Document:

EX-4.4

 

Exhibit 4.4

W. R. BERKLEY CORPORATION

TO

THE BANK OF NEW YORK, as Trustee

THIRD SUPPLEMENTAL INDENTURE TO

INDENTURE DATED FEBRUARY 14, 2003

(SENIOR DEBT SECURITIES)

Dated as of August 24, 2004

6.150% Senior Notes due 2019

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	ARTICLE I	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	Relation to Indenture; Definitions	 	 	 	 
	 
	 	 	 	 	 	 
	Section 1.1.
	 	RELATION TO INDENTURE	 	 	1	 
	Section 1.2.
	 	DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE II	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	The Series of Securities	 	 	 	 
	 
	 	 	 	 	 	 
	Section 2.1.
	 	TITLE OF THE SECURITIES	 	 	2	 
	Section 2.2.
	 	LIMITATION ON AGGREGATE PRINCIPAL AMOUNT	 	 	2	 
	Section 2.3.
	 	PRINCIPAL PAYMENT DATE	 	 	2	 
	Section 2.4.
	 	INTEREST AND INTEREST RATES	 	 	2	 
	Section 2.5.
	 	PLACE OF PAYMENT	 	 	3	 
	Section 2.6.
	 	REDEMPTION	 	 	3	 
	Section 2.7.
	 	DENOMINATION	 	 	5	 
	Section 2.8.
	 	CURRENCY	 	 	5	 
	Section 2.9.
	 	FORM OF NOTES	 	 	5	 
	Section 2.10.
	 	REGISTRAR AND PAYING AGENT FOR THE NOTES	 	 	5	 
	Section 2.11.
	 	SINKING FUND OBLIGATIONS	 	 	5	 
	Section 2.12.
	 	DEFEASANCE AND COVENANT DEFEASANCE	 	 	5	 
	Section 2.13.
	 	PAYMENT OF TAXES	 	 	5	 
	Section 2.14.
	 	LIMITATION ON LIENS ON STOCK OF PRINCIPAL SUBSIDIARIES	 	 	5	 
	Section 2.15.
	 	LIMITATIONS ON ISSUE OR DISPOSITION OF COMMON STOCK OF PRINCIPAL SUBSIDIARIES	 	 	6	 
	Section 2.16.
	 	IMMEDIATELY AVAILABLE FUNDS	 	 	6	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE III	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	Miscellaneous Provisions	 	 	 	 
	 
	 	 	 	 	 	 
	Section 3.1.
	 	TRUSTEE NOT RESPONSIBLE FOR RECITALS	 	 	6	 
	Section 3.2.
	 	PAYMENT OF EXPENSES UPON RESIGNATION OR REMOVAL	 	 	7	 
	Section 3.3.
	 	ADOPTION, RATIFICATION AND CONFIRMATION	 	 	7	 
	Section 3.4.
	 	COUNTERPARTS	 	 	7	 
	Section 3.5.
	 	GOVERNING LAW	 	 	7	 

 

 

W. R. BERKLEY CORPORATION

THIRD SUPPLEMENTAL INDENTURE TO

INDENTURE DATED FEBRUARY 14, 2003

(SENIOR DEBT SECURITIES)

$150,000,000

6.150% Senior Notes due 2019

          THIRD SUPPLEMENTAL INDENTURE, dated as of August 24, 2004 between W. R. BERKLEY CORPORATION, a
Delaware corporation (the “Company”), and THE BANK OF NEW YORK, a trust company organized under the
laws of the State of New York, as Trustee (the “Trustee”).

RECITALS

          The Company has heretofore executed and delivered to the Trustee an indenture for senior debt
securities, dated as of February 14, 2003 (the “Indenture”), providing for the issuance from time
to time of series of the Company’s Securities.

          Section 3.1 of the Indenture provides for various matters with respect to any series of
Securities issued under the Indenture to be established in an indenture supplemental to the
Indenture.

          Section 9.1(4) of the Indenture provides for the Company and the Trustee to enter into an
indenture supplemental to the Indenture to establish the form or terms of Securities of any series
as provided by Sections 2.1 and 3.1 of the Indenture.

          NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:

          For and in consideration of the premises and the issuance of the series of Securities provided
for herein, it is mutually agreed, for the equal and proportionate benefit of all Holders of the
Securities of such series, as follows:

ARTICLE I

RELATION TO INDENTURE; DEFINITIONS

          Section 1.1. RELATION TO INDENTURE. This Third Supplemental Indenture constitutes an integral
part of the Indenture.

          Section 1.2. DEFINITIONS. For all purposes of this Third Supplemental Indenture:

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          (a) Capitalized terms used herein without definition shall have the meanings specified in the
Indenture;

          (b) All references herein to Articles and Sections, unless otherwise specified, refer to the
corresponding Articles and Sections of this Third Supplemental Indenture; and

          (c) The terms “herein,” “hereof,” “hereunder” and other words of similar import refer to this
Third Supplemental Indenture.

          (d) “Fair Value,” when used with respect to Common Stock, means the fair value thereof as
determined in good faith by the Board of Directors.

ARTICLE II

THE SERIES OF SECURITIES

          Section 2.1. TITLE OF THE SECURITIES. There shall be a series of Securities designated the
“6.150% Senior Notes due 2019” (the “Notes”).

          Section 2.2. LIMITATION ON AGGREGATE PRINCIPAL AMOUNT. The aggregate principal amount of the
Notes shall initially be limited to $150,000,000. The Company may, without the consent of the
Holders of the Notes, issue additional Securities having the same interest rate, maturity date and
other terms as described in the related prospectus supplement and prospectus. Any additional
Securities, together with the Notes offered by the related prospectus supplement, will constitute a
single series of Securities under the Indenture. No additional Securities may be issued if an Event
of Default under the Indenture has occurred and is continuing with respect to the Securities.

          Section 2.3. PRINCIPAL PAYMENT DATE. The principal amount of the Notes outstanding (together
with any accrued and unpaid interest) shall be payable in a single installment on August 15, 2019,
which date shall be the Stated Maturity of the Notes Outstanding.

          Section 2.4. INTEREST AND INTEREST RATES. The rate of interest on each Note shall be 6.150%
per annum, accruing from August 24, 2004, or from the most recent interest payment date (each such
date, an “Interest Payment Date”) to which interest has been paid or duly provided for, payable
semiannually in arrears on February 15 and August 15 of each year commencing February 15, 2005
until the principal thereof shall have become due and payable, and until the principal thereof is
paid or duly provided for or made available for payment. The amount of interest payable on any
Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. The
amount of interest payable for any partial period shall be computed on the basis of the actual
number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on
which interest is payable on any Note is not a Business Day, then payment of interest payable on
such date will be made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay). The interest installment so payable in respect of
any Note, and punctually paid or duly provided for, on any Interest Payment Date will, as provided
in the Indenture, be paid to

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the person in whose name such Note (or one or more Predecessor Securities) is registered at
the close of business on February 1 or August 1 prior to such Interest Payment Date. Any such
interest installment not punctually paid or duly provided for in respect of any Note shall
forthwith cease to be payable to the registered Holder on such Regular Record Date and may either
be paid to the Person in whose name such Note (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date to be fixed by the Trustee for the payment of
such Defaulted Interest, notice whereof shall be given to the Holders of the Notes not less than 10
days prior to such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the Notes may be listed, and
upon such notice as may be required by such exchange, all as more fully provided in the Indenture.

          Section 2.5. PLACE OF PAYMENT. The Place of Payment where the Notes may be presented or
surrendered for payment, where the Notes may be surrendered for registration of transfer or
exchange and where notices and demand to or upon the Company in respect of the Notes and the
Indenture may be served shall be the Corporate Trust Office of the Trustee.

          Section 2.6. REDEMPTION.

          (a) The Company may redeem the Notes, in whole or in part, at any time at a Redemption Price
equal to the greater of (i) 100% of the principal amount of such Securities to be redeemed or (ii)
an amount, as determined by an Independent Investment Banker, equal to the sum of the present
values of the remaining scheduled payments of principal of and interest on the securities to be
redeemed (not including any portion of such payments of interest accrued as of the date of
redemption) discounted to the Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 30 basis points, plus, in
either of the above cases, accrued and unpaid interest thereon to, but not including, the
Redemption Date.

