Document:

EX-4.1

 

Exhibit 4.1

EXECUTION COPY

 

 

INDENTURE

Dated as of August 16, 2006

between

RETAIL VENTURES, INC.

and

HSBC Bank USA, National Association, as Indenture Trustee

 

 

 

 

	 	 	 	 	 	 	 
	Trust Indenture Act Section	 	Indenture Section
	Section 310

	 	(a)(1)
	 	 	7.08	 
	 

	 	(a)(2)
	 	 	7.08	 
	 

	 	(a)(3)
	 		Not Applicable	 
	 

	 	(a)(4)
	 		Not Applicable	 
	 

	 	(b)
	 		7.07 and 7.09	 
	 

	 	(c)
	 		Not Applicable	 
	Section 311

	 	(a)
	 	 	7.12	 
	 

	 	(b)
	 	 	7.12	 
	 

	 	(c)
	 		Not Applicable	 
	Section 312

	 	(a)
	 	 	2.06	 
	 

	 	(b)
	 	 	7.15	 
	 

	 	(c)
	 	 	7.15	 
	Section 313

	 	(a)
	 	 	7.14	 
	 

	 	(b)
	 	 	7.14	 
	 

	 	(c)
	 	 	7.14	 
	 

	 	(d)
	 	 	7.14	 
	Section 314

	 	(a)
	 	 	10.05, 10.02	 
	 

	 	(b)
	 	 	10.07	 
	 

	 	(c)
	 	 	1.02	 
	 

	 	(c)(1)
	 	 	1.02	 
	 

	 	(c)(2)
	 	 	1.02	 
	 

	 	(c)(3)
	 		Not Applicable	 
	 

	 	(d)
	 	 	10.07	 
	 

	 	(e)
	 	 	1.02	 
	Section 315

	 	(a)
	 	 	7.01(b)	 
	 

	 	(b)
	 	 	7.13	 
	 

	 	(c)
	 	 	7.01(a)	 
	 

	 	(d)
	 	 	7.01(c)	 
	 

	 	(d)(1)
	 		7.01(b)(ii)	 
	 

	 	(d)(2)
	 		7.01(c)(ii)	 
	 

	 	(d)(3)
	 		7.01(c)(iii)	 
	 

	 	(e)
	 	 	5.13	 
	Section 316

	 	(a)(1)(A)
	 		5.02 and 5.10	 
	 

	 	(a)(1)(B)
	 	 	5.11	 
	 

	 	(a)(2)
	 		Not Applicable	 
	 

	 	(b)
	 	 	5.05(a)	 
	Section 317

	 	(a)(1)
	 	 	5.03	 
	 

	 	(a)(2)
	 	 	5.03	 
	 

	 	(b)
	 	 	7.05	 
	Section 318

	 	(a)
	 	 	1.07	 

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the
Indenture.

i

 

Table of Contents

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	Article 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATIONS	 	 	1	 
	 	 	Section 1.01.	 	Definitions
	 	 	1	 
	 	 	Section 1.02.	 	Compliance Certificates and Opinions
	 	 	7	 
	 	 	Section 1.03.	 	Form of Documents Delivered to Indenture Trustee
	 	 	8	 
	 	 	Section 1.04.	 	Acts of Holders; Record Dates
	 	 	8	 
	 	 	Section 1.05.	 	Notices
	 	 	9	 
	 	 	Section 1.06.	 	Notice to Holders; Waiver
	 	 	10	 
	 	 	Section 1.07.	 	Conflict with Trust Indenture Act
	 	 	10	 
	 	 	Section 1.08.	 	Effect of Headings and Table of Contents
	 	 	10	 
	 	 	Section 1.09.	 	Successors and Assigns
	 	 	10	 
	 	 	Section 1.10.	 	Separability Clause
	 	 	11	 
	 	 	Section 1.11.	 	Benefits of Indenture
	 	 	11	 
	 	 	Section 1.12.	 	Governing Law
	 	 	11	 
	 	 	Section 1.13.	 	Waiver of Jury Trial
	 	 	11	 
	 	 	Section 1.14.	 	Legal Holidays
	 	 	11	 
	 	 	Section 1.15.	 	Counterparts
	 	 	11	 
	 	 	Section 1.16.	 	Inspection of Indenture
	 	 	11	 
	 	 	Section 1.17.	 	No Recourse Against Others
	 	 	11	 
	 	 	Section 1.18.	 	Issuer Responsible for Making Calculations
	 	 	12	 
	 	 	Section 1.19.	 	Issuer-owned Notes Disregarded
	 	 	12	 
	 	 	 	 	 
	 	 	 	 
	Article 2 FORM AND ADMINISTRATION OF THE NOTES	 	 	12	 
	 	 	Section 2.01.	 	Form of Notes Generally; Denomination
	 	 	12	 
	 	 	Section 2.02.	 	Dating
	 	 	13	 
	 	 	Section 2.03.	 	Execution and Authentication
	 	 	13	 
	 	 	Section 2.04.	 	Registrar and Paying Agent
	 	 	13	 
	 	 	Section 2.05.	 	Paying Agent to Hold Monies in Trust
	 	 	14	 
	 	 	Section 2.06.	 	Holder Lists and Notices to Holders
	 	 	14	 
	 	 	Section 2.07.	 	Transfer and Exchange
	 	 	14	 
	 	 	Section 2.08.	 	Replacement Notes
	 	 	15	 
	 	 	Section 2.09.	 	Delivery of Exchange Property (or the Cash Exchange Amount)
in Lieu of Transfer, Exchange or Replacement of Notes
	 	 	16	 
	 	 	Section 2.10.	 	Outstanding Notes; Determinations of Holders’ Actions
	 	 	16	 
	 	 	Section 2.11.	 	Temporary Notes
	 	 	16	 
	 	 	Section 2.12.	 	Cancellation
	 	 	16	 
	 	 	Section 2.13.	 	Book-Entry System
	 	 	16	 
	 	 	Section 2.14.	 	Persons Deemed Owners
	 	 	18	 
	 	 	Section 2.15.	 	CUSIP Numbers
	 	 	19	 
	 	 	Section 2.16.	 	Agreed Tax Treatment
	 	 	19	 
	 	 	 	 	 
	 	 	 	 
	Article 3 PAYMENT AND DELIVERY OBLIGATIONS UNDER THE NOTES	 	 	19	 
	 	 	Section 3.01.	 	Initial Collateral for the Notes
	 	 	19	 
	 	 	Section 3.02.	 	Exchange at Maturity
	 	 	20	 
	 	 	Section 3.03.	 	Cash Exchange Option
	 	 	21	 

ii

 

	 	 	 	 	 	 	 	 	 
	 	 	Section 3.04.	 	Delivery upon Exchange of the Notes
	 	 	22	 
	 	 	Section 3.05.	 	Coupon Payments
	 	 	23	 
	 	 	Section 3.06.	 	No Fractional Shares
	 	 	24	 
	 	 	Section 3.07.	 	Charges and Taxes
	 	 	25	 
	 	 	 	 	 
	 	 	 	 
	Article 4 ADJUSTMENTS	 	 	25	 
	 	 	Section 4.01.	 	Dilution Events; Adjustment of Exchange Ratio
	 	 	25	 
	 	 	Section 4.02.	 	Adjustment Events
	 	 	27	 
	 	 	Section 4.03.	 	Reorganization Events
	 	 	28	 
	 	 	Section 4.04.	 	Exchange Property
	 	 	29	 
	 	 	Section 4.05.	 	Merger Early Exchange
	 	 	30	 
	 	 	Section 4.06.	 	Notice of Adjustments and Certain Other Events
	 	 	31	 
	 	 	 	 	 
	 	 	 	 
	Article 5 EVENTS OF DEFAULT; ACCELERATION; REMEDIES	 	 	32	 
	 	 	Section 5.01.	 	Events of Default
	 	 	32	 
	 	 	Section 5.02.	 	Acceleration Event
	 	 	33	 
	 	 	Section 5.03.	 	Payments of Notes on Default; Suit Therefor
	 	 	34	 
	 	 	Section 5.04.	 	Transfer of Collateral upon Occurrence of Acceleration Event
	 	 	35	 
	 	 	Section 5.05.	 	Unconditional Right of Holders to Receive Delivery Obligations
and Coupon Payments under the Notes; Right of Holders to
Institute Suit
	 	 	36	 
	 	 	Section 5.06.	 	Limitation on Proceedings
	 	 	36	 
	 	 	Section 5.07.	 	Restoration of Rights and Remedies
	 	 	36	 
	 	 	Section 5.08.	 	Rights and Remedies Cumulative
	 	 	36	 
	 	 	Section 5.09.	 	Delay or Omission Not Waiver
	 	 	36	 
	 	 	Section 5.10.	 	Direction of Proceedings by Majority
	 	 	37	 
	 	 	Section 5.11.	 	Waiver of Defaults by Majority
	 	 	37	 
	 	 	Section 5.12.	 	Application of Money Collected
	 	 	37	 
	 	 	Section 5.13.	 	Undertaking to Pay Costs
	 	 	38	 
	 	 	 	 	 
	 	 	 	 
	Article 6 SATISFACTION AND DISCHARGE OF INDENTURE	 	 	38	 
	 	 	Section 6.01.	 	Discharge of Indenture
	 	 	38	 
	 	 	Section 6.02.	 	Paying Agent to Repay Monies Held
	 	 	38	 
	 	 	Section 6.03.	 	Payment of Unclaimed Monies
	 	 	39	 
	 	 	 	 	 
	 	 	 	 
	Article 7 THE INDENTURE TRUSTEE	 	 	39	 
	 	 	Section 7.01.	 	Certain Duties and Responsibilities
	 	 	39	 
	 	 	Section 7.02.	 	Certain Rights
	 	 	40	 
	 	 	Section 7.03.	 	Trustee’s Disclaimer
	 	 	41	 
	 	 	Section 7.04.	 	Indenture Trustee, Paying Agent or Registrar May Own Notes
	 	 	42	 
	 	 	Section 7.05.	 	Monies Held in Trust
	 	 	42	 
	 	 	Section 7.06.	 	Compensation and Reimbursement of Expenses
	 	 	42	 
	 	 	Section 7.07.	 	Conflicting Interests
	 	 	43	 
	 	 	Section 7.08.	 	Corporate Indenture Trustee Required; Eligibility
	 	 	43	 
	 	 	Section 7.09.	 	Resignation and Removal; Appointment of Successor
	 	 	43	 
	 	 	Section 7.10.	 	Acceptance of Appointment by Successor
	 	 	44	 
	 	 	Section 7.11.	 	Merger; Conversion; Consolidation or Succession to Business
	 	 	44	 
	 	 	Section 7.12.	 	Preferential Collection of Claims
	 	 	44	 
	 	 	Section 7.13.	 	Notice of Default
	 	 	45	 
	 	 	Section 7.14.	 	Reports by Indenture Trustee to Holders
	 	 	45	 
	 	 	Section 7.15.	 	Communication to Holders
	 	 	45	 

iii

 

	 	 	 	 	 	 	 	 	 
	Article 8 SUPPLEMENTAL INDENTURES	 	 	45	 
	 	 	Section 8.01.	 	Supplemental Indentures without Consent of Holders
	 	 	45	 
	 	 	Section 8.02.	 	Supplemental Indentures with Consent of Holders
	 	 	46	 
	 	 	Section 8.03.	 	Execution of Supplemental Indentures
	 	 	46	 
	 	 	Section 8.04.	 	Effect of Supplemental Indentures
	 	 	47	 
	 	 	Section 8.05.	 	Reference to Supplemental Indentures
	 	 	47	 
	 	 	 	 	 
	 	 	 	 
	Article 9 CONSOLIDATION, MERGER, SALE, LEASE, CONVEYANCE OR TRANSFER	 	 	47	 
	 	 	Section 9.01.	 	Consolidate, Merge, Sell, Lease, Convey or Transfer Property
Only under Certain Conditions
	 	 	47	 
	 	 	Section 9.02.	 	Rights and Duties of Successor Entity
	 	 	47	 
	 	 	Section 9.03.	 	Sale of All or Substantially All Assets upon Deposit into
Collateral Account
	 	 	48	 
	 	 	Section 9.04.	 	Officers’ Certificate and Opinion of Counsel Given to
Indenture Trustee
	 	 	48	 
	 	 	 	 	 
	 	 	 	 
	Article 10 COVENANTS OF THE ISSUER	 	 	48	 
	 	 	Section 10.01.	 	Performance under Notes
	 	 	48	 
	 	 	Section 10.02.	 	Compliance Certificate
	 	 	49	 
	 	 	Section 10.03.	 	Statement by Officers as to Default
	 	 	49	 
	 	 	Section 10.04.	 	Existence
	 	 	49	 
	 	 	Section 10.05.	 	Periodic Reports by the Issuer
	 	 	49	 
	 	 	Section 10.06.	 	Waiver of Stay; Extension or Usury Laws
	 	 	49	 
	 	 	Section 10.07.	 	Recording; Certificates and Opinions
	 	 	50	 
	 	 	 	 	 
	 	 	 	 
	 	 	EXHIBIT A— Form of Note	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	 	EXHIBIT B—Notice From Indenture Trustee to Holders	 	 	 	 

iv

 

     INDENTURE, dated as of August 16, 2006, between Retail Ventures, Inc., an Ohio
corporation (the “Issuer”), and HSBC Bank USA, National Association, acting as indenture trustee
(the “Indenture Trustee”).

RECITALS

     WHEREAS, the Issuer has duly authorized the creation and issue of 6.625% Mandatorily
Exchangeable Notes due September 15, 2011, or PIESsm (Premium Income
Exchangeable SecuritiesSM) in the aggregate principal amount of $125,000,000
($143,750,000 if the Underwriter exercises in full its option to purchase additional PIES pursuant
to the Underwriting Agreement) (the “Notes”) and to provide therefor, the Issuer has duly
authorized the execution and delivery of this Indenture;

     NOW, THEREFORE, THIS INDENTURE WITNESSETH:

     For and in consideration of the premises and the purchase of the Notes by the Holders thereof,
it is mutually agreed by the Issuer and the Indenture Trustee, for the equal and proportionate
benefit of all Holders of the Notes, as follows:

ARTICLE 1

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATIONS

          Section 1.01. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or
unless the context otherwise requires:

     (a) the terms defined in this Article have the meanings assigned to them in this
Article and include the plural as well as the singular, and nouns and pronouns of the
masculine gender include the feminine and neuter genders;

     (b) the words “herein,” “hereof” and “hereunder” and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section, Exhibit or
other subdivision; and

     (c) the following terms have the meanings given to them in this Section 1.01(c):

     “Acceleration Additional Cash Amounts” has the meaning set forth in Section 5.02(b).

     “Acceleration Date” has the meaning set forth in Section 5.02(a).

     “Acceleration Event” has the meaning set forth in Section 5.02(a).

     “Act” has the meaning, with respect to any Holder, set forth in Section 1.04(a).

     “Adjustment Event” has the meaning set forth in Section 4.02.

     “Affiliate” of any specified Person means any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control with such specified Person. For the
purposes of this definition, “control” when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

 

 

     “Agent” means any Registrar, Paying Agent or co-Registrar.

     “Agent Members” has the meaning set forth in Section 2.13(j).

     “Anti-Takeover Rights” has the meaning set forth in Section 4.01(a)(iii).

     “Applicable Market Value” has the meaning set forth in Section 3.02 with respect to DSW Class
A Common Shares and the meaning set forth in Section 4.04 with respect to other Exchange Property.

     “Authorized Officer” means any of the Chairman of the Board of Directors; the President and
Chief Executive Officer; the Executive Vice President, Chief Financial Officer, Treasurer and
Secretary; the Executive Vice President and General Counsel and the Senior Vice President and
Controller of the Issuer.

     “Beneficial Owner” means, with respect to a Book-Entry Interest, a Person who is the
beneficial owner of such Book-Entry Interest as reflected on the books of DTC or on the books of a
Person maintaining an account with DTC (directly as a DTC Participant or as an indirect
participant, in each case in accordance with the rules of DTC).

     “Board of Directors” means the Board of Directors of the Issuer or a duly authorized committee
of the Board of Directors of the Issuer.

     “Board Resolution” means one or more resolutions of the Board of Directors, a copy of which
has been certified by the Secretary or an Assistant Secretary of the Issuer to have been duly
adopted by the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Indenture Trustee.

     “Book-Entry Interest” means a beneficial interest in a Global Note, registered in the name of
DTC or a nominee thereof, ownership and transfers of which shall be maintained and made through
book entries by DTC as described in Section 2.13.

     “Business Day” means any day other than a Saturday or Sunday or any other day on which banking
institutions and trust companies in New York City, New York are permitted or required by any
applicable law to close.

     “Cash Equivalents” means:

     (i) United States dollars;

     (ii) securities issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full faith and credit of the
United States is pledged in support thereof) having maturities of not more than six months from the
date of acquisition;

     (iii) certificates of deposit with maturities of six months or less from the date of the
acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and surplus in excess of
$500 million and a Thompson Bank Watch Rating of “B” or better;

2

 

     (iv) repurchase obligations with a term of not more than seven calendar days for underlying
securities of the types described in clause (ii) above entered into with any financial institution
meeting the qualifications specified in clause (iii) above;

     (v) commercial paper having the highest rating obtainable from Moody’s Investors Service, Inc.
or Standard & Poor’s Ratings Group and in each case maturing within six months after the date of
acquisition; and

     (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)-(v) of this definition.

     “Cash Exchange Amount” means either the Full Cash Exchange Amount or the Partial Cash Exchange
Amount.

     “Cash Merger” has the meaning set forth in Section 4.05(a).

     “Closing Price” has the meaning set forth in Section 3.02.

     “Collateral” has the meaning set forth in Section 1(a) of the Collateral Agreement.

     “Collateral Account” has the true meaning set forth in Section 6(d) of the Collateral
Agreement.

     “Collateral Agent” means HSBC Bank USA, National Association, as Collateral Agent under the
Collateral Agreement until a successor Collateral Agent shall have become such pursuant to the
applicable provisions of the Collateral Agreement, and thereafter “Collateral Agent” shall mean the
Person who is then the Collateral Agent thereunder.

     “Collateral Agreement” means the Collateral Agreement, dated as of August 16, 2006, among the
Issuer, as Pledgor, and the Indenture Trustee, as Collateral Agent, Indenture Trustee and
Securities Intermediary.

     “Collateral Event of Default” has the meaning set forth in Section 6(e) of the Collateral
Agreement.

     “Commission” means the Securities and Exchange Commission.

