DSW 2012 Annual Report Download - page 15

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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.
If our existing shareholders sell their Common Shares, it could adversely affect the price of our Class A Common
Shares.
The market price of our Class A Common Shares could decline as a result of market sales by our existing shareholders or
option holders. These sales also might make it difficult for us to sell equity securities in the future at a time and at a price that
we deem appropriate. We cannot predict the timing or the size of future sales of our Common Shares by existing shareholders
or option holders.
As of February 2, 2013, there were 36.1 million Class A Common Shares of DSW outstanding. Additionally, there were 0.2
million director stock units outstanding as of February 2, 2013 that were issued pursuant to the terms of the DSW 2005 Equity
Incentive Plan. The remaining 8.7 million Class B Common Shares outstanding are restricted securities within the meaning of
Rule 144 under the Securities Act but will be eligible for resale subject to applicable volume, manner of sale, holding period
and other limitations of Rule 144. Our Class B Common Shares can be exchanged for Class A Common Shares at the election
of the holder.
Risks Relating to our Relationship with the Schottenstein Affiliates
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 February 2, 2013, the Schottenstein Affiliates have approximately 66% 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 may compete directly against us.
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.
Risks Relating to our Merger with Retail Ventures, Inc.
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.
Merger Sub assumed the obligations of RVI for the guaranteed lease obligations. On November 2, 2011, Syms and Filene’s
Basement filed for bankruptcy protection. RVI guaranteed the obligations of Filene’s Basement in connection with three leases
for retail store locations. Merger Sub may be responsible for any obligations of RVI under these guarantees. These leases expire
in January 2017, September 2017 and October 2024. DSW assumed one of these leases and is currently operating a store in that
location. As of February 2, 2013, there is a recorded liability of $6.6 million associated with the remaining lease guarantees.
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