DSW 2009 Annual Report Download - page 22

SSC and its affiliates, Cerberus Partners L.P., or Cerberus, and Millennium Partners, L.P., or Millennium, have
the right to acquire Class A Common Shares of DSW from Retail Ventures pursuant to warrant agreements they
have with Retail Ventures. All of these Common Shares are eligible for future sale, subject to the applicable volume,
manner of sale, holding period and other limitations of Rule 144. Retail Ventures has registration rights with respect
to its DSW Common Shares in specified circumstances pursuant to the master separation agreement. In addition,
SSC and its affiliates and Cerberus (and any party to whom either of them transfers at least 15% of their interest in
registrable DSW Common Shares) have the right to require that we register for resale in specified circumstances the
Class A Common Shares issued to them upon exercise of their warrants, and each of these entities and Millennium
will be entitled to participate in registrations initiated by the other entities.
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, lim-
itations 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 and 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.
Risks Relating to our Relationship with and Separation from Retail Ventures
The agreements we entered into with Retail Ventures in connection with our initial public offering could
restrict our operations and adversely affect our financial condition.
We and Retail Ventures have entered into a number of agreements governing our separation from and our
future relationship with Retail Ventures, including a master separation agreement, an Amended and Restated
Shared Services Agreement and a tax separation agreement, in the context of our relationship to Retail Ventures.
Accordingly, the terms and provisions of these agreements may be less favorable to us than terms and provisions we
could have obtained in arm’s length negotiations with unaffiliated third parties. The tax separation agreement
governs the respective rights, responsibilities, and obligations of Retail Ventures and us with respect to tax liabilities
and benefits, tax attributes, tax contests and other matters regarding taxes and related tax returns.
Although Retail Ventures has informed us that it does not currently intend or plan to undertake a spin-off of our
stock to Retail Ventures’ shareholders, we and Retail Ventures have agreed to set forth our respective rights,
responsibilities and obligations with respect to any possible spin-off in the tax separation agreement. If Retail
Ventures were to decide to pursue a possible spin-off, we have agreed to cooperate with Retail Ventures and to take
any and all actions reasonably requested by Retail Ventures in connection with such a transaction.
The PIES (Premium Income Exchangeable Securities) issued by Retail Ventures may adversely affect the
market price for DSW Class A Common Shares.
In fiscal 2006, Retail Ventures issued 2,875,000 units of its 6.625% Mandatorily Exchangeable Notes due
September 15, 2011, or PIES (Premium Income Exchangeable Securities) in the aggregate principal amount of
$143,750,000. In the third quarter of fiscal 2008, Retail Ventures repurchased 200,000 units of PIES, which are still
considered outstanding and can be resold by Retail Ventures.
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