     “Corporate Trust Office” means the principal corporate trust office of the Indenture Trustee
at which, at any particular time, its corporate trust business shall be administered, which office
at the date hereof is located at 452 Fifth Avenue, New York, New York 10018, Attention: Corporate
Trust and Loan Agency.

     “Coupon Payment Date” means each March 15, June 15, September 15 and December 15 of each year,
commencing December 15, 2006.

     “Coupon Payments” means the payments payable by the Issuer on the Coupon Payment Dates in
respect of each Note, calculated based on the Coupon Rate and the Principal Amount of such Note.

     “Coupon Rate” means a rate per annum of 6.625%.

     “Coupon Record Date” means, with respect to any Coupon Payment payable on any Coupon Payment
Date, the date fifteen calendar days immediately preceding the relevant Coupon Payment Date.

3

 

     “Current Market Price” means, on any date of determination, the average of the daily Closing
Prices per DSW Class A Common Share for the ten consecutive Trading Days up to, but excluding, the
earlier of such date of determination and the day before the “ex date” with respect to the issuance
requiring such computation. For purposes of this definition, the term “ex date,” when used with
respect to any issuance, shall mean the first date on which DSW Class A Common Shares trade regular
way on the applicable exchange or in the applicable market from which such Closing Prices were
obtained without the right to receive such issuance.

     “Defaulted Coupon Payment” has the meaning set forth in Section 3.05(d).

     “Dilution Event” has the meaning set forth in Section 4.01(a).

     “DSW” means DSW Inc., an Ohio corporation.

     “DSW Class A Common Shares” means the Class A common shares of DSW, no par value per share.

     “DSW Class B Common Shares” means the Class B common shares of DSW, no par value per share.

     “DSW Offeror” has the meaning set forth in Section 4.02(iii).

     “DTC” means The Depository Trust Company, New York, New York, and any successor thereto.

     “DTC Custodian” means any Person appointed by the Issuer to act as custodian of the Global
Notes for DTC.

     “DTC Participant” means a broker, dealer, bank, other financial institution or other Person
for whom from time to time DTC effects book entry transfers and pledges of securities deposited
with DTC.

     “Early Exchange” means the exchange of all Outstanding Notes as the result of an Acceleration
Event or a Merger Early Full Exchange.

     “Event of Default” has the meaning set forth in Section 5.01.

     “Exchange Act” means the Securities Exchange Act of 1934, and any statute successor thereto,
in each case as amended from time to time, together with the rules and regulations promulgated
thereunder.

     “Exchange Date” means the Maturity Date, any Acceleration Date or any Merger Early Exchange
Date with respect to a Merger Early Full Exchange.

     “Exchange Number” equals the product of the Exchange Ratio and a fraction, the numerator of
which will be the aggregate Principal Amount of the Outstanding Notes and the denominator of which
will be $50.

     “Exchange Property” means the type of property, whether DSW Class A Common Shares, cash or
other property, deliverable upon exchange of the Notes.

     “Exchange Ratio” has the meaning set forth in Section 3.02.

4

 

     “Existing Exchange Property” has the meaning set forth in Section 4.02(iv)(A).

     “Exchange Request” means the irrevocable instruction by the Issuer to DSW, dated August 16,
2006, to exchange DSW Class B Common Shares for DSW Class A Common Shares pursuant to the
provisions therein, such Exchange Request having been made pursuant to the Exchange Agreement,
dated as of July 5, 2005 by and between the Pledgor and DSW.

     “Expiration Date” has the meaning set forth in Section 1.04(e).

     “Full Cash Exchange Amount” has the meaning set forth in Section 3.03(a).

     “Global Note” means a Note in the form of Exhibit A that evidences all or any number of the
Notes and is registered in the name of DTC or a nominee thereof.

     “Holder” means, with respect to a Note, the Person in whose name the Note is registered in the
Note Register; provided, however, that in determining whether the Holders of the requisite
aggregate Principal Amount of Notes have voted on any matter, then for the purpose of such
determination only (and not for any other purpose hereunder), if the Note remains in the form of
one or more Global Notes and if DTC is the registered holder of such Global Note and has sent an
omnibus proxy assigning voting rights to DTC Participants to whose accounts the Notes are credited
on the record date, the term “Holder” shall mean such DTC Participant acting at the direction of
the Beneficial Owners.

     “Indenture” means this instrument as originally executed or as it may from time to time be
supplemented or amended by one or more agreements supplemental hereto entered into pursuant to the
applicable provisions hereof.

     “Indenture Trustee” means the Person named as the “Indenture Trustee” in the first paragraph
of this Indenture until a successor Indenture Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter “Indenture Trustee” shall mean such Person.

     “Initial Price” has the meaning set forth in Section 3.02.

     “Issue Date” means August 16, 2006.

     “Issuer” means the Person named as the “Issuer” in the first paragraph of this Indenture until
a successor shall have become such pursuant to the applicable provision of this Indenture, and
thereafter “Issuer” shall mean such successor.

     “Issuer Order” or “Issuer Request” means a written order or request signed in the name of the
Issuer by one of its Authorized Officers and delivered to the Indenture Trustee.

     “Market Disruption Event” has the meaning set forth in Section 3.02.

     “Marketable Security” has the meaning set forth in Section 4.04.

     “Maturity Date” means September 15, 2011.

     “Maximum Deliverable Number” has the meaning set forth in Section 2 of the Collateral
Agreement.

     “Merger Cash Consideration” has the meaning set forth in Section 4.05(a).

5

 

     “Merger Early Exchange” means a Merger Early Partial Exchange or a Merger Early Full Exchange,
as the case may be.

     “Merger Early Exchange Additional Cash Amounts” has the meaning set forth in Section 4.05(f).

     “Merger Early Exchange Cash Amount” has the meaning set forth in Section 4.05(d).

     “Merger Early Exchange Date” has the meaning set forth in Section 4.05(c).

     “Merger Early Full Exchange” has the meaning set forth in Section 4.05(a).

     “Merger Early Partial Exchange” has the meaning set forth in Section 4.05(a).

     “Merger Market Value” has the meaning set forth in Section 4.05(e).

     “Note Register” means the register maintained by the Registrar that evidences ownership of the
Notes.

     “Notes” has the meaning set forth in the Recitals.

     “Notes Exchange Fund” has the meaning set forth in Section 3.04(a)(ii).

     “NYSE” has the meaning set forth in Section 3.02.

     “Officers’ Certificate” means a certificate signed by two Authorized Officers and delivered to
the Indenture Trustee.

     “Opinion of Counsel” means a written opinion of counsel, who may be (i) counsel to the Issuer
(and who may be an employee of the Issuer), in which case such counsel shall be reasonably
acceptable to the Indenture Trustee or (ii) counsel to the Indenture Trustee (and who may be an
employee of the Indenture Trustee), in which case such counsel shall be reasonably acceptable to
the Issuer. An opinion of counsel may rely on certificates as to matters of fact.

     “Outstanding Notes” has the meaning set forth in Section 2.10(a).

     “Partial Cash Exchange Amount” has the meaning set forth in Section 3.03(b).

     “Paying Agent” has the meaning set forth in Section 2.04(a).

     “Person” means a legal person, including any individual, corporation, estate, partnership,
joint venture, association, joint-stock company, limited liability company, trust, unincorporated
organization or government or any agency or political subdivision thereof or any other entity of
whatever nature.

     “Pledge” means the pledge under the Collateral Agreement of DSW Class B Common Shares or other
Collateral to secure the obligations of the Issuer under the Notes.

     “Pledged Shares” has the meaning set forth in Section 2 of the Collateral Agreement.

     “Predecessor Note” of any particular Note means every previous Note evidencing all or a
portion of the same debt as that evidenced by such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under Section 2.08 in exchange for or in lieu of a
mutilated,

6

 

destroyed, lost or stolen Note shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Note.

     “Present Value” of any amount on any date means the discounted value of such amount calculated
based on an interest rate equal to (i) (x) for any period of twelve months or less, the
USD-LIBOR-BBA interest rate or (y) for any period greater than twelve months, the “offer side” U.S.
dollar swap rate, in effect on such date, in each case, that has a designated maturity that
corresponds most closely to, but is longer than, the period from, and including, such date to, but
excluding, the Maturity Date, plus (ii) 1.00%.

     “Principal Amount” of a Note means the stated Principal Amount as set forth on the face of
such Note.

     “Proceeds” has the meaning set forth in Section 1(a) of the Collateral Agreement.

     “Registrar” has the meaning set forth in Section 2.04(a).

     “Reorganization Event” has the meaning set forth in Section 4.03.

     “Required Holders” has the meaning set forth in Section 5.01(a)(iii).

     “Responsible Officer”, when used with respect to the Indenture Trustee, means any officer
within the corporate trust department (or any successor group) who shall have direct responsibility
for the administration of this Indenture and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.

     “Securities Act” means the Securities Act of 1933, and any statute successor thereto, in each
case as amended from time to time, together with the rules and regulations promulgated thereunder.

     “Significant Subsidiary” means any subsidiary that would be a “Significant Subsidiary” within
the meaning of Rule 1-02 under Regulation S-X promulgated by the Commission.

     “Special Coupon Record Date” has the meaning set forth in Section 3.05(d)(1).

     “Threshold Appreciation Price” has the meaning set forth in Section 3.02.

     “Trading Day” has the meaning set forth in Section 3.02.

     “Trust Indenture Act” means the Trust Indenture Act of 1939, and any statute successor
thereto, in each case as amended form time to time, together with the rules and regulations
promulgated thereunder.

     “Underwriter” means Lehman Brothers Inc.

     “Underwriting Agreement” means the Underwriting Agreement, dated as of August 10, 2006, among
the Issuer, DSW and the Underwriter.

     “Volume Weighted Average Price” has the meaning set forth in Section 3.02.

          Section 1.02. Compliance Certificates and Opinions. Except as otherwise expressly provided by
this Indenture, upon any application or request by the Issuer to the Indenture Trustee to take

7

 

any action in accordance with any provision of this Indenture, the Issuer shall furnish to the
Indenture Trustee an Officers’ Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with and, if requested by
the Indenture Trustee, an Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.

     Every certificate or opinion with respect to compliance with a condition or covenant provided
for in this Indenture shall include:

     (i) a statement that each individual signing such certificate or opinion has read such
covenant or condition and the definitions herein relating thereto;

     (ii) a brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion are based;

     (iii) a statement that, in the opinion of each such individual, he or she has made such
examination or investigation as is necessary to enable such individual to express an
informed opinion as to whether or not such covenant or condition has been complied with; and

     (iv) a statement as to whether, in the opinion of each such individual, such condition
or covenant has been complied with.

          Section 1.03. Form of Documents Delivered to Indenture Trustee. In any case where several matters are
required to be certified by, or covered by an opinion of, any specified Person, it is not necessary
that all such matters be certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to other matters, and
any such Person may certify or give an opinion as to such matters in one or several documents. Any
certificate or opinion of an officer of the Issuer may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an officer or officers of
the Issuer stating that the information with respect to such factual matters is in the possession
of the Issuer unless such counsel knows, or in the exercise of reasonable care should know, that
the certificate or opinion or representations with respect to such matters are erroneous.

     Where any Person is required to make, give or execute two or more applications, requests,
consents, certificates, statements, opinions or other instruments under this Indenture, they may,
but need not, be consolidated and form one instrument.

          Section 1.04. Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken by Holders may be
embodied in and evidenced by one or more instruments of substantially similar tenor signed by such
Holders in person or by an agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee and, where it is hereby expressly required, to the Issuer. Such
instrument or instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the “Act” of the Holders signing such instrument or instruments. Proof of
execution of any

8

 

such instrument or of a writing appointing any such agent shall be sufficient for any purpose
of this Indenture and (subject to Section 7.01) conclusive in favor of the Indenture Trustee and
the Issuer, if made in the manner provided in this Section 1.04.

     (b) The fact and date of the execution by any Person of any such instrument or writing may be
proved in any manner which the Indenture Trustee deems sufficient.

     (c) The ownership of Notes shall be proved by the Registrar upon review of the Note Register.

     (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the
Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note
issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in
reliance thereon, whether or not notation of such action is made upon such Note.

     (e) The Issuer may set any date as a record date for the purpose of determining the Holders of
Outstanding Notes entitled to give, make or take any request, demand, authorization, direction,
notice, consent, waiver or other action provided or permitted by this Indenture to be given, made
or taken by Holders of Notes. If any record date is set pursuant to this Section 1.04(e), the
Holders of the Outstanding Notes on such record date, and no other Holders, shall be entitled to
take the relevant action with respect to the Notes, whether or not such Holders remain Holders
after such record date; provided that no such action shall be effective hereunder unless taken
prior to or on the applicable Expiration Date by Holders of the requisite Principal Amount of
Outstanding Notes on such record date. Nothing contained in this paragraph shall be construed to
prevent the Issuer from setting a new record date for any action for which a record date has
previously been set pursuant to this Section 1.04(e) (whereupon the record date previously set
shall automatically and with no action by any Person be cancelled and be of no effect), and nothing
contained in this Section 1.04(e) shall be construed to render ineffective any action taken by
Holders of the requisite Principal Amount of Outstanding Notes on the date such action is taken.
Promptly after any record date is set pursuant to this Section 1.04(e), the Issuer, at its own
expense, shall cause notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Indenture Trustee in writing and to each Holder of Notes in the
manner set forth in Section 1.06.

     With respect to any record date set pursuant to this Section 1.04, the Issuer may designate
any date as the “Expiration Date” and from time to time may change the Expiration Date to any
earlier or later day; provided that no such change shall be effective unless notice of the proposed
new Expiration Date is given to the Indenture Trustee in writing, and to each Holder of Notes in
the manner set forth in Section 1.06, prior to or on the existing Expiration Date. Notwithstanding
the foregoing, no Expiration Date shall be later than the 180th day after the applicable record
date.

          Section 1.05. Notices. Any notice or communication to any Person listed below is duly given if in writing
and delivered in person or mailed by first-class mail (registered or certified, return receipt
requested), telecopier (with receipt confirmed) or overnight air courier guaranteeing next day
delivery, to such Person’s address specified below:

     If to the Indenture Trustee or Collateral Agent:

HSBC Bank USA, National Association

452 Fifth Avenue

New York, New York 10018

9

 

Fax: 212-525-1300

Attention: Corporate Trust and Loan Agency

     If to the Issuer:

Retail Ventures, Inc.

3241 Westerville Road

Columbus, Ohio 43224

Fax: 614-473-2721

Attention: James A. McGrady

Executive Vice President, Chief Financial Officer,

Treasurer and Secretary

     with a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Fax: 917-777-2588

Attn: Robert M. Chilstrom

          Section 1.06. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid, to each Holder affected by such event, at its address as
it appears in the Note Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to Holders is given by
mail, neither the failure to mail such notice, nor any defect in any notice so mailed to any
particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where
this Indenture provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture
Trustee, but such filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

     In case by reason of the suspension of regular mail service or by reason of any other cause it
shall be impracticable to give such notice by mail, then such notification as shall be made with
the written approval of the Indenture Trustee shall constitute a sufficient notification for every
purpose hereunder.

          Section 1.07. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts
with the duties imposed by any of Sections 310 through 317, inclusive, of the Trust Indenture Act
through the operation of Section 318(c) thereof, such imposed duties shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may
be so modified or excluded, the provision shall be deemed to apply to this Indenture as so modified
or excluded, as the case may be.

          Section 1.08. Effect of Headings and Table of Contents. The Article and Section headings herein and in the
Table of Contents are for convenience only and shall not affect the construction hereof.

          Section 1.09. Successors and Assigns. All covenants and agreements in this Indenture by the Issuer and the
Indenture Trustee shall bind their respective successors and assigns, whether so expressed or not.

10

 

          Section 1.10.
Separability Clause. In case any provision in this Indenture or in the
Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions hereof and thereof shall not in any way be affected or impaired thereby.

          Section 1.11.
Benefits of Indenture. Nothing contained in this Indenture or in the Notes,
express or implied, shall give to any Person, other than the parties hereto and their successors
hereunder and, to the extent provided hereby, the Holders, any benefits or any legal or equitable
right, remedy or claim under this Indenture. The Holders from time to time shall be beneficiaries
of this Indenture and shall be bound by all of the terms and conditions hereof and of the Notes by
their acceptance of delivery of such Notes.

          Section 1.12.
Governing Law. This Indenture and the Notes shall be governed by, and
construed in accordance with, the laws of the State of New York.

          Section 1.13.
Waiver of Jury Trial.  EACH OF THE ISSUER AND THE TRUSTEE HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO EACH OF THIS INDENTURE OR THE NOTES.

     Nothing in this Section 1.13 shall affect the right of any party hereto to serve process in
any manner permitted by law, or limit any right to bring proceedings against any other party hereto
in the courts of any jurisdiction or to enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction.

          Section 1.14.
Legal Holidays.  In any case where any Coupon Payment Date or Merger Early
Exchange Date with respect to a Merger Early Partial Exchange, if applicable, shall not be a
Business Day, notwithstanding any other provision of this Indenture or the Notes, Coupon Payments
or the Merger Early Exchange Cash Amount or Merger Early Exchange Additional Cash Amounts, as the
case may be, shall not be paid on such date, but shall be paid on the next succeeding Business Day
with the same force and effect as if made on such Coupon Payment Date or Merger Early Exchange
Date, as the case may be, provided that no interest shall accrue or be payable by the Issuer or to
any Holder with respect to such payments for the period from and after any such Coupon Payment Date
or Merger Early Exchange Date, as the case may be.

     If any Exchange Date is not a Business Day, notwithstanding any other provision of this
Indenture or the Notes, the Notes shall not be exchanged on such Exchange Date, but shall be
exchanged on the next succeeding Business Day with the same force and effect as if made on such
Exchange Date, provided that no interest shall accrue or be payable by the Issuer or to any Holder
for the period from and after any such Exchange Date.

          Section 1.15. Counterparts. This Indenture may be executed in any number of counterparts by the parties hereto on
separate counterparts, each of which, when so executed and delivered, shall be deemed an original,
but all such counterparts shall together constitute one and the same instrument.

          Section 1.16. Inspection of Indenture. A copy of this Indenture shall be available at all reasonable times during normal business
hours at the Corporate Trust Office for inspection by any Holder.

          Section 1.17. No Recourse Against Others. No director, officer, employee, incorporator or shareholder of the Issuer, as such, shall
have any liability for any obligations of the Issuer under the 

11

 

Notes or this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of
the Notes by accepting a Note waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Notes.