          (b) For the purposes of this Section 2.6,

          “Adjusted Treasury Rate” means, with respect to any Redemption Date:

	 	- 	the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated “H.15(519)” published by the Board of Governors
of the Federal Reserve System (or any successor publication which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity) under the caption “Treasury Constant
Maturities,” for the maturity corresponding to the Comparable Treasury Issue.
If no maturity is within three months before or after the Remaining Life,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate
shall be interpolated or

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	 	   	extrapolated from such yields on a straight line basis, rounding to the
nearest month; or
	 
	 	- 	if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date.

          The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the
Redemption Date.

          “Comparable Treasury Issue” means the United States Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining term of the notes to
be redeemed that would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of comparable maturity to
the remaining term of such securities (“Remaining Life”).

          “Comparable Treasury Price” means (i) the average of three Reference Treasury Dealer
Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury
Dealer Quotations, or (ii) if the Independent Investment Banker obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such quotations.

          “Independent Investment Banker” means one of the Reference Treasury Dealers appointed by us.

          “Reference Treasury Dealer” means:

	 	- 	each of Morgan Stanley & Co. Incorporated and Deutsche Bank Securities Inc.
and their respective successors; provided that, if any of the foregoing ceases
to be a primary U.S. Government securities dealer in the United States (a
“Primary Treasury Dealer”), the Company shall substitute therefor another
Primary Treasury Dealer; and
	 
	 	- 	 any other Primary Treasury Dealer selected by the Company.

          “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the Independent Investment Banker, of the
bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of
its principal amount) quoted in writing to the Independent Investment Banker at 5:00 p.m., New York
City Time, on the third Business Day preceding such Redemption Date.

          The Company will mail a notice of redemption at least 30 days but not more than 60 days before
the Redemption Date to each holder of the notes to be redeemed. If less than all

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of the notes are to be redeemed, the trustee will select, by such method as it will deem fair
and appropriate, including pro rata or by lot, the notes to be redeemed in whole or in part.

          Unless the Company defaults in payment of the Redemption Price, on and after the Redemption
Date, interest will cease to accrue on the notes or portions thereof called for redemption.

          Section 2.7. DENOMINATION. The Notes shall be issuable only in registered form without
coupons and in denominations of $1,000 and integral multiples thereof.

          Section 2.8. CURRENCY. Principal and interest on the Notes shall be payable in such coin or
currency of the United States of America that at the time of payment is legal tender for payment of
public and private debts.

          Section 2.9. FORM OF NOTES. The Notes shall be substantially in the form attached as EXHIBIT
A hereto.

          Section 2.10. REGISTRAR AND PAYING AGENT FOR THE NOTES. The Trustee shall serve initially as
Registrar and Paying Agent for the Notes.

          Section 2.11. SINKING FUND OBLIGATIONS. The Company has no obligation to redeem or purchase
any Notes pursuant to any sinking fund or analogous requirement or upon the happening of a
specified event or at the option of a Holder thereof.

          Section 2.12. DEFEASANCE AND COVENANT DEFEASANCE. The Company has elected to have both
Section 4.2(2) of the Indenture (relating to defeasance) and Section 4.2(3) (relating to covenant
defeasance) applied to the Notes.

          Section 2.13. PAYMENT OF TAXES. The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, and lawful claims for labor, materials and supplies,
which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment or governmental charge whose amount, applicability or
validity is being contested in good faith by appropriate proceedings or where the failure to effect
such payment is not adverse in any material respect to the Holders of the Notes.

          Section 2.14. LIMITATION ON LIENS ON STOCK OF PRINCIPAL SUBSIDIARIES. The Company will not,
and it will not permit any Subsidiary of the Company to, at any time directly or indirectly create,
assume, incur or permit to exist any Indebtedness secured by a pledge, lien or other encumbrance
(any pledge, lien or other encumbrance being hereinafter in this Section referred to as a “lien”)
on the voting securities of Principal Subsidiaries, or the voting securities of a Subsidiary that
owns, directly or indirectly, the voting securities of any of the Principal Subsidiaries without
making effective provision whereby the Notes then Outstanding (and, if the Company so elects, any
other Indebtedness of the Company

5

 

that is not subordinate to the Notes and with respect to which the governing instruments
require, or pursuant to which the Company is otherwise obligated or required, to provide such
security) shall be equally and ratably secured with such secured Indebtedness so long as such other
Indebtedness shall be secured. For purposes of this Section 2.14 only, “Indebtedness”, in addition
to those items specified in Section 1.1 of the Indenture, shall include any obligation of, or any
such obligation guaranteed by, any Person for the payment of amounts due under a swap agreement or
other similar instrument or agreement or foreign currency hedge exchange or similar instrument or
agreement.

          If the Company shall hereafter be required to secure the Notes equally and ratably with any
other Indebtedness pursuant to this Section, (i) the Company will promptly deliver to the Trustee
an Officer’s Certificate stating that the foregoing covenant has been complied with, and an Opinion
of Counsel stating that in the opinion of such counsel the foregoing covenant has been complied
with and that any instruments executed by the Company or any Subsidiary of the Company in the
performance of the foregoing covenant comply with the requirements of the foregoing covenant and
(ii) the Trustee is hereby authorized to enter into an indenture or agreement supplemental hereto
and to take such action, if any, as it may deem advisable to enable it to enforce the rights of the
holders of the Notes so secured.

          Section 2.15. LIMITATIONS ON ISSUE OR DISPOSITION OF COMMON STOCK OF PRINCIPAL SUBSIDIARIES.
As long as any of the Notes remain outstanding, the Company will not, and will not permit any
Subsidiary to, issue, sell, assign, transfer or otherwise dispose of, directly or indirectly, any
of the Common Stock of any Principal Subsidiary (except to the Company or to one or more
Subsidiaries or for the purpose of qualifying directors); provided, however, that this covenant
shall not apply if (i) the issuance, sale, assignment, transfer or other disposition is required to
comply with the order of a court or regulatory authority of competent jurisdiction, other than an
order issued at the request of the Company or of one of its Subsidiaries; (ii) the entire Common
Stock of a Principal Subsidiary then owned by the Company or by its Subsidiaries is disposed of in
a single transaction or in a series of related transactions, for consideration consisting of cash
or other property which is at least equal to the Fair Value of such Common Stock; or (iii) after
giving effect to the issuance, sale, assignment, transfer or other disposition, the Company and its
Subsidiaries would own directly or indirectly at least 80% of the issued and outstanding Common
Stock of such Principal Subsidiary and such issuance, sale, assignment, transfer or other
disposition is made for consideration consisting of cash or other property which is at least equal
to the Fair Value of such Common Stock.

          Section 2.16. IMMEDIATELY AVAILABLE FUNDS. All payments of principal and interest shall be
made in immediately available funds.

ARTICLE III

MISCELLANEOUS PROVISIONS

          Section 3.1. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals herein contained are made by
the Company and not by the Trustee, and the Trustee assumes no

6

 

responsibility for the correctness thereof. The Trustee makes no representation as to the
validity or sufficiency of this Third Supplemental Indenture.

          Section 3.2. PAYMENT OF EXPENSES UPON RESIGNATION OR REMOVAL. Upon termination of this Third
Supplemental Indenture or the Indenture or the removal or resignation of the Trustee, unless
otherwise stated, the Company shall pay to the Trustee all amounts accrued to the date of such
termination, removal or resignation.

          Section 3.3. ADOPTION, RATIFICATION AND CONFIRMATION. The Indenture, as supplemented and
amended by this Third Supplemental Indenture, is in all respects hereby adopted, ratified and
confirmed.

          Section 3.4. COUNTERPARTS. This Third Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall together constitute
but one and the same instrument.

          Section 3.5. GOVERNING LAW. THIS THIRD SUPPLEMENTAL INDENTURE AND EACH NOTE SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.

7

 

          IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be
duly executed on the day and year first above written.

	 	 	 	 	 
	 	W. R. BERKLEY CORPORATION

 	 
	 	By:  	/s/ William R. Berkley, Jr.
 	 
