all or any part of the Premises for at least the balance of the term of this Lease for commercially reasonable rent, whereupon Tenant shall be obligated to pay to Landlord as liquidated damages the difference between the rent provided for herein and that provided for in any lease covering a subsequent re-letting of the Premises, such deficiency to be computed and paid monthly at the times that Rent is payable hereunder, together with all of Landlord's reasonable costs and expenses for preparing the Premises for re-letting, including all repairs which are Tenant's obligations hereunder, reasonable broker's and attorney's fees, and all loss or damage which Landlord may sustain by reason of such termination, re-entry and re-letting, it being expressly understood and agreed that the liabilities and remedies specified herein shall survive the termination of this Lease. Notwithstanding a termination of this Lease by Landlord, Tenant shall remain liable for payment of all rentals and other charges and costs imposed on Tenant herein, in the amounts, at the times and upon the conditions as herein provided. Landlord shall credit against such liability of the Tenant all amounts received by Landlord from such re-letting after first reimbursing itself for all reasonable costs incurred in curing Tenant's defaults and re-entering, preparing and refinishing the Premises for re-letting, and re-letting the Premises.
3. Upon termination of this Lease pursuant to Section 33(b)2, Landlord may recover possession of the Premises under and by virtue of the provisions of the laws of the State of Ohio, or by such other proceedings, including reentry and possession, as may be applicable.
4. If the Tenant shall not remove all of Tenant's property from said Premises as provided in this Lease, Landlord, at its option, may remove any or all of said property in any manner that Landlord shall choose and store same without liability for loss thereof,
and Tenant will pay the Landlord, on demand, any and all reasonable expenses incurred in such removal and storage of said property for any length of time during which the same shall be in possession of Landlord or in storage, or Landlord may, upon thirty (30) days prior notice to Tenant, sell any or all of said property in such manner and for such price as the Landlord may reasonably deem best and apply the proceeds of such sale upon any amounts due under this Lease from the Tenant to the Landlord, including the reasonable expenses of removal and sale.
5. Any damage or loss of rent sustained by Landlord may be recovered by Landlord, at Landlord's option, at the time of the reletting, or in separate actions, from time to time, as said damage shall have been made more easily ascertainable by successive relettings, or at Landlord's option in a single proceeding deferred until the expiration of the term of this Lease (in which event Tenant hereby agrees that the cause of action shall not be deemed to have accrued until the date of expiration of said term) or in a single proceeding prior to either the time of reletting or the expiration of the term of this Lease.
6. In the event of a breach by Tenant of any of the covenants or provisions hereof, Landlord shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if reentry, summary proceedings, and other remedies were not provided for herein. Mention in this Lease of any particular remedy shall not preclude Landlord from any other remedy, in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Premises by reason of the violation by Tenant of any of the covenants and conditions of this Lease or other use.
7. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws, in the event of eviction or dispossession of Tenant by Landlord under any provision of this Lease. No receipt of monies by Landlord from or for the account of Tenant or from anyone in possession or occupancy of the Premises after the termination of this Lease or after the giving of any notice shall reinstate, continue or extend the term of this Lease or affect any notice given to the Tenant prior to the receipt of such money, it being agreed that after the service of notice or the commencement of a suit, or after final judgment for possession of said Premises, the Landlord may receive and collect any rent or other amounts due Landlord and such payment shall not waive or affect said notice, said suit or said judgment.
(c) Additional Remedies and Waivers: The rights and remedies of Landlord set forth herein shall be in addition to any other right and remedy now or hereinafter provided by law and/or equity and all such rights and remedies shall be cumulative and shall not be deemed inconsistent with each other, and any two or more or all of said rights and remedies may be exercised at the same time or at different times and from time to time without waiver thereof of any right or remedy provided or reserved to Landlord. No action or inaction by Landlord shall constitute a waiver of a default and no waiver of default shall be effective unless it is in writing, signed by the Landlord.