          Section 1.18. Issuer Responsible for Making Calculations. The Issuer will be responsible for making all calculations and determinations called for under
this Indenture. These calculations and determinations, include, but are not limited to,
determination of the Volume Weighted Average Prices of DSW Class A Common Shares, the Applicable
Market Value, the Exchange Ratio, whether a Cash Merger has occurred, whether adjustments to the
Exchange Ratio, Initial Price, Threshold Appreciation Price or Applicable Market Value are required
under this Indenture, the amount of the Coupon Payments payable on the Notes and the amount of the
Merger Early Exchange Cash Amount, Merger Early Exchange Additional Cash Amounts or Acceleration
Additional Cash Amounts, if applicable. The Issuer or its agent will make these calculations and
determinations in good faith, and, absent manifest error, such calculations and determinations will
be final and binding on the Holders, and the Indenture Trustee shall have no responsibility with
respect thereto. In addition to the requirements of Section 4.06(a), the Issuer will provide a
schedule of these calculations and determinations to the Indenture Trustee, and the Indenture
Trustee shall be entitled to rely upon the accuracy of these calculations without independent
verification thereof. The Indenture Trustee will forward these calculations and determinations to
any Holder upon the written request of such Holder.

          Section 1.19. Issuer-owned Notes Disregarded. In determining whether the Holders of the requisite aggregate Principal Amount of Notes
have concurred in any direction, consent, waiver or other action under this Indenture, Notes which
are owned by the Issuer or any Affiliate of the Issuer (including DSW) shall be disregarded and
deemed not to be outstanding for the purpose of any such determination; provided that for the
purposes of determining whether the Indenture Trustee shall be protected in relying on any such
direction, consent, waiver or other action, only Notes which a Responsible Officer actually knows
are so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 1.19 if the pledgee shall establish to the
satisfaction of the Indenture Trustee the pledgee’s right to vote such Notes and that the pledgee
is not the Issuer or any Affiliate of the Issuer (including DSW). In the case of a dispute as to
such right, any decision by the Indenture Trustee taken upon the advice of counsel shall be full
protection to the Indenture Trustee. Upon request of the Indenture Trustee, the Issuer shall
furnish to the Indenture Trustee promptly an Officers’ Certificate listing and identifying all
Notes, if any, known by the Issuer to be owned or held by or for the account of the Issuer or any
Affiliate of the Issuer (including DSW), and, subject to this Section 1.19, the Indenture Trustee
shall be entitled to accept such Officers’ Certificate as conclusive evidence of the facts therein
set forth and of the fact that all Notes not listed therein are outstanding for the purpose of any
such determination.

ARTICLE 2

FORM AND ADMINISTRATION OF THE NOTES

          Section 2.01. Form of Notes Generally; Denomination. (a) The Notes shall be in substantially the form set forth in Exhibit A hereto, which
Exhibit is incorporated in and made part of this Indenture. The Notes may have notations, legends
or endorsements required by law, stock exchange rule or usage. The Issuer and the Indenture
Trustee shall approve the form of the Notes and any such notations, legends or endorsements on
them.

     (b) The aggregate Principal Amount of the Outstanding Notes at any time may not exceed
$125,000,000 ($143,750,000 if the Underwriter exercises in full its option to purchase additional
Notes

12

 

pursuant to the Underwriting Agreement). The Notes shall be issuable only in registered form
without coupons in denominations of $50 and any integral multiple thereof.

          Section 2.02. Dating. Each Note shall be dated the date of its authentication. The Indenture Trustee’s
certificate of authentication shall be substantially in the form set forth in Exhibit A, which
Exhibit is incorporated in and made part of this Indenture.

          Section 2.03. Execution and Authentication. (a) One Authorized Officer who shall have been duly authorized to sign by all requisite
corporate actions shall sign the Notes for the Issuer by manual or facsimile signature.

     (b) If an Authorized Officer whose signature is on a Note was an Authorized Officer at the
time of such execution but no longer holds that office at the time the Indenture Trustee
authenticates the Note, the Note shall be valid nevertheless.

     (c) A Note shall not be valid until an authorized signatory of the Indenture Trustee manually
signs the certificate of authentication on such Note. The signature shall be conclusive evidence
that the Note has been authenticated under this Indenture.

     (d) The Indenture Trustee shall authenticate the Notes for original issue in an aggregate
Principal Amount not to exceed the amount specified in the Issuer Order. In addition, the Issuer
Order shall specify the date on which the Notes are to be authenticated and such other information
as the Indenture Trustee may reasonably request.

     (e) All Notes issued under this Indenture shall vote and consent together on all matters as to
which any of such Notes may vote or consent as one class and no series of Notes will have the right
to vote or consent as a separate class on any matter.

     (f) The Indenture Trustee may appoint an authenticating agent reasonably acceptable to the
Issuer to authenticate the Notes. Unless otherwise provided in the appointment, an authenticating
agent may authenticate the Notes whenever the Indenture Trustee may do so. Each reference in this
Indenture to authentication by the Indenture Trustee includes authentication by such agent. An
authenticating agent shall have the same rights as an Agent to deal with the Issuer and any
Affiliate of the Issuer.

          Section 2.04. Registrar and Paying Agent. (a) The Issuer shall maintain an office or agency in New York City, New York where:

     (i) the Notes may be presented or surrendered for registration of transfer or for
exchange (the Person performing such functions at such office or
agency, the “Registrar”),

     (ii) the Notes may be presented or surrendered for payment (the Person performing such
functions at such office or agency, the “Paying Agent”), and

     (iii) notices and demands in respect of the Notes and this Indenture may be served.

The Issuer, upon notice to the Indenture Trustee, may appoint one or more co-Registrars and one or
more additional Paying Agents. Except as provided herein, the Issuer may act as a Paying Agent,
Registrar or co-Registrar.

     (b) The Issuer shall enter into an appropriate agency agreement with any Agent not party to
this Indenture. The agreement shall implement the provisions of this Indenture that relate to such
Agent.

13

 

The Issuer shall notify the Indenture Trustee of the name and address of any such Agent. If
the Issuer fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice,
the Indenture Trustee shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.06.

     (c) The Issuer initially appoints the Indenture Trustee as Registrar and Paying Agent until
such time as the Indenture Trustee has resigned or a successor has been appointed.

          Section 2.05. Paying Agent to Hold Monies in Trust. (a) The Issuer shall require each Paying Agent other than the Indenture Trustee to agree
in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the
Indenture Trustee all monies held by the Paying Agent for the payment of Coupon Payments on the
Notes, the Cash Exchange Amount, if applicable, the Merger Early Exchange Cash Amount and Merger
Early Exchange Additional Cash Amounts, if applicable, and the Acceleration Additional Cash
Amounts, if applicable, and the Paying Agent shall notify the Indenture Trustee of any default by
the Issuer in making any such payment. The Issuer at any time may require any Paying Agent to
distribute all monies held by it to the Indenture Trustee and account for any monies disbursed, and
the Indenture Trustee may at any time during the continuance of any payment default, upon written
request to any Paying Agent, require such Paying Agent to distribute all monies held by it to the
Indenture Trustee and to account for any assets distributed. Upon distribution to the Indenture
Trustee of all monies that shall have been delivered by the Issuer to the Paying Agent (if other
than the Issuer), the Paying Agent shall have no further liability for such monies.

     (b) If the Issuer or any of its Affiliates acts as Paying Agent, the Issuer or such Affiliate
of the Issuer, as the case may be, shall, on or before each Coupon Payment Date, Exchange Date, if
applicable, or Merger Early Exchange Date, if applicable, segregate and hold in trust for the
benefit of the Holders of Notes a sum sufficient to pay the Coupon Payments on the Notes, the Cash
Exchange Amount, if applicable, or the Merger Early Exchange Cash Amount and the Merger Early
Exchange Additional Cash Amounts, if applicable, or the Acceleration Additional Cash Amounts, if
applicable, so becoming due until such sums shall be paid to such Holders of Notes and will
promptly notify the Indenture Trustee of any failure to take such action or of any failure by the
Issuer to pay any Coupon Payment on the Coupon Payment Date, the Cash Exchange Amount on the
Exchange Date, if applicable, or the Merger Early Exchange Cash Amount or Merger Early Exchange
Additional Cash Amounts on the Merger Early Exchange Date, if applicable, or the Acceleration
Additional Cash Amounts as soon as practicable on or after the Acceleration Date, if applicable,
when the same shall become due and payable.

          Section 2.06. Holder Lists and Notices to Holders. The Indenture Trustee shall preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of Holders. If the Indenture Trustee
is not the Registrar, the Issuer shall furnish to the Indenture Trustee before each Coupon Record Date
and at such other times as the Indenture Trustee may request in writing a list as of such date and
in such form as the Indenture Trustee may reasonably require of the names and addresses of the
Holders, which list may be conclusively relied upon by the Indenture Trustee. Whenever a notice or
other communication to the Holders is required to be given under this Indenture, the Issuer or the
Issuer’s agent shall give such notices and communications to the Holders and, with respect to any
Notes registered in the name of DTC or the nominee of DTC, the Issuer or the Issuer’s agent shall,
except as set forth herein, have no obligations to the Beneficial Owners.

          Section 2.07. Transfer and Exchange. (a) Subject to Section 2.13, upon surrender for registration of transfer of any Note,
together with a written instrument of transfer satisfactory to the Registrar duly executed by the
Holder or such Holder’s attorney duly authorized in writing, at the office or agency of the
Registrar or co-Registrar, the Issuer shall execute, and the Indenture Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one or more new Notes of any
authorized denomination or denominations, of like tenor and aggregate Principal Amount. No

14

 

transfer of a Note to any Person shall be effective under this Indenture unless and until such Note
has been registered in the name of such Person.

     (b) Notwithstanding any provision to the contrary herein, so long as a Global Note remains
outstanding and is held by or on behalf of DTC, transfers of a Global Note, in whole or in part,
shall be made only in accordance with Section 2.13 and this Section 2.07.

     (c) Successive registrations of transfers and exchanges as aforesaid may be made from time to
time as desired, and each such registration shall be noted on the Note Register.

     (d) Any Registrar appointed pursuant to Section 2.04 shall provide to the Indenture Trustee
such information as the Indenture Trustee may reasonably require in connection with the delivery by
such Registrar of Notes upon transfer or exchange of Notes.

     (e) No Registrar shall be required to make registrations of transfer or exchange of Notes
during any period designated in the text of the Notes or in this Indenture as a period during which
such registration of transfers and exchanges need not be made.

     (f) The Issuer shall not charge a service charge for any registration of transfer or exchange,
but the Issuer or the Indenture Trustee may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges that may be imposed in connection with the transfer or
exchange of the Notes from the Holder requesting such transfer or exchange.

     (g) The Issuer and any of its Affiliates (including DSW) may from time to time, to the extent
permitted by law, purchase any of the Notes that are then outstanding by tender, in the open market
or by private agreement. Any Notes purchased by the Issuer will be cancelled in accordance with
Section 2.12.

          Section 2.08. Replacement Notes. (a) If (i) any mutilated Note is surrendered to the Indenture Trustee or (ii) the Issuer
and the Indenture Trustee receive evidence to their satisfaction of the destruction, loss or theft
of any Note, and there is delivered to the Issuer and the Indenture Trustee such security or
indemnity as may be required by them to save each of them harmless, then, in the absence of notice
to the Issuer or the Indenture Trustee that such Note has been acquired by a protected purchaser,
the Issuer shall execute and upon its written
request the Indenture Trustee shall authenticate and deliver, in exchange for any such
mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and
Principal Amount, bearing a number not contemporaneously outstanding.

     (b) Upon the issuance of any new Note under this Section 2.08, the Issuer may require the
payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the Indenture Trustee)
connected therewith.

     (c) Every new Note issued pursuant to this Section 2.08 in lieu of any mutilated, destroyed,
lost or stolen Note shall constitute an original additional obligation of the Issuer, whether or
not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately with any and all
other Notes duly issued and outstanding hereunder.

     (d) The provisions of this Section 2.08 are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Notes.

15

 

          Section 2.09. Delivery of Exchange Property (or the Cash Exchange Amount) in Lieu of
Transfer, Exchange or Replacement of Notes. Notwithstanding the foregoing, the Issuer shall not be obligated to execute and deliver to
the Indenture Trustee, and the Indenture Trustee shall not be obligated to authenticate, execute on
behalf of the Holder or deliver any Note (x) in exchange for any other Note presented or
surrendered for registration of transfer or for exchange or (y) as replacement for a mutilated,
destroyed, lost or stolen Note on or after the Business Day immediately preceding any Exchange
Date. In lieu of delivery of a new Note, upon satisfaction of the applicable conditions specified
above in this Section 2.09 and receipt of appropriate registration or transfer instructions from
such Holder, the Indenture Trustee shall, if such Exchange Date has occurred, deliver the DSW Class
A Common Shares, other Exchange Property or the Cash Exchange Amount, if applicable, deliverable in
respect of the Notes.

          Section 2.10. Outstanding Notes; Determinations of Holders’ Actions. (a) Notes outstanding at any time (the “Outstanding Notes”) are all the Notes
authenticated by the Indenture Trustee except for those cancelled by it, those delivered to it for
cancellation, those delivered to it pursuant to Section 2.08 and those described in this Section
2.10 as not outstanding.

     (b) If a Note is replaced pursuant to Section 2.08, it ceases to be outstanding unless the
Indenture Trustee receives proof satisfactory to it that the replaced Note is held by a protected
purchaser.

     (c) If a Note is exchanged or paid in full in accordance with Article 3, then from and after
the time of exchange on the Exchange Date, such Note shall cease to be outstanding and interest
shall cease to accrue on such Note.

          Section 2.11. Temporary Notes. Pending the preparation of definitive Notes, the Issuer may execute, and upon Issuer Order
the Indenture Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are issued and with such
appropriate insertions,
omissions, substitutions and other variations as the officers executing such Notes may
determine, as conclusively evidenced by their execution of such Notes.

     If temporary Notes are issued, the Issuer will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be
exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of
the Registrar, without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes the Issuer shall execute and the Indenture Trustee shall authenticate and deliver
in exchange therefor a like Principal Amount of definitive Notes of authorized denominations. Until
so exchanged the temporary Notes shall in all respects be entitled to the same benefits under this
Indenture as definitive Notes.

          Section 2.12. Cancellation. All Notes surrendered for exchange or registration of transfer or exchange shall, if
surrendered to any person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by it. All Notes purchased by the Issuer will be immediately
cancelled and no longer outstanding, and collateral securing such Notes may be released to the
Issuer. Any Notes purchased by Affiliates of the Issuer may not be resold, except in accordance
with the securities laws. The Issuer may not issue new Notes to replace Notes it has paid or
delivered to the Indenture Trustee for cancellation or Notes that any Holder has exchanged pursuant
to Article 3. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as
provided in this Section 2.12, except as expressly permitted by this Indenture. All cancelled
Notes held by the Indenture Trustee shall be disposed of by the Indenture Trustee in accordance
with its customary practice.

          Section 2.13. Book-Entry System. (a) All of the Notes shall be deposited on behalf of the holders of the Notes represented
thereby with the Indenture Trustee or any DTC Custodian, as

16

 

custodian for DTC, and registered in
the name of its nominee, Cede & Co., duly executed by the Issuer and authenticated by the Indenture
Trustee.

     (b) Each Global Note shall represent such of the Outstanding Notes as shall be specified
therein and each shall provide that it shall represent the aggregate Principal Amount of the
Outstanding Notes from time to time endorsed thereon and that the aggregate Principal Amount of the
Outstanding Notes represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges of such Notes. Any endorsement of a Global Note to reflect the
amount of any increase or decrease in the Principal Amount of the Outstanding Notes represented
thereby shall be made by the Indenture Trustee or DTC Custodian in accordance with the standing
instructions and procedures existing between the Indenture Trustee and DTC Custodian.

     (c) Definitive Notes shall be issued only under the limited circumstances provided in Section
2.13(f). Unless and until definitive, fully registered Notes have been issued to Beneficial Owners
pursuant to Section 2.13(f):

     (i) the provisions of this Section 2.13 shall be in full force and effect;

     (ii) except as contemplated in the definition of “Holders” in Section 1.01(c), the
Issuer shall be entitled to deal with DTC for all purposes of this Indenture (including
making Coupon Payments and receiving approvals, votes or consents hereunder) as the Holder
of the Notes and the sole Holder of the Global Notes and shall have no obligation to the
Beneficial Owners;

     (iii) to the extent that the provisions of this Section 2.13 conflict with any other
provisions of this Indenture, the provisions of this Section 2.13 shall control; and

     (iv) the rights of the Beneficial Owners shall be exercised only through DTC and shall
be limited to those established by law and agreements between such Beneficial Owners and DTC
or DTC Participants.

     (d) If DTC elects to discontinue its services as securities depositary with respect to the
Global Notes, the Issuer may, in its sole discretion, appoint a successor Depositary with respect
to the Global Notes.

     (e) Notwithstanding any other provisions of this Indenture or the Notes, transfers of a Global
Note shall be made in accordance with Section 2.07 and this Section 2.13. A Global Note may only be
transferred in whole and only to DTC or a nominee or any successor thereof, and no such transfer to
any such other Person may be registered; provided that this clause (e) shall not prohibit any
transfer of a Note that is issued in exchange for a Global Note but is not itself a Global Note.

     (f) Notwithstanding any other provisions of this Indenture or the Notes, a Global Note shall
not be exchanged in whole or in part for a Note registered in the name of any Person other than DTC
or one or more nominees thereof; provided that a Global Note may be exchanged for Notes registered
in the names of any person designated by DTC in the event that:

     (i) DTC has notified the Issuer that it is unwilling or unable to continue as
Depositary for such Global Note and a successor Depositary is not appointed by the Issuer
within 90 calendar days;

17

 

     (ii) DTC ceases to be a clearing agency registered under the Exchange Act and a
successor Depositary is not appointed by the Issuer within 90 calendar days;

     (iii) the Issuer decides in its sole discretion that such Global Note will be
exchangeable for definitive Notes in registered form and notifies the Indenture Trustee of
such decision; or

     (iv) an Event of Default has occurred and is continuing with respect to the Notes
represented by such Global Note.

Any Global Note exchanged pursuant to clause (i) above shall be so exchanged in whole and not in
part, and any Global Note exchanged pursuant to clause (iii) above may be exchanged in whole or
from time to time in part as directed by DTC. Any Note issued in exchange for a Global Note or any
portion thereof shall be a Global Note; provided that any such Note so issued that is registered in
the name of a Person other than DTC, a successor Depositary or a nominee thereof shall not be a
Global Note.