	 	 	Name:  	William R. Berkley, Jr. 	 
	 	 	Title:  	Senior Vice President 	 
	 

	 	 	 	 	 
	 	THE BANK OF NEW YORK, as Trustee

 	 
	 	By:  	/s/ Stacey B. Poindexter
 	 
	 	 	Name:  	Stacey B. Poindexter 	 
	 	 	Title:  	Assistant Vice President 	 

8

 

	 	 	 	 	 

EXHIBIT A

(FORM OF FACE OF NOTE)

          This Note is a global Note within the meaning of the Indenture hereinafter referred to and is
registered in the name of a Depository or a nominee of a Depository. This Note is exchangeable for
Securities registered in the name of a person other than the Depository or its nominee only in the
limited circumstances described in the Indenture, and no transfer of this Note (other than a
transfer of this Note as a whole by the Depository to a nominee of the Depository or by a nominee
of the Depository to the Depository or another nominee of the Depository) may be registered except
in limited circumstances.

          Unless this Note is presented by an authorized representative of The Depository Trust Company
(55 Water Street, New York, New York) to the issuer or its agent for registration of transfer,
exchange or payment, and any Note issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of The Depository Trust Company and any payment hereon
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON
IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.

	 	 	 	 	 
	Certificate No. 3

	 	$150,000,000
	Dated: August 24, 2004

	 	CUSIP No. 084423AL6

W. R. BERKLEY CORPORATION

6.150% Senior Notes due 2019

          W. R. BERKLEY CORPORATION, a Delaware corporation (the “Company,” which term includes any
successor corporation under the Indenture hereinafter referred to), for value received, hereby
promises to pay to CEDE & CO. or registered assigns, the principal sum of ONE HUNDRED FIFTY MILLION
DOLLARS AND NO CENTS ($150,000,000.00) on August 15, 2019. The Company further promises to pay
interest on said principal sum outstanding from August 24, 2004, or from the most recent interest
payment date (each such date, an “Interest Payment Date”) to which interest has been paid or duly
provided for, semiannually (subject to deferral as set forth herein) in arrears on February 15 and
August 15 of each year commencing February 15, 2005 at the rate of 6.150% per annum, until the
principal hereof shall have become due and payable and, until the principal hereof is paid or duly
provided for or made available for payment. The amount of interest payable on any Interest Payment
Date shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of
interest payable for any partial period shall be computed on the basis of the number of actual days
elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is
payable on this Note is not a Business Day, then payment of interest payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay). A “Business Day,” with respect to any Place of

A-1

 

Payment or other location, shall mean any day other than a Saturday, Sunday or other day on
which banking institutions in such Place of Payment or other location are authorized or obligated
by law, regulation or executive order to close. The interest installment so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid
to the Person in whose name this Note (or one or more Predecessor Securities) is registered at the
close of business on February 1 or August 1 prior to such Interest Payment Date. Any such interest
installment not punctually paid or duly provided for shall forthwith cease to be payable to the
registered Holder on such Regular Record Date and may either be paid to the Person in whose name
this Note (or one or more Predecessor Securities) is registered at the close of business on a
Special Record Date to be fixed by the Trustee for the payment of such Defaulted Interest, notice
whereof shall be given to the Holder of this Note not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which this Note may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in the Indenture.

          The principal of (and premium, if any) and the interest on this Note shall be payable at the
office or agency of the Company maintained for that purpose in the United States in such coin or
currency of the United States of America that at the time of payment is legal tender for payment of
public and private debts; PROVIDED, HOWEVER, that payment of interest may be made at the option of
the Company by check mailed to the registered Holder at such address as shall appear in the
Security Register. Notwithstanding the foregoing, so long as the Holder of this Note is Cede & Co.,
the payment of the principal of (and premium, if any) and interest on this Note will be made at
such place and to such account as may be designated by Cede & Co. All payments of principal and
interest hereunder shall be made in immediately available funds.

          Reference is hereby made to the further provisions of this Note set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.

          Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the
Indenture or be valid for any purpose.

A-2

 

          IN WITNESS WHEREOF, the Company has caused this instrument to be executed.

	 	 	 	 	 
	 	W. R. BERKLEY CORPORATION

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

CERTIFICATE OF AUTHENTICATION

          This is one of the Securities of the series designated herein referred to in the
within-mentioned Indenture.

Dated: August 24, 2004

THE BANK OF NEW YORK,

as Trustee

By:                                        

     Authorized Signatory

A-3

 

(FORM OF REVERSE OF NOTE)

          This Note is one of a duly authorized issue of securities of the Company, designated as its
6.150% Senior Notes due 2019 (herein referred to as the “Securities”), issued under and pursuant to
an Indenture, dated as of February 14, 2003 between the Company and The Bank of New York, as
Trustee (herein called the “Trustee,” which term includes any successor trustee under the
Indenture), as supplemented by the Third Supplemental Indenture dated as of August 24, 2004,
between the Company and the Trustee (the Indenture as so supplemented, the “Indenture”), to which
Indenture and all indentures supplemental thereto reference is hereby made for a description of the
rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the Holders of the Securities, and of the terms upon which the Securities are, and are
to be, authenticated and delivered.

               All terms used in this Note that are defined in the Indenture shall have the
meanings assigned to them in the Indenture.

               The Company may redeem the Securities, in whole or in part, at any time at a
Redemption Price equal to the greater of (i) 100% of the principal amount of such
Securities to be redeemed or (ii) an amount, as determined by an Independent Investment
Banker, the sum of the present values of the remaining scheduled payments of principal of
and interest thereon on the securities to be redeemed (not including any portion of such
payments of interest accrued to the date of redemption) discounted to the Redemption Date
on a semiannual basis assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate, plus 30 basis points, plus, in either of the above cases, accrued
and unpaid interest thereon to the Redemption Date.

          “Adjusted Treasury Rate” means, with respect to any Redemption Date:

	 	- 	the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated “H.15(519)” published by the Board of Governors
of the Federal Reserve System (or any successor publication which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity) under the caption “Treasury Constant
Maturities,” for the maturity corresponding to the Comparable Treasury Issue.
If no maturity is within three months before or after the Remaining Life,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate
shall be interpolated or extrapolated from such yields on a straight line
basis, rounding to the nearest month; or
	 
	 	- 	 if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semiannual equivalent yield to maturity of the

A-4

 

	 	   	Comparable Treasury Issue, calculated using a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to
the Comparable Treasury Price for such Redemption Date.

          The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the
Redemption Date.

          “Comparable Treasury Issue” means the United States Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining term of the
securities to be redeemed that would be used, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such securities (“Remaining Life”).

          “Comparable Treasury Price” means (i) the average of three Reference Treasury Dealer
Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury
Dealer Quotations, or (ii) if the Independent Investment Banker obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such quotations.

          “Independent Investment Banker” means one of the Reference Treasury Dealers appointed by us.

          “Reference Treasury Dealer” means:

	 	- 	each of Morgan Stanley & Co. Incorporated and Deutsche Bank Securities Inc.
and their respective successors; provided, however, that if any of the
foregoing shall cease to be a primary U.S. Government securities dealer in the
United States (a “Primary Treasury Dealer”), the Company shall substitute
therefor another Primary Treasury Dealer; and
	 
	 	- 	any other Primary Treasury Dealer selected by the Company.

          “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the Independent Investment Banker, of the
bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of
its principal amount) quoted in writing to the Independent Investment Banker at 5:00 p.m., New York
City Time, on the third Business Day preceding such Redemption Date.

          The Company will mail a notice of redemption at least 30 days but not more than 60 days before
the Redemption Date to each holder of the securities to be redeemed. If less than all of the
securities are to be redeemed, the Trustee will select, by such method as it will deem fair and
appropriate, including pro rata or by lot, the securities to be redeemed in whole or in part.

          Unless we default in payment of the Redemption Price, on and after the Redemption Date,
interest will cease to accrue on the securities or portions thereof called for redemption.

A-5

 

          If an Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due and payable in the
manner, with the effect and subject to the conditions provided in the Indenture.

          The Indenture contains provisions for satisfaction, discharge and defeasance at any time of
the entire indebtedness of this Note upon compliance by the Company with certain conditions set
forth in the Indenture.

          The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Securities of each series to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in principal amount of the Securities of each
series at the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting Holders of specified percentages in principal amount of the Securities of
each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note
shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Note. No reference herein to
the Indenture and no provision of this Note or of the Indenture (other than Section 4.2 of the
Indenture) shall alter or impair the obligation of the Company to pay the principal and interest on
the Note at the times, place and rate, and in the coin or currency, herein prescribed.