(d) Default by Landlord. Any failure by Landlord to observe or perform any provision, covenant or condition of this Lease to be observed or performed by Landlord, if such failure continues for thirty (30) days after written notice thereof from Tenant to Landlord, shall constitute a default by Landlord under this Lease, provided, however, that if the nature of such default is such that the same cannot reasonably be cured within a thirty (30) day period, Landlord shall not be deemed to be in default if it shall commence such cure within such thirty (30) day period and thereafter rectify and cure such default with due diligence.
(e) Interest on Past Due Obligations: All monetary amounts required to be paid by Tenant or Landlord hereunder which are not paid on or before the due date thereof shall, from and after such due date, bear interest at the Interest Rate, and shall be due and payable by such party without notice or demand.
(f) Tenant's Remedies. In the event of default by the Landlord with respect to the Premises, Tenant shall have the option to cure said default. Landlord shall reimburse Tenant for
the reasonable costs incurred by Tenant in curing such default within thirty
(30) days after invoice thereof by Tenant, together with reasonable evidence
supporting such invoiced amount. Tenant shall also have any and all rights
available under the laws of the state in which the Premises are situated;
provided, however, that any right of offset available to Tenant shall be subject
to the provisions of Section 35 below.
SECTION 34. WAIVER OF SUBROGATION
Landlord and Tenant, and all parties claiming under each of them, mutually release and discharge each other from all claims and liabilities arising from or caused by any casualty or hazard covered or required hereunder to be covered in whole or in part by insurance coverage required to be maintained by the terms of this Lease on the Premises or in connection with the Center or activities conducted with the Premises, and waive any right of subrogation which might otherwise exist in or accrue to any person on account thereof. All policies of insurance required to be maintained by the parties hereunder shall contain waiver of subrogation provisions so long as the same are available.
SECTION 35. LIABILITY OF LANDLORD; EXCULPATION
(a) Except with respect to any damages resulting from the gross negligence of Landlord, its agents, or employees, Landlord shall not be liable to Tenant, its agents, employees, or customers for any damages, losses, compensation, accidents, or claims whatsoever. The foregoing notwithstanding, it is expressly understood and agreed that nothing in this Lease contained shall be construed as creating any liability whatsoever against Landlord personally, and in particular without limiting the generality of the foregoing, there shall be no personal liability to pay any indebtedness accruing hereunder or to perform any covenant, either express or implied, herein contained, or to keep, preserve or sequester any property of Landlord and that all personal liability of Landlord to the extent permitted by law, of every sort, if any, is hereby expressly waived by Tenant, and by every person now or hereafter claiming any right or security hereunder; and that so far as the parties hereto are concerned, the owner of any indebtedness or liability accruing hereunder shall look solely to the Premises and the Center for the payment thereof.
(b) If the Tenant obtains a money judgment against Landlord, any of its officers, directors, shareholders, partners, members or their successors or assigns under any provisions of or with respect to this Lease or on account of any matter, condition or circumstance arising out of the relationship of the parties under this Lease, Tenant's occupancy of the building or Landlord's ownership of the Center, Tenant shall be entitled to have execution upon any such final, unappealable judgment only upon Landlord's fee simple or leasehold estate in the Center (whichever is applicable) and not out of any other assets of Landlord, or any of its officers, directors, shareholders, members or partners, or their successor or assigns; and Landlord shall be entitled to have any such judgment so qualified as to constitute a lien only on said fee simple or leasehold estate.
Notwithstanding the above, Tenant shall have the right to offset any final, unappealable judgment against twenty five percent (25%) of all minimum rent and all percentage rental (but no other additional rent components) if not paid to Tenant by Landlord within thirty (30) days thereafter.
(c) It is expressly agreed that nothing in this Lease shall be construed as creating any personal liability of any kind against the assets of any of the officers, directors, members, partners or shareholders of Tenant, or their successors and assigns.
SECTION 36. RIGHTS CUMULATIVE
Unless expressly provided to the contrary in this Lease, each and every one of the rights, remedies and benefits provided by this Lease shall be cumulative and shall not be exclusive of any other of such rights, remedies and benefits or of any other rights, remedies and benefits allowed by law.