     (g) Notes issued in exchange for a Global Note or any portion thereof shall be issued in
definitive, fully registered form, without coupons, shall have an aggregate Principal Amount equal
to that of such Global Note or portion thereof to be so exchanged and shall be registered in such
names and be in such authorized denominations as DTC shall designate. Any Global Note to be
exchanged in whole shall be surrendered by DTC to the Indenture Trustee or the Registrar. With
regard to any Global Note to be exchanged in part, either such Global Note shall be so surrendered
for exchange or, if the Indenture Trustee is acting as custodian for DTC or its nominee with
respect to such Global Note, the Principal Amount thereof shall be reduced, by an amount equal to
the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records
of the Indenture Trustee. Upon any such surrender or
adjustment, the Indenture Trustee shall authenticate and deliver the Note issuable on such
exchange to or upon the order of DTC or an authorized representative thereof.

     (h) Subject to the provisions of Section 2.13(j), the registered Holder may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this Indenture or the
Notes.

     (i) In the event of the occurrence of any of the events specified in Section 2.13(f), the
Issuer will promptly make available to the Indenture Trustee a reasonable supply of certificated
Notes in definitive, fully registered form, without coupons.

     (j) Neither
any member of DTC or any DTC Participant (collectively, the
“Agent Members”) nor
any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture
with respect to any Global Note registered in the name of DTC or any nominee thereof or under any
such Global Note. DTC or such nominee, as the case may be, may be treated by the Issuer, the
Indenture Trustee and any agent of the Issuer or the Indenture Trustee as the absolute owner and
Holder of such Global Note for all purposes whatsoever. Notwithstanding the foregoing and Section
2.14, with respect to any Global Note, nothing herein shall prevent the Issuer or the Indenture
Trustee or any agent of the Issuer or the Indenture Trustee from giving effect to any written
certification, proxy or other authorization furnished by DTC or such nominee, as the case may be,
or impair, as between DTC, its Agent Members and any other person on whose behalf an Agent Member
may act, the operation of customary practices of such Persons governing the exercise of the rights
of DTC or such nominee as Holder of such Global Note.

          Section 2.14. Persons Deemed Owners. Prior to due presentment of a Note for registration of transfer, the Issuer and the
Indenture Trustee, and any agent of the Issuer or the Indenture 

18

 

Trustee, may treat the Person in
whose name such Note is registered as the owner of the Outstanding Notes evidenced thereby, for the
purpose of receiving (i) Coupon Payments, DSW Class A Common Shares or other Exchange Property, or
the Cash Exchange Amount, if applicable, on any Exchange Date, (ii) the Merger Early Exchange Cash
Amount or Merger Early Exchange Additional Cash Amounts, if applicable, on the Merger Early
Exchange Date and (iii) the Acceleration Additional Cash Amounts, if applicable, as soon as
practicable on or after the Acceleration Date, the performance of the Notes and for all other
purposes whatsoever, notwithstanding any notice to the contrary, and neither the Issuer nor the
Indenture Trustee, nor any agent of the Issuer or the Indenture Trustee, shall be affected by
notice to the contrary.

          Section 2.15. CUSIP Numbers. The Issuer in issuing the Notes may use “CUSIP” numbers (if then generally in use), and, if
so, the Indenture Trustee shall use “CUSIP” numbers in notices of exchange as a convenience to
Holders; provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in any notice of
exchange and that reliance may be placed only on the other identification numbers printed on the
Notes. The Issuer will promptly notify the Indenture Trustee in writing of any change in the CUSIP
numbers.

          Section 2.16. Agreed Tax Treatment.
Each Note issued hereunder shall provide that the Issuer, and by its acceptance or acquisition
of a Note or beneficial interest therein, the Holder of, and any Person that acquires a beneficial
interest in,
such Note intend and agree to treat such Note as a variable prepaid forward contract rather
than as a debt instrument for all United States federal, state and local tax purposes.

ARTICLE 3

PAYMENT AND DELIVERY OBLIGATIONS UNDER THE NOTES

          Section 3.01. Initial Collateral for the Notes. (a) The Issuer agrees to perform its obligations under the Collateral Agreement, and shall
initially pledge, pursuant to the Collateral Agreement, the number of DSW Class B Common Shares
equal to the Maximum Deliverable Number to the Collateral Agent and grant to the Collateral Agent a
security interest in the right, title and interest of the Issuer in such DSW Class B Common Shares
for the benefit of the Holders, to secure the obligation of the Issuer under the Notes to deliver
DSW Class A Common Shares pursuant to Section 3.02 or the Cash Exchange Amount pursuant to Section
3.03. If the Underwriter exercises its option to purchase additional Notes pursuant to the
Underwriting Agreement, the Issuer shall pledge to the Collateral Agent, on the issue date of such
additional Notes, the number of additional DSW Class B Common Shares required in order that the
number of DSW Class B Common Shares in the Collateral Account shall equal the Maximum Deliverable
Number and grant the Collateral Agent a security interest therein as set forth in the preceding
sentence.

     (b) The Issuer shall have the right at any time, and from time to time, to substitute DSW
Class A Common Shares for DSW Class B Common Shares as Collateral under the Collateral Agreement,
so long as the aggregate number of DSW Class A Common Shares and DSW Class B Common Shares in the
Collateral Account shall at all times equal the Maximum Deliverable Number. For the avoidance of
doubt, the Issuer shall not have the right at any time to substitute DSW Class B Common Shares for
DSW Class A Common Shares as Collateral under the Collateral Agreement.

     (c) For the avoidance of doubt, prior to the delivery of DSW Class A Common Shares under the
Notes upon exchange pursuant to Section 3.02, such Notes shall not entitle the Holder of the Notes
to any of the rights of a holder of DSW Class A Common Shares or DSW Class B Common Shares,
including, without limitation, the right to vote or receive any dividends or other payments or to
consent or

19

 

to receive notice as a shareholder in respect of the meetings of shareholders or for the
election of directors of DSW or for any other matter, or any other rights whatsoever as a
shareholder of DSW; all such rights shall remain with the Issuer prior to the exchange of the Notes
into DSW Class A Common Shares.

          Section 3.02. Exchange at Maturity. The Issuer shall deliver, on the Maturity Date, in exchange for each $50 Principal Amount
of the Outstanding Notes as of the Maturity Date, a number of DSW Class A Common Shares (subject to
Section 3.03, Section 3.06 and Article 4) equal to the Exchange Ratio unless, prior to or on the
Maturity Date, there shall have occurred an Early Exchange.

     The “Exchange Ratio” in respect of each $50 Principal Amount of the Outstanding Notes is equal
to:

     (i) if the Applicable Market Value (as defined below) is greater than or equal to
$34.95 (the “Threshold Appreciation Price”), which is 27.50% above the initial price of
$27.41 (the “Initial Price”), 1.4306 DSW Class A Common Shares;

     (ii) if the Applicable Market Value is less than the Threshold Appreciation Price but
greater than the Initial Price, the quotient obtained by dividing $50 by the Applicable
Market Value, which is between 1.4306 and 1.8242 DSW Class A Common Shares; and

     (iii) if the Applicable Market Value is less than or equal to the Initial Price, 1.8242
DSW Class A Common Shares,

subject to adjustment as provided in Article 4 and rounded upward or downward to the nearest
1/10,000th of a share (or if there is not a nearest 1/10,000th of a share, to the next lower
1/10,000th of a share).

     The “Applicable Market Value” means the average of the Volume Weighted Average Prices per DSW
Class A Common Share during the 20 consecutive Trading Day period ending on the third Trading Day
immediately preceding the Maturity Date; provided, however, that (i) in connection with a Cash
Merger, Applicable Market Value shall mean Merger Market Value, as provided in Section 4.05(d);
(ii) upon an Acceleration Event, Applicable Market Value shall be as defined in Section 5.02(b);
(iii) following an Adjustment Event or Reorganization Event, Applicable Market Value shall be as
defined in Section 4.04 and (iv) following a Dilution Event, Applicable Market Value may be
adjusted as provided in Section 4.01(c).

     The “Volume Weighted Average Price” per DSW Class A Common Share on any date of determination
means:

     (i) if the DSW Class A Common Shares are listed for trading on the New York Stock
Exchange, Inc. (together with any successor thereto, the “NYSE”), the volume weighted
average price per DSW Class A Common Share on the NYSE on such date, as displayed on
Bloomberg key strokes “DSW Equity VAP” or any successor or replacement page;

     (ii) if the DSW Class A Common Shares are not listed for trading on the NYSE, the
volume weighted average price of DSW Class A Common Shares shall be determined by reference
to the Bloomberg Financial Markets page that reports such information with respect to DSW
Class A Common Shares for the national or regional securities exchange or association, the
Nasdaq Stock Market or the over-the-counter market that is the primary market for the
trading of DSW Class A Common Shares on such date; or

20

 

     (iii) if such information is not available on any Bloomberg Financial Markets page, the
Closing Price per share of DSW Class A Common Shares on such date.

     The “Closing Price” per DSW Class A Common Share on any date of determination means:

     (i) the closing sale price (or, if no closing sale price is reported, the last reported
sale price) per share on the NYSE on such date;

     (ii) if the DSW Class A Common Shares are not listed for trading on the NYSE on such
date, the closing sale price (or, if no closing sale price is reported, the last reported
sale price) per share as reported in the composite transactions for the principal United
States national or regional securities exchange or association on which the DSW Class A
Common Shares are so listed;

     (iii) if the DSW Class A Common Shares are not so listed on a United States national or
regional securities exchange or association, the last sale price per share as reported by
the Nasdaq Stock Market;

     (iv) if the DSW Class A Common Shares are not so reported, the last quoted bid price
for the DSW Class A Common Shares in the over-the-counter market as reported by Pink Sheets
LLC or similar organization; or

     (v) if such last quoted bid price is not available, the market value of DSW Class A
Common Shares as determined by a nationally recognized investment banking firm retained by
the Issuer for this purpose.

     The Closing Price will be determined without reference to extended or after hours trading.

     A “Trading Day” means a day during which:

     (i) trading in DSW Class A Common Shares generally occurs on the principal United
States national or regional securities exchange or association or over-the-counter market on
which DSW Class A Common Shares are listed or admitted to trading; and

     (ii) there is no Market Disruption Event.

     A “Market Disruption Event” means:

     (i) a failure by the principal United States national or regional securities exchange
or association or over-the-counter market on which DSW Class A Common Shares are listed or
admitted to trading to open for trading during its regular trading session; or

     (ii) the occurrence or existence, prior to 1:00 p.m. on any day during which trading
for DSW Class A Common Shares occurs for an aggregate one half hour period, of any
suspension or limitation imposed on trading (by reason of movements in price exceeding
limits permitted by the securities exchange or association or over-the-counter market or
otherwise) in DSW Class A Common Shares or in any options, contracts or future contracts
relating to DSW Class A Common Shares.

          Section 3.03. Cash Exchange Option. The Issuer may, by written notice to the Indenture Trustee and the Holders at any time on
or before the date that is 25 Business Days prior to the

21

 

Maturity Date, elect to deliver on the
Maturity Date in exchange for each $50 Principal Amount of the Outstanding Notes as of the Maturity
Date either:

     (a) an amount in cash equal to the product of the Applicable Market Value and the Exchange
Ratio (the “Full Cash Exchange Amount”); or

     (b) (i) an amount in cash equal to either (A) the product of the Applicable Market Value and
a portion of the Exchange Ratio or (B) a fixed dollar amount, in either case as set forth in the
written notice provided to Indenture Trustee (the “Partial
Cash Exchange Amount”), in each case in
lieu of the DSW Class A Common Shares (or, pursuant to Article 4, units of other Exchange Property)
to be delivered on the Maturity Date pursuant to Section 3.02, plus

     (ii) a number of DSW Class A Common Shares (or, pursuant to Article 4, units of other Exchange
Property) equal to in the case of (b)(i)(A), the remaining portion of the Exchange Ratio for which
cash delivery is not elected pursuant to the notice and in the case of (b)(i)(B), the quotient
obtained by dividing (I) (x) the product of the Applicable Market Value and the Exchange Ratio
minus (y) the Partial Cash Amount by (II) the Applicable Market Value.

          Section 3.04. Delivery upon Exchange of the Notes.

     (a) Unless an Early Exchange shall have occurred,

     (i) if the Issuer has not previously substituted a number of DSW Class A Common Shares
equal to the Maximum Deliverable Number of DSW Class A Common Shares for DSW Class B Common
Shares as Collateral pursuant to Section 3.01(b), on the third Business Day prior to the
Maturity Date, pursuant to the Collateral Agreement, the Collateral Agent shall, pursuant to
Section 6(h)(ii) of the Collateral Agreement, deliver to the Indenture Trustee the
certificate(s) representing the DSW Class B Common Shares held as Collateral and, pursuant
to the Exchange Request, the Indenture Trustee shall surrender to DSW such certificate(s),
along with the required notice, and DSW shall exchange a number of DSW Class B Common Shares
equal to the number indicated in the required notice (which number shall equal the Exchange
Number unless the Issuer has substituted DSW Class A Common Shares for DSW Class B Common
Shares pursuant to Section 3.01(b), in which case the number shall equal the Exchange Number
less the number of shares so substituted) for an equal number of DSW Class A Common Shares
to be held by the Collateral Agent as Collateral until the Notes are exchanged and shall
deposit such DSW Class A Common Shares with DTC, credited to the Collateral Agent, and
deliver a certificate representing remaining DSW Class B Common Shares, if any, to the
Indenture Trustee, which shall then deliver such certificate to the Collateral Agent; and

     (ii) on the Maturity Date, the Collateral Agent shall, pursuant to Section 6(h)(iii) of
the Collateral Agreement, deliver to the Indenture Trustee through DTC, for the benefit of
the Holders of the Outstanding Notes, a number of DSW Class A Common Shares then held by the
Collateral Agent as Collateral equal to the Exchange Number, credited to an account at DTC
in the name of the Indenture Trustee (or its nominee) as custodian for the Holders (such DSW
Class A Common Shares, together with any dividends or distributions for which a record date
and payment date for such dividend or distribution have occurred after the due date for the
delivery of the Exchange Property to the Indenture Trustee, being hereinafter referred to as
the “Notes Exchange Fund”).

     (b) Notwithstanding the foregoing, if the Issuer has elected to deliver the Cash Exchange
Amount pursuant to Section 3.03 or, if an Adjustment Event or a Reorganization Event shall have

22

 

occurred prior to the Maturity Date, then, in lieu of, or, in the case of an Adjustment Event or an
election to deliver a Partial Cash Exchange Amount, in addition to, the foregoing:

     (i) the Issuer shall deliver any cash required to be delivered on the Maturity Date as
provided in Section 3.03, by wire transfer of immediately available funds to an account
designated by the Indenture Trustee for the benefit of the Holders of the Outstanding Notes;
and

     (ii) the Collateral Agent shall deliver any other Exchange Property required to be
delivered on the Maturity Date as provided in Section 4.02 and Section 4.03 to the Indenture
Trustee for the benefit of the Holders of the Outstanding Notes.

     (c) Subject to the foregoing, upon book-entry transfer of the Notes or delivery of the Notes
to the Indenture Trustee with duly completed transfer instructions, the Indenture Trustee shall
transfer the DSW Class A Common Shares or other Exchange Property, or the Cash Exchange Amount, if
applicable, into which such Notes are exchangeable, together with cash in lieu of fractional shares
as provided in Section 3.06 and any dividends or distributions with respect to such shares
constituting part of the Notes
Exchange Fund, but without any interest thereon, to such Holder by book-entry transfer, or
other appropriate procedures, in accordance with such instructions.

     (d) Such DSW Class A Common Shares shall be registered in the name of the Holder or the
Holder’s designee as specified in the exchange instructions provided by the Holder to the Indenture
Trustee. If any DSW Class A Common Shares or other Exchange Property deliverable in respect of a
Note are to be registered to a Person other than the Person in whose name the Note is registered,
no such registration shall be made unless the Person requesting such registration has paid any
transfer and other taxes required by reason of such registration in a name other than that of the
registered Holder of the Note or has established to the satisfaction of the Issuer that such tax
either has been paid or is not payable, as provided in Section 3.07.

     (e) In the event a Holder of Notes fails to effect such transfer, payment or delivery, the DSW
Class A Common Shares or other Exchange Property underlying such Notes, and any distributions
thereon, shall be held in the name of the Indenture Trustee or its nominee in trust for the benefit
of such Holder, until the earlier to occur of:

     (i) the surrender of the Note or receipt by the Issuer and the Indenture Trustee from
such Holder of satisfactory evidence that such Note has been destroyed, lost or stolen,
together with any indemnity that may be required by the Indenture Trustee and the Issuer;
and

     (ii) the expiration of the time period specified in the abandoned property laws of the
relevant jurisdiction.

          Section 3.05. Coupon Payments. (a) The Issuer shall pay, on each Coupon Payment Date, the Coupon Payments payable in
respect of Principal Amount of each Outstanding Note to the Person in whose name a Note is
registered at 5:00 p.m., New York City time, on the Coupon Record Date relating to such Coupon
Payment Date, unless such Coupon Payment Date is the Maturity Date, in which case such Coupon
Payment shall be made to the Person presenting the Notes for mandatory exchange at maturity.
Coupon Payments for any full period will be computed on the basis of a 360-day year of twelve
30-day months and for any period other than a full period will be computed on the basis of the
actual number of days elapsed during the period and a 365-day year. Coupon Payments will accrue
from August 16, 2006, or from the most recent date to which coupon has been paid or duly provided
for. The Coupon Payments will be payable at the office of the Paying Agent in New York City
maintained for that purpose, by wire transfer of immediately available funds to an account
appropriately designated by the Holder

23

 

entitled thereto or by check mailed to the address of the
Person entitled thereto at such Person’s address as it appears on the Note Register.

     (b) Each Note delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the right to accrued and unpaid Coupon Payments and
the right to accrue Coupon Payments, which rights were carried by the Notes represented by such
other Note.

     (c) For the avoidance of doubt, the Coupon Payments will not be reduced as a result of any
Merger Early Partial Exchange.

