DSW 2011 Annual Report Download - page 32

Table of Contents
Millennium’
s exercise of its outstanding warrant that was originally issued by RVI on July 5, 2005. The common shares were issued at an exercise
price of $4.50 per share, for an aggregate cash purchase price of $1.0 million. In connection with this exercise, the Company reclassified $3.6 million
from the warrant liability to paid in capital during the first quarter of fiscal 2011, for a total of $4.6 million increase to paid in capital. In connection
with this issuance, no underwriters were utilized, and no commissions were paid.
On November 16, 2010, RVI issued 1,214,572 common shares (which represent 528,338 DSW Common Shares factoring in the
exchange ratio of
0.435 subsequent to the Merger), without par value, to Cerberus Partners, L.P. (“Cerberus”) in connection with Cerberus’
exercise of its outstanding
warrant that was originally issued by RVI on July 5, 2005. The warrant was exercised on a cashless exercise basis as permitted by the warrant,
resulting in the issuance of 1,214,572 of the 1,731,460 shares (which represent 528,338 of 753,185 DSW Common Shares factoring in the
exchange
ratio of 0.435
subsequent to the Merger) for which the warrant could have been exercised (at an exercise price of $4.50 per share). In connection with
this issuance, no payment was made to RVI, no underwriters were utilized, and no commissions were paid.
RVI Credit Facility. On February 8, 2011, RVI and SEI, Inc. (“SEI”), a Schottenstein Affiliate, entered into a Loan Agreement (the “
Loan
Agreement”)
pursuant to which SEI made available to RVI a revolving credit facility, to fund its operations prior to the Merger, in the principal
amount not to exceed $30.0 million (the “RVI Credit Facility”). Upon execution of the Loan Agreement, RVI also paid an up-
front commitment fee of
8.75% of the maximum loan amount, $2.625 million , to SEI, which was approved by the RVI board of directors, prior to the Merger.
In connection
with the completion of the Merger, DSW repaid RVI’
s obligations during the second quarter of fiscal 2011 under the RVI Credit Facility with SEI, a
Schottenstein Affiliate, of $11.0 million in principal and $0.1 million in interest. In fiscal 2011, DSW fully amortized the up-
front commitment fee of
$2.625 million.
Value City Disposition.
Prior to the Merger, RVI completed the disposition of an 81% ownership interest in its Value City business on January 23,
2008. RVI, now Merger Sub, guaranteed or may, in certain circumstances, be responsible for certain liabilities of Value City including, but not limited
to: amounts owed under certain guarantees with various financing institutions for Value City inventory purchases made prior to the disposition date;
amounts owed for guaranteed severance for certain Value City employees; amounts owed under lease obligations for certain equipment leases;
amounts owed under certain employee benefit plans if the plans are not fully funded on a termination basis; amounts owed for certain workers
compensation claims for events prior to the disposition date; amounts owed under certain income tax liabilities and the guarantee of other amounts.
As of January 28, 2012 and January 29, 2011, the amount of guarantees of Value City commitments was $0.2 million and $0.4 million,
respectively. The reduction in the liability through January 28, 2012 is due to payments by the primary obligor to the guaranteed party or information
available indicating that it was no longer probable that the guaranteed liability would be incurred. On October 26, 2008, Value City filed for
bankruptcy protection and announced that it would close its remaining stores. RVI may become subject to risks associated with the bankruptcy filing
by Value City, if creditors whose obligations RVI has guaranteed are not paid.
Filene’s Basement Disposition. On April 21, 2009, RVI sold all of the outstanding capital stock of Filene’
s Basement and certain related entities to
FB II Acquisition Corp., a newly formed entity owned by Buxbaum Holdings, Inc. RVI, now Merger Sub, guaranteed or may, in certain
circumstances, be responsible for certain liabilities of Filene’
s Basement, including, but not limited to, amounts owed under lease obligations related to
leases not assumed by Syms. On May 4, 2009, Filene’
s Basement filed for bankruptcy protection. On June 18, 2009, following bankruptcy court
approval, Syms purchased certain assets of Filene’
s Basement. On November 2, 2011, Syms and Filene's Basement filed for bankruptcy and closed all
stores in December 2011. As of January 28, 2012, we have recorded a liability of $9.0 million for the guarantees of Filene’
s Basement commitments
for lease obligations. We also believe that not all of the guarantees may be enforceable and/or that the amount of liability under the guarantees may be
limited. Currently, the ultimate disposition of these leases is unknown. Among other things, the landlords could find a tenant and assert that DSW is
responsible for any shortfalls or rent while the space is unoccupied, DSW could acquire additional space at these locations, or DSW could successfully
assert that the guarantee is not enforceable resulting in limited or no liability to DSW. We will continue to monitor our potential liability regarding
these lease obligations. The landlord at one of the locations has brought a lawsuit against Merger Sub seeking to recoup payments under the guarantee.
Contractual Obligations
We have the following minimum commitments under contractual obligations, as defined by the SEC. A “purchase obligation”
is defined as an
agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or
minimum quantities to be purchased, fixed, minimum or variable price provisions; and the approximate timing of the transaction. Other long-
term
liabilities are defined as long-
term liabilities that are reflected on our balance sheet in accordance with generally accepted accounting principles, or
GAAP. Based on this definition, the table below includes only those contracts which include fixed or minimum obligations. It does not include normal
purchases, which are made in the ordinary
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