SECTION 37. MITIGATION OF DAMAGES
Notwithstanding any of the terms and provisions herein contained to the contrary, Landlord and Tenant shall each have the duty and obligation to mitigate, in every reasonable manner, any and all damages that may or shall be caused or suffered by virtue of defaults under or violation of any of the terms and provisions of this Lease agreement committed by the other.
SECTION 38. SIGNS
(a) Landlord shall, at its sole cost and expense, construct, erect and maintain at the location(s) shown on the Site Plan, pylon sign(s) upon which Tenant's advertising panel shall be installed, provided same are approved by the applicable local governmental authority. Tenant's advertising panel shall be in the position and shall otherwise be as shown on Exhibit "F" attached hereto and made a part hereof. Landlord hereby approves Tenant's advertising panel for the pylon sign(s) as shown on said Exhibit "F". Thereafter, throughout the term of this Lease, Tenant shall have continuous representation on (a) such pylon sign(s) and any replacement pylon sign(s) consistent with Exhibit "F" and (b) any new pylon signs erected at the Center, and Tenant shall have no worse representation on any such new pylon sign(s) than any other tenant of the Center leasing the same or less square feet of leasable space as Tenant.
(b) Tenant shall have the right to install its standard signs and awnings on the exterior of the Leased Premises provided that the same are in compliance with local code. Landlord agrees to provide an adequate building facia for Tenant's signs. Tenant shall also have the right to place signs or banners in the windows of the Premises provided the same have been professionally prepared.
(c) Tenant shall have the right to alter its exterior and pylon signs with Landlord's consent, which consent shall not be unreasonably withheld; provided, however, Tenant shall have no obligation to obtain Landlord's consent to any change in Tenant's signage if such signage is consistent with Tenant's then prototypical signage.
SECTION 39. ENTIRE AGREEMENT
This Lease shall constitute the entire agreement of the parties hereto; all prior agreements between the parties, whether written or oral, are merged herein and shall be of no force and effect. This Lease cannot be changed, modified, or discharged orally but only by an agreement in writing signed by the party against whom enforcement of the change, modification or discharge is sought.
SECTION 40. TENANT'S PROPERTY
All equipment, inventory, trade fixtures and other property owned by the Tenant and located in the Premises shall remain the personal property of the Tenant and shall be exempt from the claims of the Landlord or any mortgagee or lienholder of the Landlord without regard to the means by which they are installed or attached specifically not including, however, the Tenant Improvements (defined in Section 49(a) below) which throughout the term and upon the expiration of this Lease shall be and remain the property of Landlord. The Landlord expressly waives any statutory or common law landlord's lien and any and all rights granted under any present or future laws to levy or distrain for rent (whether in arrears or in advance) against the aforesaid property of the Tenant on the Premises and further agrees to execute any reasonable instruments evidencing such waiver, at any time or times hereafter upon the Tenant's request including the "Landlord's Waiver" described in Section 56(c) hereof. The Tenant shall have the right, at any time or from time to time, to remove such trade fixtures or equipment. If such removal damages any part of the Premises, the Tenant shall repair such damages. Tenant is expressly authorized to finance, pledge, and encumber its own trade fixtures, equipment, and inventory for purposes of financing such trade fixtures, equipment and inventory.
SECTION 41. BINDING UPON SUCCESSORS
The covenants, conditions, and agreements made and entered into by the parties hereto shall be binding upon and inure to the benefit of their respective heirs, representatives, successor and assigns.
SECTION 42. HAZARDOUS SUBSTANCES
(a) During the term of this Lease, Tenant shall not suffer, allow, permit or cause the generation, accumulation, storage, possession, release or threat of release of any hazardous substance or toxic material, as those terms are used in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, and any regulations promulgated thereunder, or any other present or future federal, state or local laws, ordinances, rules, and regulations. Tenant shall indemnify and hold Landlord harmless from any and all liabilities, penalties, demands, actions, costs and expenses (including without limitation reasonable attorney fees), remediation and response costs incurred or suffered by Landlord directly or indirectly arising due to the breach of Tenant's obligations set forth in this Section. Such indemnification shall survive expiration or earlier termination of this Lease. At the expiration or sooner termination hereof, Tenant shall return the Premises to Landlord in substantially the same condition as existed on the date of commencement hereof free of any hazardous substances in, on or from the Premises.