          As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Note is registrable in the Security Register, upon surrender of this Note for
registration of transfer at the office or agency of the Company maintained under Section 10.2 of
the Indenture duly endorsed by, or accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Security Registrar, duly executed by the Holder hereof or his
or her attorney duly authorized in writing, and thereupon one or more new Securities of this
series, of authorized denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees. No service charge shall be made for any such registration
of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.

          Prior to due presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

          This global Note is exchangeable for Securities in definitive form only under certain limited
circumstances set forth in the Indenture. Securities of this series so issued are issuable only in
registered form without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations herein and therein set forth,
Securities of this series so issued are exchangeable for a like aggregate principal

A-6

 

amount of Securities of this series of a different authorized denomination, as requested by
the Holder surrendering the same.

          The Company and, by its acceptance of this Note or a beneficial interest therein, the Holder
of, and any Person that acquires a beneficial interest in, this Note agree that for United States
federal, state and local tax purposes it is intended that this Note constitute indebtedness.

          THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE SECURITIES
WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF.

A-7<PAGE>

                                                                    EXHIBIT 10.4

                              EMPLOYMENT AGREEMENT

                                     BETWEEN

                                    DSW INC.

                                       AND

                                DEBORAH L. FERREE

This employment agreement ("Agreement") by and between DSW Inc. ("Company") and
Deborah L. Ferree ("Executive"), collectively, the "Parties," is effective as of
November 22, 2004 ("Effective Date") and supersedes and replaces any other oral
or written employment-related agreement between the Executive and the Company.

                                  1.00 DURATION

This Agreement will remain in effect from the Effective Date until it terminates
as provided in Section 5.00. Any notice of termination required to be given
under this Agreement must be given as provided in Section 6.00 and will be
effective on the date prescribed in Section 5.00.

                      2.00 EXECUTIVE'S EMPLOYMENT FUNCTION

2.01 POSITION. The Executive agrees to serve as the President and Chief
Merchandising Officer of DSW Shoe Warehouse, Inc., or its successor
(collectively "DSW") with authority and duties customarily associated with this
position and to discharge any other duties and responsibilities assigned by the
Chief Executive Officer of DSW ("Chief Executive Officer"). The Executive will
report directly to and be subject to the supervision, advice, and direction of
the Chief Executive Officer, or his designate. The Executive agrees at all times
to observe and be bound by all Company rules, policies, practices, procedures
and resolutions that generally apply to Company employees of comparable status
and which do not conflict with the specific terms of this Agreement.

2.02 PLACE OF PERFORMANCE. The Executive's duties will principally be performed
in Columbus, Ohio, except for required travel on the Company's business, unless
the Chief Executive Officer requires the Executive to perform duties at another
location.

                                3.00 COMPENSATION

The Company will pay the Executive the amounts described in Section 3.00 as
compensation for the services described in this Agreement and in exchange for
the duties and responsibilities described in Section 4.00.

<PAGE>

3.01 BASE SALARY. The Company will pay to the Executive an annualized base
salary of $700,000 (retroactive to November 22, 2004), which will be increased
annually by a minimum of 2.5 percent over the previous year's base salary. The
Executive's Base Salary will be paid in installments that correspond with the
Company's normal payroll practices.

3.02  CASH INCENTIVE BONUS.

      [1] While employed hereunder and commencing with the 2005 Fiscal Year, the
      Executive will be eligible to receive a Cash Incentive Bonus under the
      terms of the Retail Ventures, Inc. Incentive Compensation Plan ("Incentive
      Plan"), as modified by the Company, with a target annual bonus per fiscal
      year of one hundred percent (100%) of Base Salary and a maximum annual
      bonus per fiscal year of two hundred percent (200%) of Base Salary. The
      actual performance metrics and goals shall be determined by the Company in
      its sole discretion.

      [2] For Fiscal Year 2004, Executive will receive the actual Cash Incentive
      Bonus earned based on a target annual bonus of 50% of Base Salary based on
      Executive's achievement of incentive goals established by the Company in
      its discretion.

      [3] Any Cash Incentive Bonus will be payable, in cash, consistent with the
      Company's normal bonus payment policy.

3.03 EQUITY INCENTIVE COMPENSATION. During the seventy-five (75) day period
following the January 30, 2005 end of the Company's current fiscal year, the
Company shall negotiate in good faith with Executive concerning enhancements to
Executive's currently existing equity incentive compensation (which shall remain
in full force and effect pending such enhancements) to take such equity
incentive compensation to a level that is commensurate with Executive's new
position. It is agreed that these enhancements may include grants of stock
appreciation rights and/or restricted stock units and other equity or
equity-based compensation awards.

3.04 BENEFIT PLANS. Subject to their terms, the Executive may participate in any
Company sponsored employee pension or welfare benefit plan at a level
commensurate with the Executive's title and position.

3.05 VACATIONS. Subject to the terms of the Company's vacation policy, the
Executive is entitled to four weeks of vacation each calendar year to be taken
during periods approved by the Chief Executive Officer.

3.06 EXPENSES. The Executive is entitled to receive prompt reimbursement for all
normal and reasonable expenses incurred while performing services under this
Agreement, including all reasonable travel expenses. Reimbursement for these
expenses will be made as soon as administratively feasible after the date the
Executive submits appropriate evidence of the expenditure and otherwise complies
with the Company's business expense reimbursement policy. The Executive shall be
entitled to

                                       2
<PAGE>

an annual perquisite allowance from the Company of $40,000 (which amount already
includes any associated tax gross-up), payable in equal installments in
accordance with the Company's payroll practices for executive employees.

3.07 TERMINATION BENEFITS. The Company also will provide the Executive with the
termination benefits described in Section 5.00.

                          4.00 EXECUTIVE'S OBLIGATIONS

The amounts described in Sections 3.00 and 5.00 are provided by the Company in
exchange for (and have a value to the Company equivalent to) the Executive's
performance of the obligations described in this Agreement, including
performance of the duties and the covenants and releases made and entered into
by and between the Executive and the Company in this Agreement.

4.01  SCOPE OF DUTIES. The Executive will:

      [1] Devote all available business time, best efforts and undivided
      attention to the Company's business and affairs; and

      [2] Not engage in any other business activity, whether or not for gain,
      profit or other pecuniary benefit,

      [3] However, the restriction described in Section 4.01 [1] and [2] will
      not preclude the Executive from:

            [A] Making or holding passive investments in outstanding shares in
            the securities of publicly-owned companies or other businesses
            [other than organizations described in Section 4.05], regardless of
            when and how that investment was made; or

            [B] Serving on corporate, civic, religious, educational and/or
            charitable boards or committees but only if this activity [I] does
            not interfere with the performance of duties under this Agreement
            and [II] is approved by the Chief Executive Officer.

4.02  CONFIDENTIAL INFORMATION.

      [1] OBLIGATION TO PROTECT CONFIDENTIAL INFORMATION. The Executive
      acknowledges that the Company and its subsidiaries, parent corporation and
      affiliated entities (collectively, "Group" and separately, "Group Member")
      have a legitimate and continuing proprietary interest in the protection of
      Confidential Information (as defined in Section 4.02[2]) and have
      invested, and will continue to invest, substantial sums of money to
      develop, maintain and protect Confidential Information. The Executive
      agrees [A] during and after employment with all Group Members [I] that any
      Confidential Information will be held in confidence and treated as
      proprietary to the Group, [II] not to use or disclose any

                                       3
<PAGE>

      Confidential Information except to promote and advance the Group's
      business interests and [B] immediately upon separation from employment
      with all Group Members, to return to the Company any Confidential
      Information.

