DSW 2009 Annual Report Download - page 21

Common Shares (assumes the issuance of 1,731,460 Retail Ventures Common Shares issuable upon the exercise of
warrants held by SSC and its affiliates). SSC and its affiliates that own Retail Ventures Common Shares are privately
held entities controlled by Jay L. Schottenstein, Chairman of our Board of Directors, and members of his immediate
family. Given their respective ownership interests, Retail Ventures and, indirectly, SSC and its affiliates, control or
substantially influence the outcome of all matters submitted to our shareholders for approval, including, the election
of directors, mergers or other business combinations, and acquisitions or dispositions of assets. The interests of
Retail Ventures, SSC and their affiliates may differ from or be opposed to the interests of our other shareholders, and
its control may have the effect of delaying or preventing a change in control that may be favored by other
shareholders.
SSC and Retail Ventures or their affiliates may compete directly against us.
Corporate opportunities may arise in the area of potential competitive business activities that may be attractive
to Retail Ventures, SSC and/or its affiliates and us. Our amended and restated articles of incorporation provide that
Retail Ventures and SSC are under no obligation to communicate or offer any corporate opportunity to us. In
addition, Retail Ventures and SSC and/or its affiliates have the right to engage in similar activities as us, do business
with our suppliers and customers and, except as limited by the master separation agreement, employ or otherwise
engage any of our officers or employees. SSC and its affiliates engage in a variety of businesses, including, but not
limited to, business and inventory liquidations, apparel companies and real estate acquisitions. The provisions of the
separation agreement also outline how corporate opportunities are to be assigned in the event that our, Retail
Ventures’ or SSC’s directors and officers learn of corporate opportunities.
Some of our directors and officers also serve as directors and officers of Retail Ventures, and may have
conflicts of interest because they may own Retail Ventures stock or options to purchase Retail Ventures
stock, or they may receive cash- or equity-based awards based on the performance of Retail Ventures.
Some of our directors and officers also serve as directors or officers of Retail Ventures and may own Retail
Ventures stock or options to purchase Retail Ventures stock, or they may be entitled to participate in the Retail
Ventures incentive plans. Jay L. Schottenstein is our Chairman of the Board of Directors and Chairman of the Board
of Directors of Retail Ventures; Harvey L. Sonnenberg is a director of DSW and of Retail Ventures; and James A.
McGrady is a Vice President of DSW and the Chief Executive Officer, President, Chief Financial Officer and
Treasurer of Retail Ventures. The Retail Ventures incentive plans provide cash- and equity-based compensation to
employees based on Retail Ventures’ performance. These employment arrangements and ownership interests or
cash- or equity-based awards could create, or appear to create, potential conflicts of interest when directors or
officers who own Retail Ventures stock or stock options or who participate in these incentive plans are faced with
decisions that could have different implications for Retail Ventures than they do for us. These potential conflicts of
interest may not be resolved in our favor.
If our existing shareholders or holders of rights to purchase our Common Shares sell the shares they
own, or if Retail Ventures distributes our Common Shares to its shareholders, it could adversely affect the
price of our Class A Common Shares.
The market price of our Class A Common Shares could decline as a result of market sales by our existing
shareholders, including Retail Ventures, or a distribution of our Common Shares to Retail Ventures’ shareholders or
the perception that such sales or distributions will occur. These sales or distributions also might make it difficult for
us to sell equity securities in the future at a time and at a price that we deem appropriate. We cannot predict the size
of future sales of our Common Shares.
As of January 30, 2010, there were 16,378,876 Class A Common Shares of DSW outstanding. Additionally,
there were 267,425 restricted stock units and 129,705 director stock units outstanding as of January 30, 2010 that
were issued pursuant to the terms of DSW’s equity incentive plan. The remaining 27,382,667 Class B Common
Shares outstanding are restricted securities within the meaning of Rule 144 under the Securities Act but will be
eligible for resale subject to applicable volume, manner of sale, holding period and other limitations of Rule 144.
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