(b) Landlord hereby represents and warrants that, except as set forth in those certain Phase I Environmental Site Assessments dated March 22, 2004 and September 14, 2004, respectively, prepared by R.E. Warner & Associates Inc.: (i) it has not used, generated, discharged, released or stored any hazardous substances on, in or under the Center and has received no notice and has no knowledge of the presence in, on or under the Center of any such hazardous substances; (ii) to Landlord's knowledge there have never been any underground storage tanks at the Center, whether owned by the Landlord or its predecessors in interest; (iii) to Landlord's knowledge there have never been accumulated tires, spent batteries, mining spoil, debris or other solid waste (except for rubbish and containers for normal scheduled disposal in compliance with all applicable laws) in, on or under the Center; (iv) to Landlord's knowledge it has not spilled, discharged or leaked petroleum products other than de minimis quantities in connection with the operation of motor vehicles on the Center; (v) to Landlord's knowledge there has been no graining, filling or modification of wetlands (as defined by federal, state or local law, regulation or ordinance) at the Center; and (vi) to Landlord's knowledge there is no asbestos or asbestos-containing material in the Premises. The representations and warranties set forth in this subparagraph shall apply to any contiguous or adjacent property owed by the Landlord. Landlord hereby indemnifies Tenant for any and all loss, cost, damage or expense to Tenant resulting from any misrepresentation or breach of the foregoing representations and warranties.
(c) If any such hazardous substances are discovered at the Center (unless introduced by the Tenant, its agents or employees) or if any asbestos or asbestos containing material is discovered in the Premises (unless introduced by the Tenant, its agents or employees), and removal, encapsulation or other remediation is required by applicable laws, the Landlord immediately and with all due diligence and at no expense to the Tenant shall take all measures necessary to comply with all applicable laws and to remove such hazardous substances or asbestos from the Center and/or encapsulate or remediate such hazardous substances or asbestos, which removal and/or encapsulation or remediation shall be in compliance with all environmental laws and regulations, and the Landlord shall repair and restore the Center at its expense. From the date such encapsulation, remediation and restoration is complete, the rent due hereunder shall be reduced by the same percentage as the percentage of the Premises which, in the Tenant's reasonable judgment, cannot be safely, economically or practically used for the operation of the Tenant's business. Anything herein to the contrary notwithstanding, if in the Tenant's reasonable judgment, such removal, encapsulation, remediation and restoration cannot be completed within one hundred eighty (180) days or the same is not actually completed by Landlord within such one hundred eighty (180) day period following the date such hazardous substances or asbestos are discovered and such condition materially adversely affects Tenant's ability to conduct normal business operations in the premises, then the Tenant may terminate this Lease by written notice to the Landlord within thirty (30) days after such 180 day period, which notice shall be effective on Landlord's receipt thereof. Landlord shall comply with OSHA 29
CFR 1910.1001 (j) to notify tenants, including Tenant, of asbestos related activities in the Premises and the Center including, but not limited to, selection of the certified/licensed asbestos abatement contractor, scope of the abatement work, and final clearance testing procedures and results.
SECTION 43. TRANSFER OF INTEREST
If Landlord should sell or otherwise transfer its interest in the Premises, upon an undertaking by the purchaser or transferee to be responsible for all the covenants and undertakings of Landlord accruing subsequent to the date of such sale or transfer, Tenant agrees that Landlord shall thereafter have no liability to Tenant under this Lease or any modifications or amendments thereof, or extensions thereof, except for such liabilities which might have accrued prior to the date of such sale or transfer of its interest by Landlord.
