Rue 21 2010 Annual Report Download - page 29

We may be subject to liability if we infringe upon the trademarks or other intellectual property rights of
third parties.
We may be subject to liability if we infringe upon the trademarks or other intellectual property rights of third
parties. If we were to be found liable for any such infringement, we could be required to pay substantial damages
and could be subject to injunctions preventing further infringement. Such infringement claims could subject us to
boycotts by our customers or otherwise harm our brand image. In addition, any payments we are required to make
and any injunctions we are required to comply with as a result of such infringement actions could adversely affect
our financial results.
Changes in laws, including employment laws and laws related to our merchandise, could make
conducting our business more expensive or otherwise change the way we do business.
We are subject to numerous regulations, including labor and employment, customs, truth-in-advertising,
consumer protection and zoning and occupancy laws and ordinances that regulate retailers generally and/or govern
the importation, promotion and sale of merchandise and the operation of stores and warehouse facilities. If these
regulations were to change or were violated by our management, employees, vendors, buying agents or trading
companies, the costs of certain goods could increase, or we could experience delays in shipments of our goods, be
subject to fines or penalties, or suffer reputational harm, which could reduce demand for our merchandise and hurt
our business and results of operations.
In addition to increased regulatory compliance requirements, changes in laws could make ordinary conduct of
our business more expensive or require us to change the way we do business. For example, changes in federal and
state minimum wage laws could raise the wage requirements for certain of our employees, which would likely cause
us to reexamine our entire wage structure for stores. Other laws related to employee benefits and treatment of
employees, including laws related to limitations on employee hours, supervisory status, leaves of absence,
mandated health benefits or overtime pay, could also negatively impact us, such as by increasing compensation
and benefits costs for overtime and medical expenses. Moreover, changes in product safety or other consumer
protection laws could lead to increased costs to us for certain merchandise, or additional labor costs associated with
readying merchandise for sale. For example, in August 2008, the Consumer Product Safety Improvement Act of
2008, or CPSIA, was signed into law. The CPSIA imposes new requirements for the textile and apparel industries.
These new requirements relate to all products marketed to children 12 years of age and under. Among other
requirements, the Consumer Product Safety Commission requires certification and testing of certain regulated
substances. We have engaged an accredited third party testing service to ensure our vendors’ compliance with
consumer safety laws and to meet further product safety goals. It is often difficult for us to plan and prepare for
potential changes to applicable laws and future actions or payments related to such changes could be material to us.
We may incur indebtedness in the future and that indebtedness could adversely affect our financial health
and harm our ability to react to changes to our business. Any future indebtedness may contain covenants
that limit our business activities.
We may incur indebtedness in the future. Any increase in the amount of our indebtedness could require us to
divert funds identified for other purposes for debt service and impair our liquidity position. If we cannot generate
sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or
issue equity to obtain necessary funds. We do not know whether we will be able to take any of such actions on a
timely basis, on terms satisfactory to us or at all.
Any indebtedness we incur may contain covenants that restrict our ability to incur additional debt, pay
dividends, make acquisitions or investments or do certain other things that may impact the value of our common
stock.
We may be unable to protect our trademarks or other intellectual property rights.
We are not aware of any claims of infringement upon or challenges to our right to use any of our brand names or
trademarks in the United States. Nevertheless, there can be no assurance that the actions we have taken to establish
and protect our trademarks will be adequate to prevent imitation of our products by others or to prevent others from
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