DSW 2010 Annual Report Download - page 69

14. SUBSEQUENT EVENTS
Proposed merger of DSW and RVI — On February 8, 2011, DSW, DSW MS LLC, a wholly owned subsidiary
of DSW (“DSW Merger LLC”) and Retail Ventures entered into an Agreement and Plan of Merger, pursuant to
which Retail Ventures will merge with and into DSW Merger LLC, with DSW Merger LLC continuing after the
merger as the surviving entity and a wholly owned subsidiary of DSW (the “merger”). Retail Ventures’ board of
directors and the independent members of DSW’s board of directors have approved the merger agreement based on
the recommendation of a special committee of each board of directors and have recommended that the shareholders
of Retail Ventures and DSW, respectively, adopt the merger agreement and the merger.
Upon the closing of the merger, each outstanding Retail Ventures common share will be converted into the
right to receive 0.435 DSW Class A Common Shares, unless the holder properly and timely elects to receive a like
amount of DSW Class B Common Shares in lieu of DSW Class A Common Shares. All compensatory awards based
on or comprised of Retail Ventures common shares, such as stock options, stock appreciation rights and restricted
stock, will be converted into and become, respectively, awards based on or comprised of DSW Class A Common
Shares, in each case on terms substantially identical to those in effect immediately prior to the effective time of the
Merger, in accordance with the 0.435 exchange ratio.
It is expected that the merger will qualify as a tax-free reorganization for U.S. federal income tax purposes, so
that, in general, none of DSW, Retail Ventures, DSW Merger LLC or any of the Retail Ventures shareholders will
recognize any gain or loss in the transaction, except that Retail Ventures shareholders will generally recognize gain
or loss with respect to cash received in lieu of fractional shares of DSW Class A or Class B Common Shares.
The merger agreement provides that DSW Merger LLC will assume, as of the effective time of the merger, by
supplemental indenture and supplemental agreement, all of Retail Ventures’ obligations with respect to certain
6.625% mandatorily exchangeable notes due September 15, 2011, known as Premium Income Exchangeable
Securities or PIES, and will assume by operation of law warrants issued by Retail Ventures to purchase DSW
Class A Common Shares outstanding immediately prior to the effective time of the merger. DSW and RVI expect to
complete the merger in the second quarter of fiscal 2011.
Upon the closing of the merger, one of Retail Ventures’ current board members will be appointed to DSW’s
board of directors.
The parties have made customary representations and warranties and agreed to customary covenants in the
merger agreement. The transaction is not subject to any financing condition. The completion of the Merger is
conditioned upon, among other things:
• adoption of the merger agreement and the merger by (i) the holders of a majority of the outstanding DSW
Class A Common Shares and Class B Common Shares, voting together as a class, (ii) the holders of a
majority of the unaffiliated DSW Class A Common Shares (i.e., those holders other than Retail Ventures,
SSC, which controls a majority of the voting power of Retail Ventures, and their respective affiliates), voting
together as a class, and (iii) the holders of a majority of outstanding Retail Ventures common shares;
• adoption of amended and restated articles of incorporation of DSW, which will amend the current articles of
incorporation to allow holders of Class B Common Shares to convert such shares into Class A Common
Shares, among other amendments, by (i) the holders of a majority of the DSW Class A Common Shares and
DSW Class B Common Shares, voting together as a class, and (ii) the holders of a majority of the DSW
Class A Common Shares, voting as a separate class; and
• approval of the issuance of DSW Class A Common Shares and Class B Common Shares to Retail Ventures
shareholders by the holders of a majority of the DSW Class A Common Shares and DSW Class B Common
Shares, voting together as a class.
F-23
DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)