Exhibit 10.4
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT, dated as of July 5, 2005 (this "Agreement"), is
made and entered into by and between Retail Ventures, Inc., an Ohio corporation
(the "Company"), and DSW Inc., an Ohio corporation ("DSW"). Capitalized terms
used herein and not defined shall have the respective meanings ascribed to such
terms in the Master Separation Agreement between the Company and DSW, dated as
of July 5, 2005 (the " Separation Agreement").
RECITALS
WHEREAS, the Company is the beneficial owner of all the issued and
outstanding common shares of DSW;
WHEREAS, the Company and DSW currently contemplate that DSW will make an
initial public offering ("IPO") of an amount of its Class A common shares, no
par value per share, pursuant to a registration statement on Form S-1 pursuant
to the Securities Act of 1933, as amended (the "IPO Registration Statement");
WHEREAS, the Company and DSW currently contemplate that DSW will amend its
articles of incorporation prior to the IPO so that the 410.09 outstanding common
shares of DSW will be changed into 27,702,667 Class B common shares of DSW;
WHEREAS, the Company and DSW will derive mutual benefit from the IPO;
WHEREAS, in order to consummate the IPO, the Company will need to obtain
the consent of Cerberus Partners, L.P. ("Cerberus");
WHEREAS, in exchange for Cerberus' consent to the IPO, Cerberus requires
that certain warrants held by it, Schottenstein Stores Corporation ("SSC") and
Back Bay Capital Funding LLC ("Back Bay" and, together with Cerberus and SSC,
the "Lenders") be amended to provide the Lenders the right from time to time,
either to (i) acquire common shares of the Company or (ii) acquire from the
Company Class A common shares of DSW at the price of shares to the public in the
IPO (the "Amended Warrants");
WHEREAS, in exchange for Cerberus' consent to the IPO, Cerberus requires
that new warrants be issued by the Company to SSC and Cerberus under which SSC
and Cerberus have, from time to time, the right either to (i) acquire common
shares of the Company or (ii) acquire from the Company Class A common shares of
DSW at a strike price equal to the price of the shares offered and sold to the
public in the IPO (the "New Warrants");
WHEREAS, in order to enable the Company to fulfill its obligations under
the terms of the Amended Warrants and the New Warrants and for other purposes of
the Company unrelated to the exercise of the Amended Warrants and the New
Warrants, DSW shall be required to deliver Class A common shares to the Company
upon receipt
of an Exchange Request (as hereinafter defined) made by the Company on the terms
and conditions set forth herein; and
WHEREAS, the Company and DSW intend in this Agreement to set forth the
principal arrangements between them regarding the mechanism by which, after the
IPO, the Company can exchange with DSW all, or a portion of, the Class B common
shares of DSW held by the Company for Class A common shares of DSW;
NOW, THEREFORE, in consideration of the foregoing and the terms,
conditions, covenants and provisions of this Agreement, the Company and DSW
mutually covenant and agree as follows:
I. Issuance of Common Stock upon Exchange. In the event that the Company
makes a request to DSW (such request, an "Exchange Request"), to exchange all,
or a portion of its Class B common shares of DSW for Class A common shares of
DSW, DSW covenants and agrees to issue, at the time of such exchange, a number
of Class A common shares sufficient to satisfy the terms of the exchange as set
forth in this Agreement. Such request shall be in writing and state the number
of Class B common shares to be exchanged.
II. Exchange. The Company may exchange with DSW the Company's Class B
common shares of DSW, in whole or in part, at the option of the Company, at any
time, for an equal number of duly authorized, validly issued, fully paid and
nonassessable Class A common shares of DSW. The Company shall not be limited in
the number of Exchange Requests it is entitled to make.
III. Procedure for Exchange. In order to exercise the exchange right
provided in Section II of this Agreement, the Company shall surrender the
certificate or certificates representing the shares of Class B common shares to
be exchanged, duly endorsed in blank, to the Secretary of DSW, accompanied by
written notice addressed to DSW specifying the number (in whole shares) of such
Class B common shares evidenced by such certificate or certificates to be
exchanged and the name or names in which the Company wishes the certificate or
certificates for the Class A common shares to be issued. Each exercise of this
exchange right shall be deemed to have been effected immediately prior to the
close of business on the business day on which such notice and the certificates
representing the shares of Class B common shares to be exchanged shall have been
surrendered to the Secretary of DSW and, to the extent permitted by law, at such
time the person or persons in whose name or names any certificate or
certificates for the Class A common shares are to be issued shall be deemed to
have become the holder or holders of record thereof for all purposes. As
promptly as practicable after the surrender of such Class B common shares as
aforesaid, but in any event not later than the second business day after such
surrender, DSW shall deliver or cause to be delivered to the Company or to such
person as may be designated by the Company, a certificate or certificates for
the number of whole Class A common shares issuable upon the exchange of such
shares of Class B common shares in accordance with the provisions hereof and any
cash payment
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in lieu of any fractional shares of Class A common shares, as provided in
Section IV. DSW shall issue certificates for the balance of any remaining Class
B common shares in any case in which fewer than all of the Class B common shares
represented by a certificate are exchanged.