      [2] DEFINITION OF CONFIDENTIAL INFORMATION. For purposes of this
      Agreement, Confidential Information includes any confidential data,
      figures, projections, estimates, pricing data, customer lists, buying
      manuals or procedures, distribution manuals or procedures, other policy
      and procedure manuals or handbooks, supplier information, tax records,
      personnel histories and records, information regarding sales, information
      regarding properties and any other Confidential Information regarding the
      business, operations, properties or personnel of the Group (or any Group
      Member) which are disclosed to or learned by the Executive as a result of
      employment with any Group Member, but will not include [A] the Executive's
      personal personnel records or [B] any information that [I] the Executive
      possessed before the date of initial employment (including periods before
      the Effective Date) with any Group Member that was a matter of public
      knowledge, [II] became or becomes a matter of public knowledge through
      sources independent of the Executive, [III] has been or is disclosed by
      any Group Member without restriction on its use or [IV] has been or is
      required to be disclosed by law or governmental order or regulation. The
      Executive also agrees that, if there is any reasonable doubt whether an
      item is public knowledge, to not regard the item as public knowledge until
      and unless the Executive Vice President of Human Resources confirms to the
      Executive that the information is public knowledge or an arbitrator,
      acting under Section 9.00, finally decides that the information is public
      knowledge.

      [3] INTELLECTUAL PROPERTY. The Executive expressly acknowledges that all
      right, title and interest to all inventions, designs, discoveries, works
      of authorship, and ideas conceived, produced, created, discovered,
      authored, or reduced to practice during the Executive's performance of
      services under this Agreement, whether individually or jointly with any
      Group Member (the "Intellectual Property") shall be owned solely by the
      Group, and shall be subject to the restrictions set forth in Section
      4.02[1] above. All Intellectual Property which constitutes copyrightable
      subject matter under the copyright laws of the United States shall, from
      the inception of creation, be deemed to be a "work made for hire" under
      the United States copyright laws and all right, title and interest in and
      to such copyrightable works shall vest in the Group. All right, title and
      interest in and to all Intellectual Property developed or produced under
      this Agreement by the Executive, whether constituting patentable subject
      matter or copyrightable subject matter (to the extent deemed not to be a
      "work made for hire") or otherwise, shall be assigned and is hereby
      irrevocably assigned to the Group by the Executive. The Executive shall,
      without any additional consideration, execute all documents and take all
      other actions needed to convey the Executive's complete ownership interest
      in any Intellectual Property to the Group so that the Group may own and
      protect such Intellectual Property and obtain patent, copyright and
      trademark registrations for it. The Executive agrees that any Group Member
      may alter or modify the Intellectual Property at the Group

                                       4
<PAGE>

      Member's sole discretion, and the Executive waives all right to claim or
      disclaim authorship.

4.03 SOLICITATION OF EMPLOYEES. The Executive agrees that during employment, and
for the longer of any period of salary continuation or for two years after
terminating employment with all Group Members [1] not, directly or indirectly,
to solicit any employee of any Group Member to leave employment with the Group,
[2] not, directly or indirectly, to employ or seek to employ any employee of any
Group Member and [3] not to cause or induce any of the Group's (or Group
Member's) competitors to solicit or employ any employee of any Group Member.

4.04 SOLICITATION OF THIRD PARTIES. The Executive agrees that during employment,
and for the longer of any period of salary continuation or for two years after
terminating employment with all Group Members not, directly or indirectly, to
recruit, solicit or otherwise induce or influence any customer, supplier, sales
representative, lender, lessor, lessee or any other person having a business
relationship with the Group (or any Group Member) to discontinue or reduce the
extent of that relationship except in the course of discharging the duties
described in this Agreement and with the good faith objective of advancing the
Group's (or any Group Member's) business interests.

4.05 NON-COMPETITION. The Executive agrees that for the longer of any period of
salary continuation or for one year after terminating employment with all Group
Members not, directly or indirectly, to accept employment with, act as a
consultant to, or otherwise perform services that are substantially the same or
similar to those for which the Executive was compensated by any Group Member
(this comparison will be based on job-related functions and responsibilities and
not on job title) for any business that directly competes with the Group's (or
any Group Member's) business, which is understood by the Parties to be the sale
of off-price and discount merchandise, including discount and off-price shoes
and accessories. Illustrations of businesses that compete with the Group's
business include The TJX Companies, Inc. (T.J. Maxx; Marshall's; HomeGoods; A.J.
Wright; Marmaxx; Winners); Shoe Carnival; MJM Designer Shoes; Ross Stores, Inc;
Payless ShoeSource; Off-Broadway Shoes; Famous Footwear; Footstar; and Big Lots
Stores, Inc.; and Burlington Coat Factory Warehouse Corporation and any of its
affiliates. This restriction applies to any parent, division, affiliate, newly
formed or purchased business(es) and/or successor of a business that competes
with the Group's (or any Group Member's) business.

4.06 POST-TERMINATION COOPERATION. As is required of the Executive during
employment, the Executive agrees that during and after employment with any Group
Members and without additional compensation (other than reimbursement for
reasonable associated expenses), to cooperate with the Group (and with each
Group Member) in the following areas:

      [1] COOPERATION WITH THE COMPANY. The Executive agrees [A] to be
      reasonably available to answer questions for the Group's (and any Group
      Member's) officers regarding any matter, project, initiative or effort for
      which the

                                       5
<PAGE>

      Executive was responsible while employed by any Group Member and [B] to
      cooperate with the Group (and with each Group Member) during the course of
      all third-party proceedings arising out of the Group's (and any Group
      Member's) business about which the Executive has knowledge or information.
      For purposes of this Agreement, [C] "proceedings" includes internal
      investigations, administrative investigations or proceedings and lawsuits
      (including pretrial discovery and trial testimony) and [D] "cooperation"
      includes [I] the Executive's being reasonably available for interviews,
      meetings, depositions, hearings and/or trials without the need for
      subpoena or assurances by the Group (or any Group Member), [II] providing
      any and all documents in the Executive's possession that relate to the
      proceeding, and [III] providing assistance in locating any and all
      relevant notes and/or documents.

      [2] COOPERATION WITH THIRD PARTIES. Unless compelled to do so by
      lawfully-served subpoena or court order, the Executive agrees not to
      communicate with, or give statements or testimony to, any opposing
      attorney, opposing attorney's representative (including private
      investigator) or current or former employee relating to any matter
      (including pending or threatened lawsuits or administrative
      investigations) about which the Executive has knowledge or information
      (other than knowledge or information that is not Confidential Information
      as defined in Section 4.02[2]) as a result of employment with the Group
      (or any Group Member) except in cooperation with the Company. The
      Executive also agrees to notify the Executive Vice President of Human
      Resources immediately after being contacted by a third party or receiving
      a subpoena or court order to appear and testify with respect to any matter
      affected by this section.

      [3] COOPERATION WITH MEDIA. The Executive agrees not to communicate with,
      or give statements to, any member of the media (including print,
      television or radio media) relating to any matter (including pending or
      threatened lawsuits or administrative investigations) about which the
      Executive has knowledge or information (other than knowledge or
      information that is not Confidential Information as defined in Section
      4.02[2]) as a result of employment with the Group (or any Group Member).
      The Executive also agrees to notify the Executive Vice President of Human
      Resources immediately after being contacted by any member of the media
      with respect to any matter affected by this section.

4.07 NON-DISPARAGEMENT. The Executive and the Company (on its behalf and on
behalf of the Group and each Group Member) agree that neither will make any
disparaging remarks about the other and the Executive will not make any
disparaging remarks about the Company's Chairman, Chief Executive Officer or any
of the Group's senior executives. However, this section will not preclude [1]
any remarks that may be made by the Executive under the terms of Section 4.06[2]
or that are required to discharge the duties described in this Agreement or [2]
the Company from making (or eliciting from any person) disparaging remarks about
the Executive concerning any conduct that may lead to a termination for Cause,
as defined in Section 5.04[5] (including initiating an inquiry or investigation
that may result in a termination for

                                       6
<PAGE>

Cause), but only to the extent reasonably necessary to investigate the
Executive's conduct and to protect the Group's (or any Group Member's)
interests.

4.08 NOTICE OF SUBSEQUENT EMPLOYMENT. The Executive agrees to notify the Company
of any subsequent employment during the period of salary continuation after
employment terminates.

4.09 NONDISCLOSURE. The Executive agrees not to disclose the terms of this
Agreement in any manner to any person other than the Chief Executive Officer,
one of the Company's Vice Presidents of Human Resources (or any Company
representative they expressly approve for such disclosure), the Executive's
personal attorney, accountant and financial advisor, and the Executive's
immediate family or as otherwise required by law.