SECTION 44. ACCESS TO PREMISES
Landlord and its representatives shall have free access to the Premises at all reasonable times for the purpose of: (a) examining the same or to make any alterations or repairs to the Premises that Landlord may deem necessary for its safety or preservation; (b) exhibiting the Premises for sale or mortgage financing; (c) during the last three (3) months of the term of this Lease, for the purpose of exhibiting the Premises and putting up the usual notice "for rent" which notice shall not be removed, obliterated or hidden by Tenant, provided, however, that any such action by Landlord shall cause as little inconvenience as reasonably practicable and such action shall not be deemed an eviction or disturbance of Tenant nor shall Tenant be allowed any abatement of rent, or damages for an injury or inconvenience occasioned thereby.
SECTION 45. HEADINGS
The headings are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope or intent of this Lease.
SECTION 46. NON-WAIVER
No payment by Tenant or receipt by Landlord or its agents of a lesser amount than the rent in this Lease stipulated shall be deemed to be other than on account of the stipulated rent nor shall an endorsement or statement on any check or any letter accompanying any check or payment of rent be deemed an accord and satisfaction and Landlord or its agents may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy in this Lease provided.
SECTION 47. SHORT FORM LEASE
This Lease shall not be recorded, but a short form lease, which describes the property herein demised, gives the term of this Lease and refers to this Lease, shall be executed by the parties hereto, upon demand of either party and such short form lease may be recorded by Landlord or Tenant at any time either deems it appropriate to do so. The cost and recording of such short form lease shall belong to the requesting party.
SECTION 48. ESTOPPEL CERTIFICATE
Each party agrees that at any time and from time to time on ten (10) days prior written request by the other, it will execute, acknowledge and deliver to the requesting party a statement in writing stating that this Lease is unmodified and in full force and effect (or, if there have been modifications, stating the modifications, and that the Lease as so modified is in full force and effect, and the dates to which the rent and other charges hereunder have been paid, and such other information as may reasonably re requested, it being intended that any such statements delivered pursuant to this Section may be relied upon by any current or prospective purchaser of or any prospective holder of a mortgage or a deed of trust upon or any interest in the fee or any leasehold or by the mortgagee, beneficiary or grantee of any security or interest, or any assignee of any thereof or under any mortgage, deed of trust or conveyance for security purposes now or hereafter done or made with respect to the fee of or any leasehold interest in the Premises
SECTION 49. TENANT'S REIMBURSEMENT
(a) Landlord shall pay Tenant Two Hundred Forty Thousand Dollars ($240,000.00) (the "Tenant Reimbursement"), as payment for all costs incurred on behalf of Tenant for the purchase, erection, and installation of Tenant Improvements on or within the Premises. "Tenant Improvements" shall consist of the work described in the attached Exhibit "G". The Tenant Reimbursement shall be paid by Landlord to Tenant within ten (10) days of the later of (i) Tenant opening for business in the Premises and (ii) Tenant providing to Landlord a lien waiver from Tenant's general contractor. In the event Landlord does not timely pay the Tenant Reimbursement to Tenant, (a) Landlord shall pay to Tenant interest on such unpaid amounts the Interest Rate and (b) Tenant shall have the right to deduct any and all such amounts owed Tenant against payments of Rent thereafter due Landlord until such time as Tenant has been credited the full amount of the Tenant Reimbursement plus applicable interest.
(b) Notwithstanding anything to the contrary contained in this Lease, the Tenant Improvements shall, at all times during the term of this Lease and upon the expiration or earlier termination of this Lease, be the property of Landlord. Tenant shall not acquire any interest, equitable or otherwise, in any Tenant Improvement.
