DSW 2009 Annual Report Download - page 23

Except to the extent Retail Ventures exercises its cash settlement option, the PIES are mandatorily exchange-
able, on the maturity date, into Class A Common Shares of DSW, no par value per share, which are issuable upon
exchange of DSW Class B Common Shares, no par value per share, beneficially owned by Retail Ventures. On the
maturity date, each holder of the PIES will receive a number of DSW Class A Common Shares per $50 principal
amount of PIES equal to the “exchange ratio” described in the offering prospectus, or if Retail Ventures elects, the
cash equivalent thereof or a combination of cash and DSW Class A Common Shares. The settlement of the PIES
will not change the number of DSW Common Shares outstanding.
The market price of our Class A Common Shares is likely to be influenced by the PIES issued by Retail
Ventures. For example, the market price of our Class A Common Shares could become more volatile and could be
depressed by (a) investors’ anticipation of the potential resale in the market of a substantial number of additional
DSW Class A Common Shares received upon exchange of the PIES, (b) possible sales of our Class A Common
Shares by investors who view the PIES as a more attractive means of equity participation in us than owning our
Class A Common Shares and (c) hedging or arbitrage trading activity that may develop involving the PIES and our
Class A Common Shares.
We may be prevented from issuing stock to raise capital, to effectuate acquisitions or to provide equity
incentives to members of our management and board of directors.
Retail Ventures is subject to contractual obligations with its warrantholders to retain enough DSW Common
Shares to be able to satisfy its obligations to deliver such shares to its warrantholders if the warrantholders elect to
exercise their warrants in full for DSW Class A Common Shares. Retail Ventures is also subject to contractual
obligations with the holders of the PIES to retain enough DSW Common Shares to be able to satisfy its obligations
to deliver shares to the holders of the PIES. These restrictions may prevent us from issuing additional equity
securities to raise capital, to effectuate acquisitions or to provide management or director equity incentives.
Our prior and continuing relationship with Retail Ventures exposes us to risks attributable to Retail
Ventures’ businesses.
Retail Ventures is obligated to indemnify us for losses that a party may seek to impose upon us or our affiliates
for liabilities relating to the Retail Ventures business that are incurred through a breach of the master separation
agreement or any ancillary agreement by Retail Ventures, if such losses are attributable to Retail Ventures in
connection with our initial public offering or are not expressly assumed by us under the master separation
agreement. Any claims made against us that are properly attributable to Retail Ventures in accordance with these
arrangements require us to exercise our rights under the master separation agreement to obtain payment from Retail
Ventures. We are exposed to the risk that, in these circumstances, Retail Ventures cannot, or will not, make the
required payment. If this were to occur, our business and financial performance could be adversely affected.
Possible future sales of Class A Common Shares by Retail Ventures, SSC and its affiliates, Cerberus and
Millennium could adversely affect prevailing market prices for the Class A Common Shares.
Retail Ventures may sell any and all of the Common Shares held by it subject to applicable securities laws and
the restrictions set forth below. In addition, SSC and its affiliates, Cerberus and Millennium have the right to acquire
from Retail Ventures Class A Common Shares of DSW. Sales or distribution by Retail Ventures, SSC and its
affiliates, Cerberus and Millennium of a substantial number of Class A Common Shares in the public market or to
their respective shareholders, or the perception that such SSC and its affiliates, Cerberus and Millennium sales or
distributions could occur, could adversely affect prevailing market prices for the Class A Common Shares.
Retail Ventures has not advised us that it currently intends to dispose of the Common Shares owned by it,
excluding the sale of 320,000 Class B Common Shares to DSW and except to the extent necessary to satisfy its
obligations, including obligations under the PIES and obligations under warrants it has granted to SSC and its
affiliates, Cerberus, and Millennium. In addition, Retail Ventures is subject to contractual obligations with its
warrantholders to retain enough DSW Common Shares to be able to satisfy its obligations to deliver such shares to
its warrantholders if the warrantholders elect to exercise their warrants in full for DSW Class A Common Shares.
Retail Ventures is also subject to contractual obligations with the holders of the PIES to retain enough DSW
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