     (d) Any Coupon Payment which is payable, but is not punctually paid or duly provided for, on
any March 15, June 15, September 15 or December 15 (a “Defaulted Coupon Payment”) shall forthwith
cease to be payable to the Holder on the relevant Coupon Record Date by virtue of its having been
such Holder, and such Defaulted Coupon Payment shall be paid by the Issuer, at its election in each
case, as provided in clause (1) or (2) below:

     (1) The Issuer may elect to make payment of any Defaulted Coupon Payment to the Persons in
whose names the Notes (or their respective Predecessor Notes) are registered at 5:00 p.m., New York
City time, on a “Special Coupon Record Date” for the payment of such Defaulted Coupon Payment,
which shall be the date fixed in the following manner. The Issuer shall notify the Indenture
Trustee in writing of the amount of the Defaulted Coupon Payment proposed to be paid on each Note
and the date of the proposed payment (which shall be not less than 25 calendar days after the
receipt by the Indenture Trustee of such notice, unless the Indenture Trustee shall consent to an
earlier date), and at the same time the Issuer shall deposit with the Indenture Trustee an amount
of money equal to the aggregate amount to be paid in respect of such Defaulted Coupon Payment or
shall make arrangements satisfactory to the Indenture Trustee for such deposit on or prior to the
date of the proposed payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Coupon Payment as in this clause provided. Thereupon the
Indenture Trustee shall fix a Special Coupon Record Date for the payment of such Defaulted Coupon
Payment which shall be not more than 15 calendar days and not less than 10 calendar days prior to
the date of the proposed payment, and not less than ten days after the receipt by the Indenture
Trustee of the notice of the proposed payment. The Indenture Trustee shall promptly notify the
Issuer of such Special Coupon Record Date and, in the name and at the expense of the Issuer, shall
cause notice of the proposed payment of such Defaulted Coupon Payment and the Special Coupon Record
Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it
appears in the Note Register, not less than 10 calendar days prior to such Special Coupon Record
Date. Notice of the proposed payment of such Defaulted Coupon Payment and the Special Coupon
Record Date therefor having been so mailed, such Defaulted Coupon Payment shall be paid to the
Persons in whose names the Notes (or their respective Predecessor Notes) are registered at 5:00
p.m., New York City time, on such Special Coupon Record Date and shall no longer be payable
pursuant to the following clause (2) of this Section 3.05(d).

     (2) The Issuer may make payment of any Defaulted Coupon Payment in any other lawful manner not
inconsistent with the requirements of any securities exchange or automated quotation system on
which the Notes may be listed or designated for issuance, and upon such notice as may be required
by such exchange or automated quotation system, if, after notice given by the Issuer to the
Indenture Trustee of the proposed payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Indenture Trustee.

          Section 3.06. No Fractional Shares. No fractional DSW Class A Common Shares or fractional shares of other Exchange Property
shall be delivered upon exchange on any Exchange Date. Instead of any fractional DSW Class A
Common Shares or fractional shares of other Exchange Property

24

 

which would otherwise be deliverable
upon exchange of any Notes on any Exchange Date, the Issuer, through the Indenture Trustee, shall
make a cash payment in respect of such fractional interest in an amount equal to the amount of such
fractional shares times the Applicable Market Value. With respect to any Holder of Notes with more
than $50 in Principal Amount, the number of full DSW Class A Common Shares or shares of other
Exchange Property shall be computed on the basis of the aggregate Principal Amount of the Notes
held by such Holder.

          Section 3.07. Charges and Taxes. The Issuer will pay all stock transfer and similar taxes attributable to the delivery of
the DSW Class A Common Shares or other Exchange Property pursuant to the Notes; provided, however,
that the Issuer shall not be required to pay any such tax or taxes that may be payable in respect
of any registration of a DSW Class A Common Share or unit of other Exchange Property in a name
other than that of the registered Holder of the Notes surrendered in respect of the Notes evidenced
thereby, other than in the
name of the Indenture Trustee, as custodian for such Holder, and the Issuer shall not be
required to deliver such share certificates unless or until the Person or Persons requesting the
transfer or registration thereof shall have paid to the Issuer the amount of such tax or shall have
established to the satisfaction of the Issuer that such tax has been paid.

ARTICLE 4

ADJUSTMENTS

          Section 4.01. Dilution Events; Adjustment of Exchange Ratio. (a) Adjustments to the Exchange Ratio shall be made upon the occurrence of the following
events (each, a “Dilution Event”).

     (i) If any dividend or other distribution on DSW Class A Common Shares in DSW Class A
Common Shares shall be paid or made, the Exchange Ratio in effect at the close of business
on the date fixed for the determination of shareholders entitled to receive such dividend or
other distribution shall be increased by dividing such Exchange Ratio by a fraction of
which:

     (A) the numerator shall be the number of DSW Class A Common Shares
outstanding at the close of business on the date fixed for such
determination; and

     (B) the denominator shall be the sum of such number of shares and the
total number of shares constituting such dividend or other distribution,

such increase to become effective at the opening of business on the day
following the date fixed for such determination. For the purposes of this
paragraph (i), the number of DSW Class A Common Shares at any time
outstanding shall not include shares held in the treasury of DSW, provided
that DSW does not pay any dividend or make any distribution on DSW Class A
Common Shares held in the treasury of DSW. If such dividend or distribution
is declared but not paid or made, the Exchange Ratio shall again be adjusted
to the Exchange Ratio that would then be in effect in such dividend or
distribution had not been declared.

     (ii) If outstanding DSW Class A Common Shares shall be subdivided into a greater number
of DSW Class A Common Shares, the Exchange Ratio in effect at the close of business on the
day upon which such subdivision or split becomes effective shall be proportionately
increased, and, conversely, if outstanding DSW Class A Common Shares shall each be combined
into a smaller number of DSW Class A Common Shares, the Exchange Ratio in effect at the
close of business on the day upon which such combination becomes effective shall be
proportionately

25

 

reduced, such increase or reduction, as the case may be, to become effective
at the opening of business on the day following the day upon which such subdivision or
combination becomes effective.

     (iii) If any rights, warrants, purchase contracts or options shall be issued to all or
substantially all holders of DSW Class A Common Shares, other than (A) pursuant to dividend
reinvestment or share purchase plans and (B) pursuant to a rights agreement or shareholder
rights plan for the purpose of deterring coercive takeover activities (the rights issued
pursuant to such agreement or plan, the “Anti-Takeover
Rights”), entitling them, at any time
on or prior to the Maturity Date, to subscribe for or purchase DSW Class A Common Shares at
a price per share less than the Current Market Price per DSW Class A Common Share on the date of issuance
of such rights, warrants, purchase contracts or options, the Exchange Ratio in effect at the
close of business on the date of issuance shall be increased by dividing such Exchange Ratio
by a fraction of which:

     (A) the numerator shall be the number of DSW Class A Common Shares
outstanding at the close of business on the date of issuance plus the number
of DSW Class A Common Shares equal to the aggregate price payable to
exercise such rights, warrants, purchase contracts or options divided by the
Current Market Price; and

     (B) the denominator shall be the number of DSW Class A Common Shares
outstanding at the close of business on the date of issuance plus the number
of DSW Class A Common Shares issuable pursuant to such rights, warrants,
purchase contracts or options,

such increase to become effective at the opening of business on the day following the date
of issuance. For the purposes of this paragraph (iii), the number of DSW Class A Common
Shares at any time outstanding shall not include shares held in the treasury of DSW,
provided that if DSW issues any such rights, warrants, purchase contracts or options in
respect of DSW Class A Common Shares held in the treasury of DSW, such treasury shares shall
be included as outstanding DSW Class A Common Shares.

Any adjustment made to the Exchange Ratio pursuant to paragraph (i), (ii) or (iii) above shall also
result in an adjustment to the Initial Price and the Threshold Appreciation Price by multiplying
the Initial Price and the Threshold Appreciation Price by a fraction of which the numerator shall
be the Exchange Ratio immediately prior to such adjustment and the denominator shall be the
Exchange Ratio immediately after such adjustment.

     (b) All adjustments to the Exchange Ratio shall be calculated to the nearest 1/10,000th of a
DSW Class A Common Share. Except as provided in the next proceeding sentence, no adjustment in the
Exchange Ratio shall be required unless such adjustment would require an increase or decrease of at
least one percent thereof. Any adjustment of less than one percent will be carried forward and will
be made at the time of and together with any subsequent adjustment, which, together with any
adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least
one percent of the Exchange Ratio; provided, however, that regardless of whether such aggregate
adjustments amount to one percent or more, all such adjustments will be made immediately prior to
an Exchange Date and annually on the anniversary of the Issue Date. Any adjustments which by reason
of this subparagraph are not required to be made shall be carried forward and taken into account in
any subsequent adjustment.

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     (c) If an adjustment is made to the Exchange Ratio pursuant to Section 4.01(a), an
adjustment shall also be made to the Volume Weighted Average Prices per DSW Class A Common Share
during the days occurring in such period prior to the date fixed for determination, effective date
or the date of issuance, as the case may be, of the event resulting in such adjustment, used in
determining the Applicable Market Value, to the extent an adjustment occurs during the period taken
into consideration for determining the Applicable Market Value for purposes of determining the
Exchange Ratio on any Exchange Date. Such adjustment shall be made by multiplying the applicable
Volume Weighted Average Prices per DSW Class A Common Share by a fraction of which the numerator
shall be the Exchange Ratio immediately prior to such adjustment and the denominator shall be the
Exchange Ratio immediately after such adjustment pursuant to Section 4.01(a).

          Section 4.02.
Adjustment Events. Upon the occurrence of any of the following events (each,
an “Adjustment Event”):

     (i) any distribution to all or substantially all holders of DSW Class A Common Shares
of evidences of DSW’s indebtedness, shares of capital stock, securities, cash or other
property (excluding any dividend or distribution referred to in Section 4.01(a)(i), any
rights, warrants, purchase contracts or options referred to in Section 4.01(a)(iii) and any
dividend or distribution referred to in clause 4.02(a)(ii));

     (ii) any distribution consisting exclusively of cash to all or substantially all
holders of DSW Class A Common Shares;

     (iii) any purchase of less than all outstanding DSW Class A Common Shares pursuant to a
tender offer or exchange offer made by DSW or one of its subsidiaries
(the “DSW Offeror”)
for DSW Class A Common Shares, to the extent that the cash and value of any other
consideration included in the payment per DSW Class A Common Share exceeds the Closing Price
per DSW Class A Common Share on the Trading Day next succeeding the last date on which
tenders or exchanges may be made pursuant to such tender offer or exchange offer; or

     (iv) the issuance by DSW of Anti-Takeover Rights,

other Exchange Property shall be deliverable upon exchange of the Notes, and each unit of Exchange
Property shall include:

     (A) in the case of an Adjustment Event described in clause (i)
immediately above, in addition to the DSW Class A Common Shares or other
Exchange Property prior to such Adjustment Event (collectively, the
“Existing Exchange Property”), the evidences of indebtedness, shares of
capital stock, securities, cash or other property distributed per unit of
such Existing Exchange Property in such Adjustment Event and, if any unit of
the Existing Exchange Property includes a fractional DSW Class A Common
Share, an amount of such evidences of indebtedness, shares of capital stock,
securities, cash or other property equal to the same fraction of such
distribution;

     (B) in the case of an Adjustment Event described in clause (ii)
immediately above, in addition to the Existing Exchange Property, an amount
in cash equal to the cash distribution per unit of such Existing Exchange
Property in such Adjustment Event and, if any unit of the Existing Exchange
Property includes a fractional DSW Class A Common Share, an amount in cash
equal to the same fraction of the cash distribution;

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     (C) in the case of an Adjustment Event described in clause (iii) above,
in addition to any Existing Exchange Property but in lieu of any DSW Class A
Common Share constituting part of each unit of Exchange Property (1) a
fraction of a DSW Class A Common Share equal to the quotient of (x) the
number of DSW Class A Common Shares outstanding on the date of such
Adjustment Event that are not purchased or exchanged in such Adjustment
Event divided by (y) the number of DSW Class A Common Shares outstanding on
the date of such Adjustment Event immediately prior to the acceptance of DSW
Class A Common Shares tendered in such tender or exchange offer, plus (2)
the amount in cash equal to the quotient of (x) the aggregate amount of cash
received by holders of DSW Class A Common Shares for DSW Class A Common
Shares accepted for purchase in such tender or exchange offer, divided by
(y) the number of DSW Class A Common Shares outstanding on the date of such
Adjustment Event immediately prior to the acceptance of DSW Class A Common
Shares tendered in such tender or exchange offer, plus (3) (x) the aggregate
amount of any other securities, property or assets received by holders of
DSW Class A Common Shares for DSW Class A Common Shares accepted for
purchase in such tender or exchange offer, divided by (y) the number of DSW
Class A Common Shares outstanding on the date of such Adjustment Event
immediately prior to the acceptance of DSW Class A Common Shares tendered in
such tender or exchange offer (and, if any unit of the Existing Exchange
Property includes a fractional DSW Class A Common Share, each of (1), (2)
and (3) above multiplied by such fraction); provided that in the case of a
tender offer or exchange offer that allows the holders of DSW Class A Common
Shares to elect to receive cash or other property, the Exchange Property
shall be deemed to include the weighted average of the kind and amount of
cash and other property received by offerees who affirmatively make an
election; and

     (D) in the case of an Adjustment Event described in clause (iv) above,
in addition to the Existing Exchange Property, the Anti-Takeover Rights that
correspond to the Existing Exchange Property, regardless of whether such
Anti-Takeover Rights are exercisable or have separated from the DSW Class A
Common Shares prior to the Maturity Date.

          Section 4.03.
Reorganization Events. Upon the occurrence of any of the following events,
(each, a “Reorganization Event”):

     (a) any reclassification of all outstanding DSW Class A Common Shares (including,
reclassification of common equity securities of DSW to non-common equity securities of DSW but
excluding a subdivision or combination to which Section 4.01(a)(ii) applies);

     (b) consolidation or merger of DSW with or into another Person as a result of which holders of
DSW Class A Common Shares shall be entitled to receive stock, other securities or other property or
assets (including cash or any combination thereof) with respect to or in exchange for such DSW
Class A Common Shares; or

     (c) any sale, lease, conveyance or other disposition of all or substantially all of the assets
of DSW to any other Person as a result of which holders of DSW Class A Common Shares shall be
entitled to receive stock, other securities or other property or assets (including cash or any
combination thereof) in respect of or in exchange for such DSW Class A Common Shares;

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each DSW Class A Common Share constituting a part of each unit of Exchange Property shall become,
without the consent of the Holders, only the stock, other securities or other property or assets
(including cash or any combination thereof) receivable upon consummation of such Reorganization
Event (except as otherwise specifically provided, without any coupon thereon and without any right
to dividends or distributions thereon that have a record date that is prior to the Maturity Date)
by a Person who holds a DSW Class A Common Share immediately prior to the consummation of such
Reorganization Event (and, if any unit of the Existing Exchange Property includes a fractional DSW
Class A Common Share, such stock, other securities or other property or assets multiplied by such
fraction); provided that if a Merger Early Partial Exchange occurs pursuant to Section 4.05, the
Cash Equivalents received per DSW Class A Common Share in a Cash Merger will not be considered
Exchange Property for the purpose of any subsequent exchange of the Notes; provided further that
the kind and amount of consideration receivable by a holder of DSW Class A Common Shares in a
Reorganization Event that causes DSW Class A Common Shares to be exchanged for more than a single
type of consideration (determined based in part upon any form of shareholder election) will be
deemed to be the weighted average of the kinds and amounts of consideration received by holders of
DSW Class A Common Shares that affirmatively made such an election.

     Upon any such Reorganization Event, an adjustment will be made to the Exchange Ratio; provided
that any anti-takeover rights issued by DSW shall be deemed to have no value for the purpose of
determining the applicable adjustments.

          Section 4.04.
Exchange Property. The actual number of units of Exchange Property receivable
upon exchange of each $50 Principal Amount of the Outstanding Notes shall be equal to the Exchange
Ratio determined based on the Applicable Market Value of the Exchange Property as defined below;
provided that for the purposes of the determination of the Exchange Ratio (or the Applicable Market
Value), any adjustments to the Exchange Ratio (or the Applicable Market Value) on account of one or
more Dilution Events with respect to DSW Class A Common Shares occurring after any Adjustment Event
or a Reorganization Event shall be made only as to the DSW Class A Common Shares.

     If the Notes become exchangeable in whole or in part into any Exchange Property other than DSW
Class A Common Shares, such Exchange Property shall be subject to adjustment in the same manner and
upon the occurrence of the same types of events as set forth in Sections 4.01, 4.02 and 4.03 with
respect to the DSW Class A Common Shares.

     Following an Adjustment Event or Reorganization Event, the actual number of units of Exchange
Property receivable upon exchange will be calculated based on the aggregate Applicable Market
Value, and the term “Applicable Market Value” as of any Exchange Date shall be deemed to refer to,
in addition to or in lieu of, respectively, the Applicable Market Value per DSW Class A Common
Share, the “Applicable Market Value” per unit of the Exchange Property, and such value shall be
determined:

     (A) with respect to any Marketable Security that constitutes all or part of one unit of
the Exchange Property, based on the average of the Volume Weighted Average Price per share
of such Marketable Security on the 20 consecutive Trading Days ending on the third Trading
Day immediately preceding such Exchange Date;

     (B) in the case of any cash that comprises all or part of one unit of the Exchange
Property, based on the amount of such cash; and

     (C) in the case of any other property that comprises all or part of one unit of the
Exchange Property, based on the value of such property, as determined by a nationally
recognized independent investment banking firm retained by the Issuer for this purpose;

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provided that any Anti-Takeover Rights issued by DSW shall be deemed to have no value for the
purpose of calculating the Applicable Market Value of such Exchange Property. Any adjustments to
the “Applicable Market Value” made prior to an Adjustment Event or Reorganization Event pursuant to
Section 4.01(c) shall also be made to the “Applicable Market Value” per unit of the Exchange
Property as defined in this Section 4.04.

     A “Marketable Security” means any security that is (i) listed on a United States national or
regional securities exchange or (ii) reported on a United States national securities system or the
Nasdaq Stock Market subject to last sale reporting. The terms “Volume Weighted Average Price” and
“Closing Price” with respect to any Marketable Security shall have the respective meanings set
forth in Section 3.02, except that each reference to “DSW Class A Common Shares” shall be deemed to
be “Marketable Security”. The term “Trading Day” shall be deemed to refer to any Marketable
Security that comprises all or part of the Exchange Property.

     In the event of a Reorganization Event, the Issuer shall promptly thereafter execute and
deliver to the Indenture Trustee an indenture supplemental hereto providing that each Holder of an
Outstanding Note shall have the rights provided by this Section 4.04. Such supplemental indenture
shall provide for adjustments which, for events subsequent to the effective date of such
supplemental indenture, shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 4. The above provisions of this Section 4.04 shall similarly apply to
successive Adjustments Events and Reorganization Events.