4.10 REMEDIES. The Executive acknowledges that money will not adequately
compensate the Group for the substantial damages that will arise upon the breach
of any provision of Section 4.00. For this reason, any disputes arising under
Section 4.00 will not be subject to arbitration under Section 9.00. Instead, if
the Executive breaches or threatens to breach any provision of Section 4.00, the
Company will be entitled, in addition to other rights and remedies, to specific
performance, injunctive relief and other equitable relief to prevent or restrain
any breach or threatened breach of Section 4.00.

4.11 RETURN OF COMPANY PROPERTY. Upon termination of employment, the Executive
agrees to promptly return to the Company all property belonging to the Group or
any Group Member.

                      5.00 TERMINATION AND RELATED BENEFITS

This Agreement will terminate upon the occurrence of any of the events described
in this section.

5.01 RULES OF GENERAL APPLICATION. The following rules apply generally to the
implementation of Section 5.00:

      [1] METHOD OF PAYMENT. The Company, at its option, may elect to pay, as a
      lump sum, any installment payments due under Section 5.00. If the Company
      decides to accelerate payment of any installment obligation due under
      Section 5.00, the amount paid will be reduced to reflect the value of the
      accelerated payment. This reduction will be based on the rate paid under
      90-day U.S. Treasury Bills issued on the first issue date after this
      Agreement terminates.

      [2] APPLICATION OF PRO RATA. Any pro rata share required to be paid under
      Section 5.00 will be based on the number of days between the first day of
      the fiscal year during which the Executive terminates employment and the
      date that the Executive terminates employment divided by the number of
      days in the fiscal year during which the Executive terminates employment.

                                       7
<PAGE>

5.02 TERMINATION DUE TO EXECUTIVE'S DEATH. This Agreement will terminate
automatically on the date the Executive dies. As of that date, and subject to
Section 5.04[6], the Company will make the following payments to the person the
Executive designates on the attached Beneficiary designation form or, with
respect to any Equity Incentive, the beneficiary the Executive designates under
the Stock Incentive Plan under which the award was issued ("Beneficiary"):

      [1] BASE SALARY. The unpaid Base Salary the Executive earned to the date
      of termination.

      [2] CASH INCENTIVE BONUS. The pro rata share of any Cash Incentive Bonus
      that would have been paid to the Executive had the Executive not died
      based on the extent to which performance standards are met on the last day
      of the year in which the Executive dies.

      [3] EQUITY INCENTIVE. Subject to the terms of any applicable agreement,
      [A] the Executive's Beneficiary may exercise any outstanding stock options
      that are then vested when the Executive dies and [B] those that would have
      been vested on the last day of the fiscal year during which the Executive
      dies if the Executive had not died.

      [4] OTHER. Any rights accruing to the Executive under any employee benefit
      plan, fund or program maintained by any Group Member will be distributed
      or made available as required by the terms of the plan fund or program or
      as required by law.

5.03 TERMINATION DUE TO EXECUTIVE'S DISABILITY. The Company may terminate this
Agreement after ascertaining that the Executive is Disabled (as defined below -
"Disability") by delivering to the Executive a written notice of termination for
Disability that includes the date termination for Disability is to be effective.
Subject to Section 5.04[6], if that notice is given and if all requirements of
this Agreement are met (including those imposed under Section 7.00), the Company
will make the following payments to the Executive:

      [1] BASE SALARY. The unpaid Base Salary the Executive earned to the date
      of termination.

      [2] CASH INCENTIVE BONUS. The pro rata share of any Cash Incentive Bonus
      that would have been paid to the Executive had the Executive not become
      Disabled based on the extent to which performance standards are met on the
      last day of the year in which the Executive becomes Disabled.

      [3] EQUITY INCENTIVE. Subject to the terms of any applicable agreement,
      [A] the Executive may exercise any outstanding stock options that are
      vested when the Executive became Disabled and [B] those that would have
      been vested on

                                       8
<PAGE>

      the last day of the fiscal year during which the Executive becomes
      Disabled if the Executive had not become Disabled.

      [4] OTHER. Any rights accruing to the Executive under any employee benefit
      plan, fund or program maintained by any Group Member will be distributed
      or made available as required by the terms of the plan fund or program or
      as required by law.

      [5] DEFINITION OF DISABILITY. For these purposes, Disability means that,
      for more than six consecutive months, the Executive is unable, with a
      reasonable accommodation, to perform the duties described in Section 4.01
      on a full-time basis due to a physical or mental disability or infirmity.

5.04 TERMINATION FOR CAUSE. The Company may terminate the Executive's employment
for Cause (as defined below - "Cause") by delivering to the Executive a written
notice describing the basis for this termination and the date the termination
for Cause is to be effective. If the Executive is terminated for Cause and if
all requirements of this Agreement are met (including those imposed under
Section 7.00), the Company will make the following payments to the Executive:

      [1] BASE SALARY. The unpaid Base Salary the Executive earned to the date
      of termination.

      [2] CASH INCENTIVE BONUS. Any unpaid Cash Incentive Bonus earned for the
      fiscal year that ends before the fiscal year during which the Executive is
      terminated for Cause (but no Cash Incentive Bonus will be given with
      respect to the fiscal year during which the Executive is terminated for
      Cause).

      [3] EQUITY INCENTIVE. The Executive's entitlement to Equity Incentive will
      be limited to those specifically described in the Company's Stock
      Incentive Plan and any applicable stock option and restricted stock
      agreements.

      [4] OTHER. Any rights accruing to the Executive under any employee benefit
      plan, fund or program maintained by any Group Member will be distributed
      or made available as required by the terms of the plan fund or program or
      as required by law.

      [5] DEFINITION OF CAUSE. For these purposes, Cause means the Executive's
      [A] failure to substantially perform the duties associated with employment
      under this Agreement, but only if [i] before issuing the notice of
      termination for Cause, the Company makes a written demand upon the
      Executive for substantial performance and specifically describes the basis
      for this demand and [ii] if the failure is one that can be cured, the
      Executive does not comply within 60 days after receiving that demand; [B]
      willful, illegal or grossly negligent conduct that is materially injurious
      to the Company or any Group Member monetarily or otherwise; [C] violation
      of laws or regulations governing the Company or to any

                                        9
<PAGE>

      Group Member; [D] breach of any fiduciary duty owed to the Company or any
      Group Member; [E] misrepresentation or dishonesty which the Company
      determines has had or is likely to have a material adverse effect upon the
      Company's or any Group Member's operations or financial condition; [F]
      breach of Section 4.00 of this Agreement; [G] involvement in any act of
      moral turpitude that has an injurious effect on the Company (or any Group
      Member) or its reputation; or [H] breach of the terms of any
      non-solicitation or confidentiality clauses contained in an employment
      agreement(s) with a former employer. The Company's dissatisfaction with
      the Executive's performance, or the business results achieved, shall not
      constitute Cause under this Section.

      [6] SUBSEQUENT INFORMATION. The terms of Section 5.04 will apply if,
      within one year after the Executive terminates under any other provision
      of Section 5.00, the Company learns and notifies Executive of an event
      that, had it been known before the Executive terminated employment, would
      have justified a termination for Cause. In this case, the Company will be
      entitled to recover (and the Executive agrees to repay) any amounts (other
      than legally protected benefits) that the Executive received under any
      other provision of Section 5.00 reduced by the amount the Executive is
      entitled to receive under Section 5.04.

5.05 VOLUNTARY TERMINATION BY EXECUTIVE. The Executive may voluntarily terminate
employment with the Company at any time, in which case the Company will make the
following payments to the Executive if all requirements of this Agreement are
met (including those imposed under Section 7.00):

      [1] BASE SALARY. The unpaid Base Salary the Executive earned to the date
      of termination.

      [2] CASH INCENTIVE BONUS. Any unpaid Cash Incentive Bonus earned for the
      fiscal year that ends before the fiscal year during which the Executive
      voluntarily terminates (but no Cash Incentive Bonus will be given with
      respect to the fiscal year during which the Executive voluntarily
      terminates).

      [3] EQUITY INCENTIVE. The Executive's entitlement to Equity Incentive will
      be limited to those specifically described in the Company's Stock
      Incentive Plan and any applicable stock option and restricted stock
      agreements.

      [4] OTHER. Any rights accruing to the Executive under any employee benefit
      plan, fund or program maintained by any Group Member will be distributed
      or made available as required by the terms of the plan fund or program or
      as required by law.