SECTION 50. TENANT'S TERMINATION RIGHT
In the event (i) that Tenant's gross sales (as defined in Section 5 of this
Lease) shall be less than Six Million Six Hundred Thousand Dollars
($6,600,000.00) in either of the eighth (8th) or ninth (9th) Lease Years of the
initial term hereof, and (ii) Tenant was open and operating for business for the
Permitted Use during the Center's standard business days and hours during the
eighth (8th) and ninth (9th) Lease Years (unless Tenant was not open and
operating on account of casualty or condemnation), Tenant shall have the right,
at Tenant's sole election, provided that Tenant is not then in default of the
terms of this Lease beyond any applicable notice and cure periods, on or before
the date (the "Last Termination Notice Date") which is thirty (30) days after
the end of the ninth (9th) Lease Year, to send to Landlord a notice terminating
this Lease as of the last day of the tenth (10th) Lease Year (the "Tenant's
Termination Date"). In the event that Tenant shall so terminate this Lease in
accordance with the provisions of this Section 50, then the term of this Lease
shall terminate and expire on Tenant's Termination Date with the same force and
effect as though said date was the scheduled expiration date of the term under
this Lease. Notwithstanding the giving of such termination notice and Tenant's
exercise of its termination right under this Section 50, Tenant shall perform
and observe all of Tenant's obligations under this Lease through and including
the Tenant's Termination Date and Tenant shall pay to Landlord, on or before the
Tenant's Termination Date, the sum of One Hundred Thousand Dollars
($100,000.00). In the event Tenant exercises the termination right provided for
in this Section 50, Landlord shall have the right, upon ten (10) days prior
written notice, at Tenant's corporate headquarters, to examine Tenant's books
and records relating to gross receipts at the Premises, provided such right
shall expire sixty (60) days after Tenant notifies Landlord of Tenant's exercise
of Tenant's election to terminate the Lease pursuant to the provisions of this
Section 50.
SECTION 51. NO BROKER
Landlord and Tenant each represent to the other that they have not entered into any agreement or incurred any obligation in connection with this transaction which might result in the obligation to pay a brokerage commission to any broker. Each party shall indemnify and hold the other party harmless from and against any claim or demand by any broker or other person for bringing about this Lease who claims to have dealt with such indemnifying party, including all expenses incurred in defending any such claim or demand (including reasonable attorney's fees).
SECTION 52. UNAVOIDABLE DELAYS
In the event either party hereto (the "Delayed Party") shall be delayed or hindered in or prevented from the performance of any act required under this Lease by reason of strikes, lockouts, labor troubles, inability to procure materials, failure of power, the unforeseen application of restrictive governmental laws or regulations, riots, insurrection, war, acts of terrorism or other reason of a like nature not the fault of the Delayed Party in performing work or
doing acts required under the terms of this Lease, then performance of such act
shall be excused for the period of the delay, and the period for the performance
of any such act shall be extended for a period equivalent to the period of such
delay, provided that the Delayed Party notified the other party within fifteen
(15) days of the Delayed Party being informed of the occurrence of the event
causing such delay. The provisions of this Section 52 shall not operate to
excuse either party from the payment of any rental or other monetary sums due
under the terms of this Lease.
SECTION 53. TIMELY EXECUTION OF LEASE
Landlord and Tenant agree that this Lease, and the parties' obligations hereunder, shall automatically be null and void and this Lease shall terminate automatically without further action of the parties if both parties do not execute this Lease and both parties have not received an original thereof within sixty (60) days after the date of execution hereof by the first party to execute this Lease.
SECTION 54. ACCORD AND SATISFACTION
No payment by Tenant or receipt by Landlord of a lesser amount than the entire rent and all other additional rents and charges hereunder shall be deemed to be other than payment on account of the earliest stipulated rent and other additional rents and charges hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment for rent or other additional rent and charges be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent and other additional rents and charges or pursue any other right or remedy available to the Landlord.
SECTION 55. WAIVER OF JURY TRIAL
Landlord and Tenant do hereby knowingly, voluntarily and intentionally waive the right to a trial by jury of any and all issues either now or hereinafter provided by law in any action or proceeding between the parties hereto, or their successors, arising directly or indirectly out of or in any way connected with this Lease or any of its provisions, Tenant's use or occupancy of said premises and/or any claim for personal injury or property damage including, without limitation, any action to rescind or cancel this Lease, and any claim or defense asserting that this Lease was fraudulently induced or is otherwise void or voidable. It is intended that said waiver shall apply to any and all defenses, rights and/or counterclaims in any action or proceeding at law or in equity. This waiver is a material inducement for Landlord and Tenant to enter into this Lease.