          Section 4.05.
Merger Early Exchange. (a) In the event of a Reorganization Event in which
30% or more of the total consideration paid to all or substantially all of DSW’s shareholders
consists of Cash Equivalents (“Merger Cash
Consideration” and such Reorganization Event, a 
“Cash Merger”), then if such Merger Cash Consideration paid in such Cash Merger constitutes less than
100% of the consideration paid in such Cash Merger, the Issuer’s obligation to deliver Exchange
Property hereunder shall be partially accelerated with respect to
such Merger Cash Consideration (a “Merger Early Partial
Exchange”). For the avoidance of doubt, if the Merger Cash Consideration
paid in such Cash Merger constitutes less than 100% of the consideration paid in such Cash Merger,
the Notes will remain outstanding and subject to exchange on the Maturity Date with respect to the
portion of such consideration that is not Merger Cash Consideration and Coupon Payments shall
continue to be payable on the full Principal Amount of the Notes (without any reduction as a result
of such Merger Early Partial Exchange). If the total consideration paid to DSW’s shareholders in a
Cash Merger consists of 100% Merger Cash Consideration, then the Notes shall be accelerated in full
(a “Merger Early Full Exchange”) and Coupon Payments shall cease to accrue on the Merger Early
Exchange Date.

     (b) The percentage of the consideration paid in the Cash Merger consisting of Cash Equivalents
shall be determined by reference to the actual amount of Cash Equivalents received by the Issuer,
as a DSW shareholder, per DSW Class A Common Share (or if the Issuer holds DSW Class B Common
Shares, the amount of Cash Equivalents that the Issuer would have received if the DSW Class B
Common Shares owned by the Issuer were exchanged for DSW Class A Common Shares immediately prior to
the consummation of the Cash Merger), in such Cash Merger; provided that if the DSW shareholders
are entitled to elect the consideration received in such Cash Merger, the percentage of Merger Cash
Consideration shall be determined by reference to the weighted average of the amount of Cash
Equivalents received per DSW Class A Common Share by DSW shareholders that affirmatively make an
election.

     (c) Promptly following the receipt by all holders of DSW Class A Common Shares of the Merger
Cash Consideration from such Cash Merger, the Issuer will provide written notice to Holders of
Notes of such completion of a Cash Merger, which shall specify:

30

 

     (i) the date of the Merger Early Exchange which shall be the date that promptly follows
the date on which holders of DSW Class A Common Shares receive the Merger Cash Consideration
from such Cash Merger and which shall in no event be more than 15 calendar days after the
date of the notice (the “Merger Early Exchange Date”);

     (ii) whether Merger Early Partial Exchange or Merger Early Full Exchange applies, and
if Merger Early Partial Exchange, the percentage of Merger Consideration that is Merger Cash
Consideration;

     (iii) the formula for determining the applicable Exchange Ratio; and

     (iv) the amount and type of Cash Equivalents receivable by the Holder upon exchange.

     (d) On the Merger Early Exchange Date, the Issuer will deliver to the Indenture Trustee for
the benefit of each Holder of the Notes the amount of Cash Equivalents (the “Merger Early Exchange
Cash Amount”) that such Holder would have been entitled to receive in the Cash Merger for the DSW
Class A Common Shares such Holder would have held if such Holder had exchanged the Notes it holds
immediately before the Cash Merger. The amount of Cash Equivalents will equal the number of DSW
Class A Common Shares such Holder will be assumed to have received multiplied by the amount of Cash
Equivalents received per DSW Class A Common Share in the Cash Merger. The number of DSW Class A
Common Shares such Holder will be assumed to have received, per $50 Principal Amount of the
Outstanding Notes, will equal the Exchange Ratio in effect at such time, calculated using the
Merger Market Value as the Applicable Market Value.

     (e) “Merger Market Value” means the average of the Volume Weighted Average Prices per DSW
Class A Common Share during the 10 consecutive Trading Day period ending on the Trading Day
immediately preceding the effective date of the Cash Merger.

     (f) In the case of a Merger Early Full Exchange, on the Merger Early Exchange Date the Issuer
shall deliver to the Indenture Trustee for the benefit of each Holder of the Notes, in addition to
the Merger Early Exchange Cash Amount determined pursuant to Section 4.05(d), (i) all accrued and
unpaid Coupon Payments on such Note to, but excluding, the Merger Early Exchange Date, plus (ii)
the Present Value of all Coupon Payments that would have been payable on such Note for the period
from, and including, the Merger Early Exchange Date to, but excluding, the Maturity Date (clauses
(i) and (ii) together, the “Merger Early Exchange Additional Cash Amounts”).

     (g) Upon a Merger Early Partial Exchange, prior to the exchange of the remaining portion of
the Notes, the Initial Price and the Threshold Appreciation Price shall be adjusted by multiplying
each by a fraction, the numerator of which is the Merger Market Value minus the amount of the
Merger Cash Consideration received per DSW Class A Common Share in such Cash Merger (determined in
accordance with clause (b) above) and the denominator of which is the Merger Market Value. The
calculation of the Exchange Ratio will also be adjusted for purposes of clause (ii) of the
definition of “Exchange Ratio” by multiplying the $50 set forth therein by the fraction set forth
in the preceding sentence. Any such adjustments will be in addition to any other adjustments set
forth in this Article 4.

          Section 4.06. Notice of Adjustments and Certain Other Events. (a) Whenever the Exchange
Ratio, the Threshold Appreciation Price, the Initial Price or the Exchange Property is required to
be adjusted as herein provided or a Dilution Event, Adjustment Event or Reorganization Event
occurs, the Issuer shall forthwith compute the adjusted Exchange Ratio, the Threshold Appreciation
Price, the Initial Price and/or Exchange Property in accordance with this Article 4 and prepare and
transmit to the

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Indenture Trustee an Officers’ Certificate, within ten Business Days following the occurrence
of the Dilution Event, Adjustment Event or Reorganization Event, setting forth the new Exchange
Ratio, Threshold Appreciation Price, Initial Price and/or the new composition of Exchange Property,
as applicable, and the Maximum Deliverable Number applicable following such adjustment, the method
of calculation thereof in reasonable detail, and the facts requiring such adjustment and upon which
such adjustment is based and certifying that the information contained in such notice is consistent
with the information contained in the notice the Issuer provided to the Collateral Agent pursuant
to Section 6(a) of the Collateral Agreement relating to the Dilution Event, the Adjustment Event or
Reorganization Event that resulted in such adjustments.

     (b) The Indenture Trustee shall not at any time be under any duty or responsibility to any
Holder of Notes to determine whether any facts exist which may require a supplemental indenture to
be executed in accordance with Section 4.04, or any adjustment of the Exchange Ratio, Threshold
Appreciation Price, Initial Price and/or Exchange Property, or with respect to the nature or extent
or calculation of any such adjustment when made, or with respect to the method employed in making
the same. The Indenture Trustee shall not be accountable with respect to the validity or value (or
the kind or amount) of any DSW Class A Common Shares or other Exchange Property, which may at the
time be delivered with respect to any Note and the Indenture Trustee makes no representation with
respect thereto. The Indenture Trustee shall not be responsible for any calculations pursuant to
Article 4, any failure of the Issuer to transfer or deliver any DSW Class A Common Shares or other
Exchange Property pursuant to a Note or to comply with any of the duties, responsibilities or
covenants of the Issuer contained in this Article 4.

ARTICLE 5

EVENTS OF DEFAULT; ACCELERATION; REMEDIES

          Section 5.01. Events of Default. (a) Each of the following events is an “Event of Default”:

     (i) failure of the Issuer to pay any Coupon Payments payable on the Notes when due and
such failure shall continue for 30 calendar days;

     (ii) failure of the Issuer to deliver the required number of DSW Class A Common Shares,
or other Exchange Property, if applicable, or the Cash Exchange Amount, if applicable, upon
exchange of the Notes, or the Merger Early Exchange Cash Amount and Merger Early Exchange
Additional Cash Amounts, if any, on the Merger Early Exchange Date, if applicable;

     (iii) default in the performance or breach of any of the Issuer’s other covenants and
agreements contained herein and such default continues for 60 calendar days after the date
on which written notice of such default, requiring the Issuer to cure the same, has been
provided to the Issuer by the Indenture Trustee, or to the Issuer and the Indenture Trustee
by the date on which Holders of not less than 25% of the aggregate Principal Amount of the
Outstanding Notes (the “Required Holders”);

     (iv) the occurrence of a Collateral Event of Default;

     (v) failure of the Issuer to pay any final judgment of $15,000,000 (or its foreign
currency equivalent) or more, which final judgment remains unpaid, undischarged and unstayed
for a period of more than 60 calendar days after the entry of such judgment;

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     (vi) commencement by the Issuer or any Significant Subsidiary of the Issuer of a
voluntary case or other proceeding seeking liquidation, reorganization or other relief with
respect to the Issuer or any Significant Subsidiary of the Issuer or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar official of the
Issuer or any Significant Subsidiary of the Issuer or any substantial part of the property
of the Issuer or any Significant Subsidiary of the Issuer, or consent by the Issuer or any
Significant Subsidiary of the Issuer to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding commenced against
the Issuer or any Significant Subsidiary of the Issuer, or general assignment by the Issuer
or any Significant Subsidiary of the Issuer for the benefit of creditors, or failure of the
Issuer or any Significant Subsidiary generally to pay its debts as they become due, or the
Issuer or any Significant Subsidiary of the Issuer shall take any corporate action in
furtherance of any of the foregoing; or

     (vii) commencement of an involuntary case or other proceeding against the Issuer or any
Significant Subsidiary of the Issuer seeking liquidation, reorganization or other relief
with respect to the Issuer or any Significant Subsidiary of the Issuer or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar official of the
Issuer or any Significant Subsidiary of the Issuer or any substantial part of the property
of the Issuer or any Significant Subsidiary of the Issuer, and such involuntary case or
other proceeding shall (x) remain undismissed and unstayed for a period of 60 consecutive
calendar days or (y) result in the entry of an order for relief or a similar order against
it.

     (b) The Issuer shall deliver to the Indenture Trustee, as soon as practicable and in any event
within five Business Days after the Issuer becomes aware of the occurrence of any Default or Event
of Default, an Officer’s Certificate setting forth the details of such Default or Event of Default
and the action the Issuer proposes to take with respect there to.

          Section 5.02. Acceleration Event. (a) The occurrence of an Event of Default as described in clauses (vi) and (vii) of Section
5.01(a) shall be immediately and automatically deemed an Acceleration Event (an “Acceleration
Event”) without necessity of further action and the occurrence and continuation of an Event of
Default described in clauses (i), (ii), (iii), (iv) and (v) of Section 5.01(a) shall be deemed an
Acceleration Event on the date that the Indenture Trustee or the Required Holders deliver written
notice of its or their election to accelerate to the Issuer, and to the Indenture Trustee if such
notice is given by the Holders. The date of the Acceleration Event shall be the “Acceleration
Date”.

     (b) Upon an Acceleration Event, the Notes shall be exchanged as soon as practicable, to the
extent permitted by law, on or after the Acceleration Date. On the date of delivery, the Issuer
shall deliver the DSW Class A Common Shares (or the other Exchange Property, if applicable);
provided that for the purposes of calculating the applicable Exchange Ratio, the Applicable Market
Value of any DSW Class A Common Share shall mean the average of the Volume Weighted Average Prices
per DSW Class A Common Share during the 10 consecutive Trading Day period ending on the Trading Day
immediately preceding the Acceleration Date. In addition, the Issuer shall deliver on such delivery
date (i) all accrued and unpaid Coupon Payments on the Notes to, but excluding, the Acceleration
Date plus (ii) a yield maintenance premium equal to the Present Value as of the Acceleration Date
of all Coupon Payments that would have been payable on the Notes for the period from, and
including, the Acceleration Date to, but excluding, the Maturity Date (clauses (i) and (ii)
together, the “Acceleration Additional Cash Amounts”); provided that the Issuer may elect to
satisfy its obligations under the Notes with respect to Acceleration Additional Cash Amounts by
delivering, in lieu of cash, the number of shares of DSW Class A Common Shares and other Exchange
Property that have been pledged pursuant to the Collateral

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Agreement that remain after the Notes are exchanged with respect to the applicable Exchange
Ratio and that are required to satisfy in full its obligations with respect to Acceleration
Additional Cash Amounts; in such event, the value of the pledged DSW Class A Common Shares and
other Exchange Property shall be calculated pursuant to the definition of Applicable Market Value
provided in this Section 5.02(b).

     (c) Upon the occurrence of any Acceleration Event, the Indenture Trustee shall immediately
notify the Collateral Agent of such Acceleration Event and the corresponding Acceleration Date.

          Section 5.03. Payments of Notes on Default; Suit Therefor. The Issuer covenants that in the case of an Event of Default pursuant to Section 5.01(a)(i)
or (a)(ii), then, upon demand of the Indenture Trustee, the Issuer will deliver to the Indenture
Trustee, for the benefit of the Holders, (i) the Exchange Property, Cash Exchange Amount, if
applicable, Merger Early Exchange Cash Amount and Merger Early Exchange Additional Cash Amounts, if
applicable, and Coupon Payments that then shall have become due and payable with respect to all
such Notes, and (ii) in addition thereto, any amounts due the Indenture Trustee under Section 7.06.
Until such demand by the Indenture Trustee, the Issuer may pay the Exchange Property, Cash
Exchange Amount, if applicable, Merger Early Exchange Cash Amount and Merger Early Exchange
Additional Cash Amounts, if applicable, and Coupon Payments on the Notes to the registered holders,
whether or not the Notes are overdue.

     In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Indenture
Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to
institute any actions or proceedings at law or in equity for the collection of the sums so due and
unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Issuer or any other obligor on the Notes and
collect in the manner provided by law out of the property of the Issuer or any other obligor on the
Notes wherever situated the monies adjudged or decreed to be payable.

     In case there shall be pending proceedings for the bankruptcy or for the reorganization of the
Issuer or any other obligor on the Notes under Title 11 of the United States Code, or any other
applicable law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or taken possession of
the Issuer or such other obligor, the property of the Issuer or such other obligor, or in the case
of any other judicial proceedings relative to the Issuer or such other obligor upon the Notes, or
to the creditors or property of the Issuer or such other obligor, the Indenture Trustee,
irrespective of whether the Exchange Property shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any
demand pursuant to the provisions of this Section 5.03, shall be entitled and empowered, by
intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole
amount of the Exchange Property and Coupon Payments owing and unpaid in respect of the Notes, and,
in case of any judicial proceedings, to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Indenture Trustee and of the
Holders allowed in such judicial proceedings relative to the Issuer or any other obligor on the
Notes, its or their creditors, or its or their property, and to collect and receive any monies or
other property payable or deliverable on any such claims, and to distribute the same after the
deduction of any amounts due the Indenture Trustee under Section 7.06, and to take any other action
with respect to such claims, including participating as a member of any official committee of
creditors, as it reasonably deems necessary or advisable, and, unless prohibited by law or
applicable regulations, and any receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, custodian or similar official is hereby authorized by each of Holder to make such
payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Indenture Trustee any amount due
it for reasonable compensation, expenses, advances and disbursements, including counsel fees and
expenses incurred by it up to the date of such distribution. To the extent that such payment of

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reasonable compensation, expenses, advances and disbursements out of the estate in any such
proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and
shall be paid out of, any and all distributions, dividends, monies, securities and other property
which the holders of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.

     All rights of action and of asserting claims under this Indenture, or under any of the Notes,
may be enforced by the Indenture Trustee without the possession of any of the Notes, or the
production thereof at any trial or other proceeding relative thereto, and any such suit or
proceeding instituted by the Indenture Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the holders of the Notes, as provided in Section 5.12.

     In any proceedings brought by the Indenture Trustee (and in any proceedings involving the
interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party)
the Indenture Trustee shall be held to represent all the Holders, and it shall not be necessary to
make any Holders parties to any such proceedings.

          Section 5.04. Transfer of Collateral upon Occurrence of Acceleration Event. Upon (x) the occurrence of an Acceleration Event and (y) the transfer to the Indenture
Trustee of the DSW Class A Common Shares (or other Exchange Property, if applicable), the Indenture
Trustee shall request transfer instructions with respect to such DSW Class A Common Shares (or
other Exchange Property, if applicable) from each Holder by written request, substantially in the
form of Exhibit B hereto, mailed to such Holder at its address as it appears in the Note Register.

     Upon book-entry transfer of the Notes or delivery of a Note to the Indenture Trustee with such
transfer instructions, the Indenture Trustee shall transfer the DSW Class A Common Shares (or other
Exchange Property, if applicable) underlying such Notes, and Acceleration Additional Cash Amounts
together with cash in lieu of fractional shares as provided in Section 3.06 and any dividends or
distributions with respect to such shares constituting part of the Notes Exchange Fund, but without
any interest thereon, to such Holder by book-entry transfer, or other appropriate procedures, in
accordance with such instructions.

     Such DSW Class A Common Shares (or other Exchange Property, if applicable) shall be registered
in the name of the Holder or the Holder’s designee as specified in the exchange instructions
provided by the Holder to the Indenture Trustee. If any DSW Class A Common Shares (or other
Exchange Property, if applicable), deliverable in respect of a Note are to be registered to a
Person other than the Person in whose name the Note is registered, no such registration shall be
made unless the Person requesting such registration has paid any transfer and other taxes required
by reason of such registration in a name other than that of the registered Holder of the Note or
has established to the satisfaction of the Issuer that such tax either has been paid or is not
payable.

     In the event a Holder of Notes fails to effect such transfer or delivery, the DSW Class A
Common Shares (or the other Exchange Property, if applicable) underlying such Notes, and
Acceleration Additional Cash Amounts together with cash in lieu of fractional shares as provided in
Section 3.06 and any dividends or any distributions thereon, if any, shall be held in the name of
the Indenture Trustee or its nominee in trust for the benefit of such Holder, until the earlier to
occur of:

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     (i) the surrender of the Note or receipt by the Issuer and the Indenture Trustee from
such Holder of satisfactory evidence that such Note has been destroyed, lost or stolen,
together with any indemnity that may be required by the Indenture Trustee and the Issuer;
and

     (ii) the expiration of the time period specified in the abandoned property laws of the
relevant jurisdiction.

          Section 5.05. Unconditional Right of Holders to Receive Delivery Obligations and Coupon
Payments under the Notes; Right of Holders to Institute Suit. (a) Notwithstanding any other provision in this Indenture, each Holder of Notes shall have
the right which is absolute and unconditional to receive DSW Class A Common Shares or other
Exchange Property, or the Cash Exchange Amount, if applicable, on any Exchange Date, the Merger
Early Exchange Cash Amount and Merger Early Exchange Additional Cash Amounts, if any, on the Merger
Early Exchange Date, if applicable, and the Acceleration Additional Cash Amounts, if applicable, as
soon as practicable on or after the Acceleration Date.

