DSW 2014 Annual Report Download - page 16

Table of Contents
Our amended articles of incorporation, amended and restated code of regulations and Ohio state law contain provisions that may have the effect of
delaying or preventing a change in control of DSW. This could adversely affect the value of our Common Shares.
Our amended articles of incorporation authorize our board of directors to issue up to 100,000,000 preferred shares and to determine the powers, preferences,
privileges, rights, including voting rights, qualifications, limitations and restrictions on those shares, without any further vote or action by the shareholders.
The rights of the holders of our Class A Common Shares will be subject to, and may be adversely affected by, the rights of the holders of any preferred shares
that may be issued in the future. The issuance of preferred shares could have the effect of delaying, deterring or preventing a change in control and could
adversely affect the voting power of our Common Shares.
In addition, provisions of our amended articles of incorporation, amended and restated code of regulations and Ohio law, together or separately, could
discourage potential acquisition proposals, delay or prevent a change in control or limit the price that certain investors might be willing to pay in the future
for our Common Shares. Among other things, these provisions establish a staggered board, require a supermajority vote to remove directors, and establish
certain advance notice procedures for nomination of candidates for election as directors and for shareholder proposals to be considered at shareholders’
meetings.
We do not expect a trading market for DSW Class B Common Shares to develop and therefore any investment in DSW Class B Common Shares may be
effectively illiquid, unless such DSW Class B Common Shares are converted into DSW Class A Common Shares.
There is currently no public market for DSW Class B Common Shares. DSW does not intend to list the Class B Common Shares on any securities exchange or
any automated quotation system. As a result, there can be no assurance that a secondary market will develop, and we do not expect any market makers to
participate in a secondary market. Trading activity, if any, in the DSW Class B Common Shares will be very limited. Because the DSW Class B Common
Shares are not listed on a securities exchange or an automated quotation system, it may be difficult to obtain pricing information with respect to the shares.
Accordingly, there may be a limited number of buyers if a holder decided to sell their DSW Class B Common Shares. This may affect the price a holder would
receive upon such sale. Alternatively, a holder of DSW Class B Common Shares could convert them into DSW Class A Common Shares prior to selling.
However, such conversion could affect the timing of any such sale, which may in turn affect the price a holder may receive upon such sale.
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The Schottenstein Affiliates, entities owned by or controlled by Jay L. Schottenstein, the executive chairman of the DSW board of directors, and members
of his family, directly control or substantially influence the outcome of matters submitted for DSW shareholder votes, and their interests may differ from
DSW’s other shareholders.
As of January 31, 2015, the Schottenstein Affiliates have approximately 49% of the voting power of the outstanding DSW Common Shares. The
Schottenstein Affiliates directly control or substantially influence the outcome of all matters submitted to DSW’s shareholders for approval, including the
election of directors, approval of mergers or other business combinations, and acquisitions or dispositions of assets. The interests of the Schottenstein
Affiliates may differ from or be opposed to the interests of DSW’s other shareholders, and their level of ownership and voting power in DSW may have the
effect of delaying or preventing a subsequent change in control that may be favored by other DSW shareholders.
The Schottenstein Affiliates engage in a variety of businesses, including, but not limited to, business and inventory liquidations, apparel companies and real
estate investments. Opportunities may arise in the area of potential competitive business activities that may be attractive to the Schottenstein Affiliates and
us. Our amended and restated articles of incorporation provide that the Schottenstein Affiliates are under no obligation to communicate or offer any corporate
opportunity to us. In addition, the Schottenstein 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 with RVI, employ or otherwise engage any of our officers or employees. The provisions of the
Master Separation Agreement with RVI also outline how opportunities are to be assigned in the event that our or the Schottenstein Affiliates' directors and
officers learn of opportunities.
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Prior to the Merger, RVI had actual liabilities and significant contingent liabilities. As of the effective time of the Merger, Merger Sub, a subsidiary of
DSW, assumed RVI's obligations with respect to these actual liabilities and contingent liabilities, if they become actual liabilities, which could adversely
affect DSW’s financial condition.
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Source: DSW Inc., 10-K, March 26, 2015 Powered by Morningstar® Document Research℠
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