SECTION 56. LEASEHOLD FINANCING
(a) Landlord acknowledges and agrees that Tenant may from time to time during the term, without the consent of Landlord, mortgage or otherwise finance and encumber, whether by leasehold deed of trust or mortgage, collateral assignment of this Lease, lease/sublease-back, and/or assignment/leaseback, any and/or all of its leasehold estate hereunder, and property and rights in and to the Leased Premises granted to it under this Lease, as security for the payment of an indebtedness (any and all of which are herein referred to as a "Leasehold Mortgage" and the holder thereof is herein referred to as "Leasehold Mortgagee"). Any such Leasehold Mortgage shall be a lien only upon Tenant's leasehold estate hereunder and Tenant's interests in this Lease and shall not encumber Landlord's fee simple title to the Center or the Leased Premises. Pursuant to any such Leasehold Mortgage, the Leasehold Mortgagee or another person or entity (a "Successor-Tenant") may acquire title to Tenant's interest in the leasehold estate in the Leased Premises in any lawful way, including but not limited to, through foreclosure, assignment in lieu of foreclosure, or otherwise. In such event, the Successor-Tenant shall succeed to the rights of Tenant under this Lease, including the right to possession of the Leased Premises, in which event Landlord shall recognize the Successor-Tenant as the tenant under this Lease, the same as if such Successor-Tenant were the original tenant hereunder.
(b) Tenant shall notify Landlord (and any Fee Mortgagee, as hereinafter defined in Section 56(d) below), in the manner hereinafter provided for the giving of notice, of the execution of such Leasehold Mortgage and the name and place for service of notice upon Leasehold Mortgagee. Upon such notification of Landlord that Tenant has entered into a
Leasehold Mortgage, Landlord hereby agrees for the benefit of such Leasehold Mortgagee, and upon written request by Tenant, to execute and deliver to Tenant and Leasehold Mortgagee a "Landlord's Agreement" whereby Landlord agrees to recognize the interest of Leasehold Mortgagee and any Successor-Tenant hereunder, on commercially reasonable terms and conditions acceptable to Leasehold Mortgagee.
(c) Landlord does hereby waive any statutory or other lien of the Landlord in Tenant's present and after-acquired assets, including among other things, Tenant's inventory and equipment. To evidence such waiver for the benefit of Tenant's existing lender, Landlord shall, simultaneously with the execution and delivery of this Lease, execute and deliver to Tenant the "Landlord's Waiver" attached hereto and made a part hereof as Exhibit "H".
(d) In the event that, at any time prior to the execution of this Lease and the recordation of a memorandum of lease in accordance with Section 47 hereof, Landlord has mortgaged or otherwise encumbered the fee simple title to the Premises, Landlord shall deliver to Tenant a commercially reasonable SNDA (as defined in Section 11) containing terms substantially similar to the terms of the document so entitled attached hereto and made a part hereof as Exhibit "I", duly executed by the holder of any such mortgage or encumbrance (the "Fee Mortgagee"). Landlord agrees that Tenant's obligations hereunder shall be contingent upon delivery by Landlord to Tenant of an SNDA executed by the Fee Mortgagee on or before the Commencement Date, as more fully set forth in Section 11.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written.
LANDLORD:
JLP-HARVARD PARK, LLC
an Ohio limited liability company
By: Jubilee Limited Partnership,
an Ohio limited partnership
Its: Sole Member
By: Schottenstein Professional Asset
Management Corporation, an Ohio
corporation
Its: General Partner
By: /s/ Jay L. Schottenstien
------------------------------------
Name: Jay L. Schottenstien
----------------------------------
Title: Chairman
---------------------------------
|
TENANT:
DSW INC.,
an Ohio corporation
By: /s/ Bill Jordan
------------------------------------
Name: Bill Jordan
Title: Vice President - General Counsel
|
EXHIBIT 21
DSW INC.