     (b) Each Holder of Notes shall have the right to institute suit for the enforcement of its
right to receive Coupon Payments on the Coupon Payment Dates and the right to receive DSW Class A
Common Shares or other Exchange Property, or the Cash Exchange Amount, if applicable, on any
Exchange Date, the Merger Early Exchange Cash Amount and Merger Early Exchange Additional Cash
Amounts, if any, on the Merger Early Exchange Date, if applicable, and the Acceleration Additional
Cash Amounts, if applicable, as soon as practicable on or after the Acceleration Date, and such
rights shall not be impaired without the consent of such Holder.

          Section 5.06. Limitation on Proceedings. No Holder of Notes may institute any proceedings, judicial or otherwise, with respect to
this Indenture or for any remedy hereunder, except in the case of failure of the Indenture Trustee,
for 60 calendar days, to act after the Indenture Trustee has received a written request to
institute proceedings in respect of an Event of Default from the Holders of not less than 25% of
the aggregate Principal Amount of the Outstanding Notes, as well as an offer of indemnity
reasonably satisfactory to the Indenture Trustee; provided, however, that this provision will not
prevent any Holder of Notes from instituting suit as provided in Section 5.05.

          Section 5.07. Restoration of Rights and Remedies. If the Indenture Trustee or any Holder has instituted any proceeding to enforce any right
or remedy under this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Indenture Trustee or such Holder, then and in every
such case, subject to any determination in such proceeding, the Issuer, the Indenture Trustee and
such Holder shall be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Issuer, the Indenture Trustee and such Holder shall
continue as though no such proceeding had been instituted.

          Section 5.08. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Notes in the last paragraph of Section 2.08, no right or remedy herein
conferred upon or reserved to the Holders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other appropriate right or remedy.

          Section 5.09. Delay or Omission Not Waiver. No delay or omission of the Indenture Trustee or any Holder to exercise any right or remedy
upon a default or Event of Default shall impair any such right or remedy or constitute a waiver of
any such default or any acquiesce therein. Every right and

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remedy given by this Article or by law to the Indenture Trustee or the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or
such Holders.

          Section 5.10. Direction of Proceedings by Majority. The Holders of not less than a majority of the Principal Amount of the Outstanding Notes
shall have the right to direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee, or of exercising any trust or power conferred upon the
Indenture Trustee; provided that the Indenture Trustee has received indemnity or security by the
Holders of Notes requesting or directing the Indenture Trustee to take action reasonably
satisfactory to it. Notwithstanding the foregoing, the Indenture Trustee may refuse to follow any
direction that is in conflict with any law or this Indenture, that may involve the Indenture
Trustee in personal liability or that may be unduly prejudicial to the Holders of Notes not joining
in the action.

          Section 5.11. Waiver of Defaults by Majority. By notice to the Indenture Trustee (and without notice to any other Holders of Notes), the
Holders of a majority in aggregate Principal Amount of the Outstanding Notes may, on behalf of the
Holders of all the Notes, waive any past default or Event of Default under this Indenture and its
consequences, provided, however, that there has been paid or deposited with the Indenture Trustee a
sum sufficient to pay all sums paid or advanced by the Indenture Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents
and counsel, except for:

     (i) the failure to pay a Coupon Payment on any Note on the related Coupon Payment Date;

     (ii) the failure to deliver the required number of DSW Class A Common Shares (or other
Exchange Property, if applicable), or the Cash Exchange Amount, if applicable, upon exchange
of the Notes or the Merger Early Exchange Cash Amount and Merger Early Exchange Additional
Cash Amounts (if any) upon a Cash Merger, if applicable, or Acceleration Additional Cash
Amounts upon an Acceleration Event, if applicable; or

     (iii) the failure to comply with Section 8.02.

     When a default or Event of Default is waived, such default or Event of Default shall be deemed
to have been cured, for every purpose of this Indenture, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any consequent right. This Section 5.11
shall be in lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(1)(1)(B)
is hereby expressly excluded from this Indenture, as permitted by the Trust Indenture Act.

          Section 5.12. Application of Money Collected. If the Indenture Trustee collects any money pursuant to this Article 5, it shall pay out the
money in the following order:

     FIRST: to the Indenture Trustee for amounts due under 7.06;

     SECOND: to the Holders of Notes for amounts due and unpaid on or in respect of the Notes for
the Coupon Payments, the Cash Exchange Amount, if applicable, the Merger Early Exchange Cash Amount
and the Merger Early Exchange Additional Cash Amounts (if any), if applicable, and Acceleration
Additional Cash Amounts, if applicable, without preference or priority of any kind, according to
such amounts due and payable on the Notes; and

     THIRD: the balance, if any, to the Issuer.

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          Section 5.13. Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of the Notes by its acceptance of such
Note shall be deemed to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture
Trustee for any action taken or omitted by it as Indenture Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses against
any party litigant in such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided that the provisions of this Section 5.13 shall not
apply to any suit instituted by (a) the Indenture Trustee, (b) any Holder, or group of Holders,
holding in the aggregate more than 10% of the aggregate Principal Amount of the Outstanding Notes,
or (c) any Holder for the enforcement of the payment of Coupon Payments on or after the related
Coupon Payment Dates therefor in respect of any Note held by such Holder, or the delivery of DSW
Class A Common Shares or other Exchange Property, or the Cash Exchange Amount, if applicable, upon
exchange of any Note held by such Holder on or after any Exchange Date or delivery of the Merger
Early Exchange Cash Amount and Merger Early Exchange Additional Cash Amounts (if any), if
applicable, upon a Cash Merger in respect of any Note held by such Holder on or after the Merger
Early Exchange Date or delivery of the Acceleration Additional Cash Amounts, if applicable, upon an
Acceleration Event in respect of any Note held by such Holder on or after the Acceleration Date.

ARTICLE 6

SATISFACTION AND DISCHARGE OF INDENTURE

          Section 6.01. Discharge of Indenture . When (a) the Issuer shall deliver to the Indenture Trustee for cancellation all Notes
theretofore authenticated (other than any Notes that have been destroyed, lost or stolen and in
lieu of or in substitution for which other Notes shall have been authenticated and delivered) and
not theretofore canceled, or (b) all the Notes not theretofore canceled or delivered to the
Indenture Trustee for cancellation shall have become due and payable (or will become due and
payable at their maturity within one year) and the Issuer shall deposit with the Paying Agent, in
trust, funds sufficient to pay all amounts due and owing on Notes (other than any Notes that shall
have been mutilated, destroyed, lost or stolen and in lieu of or in substitution for which other
Notes shall have been authenticated and delivered) not theretofore canceled or delivered to the
Indenture Trustee for cancellation, and if in either case the Issuer shall also pay or cause to be
paid all other sums payable hereunder by the Issuer, then this Indenture shall cease to be of
further effect (except as to (1) remaining rights of registration of transfer, substitution and
exchange of Notes, (2) rights hereunder of Holders to receive payments of Coupon Payments on the
Notes or delivery of DSW Class A Common Shares or other Exchange Property, if applicable, or the
Cash Exchange Amount, if applicable, or the Merger Early Exchange Cash Amount and Merger Early
Exchange Additional Cash Amounts (if any), if applicable, or Acceleration Additional Cash Amounts,
if applicable, and the other rights, duties and obligations of Holders, as beneficiaries hereof
with respect to the amounts, if any, so deposited with the Indenture Trustee and (3) the rights,
obligations and immunities of the Indenture Trustee hereunder, and the Indenture Trustee, on
written demand of the Issuer accompanied by an Officers’ Certificate and an Opinion of Counsel as
required by Section 1.02 and at the cost and expense of the Issuer, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture; the Issuer, however,
hereby agrees to reimburse the Indenture Trustee for any costs or expenses thereafter reasonably
and properly incurred by the Indenture Trustee and to compensate the Indenture Trustee for any
services thereafter reasonably and properly rendered by the Indenture Trustee in connection with
this Indenture or the Notes.

          Section 6.02. Paying Agent to Repay Monies Held. Upon the satisfaction and discharge of this Indenture, all monies then held by any Paying
Agent of the Notes (other than the Indenture

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Trustee) shall, upon written request of the Issuer, be
repaid to the Issuer or paid to the Indenture Trustee, and thereupon such Paying Agent shall be
released from all further liability with respect to such monies.

          Section 6.03. Payment of Unclaimed Monies. Subject to the requirements of applicable law, any monies deposited with or paid
to the Indenture Trustee or Paying Agent for payment of Coupon Payments on the Notes, the Cash
Exchange Amount, if applicable, the Merger Early Exchange Cash Amount and Merger Early Exchange
Additional Cash Amounts (if any), if applicable, or the Acceleration Additional Cash Amounts, if
applicable, and not applied but remaining unclaimed by the Holders of Notes for two years after the
date upon which the Principal Amount of or Coupon on such Notes, as the case may be, shall have
become due and payable, shall be repaid to the Issuer by the Indenture Trustee or the Paying Agent
on written demand and all liability of the Indenture Trustee and the Paying Agent shall thereupon
cease with respect to such monies; and the Holder of any of the Notes shall thereafter look only to
the Issuer for any payment that such Holder may be entitled to collect unless an applicable
abandoned property law designates another Person.

ARTICLE 7

THE INDENTURE TRUSTEE

          Section 7.01. Certain Duties and Responsibilities. (a) The Indenture Trustee, prior to the occurrence of an Event of Default and after the
curing of all Events of Default which may have occurred, undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and the Collateral Agreement. In case
an Event of Default has occurred (which has not been cured or waived), the Indenture Trustee shall
exercise the rights and powers vested in it by this Indenture and the Collateral Agreement, and use
the same degree of care and skill in its exercise of those rights and powers as a prudent person
would exercise or use under the circumstances in the conduct of such person’s own affairs.

     (b) Prior to the occurrence of an Event of Default and after the curing or waiving of all
Events of Default which may have occurred, the Indenture Trustee:

     (i) undertakes to perform, with respect to the Notes, only those duties as are
specifically set forth in this Indenture and the Collateral Agreement, and no implied
covenants or obligations shall be read into this Indenture or the Collateral Agreement
against the Indenture Trustee; and

     (ii) in the absence of bad faith on its part, may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the requirements of this
Indenture or the Collateral Agreement, as applicable, but in the case of any certificates or
opinions that by any provision hereof are specifically required to be furnished to the
Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Indenture or the
Collateral Agreement, as applicable (but need not confirm or investigate the accuracy of the
mathematical calculations or other facts stated therein and may assume the genuineness of
all signatures).

     (c) No provision of this Indenture or the Collateral Agreement shall be construed to relieve
the Indenture Trustee from liability for its own negligent action, its own negligent failure to
act, or its own willful misconduct, except that:

     (i) this Subsection shall not be construed to limit the effect of Section 7.01(a);

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     (ii) the Indenture Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it shall be proved that the Indenture Trustee was
negligent in ascertaining the pertinent facts;

     (iii) the Indenture Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the Holders of
not less than a majority in Principal Amount of the Outstanding Notes; and

     (iv) no provision of this Indenture or the Collateral Agreement shall require the
Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder, or in the exercise of any of its rights
or powers, if indemnity satisfactory to the Indenture Trustee is not provided to it.

     (d) Whether or not herein or therein expressly so provided, every provision of this Indenture
and the Collateral Agreement relating to the conduct or affecting the liability of or affording
protection to the Indenture Trustee shall be subject to the provisions of Section 7.01 and Section
7.03.

     (e) The Indenture Trustee is authorized to execute and deliver the Collateral Agreement in its
capacity as Indenture Trustee.

          Section 7.02. Certain Rights. Subject to the provisions of Section 7.01:

     (a) the Indenture Trustee may conclusively rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, note, other evidence of indebtedness or other paper or
document reasonably believed by it in good faith to be genuine and to have been signed or presented
by the proper party or parties;

     (b) any request, direction, order or demand of the Issuer mentioned herein shall be
sufficiently evidenced by an Officers’ Certificate, Issuer Order or Issuer Request, and any
resolution of the Board of Directors of the Issuer may be sufficiently evidenced to the Indenture
Trustee by a Board Resolution;

     (c) whenever in the administration of this Indenture or the Collateral Agreement the Indenture
Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering
or omitting to take any action hereunder, the Indenture Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an
Officers’ Certificate of the Issuer;

     (d) the Indenture Trustee may consult with counsel of its selection and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or omitted to be taken by it hereunder in good faith and in reliance on
such advice or Opinion of Counsel;

     (e) the Indenture Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document, but the Indenture Trustee, in its discretion may make reasonable further inquiry
or investigation into such facts or matters related to the execution, delivery and performance of
the Notes as it may see fit, and, if the Indenture Trustee shall determine to make such further inquiry or
investigation, it shall be given a reasonable opportunity, during the Issuer’s normal business
hours, to examine the

40

 

relevant books, records and premises of the Issuer, personally or by agent or
attorney, and shall incur no liability or additional liability of any kind by reason of such
inquiry or investigation;

     (f) the Indenture Trustee may execute any of the powers hereunder or perform any duties
hereunder either directly or by or through agents, attorneys, or Affiliates and the Indenture
Trustee shall not be responsible for any misconduct or negligence on the part of any agent,
attorney or Affiliate appointed with due care by it hereunder;

     (g) other than the provisions of Article 5 and Section 7.13 requiring the Indenture Trustee to
provide notice (and other than the delivery of the DSW Class A Common Shares, other Exchange
Property or the Cash Exchange Amount, if applicable, or the Merger Early Exchange Cash Amount and
the Merger Early Exchange Additional Cash Amounts (if any), if applicable, or the Acceleration
Additional Cash Amounts, if applicable, deliverable under the Notes or the payments of amounts due
under the Notes furnished to it pursuant to the Indenture), the Indenture Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders shall have provided
to the Indenture Trustee security or indemnity reasonably satisfactory to the Indenture Trustee
against the costs, expenses and liabilities that might be incurred by it in compliance with such
request or direction;

     (h) the Indenture Trustee shall not be liable for any action taken or omitted to be taken by
it in good faith and reasonably believed by it to be authorized or within the discretion or rights
or powers conferred upon it by this Indenture;

     (i) the Indenture Trustee shall not be deemed to have notice of any default hereunder unless a
Responsible Officer of the Indenture Trustee has actual knowledge thereof or unless written notice
of any event which is in fact such a default is received by the Indenture Trustee at the Corporate
Trust Office of the Indenture Trustee, and such notice references the Notes and this Indenture;

     (j) the Indenture Trustee may request that the Issuer deliver an Officers’ Certificate setting
forth the names of individuals and/or titles of officers authorized at such time to take specified
actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person
authorized to sign an Officers’ Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded;

     (k) the rights, privileges, protections, immunities and benefits given to the Indenture
Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be
enforceable by, the Indenture Trustee in each of its capacities hereunder and as Indenture Trustee
under the Collateral Agreement, and to each agent, custodian and other Person employed to act
hereunder;

     (l) the Indenture Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity or enforceability of any Collateral or any calculations relating
hereto or any arrangement or agreement between the Issuer and any Person with respect thereto, or
the perfection or priority of any security interest created in any of the Collateral or the
maintenance of any such perfection and priority, or for or with respect to the sufficiency of the
Collateral following an Event of Default; and

     (m) the permissive rights of the Indenture Trustee enumerated herein shall not be construed as
duties.

          Section 7.03. Trustee’s Disclaimer. The Indenture Trustee makes no representation as to the validity or sufficiency of this
Indenture or of the Notes, or of the Collateral Agreement or the

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Pledge. The Indenture Trustee
shall not be accountable for the use or application by the Issuer of the proceeds of the Notes
authenticated and delivered by the Indenture Trustee in conformity with the provisions of this
Indenture.

          Section 7.04. Indenture Trustee, Paying Agent or Registrar May Own Notes. Any Registrar or any other agent of the Issuer, or the Indenture Trustee and its
Affiliates, in their individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Issuer, the Collateral Agent or any other Person with the same rights
it would have if it were not Registrar or such other agent, or the Indenture Trustee.

          Section 7.05. Monies Held in Trust. Subject to Section 6.03, all monies received by the Indenture Trustee shall, until used or
applied as provided herein, be held in trust for the purposes for which they received. Monies held
by the Indenture Trustee in trust hereunder need not be segregated from other funds except to the
extent required by law. The Indenture Trustee shall be under no obligation to invest or pay
interest on any money received by it hereunder except as agreed in writing from time to time by the
Issuer and the Indenture Trustee.

          Section 7.06. Compensation and Reimbursement of Expenses. The Issuer agrees:

     (a) to pay to the Indenture Trustee compensation for all services rendered by it hereunder and
under the Collateral Agreement as the Issuer and the Indenture Trustee shall from time to time
agree in writing;

     (b) except as otherwise expressly provided for herein, to reimburse the Indenture Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or made by the
Indenture Trustee in accordance with any provision of this Indenture or the Collateral Agreement
(including the reasonable compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be attributable to the Indenture
Trustee’s own negligence, willful misconduct or bad faith; and

     (c) to indemnify the Indenture Trustee and any predecessor Indenture Trustee and their
respective agents and representatives for, and to hold them harmless against, any loss, liability
or expense incurred without negligence, willful misconduct or bad faith on their part, arising out
of or in connection with the acceptance or administration of the Indenture Trustee’s duties
hereunder or under the Collateral Agreement, including the costs and expenses of defending itself
against any claim (whether asserted by the Issuer, a Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties hereunder or under the
Collateral Agreement.

     The provisions of this Section 7.06 shall survive the resignation and removal of the Indenture
Trustee and the termination of this Indenture.

     As security for the performance of the obligations of the Issuer under this Section 7.06, the
Indenture Trustee shall have a lien prior to the Notes of any series upon all property and funds
held or collected by the Indenture Trustee as such, except funds held in trust for the payment of
principal of or coupon on the Notes.

     When the Indenture Trustee incurs expenses or renders services in connection with an Event of
Default specified in Section 5.01(a)(vi) or Section 5.01(a)(vii), the expenses are intended to
constitute expenses of administration under the United States Bankruptcy Code (Title 11 of the
United States Code)or any other similar law for the relief of debtors.

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          Section 7.07. Conflicting Interests. In accordance with Trust Indenture Act Section 310(b), if the Indenture Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Indenture
Trustee shall either eliminate such interest or resign, to the extent and in the manner provided
by, and subject to the provisions of, the Trust Indenture Act and this Indenture.

          Section 7.08. Corporate Indenture Trustee Required; Eligibility. There shall at all times be an Indenture Trustee hereunder which shall be a Person that is
eligible pursuant to Trust Indenture Act Section 310(a)(1) to act as such and has a combined
capital and surplus of at least $50,000,000 (or if such Person is a member of a bank holding
company system, its bank holding company shall have a combined capital and surplus of at least
$50,000,000). If such Person publishes reports of condition at least annually, pursuant to law or
to the requirements of said supervising or examining authority, then for the purposes of this
Section 7.08, the combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so published. If at any
time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this
Section 7.08, it shall resign immediately in the manner and with the effect hereinafter specified
in this Article.