5.06 INVOLUNTARY TERMINATION WITHOUT CAUSE. The Company may terminate the
Executive's employment at any time Without Cause (as defined below) by
delivering to the

                                       10
<PAGE>

Executive a written notice specifying the date termination is to be effective.
Subject to Section 5.04[6], if this notice is given and if all requirements of
this Agreement are met (including those imposed under Section 7.00), the Company
will make the following payments to the Executive as of the effective date of
termination Without Cause:

      [1]   BASE SALARY.

            [A] IF TERMINATION OCCURS BEFORE JANUARY, 2007 FISCAL YEAR END: The
            Company will continue to pay the Executive's Base Salary at the rate
            in effect on the date of termination Without Cause through the
            Fiscal Year ending January, 2008.

            [B] IF TERMINATION OCCURS ON OR AFTER JANUARY, 2007 FISCAL YEAR END:
            For 12 months beginning on the date of termination Without Cause,
            the Company will continue to pay the Executive's Base Salary at the
            rate in effect on the date of termination Without Cause.

      [2]   HEALTH CARE. The Company will reimburse the Executive for the cost
      of maintaining continuing health coverage under COBRA for a period of no
      more than 18 months following the date of termination, less the amount the
      Executive is expected to pay as a regular employee premium for such
      coverage. Such reimbursements will cease if the Executive becomes eligible
      for similar coverage under another benefit plan.

      [3]   CASH INCENTIVE BONUS. The pro rata share of any Cash Incentive Bonus
      that would have been paid to the Executive had the Executive not been
      terminated Without Cause based on the extent to which performance
      standards are met on the last day of the year in which the Executive is
      terminated Without Cause.

      [4]   EQUITY INCENTIVE. Subject to the terms of the Company's Stock
      Incentive Plan and any applicable agreement, the Executive may exercise
      any outstanding stock options that are vested on the date of termination
      Without Cause and those that would have vested during the one year
      following the effective date of termination Without Cause as if the
      Executive had remained employed throughout that one-year period.

      [5]   OTHER. Any rights accruing to the Executive under any employee
      benefit plan, fund or program maintained by any Group Member will be
      distributed or made available as required by the terms of the plan fund or
      program or as required by law.

      [6]   DEFINITION OF WITHOUT CAUSE. For purposes of this Agreement, Without
      Cause means termination of the Executive's employment by the Company for
      any reason other than those set forth in Section 5.02, 5.03 or 5.04.

                                       11
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5.07  TERMINATION FOR GOOD REASON: Executive may terminate her employment for
      Good Reason (as defined in this section). If Executive terminates her
      employment for Good Reason she shall be entitled to all of the payments
      described in Section 5.07 pertaining to an Involuntary Termination Without
      Cause. "Good Reason" means without the Executive's express prior written
      consent, the occurrence of any one or more of the following events during
      the term of this Agreement and which is not corrected to the Executive's
      reasonable satisfaction within 60 days after she gives notice to the Chief
      Executive Officer of the circumstance that she believes does or may
      constitute Good Reason:

      [1]   A material reduction in the Executive's duties, responsibilities or
            status with respect to the Company, as compared to those in effect
            on the effective date of this Agreement (but will not include any
            changes resulting directly from implementation of a plan that
            restructures the business organization of the Company and its
            affiliates, including, without limitation, by way of disaffiliation
            or liquidation of a subsidiary or division), it being understood
            that the mere occurrence of a sale of the Company or of a
            controlling interest therein to a third party shall not constitute
            such a material reduction as a result of the Company ceasing to be
            publicly traded or because the Company becomes a subsidiary of
            another entity;

      [2]   Deprivation of the Executive of the titles of President and Chief
            Merchandising Officer of the Company without a simultaneous grant of
            a more senior title;

      [3]   The permanent assignment to the Executive of job duties materially
            inconsistent with those contemplated by this Agreement;

      [4]   The failure of the Company to maintain the Executive's relative
            level of coverage under the employee benefit or retirement plans,
            policies, practices or arrangements as in effect on the effective
            date of this Agreement, both in terms of the amount of benefits
            provided and the relative level of the Executive's participation.
            However, Good Reason will not arise under this subsection if the
            Company eliminates and/or modifies any of these programs if required
            by law to do so, to the extent needed to preserve the tax-character
            of the plan, policy, practice or arrangement, or if such elimination
            and/or modification applies uniformly to other Company employees
            similarly situated to the Executive;

      [5]   Any material breach of this Agreement including failure to make any
            payment or grant provided under this Agreement when due by or on or
            in behalf of the Company.

                                       12
<PAGE>

                                   6.00 NOTICE

6.01 HOW GIVEN. Any notice permitted or required to be given under this
Agreement must be given in writing and delivered in person or by registered,
U.S. mail, return receipt requested, postage prepaid, or through Federal
Express, UPS, DHL and any other reputable professional delivery service that
maintains a confirmation of delivery system. Any delivery must be addressed to
the Company's Executive Vice President of Human Resources at the Company's
then-current corporate offices or to the Executive at the Executive's address as
contained in the Executive's personnel file.

6.02 EFFECTIVE DATE. Any notice permitted or required to be given under this
Agreement will be effective on the date it is delivered, in the event of
personal delivery, or on the date its receipt is acknowledged, in the event of
delivery by registered mail or through a professional delivery service described
in Section 6.01.

                                  7.00 RELEASE

In exchange for the payments and benefits described in this Agreement, as well
as any and all other mutual promises made in this Agreement, the Executive and
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, legatees and assigns agree to release
and forever discharge the Company, the Group and each Group Member and their
executives, officers, directors, agents, attorneys, successors and assigns, from
any and all claims, suits and/or causes of action that grow out of or are in any
way related to the Executive's recruitment to or employment with the Company and
all Group Members, other than any claim that the Company has breached this
Agreement. This release includes, but is not limited to, any claims that the
Company, the Group or any Group Member violated the Employee Retirement and
Income Security Act of 1974; the Age Discrimination in Employment Act; the Older
Worker's Benefit Protection Act; the Americans with Disabilities Act; Title VII
of the Civil Rights Act of 1964 (as amended); the Family and Medical Leave Act;
any law prohibiting discrimination, harassment or retaliation in employment; any
claim of promissory estoppel or detrimental reliance, defamation, intentional
infliction of emotional distress; or the public policy of any state, or any
federal, state or local law. The Executive agrees, upon termination of
employment with all Group Members, to reaffirm and execute this release in
writing. If the Executive fails to reaffirm and execute this release, the
Executive agrees to forego any payment from the Company, other than those
described in Section 5.06, as if the Executive had terminated employment
voluntarily under Section 5.05. Specifically, the Executive agrees that a
necessary condition for the payment of any of the amounts described in Section
5.00 in the event of termination (except termination under Section 5.02) is the
Executive's reaffirmation of this release upon termination of employment. The
Executive acknowledges that the Executive is an experienced senior executive
knowledgeable about the claims that might arise in the course of employment with
the Company and knowingly agrees that the payments upon termination (except
those payable upon the Executive's death) provided for in this Agreement are
satisfactory

                                       13
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consideration for the release of all possible claims. The Executive is advised
to consult with an attorney prior to executing this Agreement. The Executive
acknowledges that 21 days have been given to consider this release. The
Executive may revoke consent to this Agreement by delivering a written notice of
such revocation to the Company within seven days of signing this Agreement. If
the Executive revokes this consent, this Agreement will become null and void and
the Executive must return any compensation received under it, except salary
earned for actual work.

                                 8.00 INSURANCE

To the extent permitted by law and its organizational documents, the Company
will include the Executive under any liability insurance policy the Company
maintains for employees of comparable status. The level of coverage will be at
least as favorable to the Executive (in amount and each other material respect)
as the coverage of other employees of comparable status. This obligation to
provide insurance for the Executive will survive termination of this Agreement
with respect to proceedings or threatened proceedings based on acts or omissions
occurring during the Executive's employment with the Company or with any Group
Member.

                                9.00 ARBITRATION

9.01 ACKNOWLEDGEMENT OF ARBITRATION. Unless stated otherwise in this Agreement,
the Parties agree that arbitration is the sole and exclusive remedy for each of
them to resolve and redress any dispute, claim or controversy involving the
interpretation of this Agreement or the terms, conditions or termination of this
Agreement or the terms, conditions or termination of Executive's employment with
the Group and with each Group Member, including any claims for any tort, breach
of contract, violation of public policy or discrimination, whether such claim
arises under federal or state law.

