DSW 2010 Annual Report Download - page 21

collectively, as the DSW defendants. The lawsuits allege, among other things, that Retail Ventures and its directors
breached their fiduciary duties by approving the merger agreement; and that in one case, Retail Ventures’ chief
executive officer and DSW, and in the other that Retail Ventures and DSW aided and abetted in these alleged
breaches of fiduciary duty. The complaints seek, among other things, to enjoin the shareholder vote on the merger,
as well as monetary damages. While the Retail Ventures defendants and the DSW defendants believe the lawsuits
are without merit and intend to defend vigorously against these claims, the outcome of any such litigation is
inherently uncertain. If a dismissal is not granted or a settlement is not reached, the lawsuits could prevent or delay
the completion of the merger and result in substantial costs to Retail Ventures and DSW. In addition, the defense or
settlement of any lawsuit or claim that remains unresolved at the time the merger closes could adversely affect
DSW’s business, financial condition or results of operations.
Risks Relating to our Relationship with and Separation from Retail Ventures
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.
We are currently controlled directly by Retail Ventures and indirectly by SSC and its affiliates, whose
interests may differ from our other shareholders.
As of January 29, 2011, Retail Ventures, a public corporation, owns 100% of our outstanding Class B Common
Shares, which represents approximately 62.0% of our outstanding Common Shares, including director stock units.
These shares collectively represent approximately 92.9% of the combined voting power of our outstanding
Common Shares.
As of January 29, 2011, SSC and its affiliates, in the aggregate, owned approximately 50.6% of the outstanding
Retail Ventures Common Shares and beneficially owned approximately 52.3% of the outstanding Retail Ventures
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
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