List of Subsidiaries
State of
Name Incorporation
-------------------------------------------------- -----------------
DSW Shoe Warehouse, Inc. Missouri
|
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement (File No. 333-126244) of our report dated April 12, 2006, relating to the consolidated financial statements and financial statement schedule of DSW Inc., appearing in the Annual Report on Form 10-K of DSW Inc. for the year ended January 28, 2006.
/s/ Deloitte & Touche LLP Columbus, Ohio April 12, 2006 |
EXHIBIT 24
POWER OF ATTORNEY
Each director and/or officer of DSW Inc. (the "Corporation") whose signature appears below hereby appoints Peter Z. Horvath, Douglas J. Probst, and William L. Jordan as the undersigned's attorney or any of them individually as the undersigned's attorney, to sign, in the undersigned's name and behalf and in any and all capacities stated below, and to cause to be filed with the Securities and Exchange Commission (the "Commission"), the Corporation's Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended January 28, 2006, and likewise to sign and file with the Commission any and all amendments to the Form 10-K, and the Corporation hereby appoints such persons as its attorneys-in-fact and each of them as its attorney-in-fact with like authority to sign and file the Form 10-K and any amendments thereto granting to each attorney-in-fact full power of substitution and revocation, and hereby ratifying all that any such attorney-in-fact or the undersigned's substitute may do by virtue hereof.
IN WITNESS WHEREOF, we have hereunto set our hands effective as of the 10th day of April, 2006.
Signature Title /s/ Jay L. Schottenstein Chairman and Chief Executive Officer ------------------------------- (Principal Executive Officer) Jay L. Schottenstein /s/ Douglas J. Probst Executive Vice President, Chief Financial ------------------------------- Officer, and Treasurer Douglas J. Probst (Principal Financial and Accounting Officer) /s/ Carolee Friedlander Director ------------------------------- Carolee Friedlander /s/ Philip B. Miller Director ------------------------------- Philip B. Miller /s/ James D. Robbins Director ------------------------------- James D. Robbins /s/ Harvey L. Sonnenberg Director ------------------------------- Harvey L. Sonnenberg /s/ Allan J. Tanenbaum Director ------------------------------- Allan J. Tanenbaum /s/ Heywood Wilansky Director ------------------------------- Heywood Wilansky |
EXHIBIT 31.1
CERTIFICATIONS
I, Jay L. Schottenstein, certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended January 28, 2006 of DSW Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. [Reserved]
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: April 12, 2006 By: /s/ Jay L. Schottenstein
----------------------------------
Jay L. Schottenstein, Chairman and
Chief Executive Officer
|
EXHIBIT 31.2
CERTIFICATIONS
I, Douglas J. Probst, certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended January 28, 2006 of DSW Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. [Reserved]
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Dated: April 12, 2006 By: /s/ Douglas J. Probst
--------------------------------------------
Douglas J. Probst, Executive Vice President,
Chief Financial Officer, and Treasurer
|
EXHIBIT 32.1
SECTION 1350 CERTIFICATION*
In connection with the Annual Report of DSW Inc. (the "Company") on Form 10-K for the fiscal year ended January 28, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jay L. Schottenstein, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Dated: April 12, 2006 By: /s/ Jay L. Schottenstein
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Jay L. Schottenstein, Chairman and
Chief Executive Officer
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* This Certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934 (the "Exchange Act") and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. This Certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
SECTION 1350 CERTIFICATION*
In connection with the Annual Report of DSW Inc. (the "Company") on
Form 10-K for the fiscal year ended January 28, 2006 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Douglas
J. Probst, Senior Vice President, Chief Financial Officer, and Treasurer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Dated: April 12, 2006 By: /s/ Douglas J. Probst
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Douglas J. Probst, Executive Vice President,
Chief Financial Officer, and Treasurer
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* This Certification is being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934 (the "Exchange Act") and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. This Certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.