9.02 SCOPE OF ARBITRATION. The Executive expressly understands and agrees that
claims subject to arbitration under this section include asserted violations of
the Employee Retirement and Income Security Act of 1974; the Age Discrimination
in Employment Act; the Older Worker's Benefit Protection Act; the Americans with
Disabilities Act; Title VII of the Civil Rights Act of 1964 (as amended); the
Family and Medical Leave Act; any law prohibiting discrimination, harassment or
retaliation in employment; any claim of promissory estoppel or detrimental
reliance, defamation, intentional infliction of emotional distress; or the
public policy of any state, or any federal, state or local law.

9.03 EFFECT OF ARBITRATION. The Parties intend that any arbitration award
relating to any matter described in Section 9.00 will be final and binding on
them and that a judgment on the award may be entered in any court of competent
jurisdiction, and enforcement may be had according to the terms of that award.
This section will survive the termination or expiration of this Agreement.

                                       14
<PAGE>

9.04 LOCATION OF ARBITRATION. Arbitration will be held in Columbus, Ohio, and
will be conducted by a retired federal judge or other qualified arbitrator. The
arbitrator will be mutually agreed upon by the Parties and the arbitration will
be conducted in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association then in effect. The
Parties will have the right to conduct discovery pursuant to the Federal Rules
of Civil Procedure; provided, however, that the arbitrator will have the
authority to establish an expedited discovery schedule and cutoff and to resolve
any discovery disputes. The arbitrator will have no jurisdiction or authority to
change any provision of this Agreement by alterations of, additions to or
subtractions from the terms of this Agreement. The arbitrator's sole authority
will be to interpret or apply any provision(s) of this Agreement or any public
law alleged to have been violated. The arbitrator will be limited to awarding
compensatory damages, including unpaid wages or benefits, but, to the extent
allowed by law, will have no authority to award punitive, exemplary or
similar-type damages.

9.05 TIME FOR INITIATING ARBITRATION. Any claim or controversy not sought to be
submitted to arbitration, in writing, within 120 days of the date the Party
asserting the claim knew, or through reasonable diligence should have known, of
the facts giving rise to that Party's claim, will be deemed waived and the Party
asserting the claim will have no further right to seek arbitration or recovery
with respect to that claim or controversy. Both Parties agree to strictly comply
with the time limitation specified in Section 9.00. For purposes of this
section, a claim or controversy is sought to be submitted to arbitration on the
date the complaining Party gives written notice to the other that [1] an issue
has arisen or is likely to arise that, unless resolved otherwise, may be
resolved through arbitration under Section 9.00 and [2] unless the issue is
resolved otherwise, the complaining Party intends to submit the matter to
arbitration under the terms of Section 9.00.

9.06 COSTS OF ARBITRATION. The Company will bear the arbitrator's fee and other
costs associated with any arbitration, unless the arbitrator, acting under
Federal Rule of Civil Procedure 54(b), elects to award these fees to the
Company.

9.07 ARBITRATION EXCLUSIVE REMEDY. The Parties acknowledge that, because
arbitration is the exclusive remedy for resolving issues arising under this
Agreement, neither Party may resort to any federal, state or local court or
administrative agency concerning breaches of this Agreement or any other matter
subject to arbitration under Section 9.00, except as otherwise provided in this
Agreement, and that the decision of the arbitrator will be a complete defense to
any suit, action or proceeding instituted in any federal, state or local court
before any administrative agency with respect to any arbitrable claim or
controversy.

9.08 WAIVER OF JURY. The Executive and the Company each waive the right to have
a claim or dispute with one another decided in a judicial forum or by a jury,
except as otherwise provided in this Agreement.

                                       15
<PAGE>

                            10.00 GENERAL PROVISIONS

10.01 REPRESENTATION OF EXECUTIVE. The Executive represents and warrants that
the Executive is not under any contractual or legal restraint that prevents or
prohibits the Executive from entering into this Agreement or performing the
duties and obligations described in this Agreement.

10.02 MODIFICATION OR WAIVER; ENTIRE AGREEMENT. No provision of this Agreement
may be modified or waived except in a document signed by the Executive and the
Company's Chief Executive Officer or other person designated by the Company's
Board of Directors. This Agreement, and any attachments referenced in the
Agreement, constitute the entire agreement between the Parties regarding the
employment relationship described in this Agreement, and any other agreements
are terminated and of no further force or legal effect. No agreements or
representations, oral or otherwise, with respect to the Executive's employment
relationship with the Company have been made or relied upon by either Party
which are not set forth expressly in this Agreement. The Executive and Company
agree that Section 10.02 does not affect the Executive's payment under the Value
Creation Program.

10.03 GOVERNING LAW; SEVERABILITY. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement, or the
application of any provision of this Agreement to any person or circumstance,
is, for any reason and to any extent, held invalid or unenforceable, such
invalidity and unenforceability will not affect the remaining provisions of this
Agreement of its application to other persons or circumstances, all of which
will be enforced to the greatest extent permitted by law and the Executive and
the Company agree that the arbitrator (or judge) is authorized to reform the
invalid or enforceable provision [1] to the extent needed to avoid the
invalidity or unenforceability and [2] in a manner that is as similar as
possible to the intent (as described in this Agreement). The validity,
construction and interpretation of this Agreement and the rights and duties of
the Parties will be governed by the laws of the State of Ohio, without reference
to the Ohio choice of law rules.

10.04 NO WAIVER. Except as otherwise provided in Section 9.05, failure to insist
upon strict compliance with any term of this Agreement will not be considered a
waiver of any such term.

10.05 WITHHOLDING. All payments made to the Executive under this Agreement will
be reduced by any amount:

      [1] That the Company is required to withhold in advance payment of the
      Executive's federal, state and local income, wage and employment tax
      liability; and

      [2] To the extent allowed by law, that the Executive owes (or, after
      employment is deemed to owe) to the Company.

                                       16
<PAGE>

However, application of Section 10.06[2] will not extinguish the Company's right
to seek additional amounts from the Executive (or to pursue other appropriate
remedies) to the extent that the amount that may be recovered by application of
Section 10.06[2] does not fully discharge the amount the Executive owes to the
Company and does not preclude the Company from proceeding directly against the
Executive without first exhausting its right of recovery under Section 10.06[2].

10.06 SURVIVAL. Subject to the terms of the Executive's Beneficiary designation
form, the Parties agree that the covenants and promises set forth in this
Agreement will survive the termination of this Agreement and continue in full
force and effect.

10.07 MISCELLANEOUS.

      [1] The Executive may not assign any right or interest to, or in, any
      payments payable under this Agreement; provided, however, that this
      prohibition does not preclude the Executive from designating in writing
      one or more beneficiaries to receive any amount that may be payable after
      the Executive's death and does not preclude the legal representative of
      the Executive's estate from assigning any right under this Agreement to
      the person or persons entitled to it.

      [2] This Agreement will be binding upon and will inure to the benefit of
      the Executive, the Executive's heirs and legal representatives and the
      Company and its successors.

      [3] The headings in this Agreement are inserted for convenience of
      reference only and will not be a part of or control or affect the meaning
      of any provision of the Agreement.

10.08 SUCCESSORS TO COMPANY. This Agreement may and will be assigned or
transferred to, and will be binding upon and will inure to the benefit of, any
successor of the Company, and any successor will be substituted for the Company
under the terms of this Agreement. As used in this Agreement, the term
"successor" means any person, firm, corporation or business entity which at any
time, whether by merger, purchase or otherwise, acquires all or essentially all
of the assets of the business of the Company. Notwithstanding any assignment,
the Company will remain, with any successor, jointly and severally liable for
all its obligations under this Agreement.

                                       17
<PAGE>

      IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Agreement, which includes an arbitration provision, and consists of 18 pages.

                                         EXECUTIVE

                                         By: /s/ Deborah L. Ferree
                                             ---------------------
                                             Deborah L. Ferree

                                         Signed: March 2, 2005

                                         DSW Inc.

                                         By: /s/ James A Mcgrady EVP and CFO
                                             -------------------------------

                                         Signed: March 2, 2005

                                       18

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