IV. Fractional Shares. No fractional Class A common shares or securities
representing fractional Class A common shares shall be issued upon exchange of
Class B common shares. Instead of any fractional Class A common shares which
would otherwise be deliverable upon the exchange of a share of Class B common
shares, DSW shall pay to the person or persons to whom any such share would
otherwise be delivered a cash adjustment in respect of such fractional interest
in an amount (computed to the nearest cent) equal to the value of such
fractional Class A common shares based upon the current market price.
V. Accredited Investor. At any time Class A common shares of DSW are
issued pursuant to an Exchange Request, the Company or such person as may be
designated by the Company to receive such Class A common shares shall be an
"accredited investor" as such term is defined in Regulation D promulgated under
the Securities Exchange Act of 1933, as amended (the "Act") and all of the terms
and conditions of Rule 502 promulgated under the Act shall be satisfied.
VI. Certificates to be Legended. The Company understands and agrees that
each certificate representing Class A common shares issued pursuant to this
Agreement will bear a legend on the face thereof (or on the reverse thereof with
a reference to such legend on the face thereof) in substantially the form set
forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE
ENCUMBERED, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY IN FORM AND SUBSTANCE TO DSW AND CONCURRED IN BY DSW'S
COUNSEL TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR SUCH TRANS-ACTION COMPLIES WITH RULES PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION UNDER SAID ACT.
VII. Authorization and Reservation of Class A common shares. DSW has taken
all action to authorize the issuance and reserve for issuance the number of
Class A common shares of DSW sufficient to cover the Class A common shares that
may be is-
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sued upon the exchange of the Class B common shares of DSW, with all such Class
A Common Shares issued upon conversion of such Class B common shares to be fully
paid and non-assessable Class A common shares of DSW.
VIII. Notices. Notices, offers, requests or other communications required
or permitted to be given by either party pursuant to the terms of this Agreement
shall be given in writing to the respective Parties to the following addresses:
if to Retail Ventures:
Retail Ventures, Inc.
0000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. XxXxxxx, Chief Financial Officer
Fax: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxx, General Counsel
0000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
if to DSW:
DSW Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Chief Operating Officer
Fax: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxx, General Counsel
0000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
or to such other address or facsimile number as the party to whom notice is
given may have previously furnished to the other in writing as provided herein.
Any notice involving non-performance, termination, or renewal shall be sent by
hand delivery, recognized overnight courier or, within the United States, may
also be sent via certified mail, return
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receipt requested. All other notices may also be sent by facsimile, confirmed by
first class mail. All notices shall be deemed to have been given when received,
if hand delivered; when transmitted, if transmitted by facsimile or similar
electronic transmission method; one working day after it is sent, if sent by
recognized overnight courier; and three days after it is postmarked, if mailed
first class mail or certified mail, return receipt requested, with postage
prepaid.
IX. Amendments. This Agreement may only be amended by a written agreement
executed by both the Company and DSW.
X. Further Assurances. Each of the parties hereto shall use its reasonable
best efforts to do all things necessary or advisable to make effective the
transactions contemplated hereby and shall cooperate and take such action as may
be reasonably requested by the other party in order to carry out fully the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
XI. Counterparts. This Agreement may be executed in one or more
counterparts (including by facsimile), each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
XII. Entire Agreement. This Agreement and any other writing signed by the
Company and DSW that specifically references or is specifically related to this
Agreement constitute the entire agreement between the Company and DSW with
respect to the subject matter hereof and supersede all prior agreements,
understandings and negotiations, both written and oral, between the Company and
DSW with respect to the subject matter hereof. This Agreement is not intended to
confer upon any person other than the Company and DSW as or remedies hereunder.
XIII. Governing Law. This Agreement shall be construed in accordance with
and governed by the substantive internal laws of the State of Ohio applicable to
contracts to be wholly performed in the State of Ohio.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first written above.
Retail Ventures, Inc.,
an Ohio corporation
By: /s/ Xxxxx X. XxXxxxx
--------------------------------
Name: Xxxxx X. XxXxxxx
Title: Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
DSW Inc.,
an Ohio corporation
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President, Chief
Financial Officer and Treasurer