          Section 7.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Indenture Trustee and no appointment of a successor
Indenture Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Indenture Trustee in accordance with the applicable requirements of
Section 7.10.

     (b) The Indenture Trustee may resign at any time by giving written notice thereof to the
Issuer 60 calendar days prior to the effective date of such resignation. If the instrument of
acceptance by a successor Indenture Trustee required by Section 7.10 shall not have been delivered
to the Indenture Trustee within 30 calendar days after the giving of such notice of resignation,
the resigning Indenture Trustee may petition, at the expense of the Issuer, any court of competent
jurisdiction for the appointment of a successor Indenture Trustee.

     (c) The Indenture Trustee may be removed at any time by Act of the Holders of a majority of
the Principal Amount of the Outstanding Notes delivered to the Indenture Trustee and the Issuer.
If the instrument of acceptance by a successor Indenture Trustee required by Section 7.10 shall not
have been delivered to the Indenture Trustee within 30 calendar days after the delivery of such
Act, the removed Indenture Trustee may petition, at the expense of the Issuer, any court of
competent jurisdiction for the appointment of a successor Indenture Trustee.

     (d) If at any time:

     (i) the Indenture Trustee shall cease to be eligible under Section 7.08 and shall fail
to resign after written request therefor by the Issuer or by any such Holder; or

     (ii) the Indenture Trustee shall be adjudged a bankrupt or insolvent or a receiver of
the Indenture Trustee or of its property shall be appointed or any public officer shall take
charge or control of the Indenture Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,

then, in any such case, (x) the Issuer by a Board Resolution may remove the Indenture Trustee, or
(y) any Holder who has been a bona fide Holder of the Notes for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent jurisdiction for the
removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.

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     (e) If the Indenture Trustee shall resign, be removed or become incapable of acting, or if a
vacancy shall occur in the office of Indenture Trustee for any cause, the Issuer shall promptly
appoint a successor Indenture Trustee and shall comply with the applicable requirements of Section
7.10. If no successor Indenture Trustee shall have been so appointed by the Issuer and accepted
appointment in the manner required by Section 7.10, any Holder who has been a bona fide Holder of
the Notes for at least six months, on behalf of itself and all others similarly situated, or the
Indenture Trustee may petition at the expense of the Issuer, any court of competent jurisdiction
for the appointment of a successor Indenture Trustee.

     (f) The Issuer shall give, or shall cause such successor Indenture Trustee to give, notice of
each resignation and each removal of the Indenture Trustee and each appointment of a successor
Indenture Trustee by mailing written notice of such event by first-class mail, postage prepaid, to
the Collateral Agent and all Holders as their names and addresses appear in the applicable Note
Register. Each notice shall include the name of the successor Indenture Trustee and the address of
its Corporate Trust Office.

          Section 7.10. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Indenture Trustee, every such
successor Indenture Trustee so appointed shall execute, acknowledge and deliver to the Issuer and
to the retiring Indenture Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective and such successor
Indenture Trustee, without any further act, deed or conveyance, shall become vested with all the
rights, powers, agencies and duties of the retiring Indenture Trustee; but, at the request of the
Issuer or the successor Indenture Trustee, such retiring Indenture Trustee shall, upon its receipt
of payment of its charges, execute and deliver an instrument transferring to such successor
Indenture Trustee all the rights, powers and trusts of the retiring Indenture Trustee and shall
duly assign, transfer and deliver to such successor Indenture Trustee all property and money held
by such retiring Indenture Trustee hereunder.

     (b) Upon request of any such successor Indenture Trustee, the Issuer shall execute any and all
instruments for more fully and certainly vesting in and confirming to such successor Indenture
Trustee all such rights, powers and agencies referred to in Section 7.10(a).

     (c) No successor Indenture Trustee shall accept its appointment unless at the time of such
acceptance such successor Indenture Trustee shall be qualified and eligible under this Article.

          Section 7.11. Merger; Conversion; Consolidation or Succession to Business. Any corporation into which the Indenture Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion or consolidation
to which the Indenture Trustee shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Indenture Trustee, shall be the successor of
the Indenture Trustee hereunder, provided that such corporation shall be otherwise qualified and
eligible under this Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. If any Notes shall have been authenticated and executed on
behalf of the Holders, but not delivered, by the Indenture Trustee then in office, any successor by
merger, conversion or consolidation to such Indenture Trustee may adopt such authentication and
execution and deliver the Notes so authenticated and executed with the same effect as if such
successor Indenture Trustee had itself authenticated and executed such Notes.

          Section 7.12. Preferential Collection of Claims. If and when the Indenture Trustee shall be or become a creditor of the Issuer (or any other
obligor upon the Notes), the Indenture Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Trustee (or any such other
obligor).

44

 

          Section 7.13. Notice of Default. If a default occurs and it is known to the Indenture Trustee, the Indenture Trustee shall
give to each Holder of Notes notice of the default within 90 calendar days after it occurs, unless
such default shall have been cured or waived before the giving of such notice. Notwithstanding the
preceding sentence, except in the case of a default described in Section 5.01(a) or (b), the
Indenture Trustee may withhold the notice if and so long the Indenture Trustee determines in good
faith that withholding such notice is in the best interest of the Holders of Notes.

          Section 7.14. Reports by Indenture Trustee to Holders. Within 60 days after May 15 of each year, the Indenture Trustee shall mail to each Holder
of Notes a brief report dated as of such May 15 that complies with Trust Indenture Act Section
313(a), if required by such Section 313(a). The Indenture Trustee shall also comply with Trust
Indenture Act Sections 313(b), 313(c) and 313(d).

     At the time the Indenture Trustee mails such report to the Holders of the Notes, the Indenture
Trustee shall file a copy of that report with the Commission and each securities exchange, if any,
on which the Notes are listed, in accordance with Trust Indenture Act Section 313(d). The Issuer
shall provide notice to the Indenture Trustee when the Notes are listed on any securities exchange
or delisted therefrom.

          Section 7.15. Communication to Holders. Holders may communicate pursuant to Trust Indenture Act Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The Issuer, the Indenture
Trustee, the Registrar and anyone else shall have the protection of Trust Indenture Act Section
312(c).

ARTICLE 8

SUPPLEMENTAL INDENTURES

          Section 8.01. Supplemental Indentures without Consent of Holders. Without the consent of any Holders, the Issuer and the Indenture Trustee, at any time and
from time to time, may enter into one or more agreements supplemental hereto, in form satisfactory
to the Issuer and the Indenture Trustee, to:

     (i) evidence the succession of another Person to the Issuer’s obligations;

     (ii) add to the covenants for the benefit of Holders or to surrender any of the
Issuer’s rights or powers;

     (iii) evidence and provide for the acceptance of appointment of a successor Indenture
Trustee;

     (iv) make provision with respect to the rights of Holders pursuant to adjustments in
the Exchange Ratio, the Initial Price and the Threshold Appreciation Price and the
Applicable Market Value, if applicable, due to Dilution Events or changes to the Exchange
Property due to Adjustment Events or Reorganization Events; or

     (v) cure any ambiguity, to cure, correct or supplement any provisions of this Indenture
that may be defective or inconsistent with any other provisions of this Indenture, or to
make any other change to this Indenture that the Issuer and the Indenture Trustee determine
is not inconsistent with the Indenture and the Notes, provided that, in all such cases, such
action shall not materially adversely affect the interest of the Holders.

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          Section 8.02. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority of the Principal Amount of
Outstanding Notes, by Act of said Holders delivered to the Issuer and the Indenture Trustee, the
Issuer and the Indenture Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of modifying in any manner the terms of the Notes or the provisions of this Indenture
or the rights of the Holders in respect of the Notes; provided, however, that no such supplemental
indenture shall, without the consent of each Holder of the Outstanding Notes affected thereby (in
addition to a majority of the aggregate Principal Amount of Outstanding Notes):

     (i) change any Coupon Payment Date or extend the Maturity Date;

     (ii) reduce the principal amount of the Notes;

     (iii) reduce the number of DSW Class A Common Shares or the amount of any other
Exchange Property, or the Cash Exchange Amount, deliverable upon exchange of the Notes,
change any Exchange Date or the provisions for Merger Early Exchange or otherwise adversely
affect such Holder’s rights under the Notes or the Indenture;

     (iv) change the amount or type of Collateral required to be pledged pursuant to the
Collateral Agreement to secure the Issuer’s obligations under the Notes;

     (v) change the place or currency of payment or reduce any Coupon Payments;

     (vi) impair the right to institute suit for the enforcement of the Notes, or any Coupon
Payments;

     (vii) change the Issuer’s obligation to maintain an office or agency in New York City;
or

     (viii) reduce the above-stated percentage of Principal Amount of Outstanding Notes the
consent of the Holders of which is required for the modification or amendment of the
provisions of the Notes, this Indenture or the Collateral Agreement or the waiver of an
Event of Default.

     It shall not be necessary for any Act of Holders under this Section 8.02 to approve the
particular form of any proposed supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.

          Section 8.03. Execution of Supplemental Indentures. In executing, or accepting the additional agencies created by, any supplemental indenture
permitted by this Article or with respect to any amendments to the Collateral Agreement, or the
modifications thereby of the agencies created by this Indenture, the Indenture Trustee shall be
provided, and (subject to Section 7.01) shall be fully protected in relying upon, in addition to
the documents required by Section 1.02 and the related Board Resolutions, an Officers’ Certificate
and an Opinion of Counsel stating the specific provision of this Indenture under which the
amendment is being made and that the execution of such supplemental indenture is authorized or
permitted by this Indenture and that any and all conditions precedent to the execution and delivery
of such supplemental indenture have been satisfied. The Indenture Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the Indenture Trustee’s own
rights, duties or immunities under this Indenture or otherwise.

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          Section 8.04. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall
be modified in accordance therewith, and such supplemental indenture shall form a part of this
Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated,
executed on behalf of the Holders and delivered hereunder, shall be bound thereby.

          Section 8.05. Reference to Supplemental Indentures. Notes authenticated, executed on behalf of the Holders and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required by the Indenture
Trustee, bear a notation in form approved by the Indenture Trustee as to any matter provided for in
such supplemental indenture. If the Issuer shall so determine, new Notes so modified as to
conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture
may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee
in exchange for outstanding Notes.

ARTICLE 9

CONSOLIDATION, MERGER, SALE, LEASE, CONVEYANCE OR TRANSFER

          Section 9.01. Consolidate, Merge, Sell, Lease, Convey or Transfer Property Only under
Certain Conditions. Subject to Section 9.03, the Issuer covenants that it will not consolidate with, or sell,
lease, convey or transfer all or substantially all of its assets to, or merge with or into, any
other Person, unless:

     (i) the Issuer will be the surviving corporation in any merger or consolidation; or the
successor entity (if other than the Issuer) is a corporation or limited liability company
organized and validly existing under the laws of the United States of America, any state of
the United States of America or the District of Columbia and, upon any such consolidation,
merger, sale, lease, conveyance or transfer, expressly assumes all of the Issuer’s
obligations under the Notes, this Indenture and the Collateral Agreement by supplemental
indenture in form satisfactory to the Indenture Trustee and by supplemental agreement in
form satisfactory to the Indenture Trustee;

     (ii) immediately after giving effect to the merger, consolidation, sale, lease,
conveyance or transfer, no default or Event of Default has occurred or is continuing under
the Notes, this Indenture or the Collateral Agreement, as applicable; and

     (iii) the Issuer shall have delivered to the Indenture Trustee the Officer’s
Certificate and Opinion of Counsel, if any, required pursuant to Section 9.04.

     This covenant shall not apply to the direct or indirect conveyance, transfer or lease of all
or substantially all of the stock, assets or liabilities of any of the Issuer’s wholly-owned
subsidiaries to the Issuer, or to the Issuer’s other wholly-owned subsidiaries, as the case may be.

          Section 9.02. Rights and Duties of Successor Entity. In case of any such merger, consolidation, sale, lease, conveyance or transfer in which the
Issuer is not the surviving corporation and upon the assumption by a successor corporation or
limited liability company of all of the Issuer’s obligations under the Notes, this Indenture and
the Collateral Agreement in accordance with Section 9.01, such successor entity shall succeed to
and be substituted for the Issuer with the same effect as if it had been named herein as the
Issuer. Such successor entity to the Issuer may cause to be signed, and may issue in its own name
any or all of the Notes issuable hereunder which theretofore shall not have been signed by the
Issuer and delivered to the Indenture Trustee; and, upon the order of such successor entity,
instead of the Issuer, and subject to all the terms, conditions and limitations in this Indenture
prescribed,

47

 

the Indenture Trustee shall authenticate and deliver any Notes that previously shall have been
signed and delivered by the officers of the Issuer to the Indenture Trustee for authentication, and
any Note that such successor corporation thereafter shall cause to be signed and delivered to the
Indenture Trustee for that purpose. All the Notes issued shall in all respects have the same legal
rank and benefit under this Indenture as the Notes theretofore or thereafter issued in accordance
with the terms of this Indenture as though all of such Notes had been issued at the date of the
execution hereof. In the case of a lease of all or substantially all of the assets of the Issuer,
the original Issuer shall not be discharged from its obligations under the Notes, this Indenture or
the Collateral Agreement.

     In the event of any such merger, consolidation, sale, lease, conveyance or transfer, such
changes in phraseology and form (but not in substance) may be made in the Notes thereafter to be
issued as may be appropriate.

          Section 9.03. Sale of All or Substantially All Assets upon Deposit into Collateral Account.
The Issuer may, at its option, elect not to comply with the provisions of Section 9.01 in
connection with a sale, lease or conveyance of all or substantially all of its assets to another
entity as long as:

     (i) the Issuer continues to validly exist following such sale, lease or conveyance and
such assets do not include any Collateral;

     (ii) the Issuer delivers to the Collateral Agent, for the benefit of the Indenture
Trustee for the benefit of the Holders, for irrevocable deposit in the Collateral Account
cash in U.S. dollars, U.S. treasury securities or a combination thereof in an amount that
will be sufficient, in the opinion of a nationally recognized investment bank, appraisal
firm or firm of independent public accountants, to pay all remaining Coupon Payments on the
Notes through and including the Maturity Date and the Issuer has delivered irrevocable
instructions to the Indenture Trustee and the Collateral Agent to apply the deposited money
toward the payment of such Coupon Payments on each Coupon Payment Date and on the Maturity
Date;

     (iii) immediately after giving effect to such sale, lease or conveyance, no default or
Event of Default has occurred or is continuing; and

     (iv) the Issuer shall have delivered to the Indenture Trustee the Officer’s Certificate
and Opinion of Counsel, if any, required pursuant to Section 9.04.

In such event, the Issuer shall not be discharged from its obligations, and the other party to such
transaction shall not succeed to or be substituted for the Issuer under the Notes, the Collateral
Agreement and this Indenture.

          Section 9.04. Officers’ Certificate and Opinion of Counsel Given to Indenture Trustee.
The Indenture Trustee shall receive an Officers’ Certificate and an Opinion of Counsel as
conclusive evidence that any merger, consolidation, sale, lease, conveyance or transfer, and any
such assumption, complies with the provisions of this Article.

ARTICLE 10

COVENANTS OF THE ISSUER

          Section 10.01. Performance under Notes.
The Issuer covenants and agrees that it will duly and punctually pay or cause to be paid
each Coupon Payment on the applicable Coupon Payment

48

 

Date, deliver or cause to be delivered DSW Class A Common Shares or other Exchange Property,
or the Cash Exchange Amount, if applicable, on the Maturity Date and/or deliver or cause to be
delivered the Merger Early Exchange Cash Amount and the Merger Early Exchange Additional Cash
amounts (if any) on the Merger Early Exchange Date, if applicable, and/or deliver or cause to be
delivered the Acceleration Additional Cash Amounts as soon as practicable on or after the
Acceleration Date, and will duly and punctually perform all of its other obligations under the
Notes in accordance with the terms of the Notes and this Indenture.

          Section 10.02. Compliance Certificate.
The Issuer covenants and agrees to deliver to the Indenture Trustee, within 120 calendar
days after the end of each fiscal year of the Issuer (which as of the date hereof shall be prior to
June 3) ending after the date hereof, a certificate signed by the principal executive officer, the
principal financial officer or the principal accounting officer, stating whether or not to the best
knowledge of the signers thereof the Issuer is in compliance with the terms, provisions, covenants
and conditions hereof (without regard to any period of grace or requirement of notice provided
hereunder), and if the Issuer shall be in noncompliance, specifying all such defaults and the
nature and status thereof of which they may have knowledge.

          Section 10.03. Statement by Officers as to Default. As provided in Section 5.01(b), the Issuer covenants and agrees to deliver to the Indenture
Trustee, as soon as practicable and in any event within five Business Days after the Issuer becomes
aware of the occurrence of any Default or Event of Default, an Officers’ Certificate setting forth
the details of such Default or Event of Default and the action which the Issuer proposes to take
with respect thereto.

          Section 10.04. Existence. Except as otherwise permitted under Article 9, the Issuer covenants and agrees to do or
cause to be done all things necessary to maintain in full force and effect its legal existence and
rights (charter and statutory), except that the Issuer is not required to preserve any right if the
Issuer determines that it is no longer desirable in the conduct of its business.

          Section 10.05. Periodic Reports by the Issuer. (a) The Issuer covenants and agrees to provide to the Indenture Trustee such reports,
information and documents, if any, as required by Trust Indenture Act §314(a).

     (b) Delivery of such reports, information and documents to the Indenture Trustee is for
informational purposes only and such Indenture Trustee’s receipt of such shall not constitute
constructive notice of any information contained therein or determined from information contain
therein, including the Issuer’s compliance with any of its covenants hereunder (as to which the
Indenture Trustee is entitled to rely exclusively on Officer’s Certificates).

          Section 10.06. Waiver of Stay; Extension or Usury Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or assume or take the benefit or
advantage of, any stay, extension or usury law or other law wherever enacted, now or at any time
hereafter in force, that would prohibit or forgive the Issuer from paying all or any portion of the
Coupon Payments or delivering the DSW Class A Common Shares or other Exchange Property, or the Cash
Exchange Amount, if applicable, or the Merger Early Exchange Cash Amount and the Merger Early
Exchange Additional Cash Amounts (if any), if applicable, or the Acceleration Additional Cash
Amounts, if applicable, as contemplated herein or that may affect the covenants or the performance
of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law and covenants that it will not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to the Indenture
Trustee or the Holders, but will suffer and permit the execution of every such power as though no
such law had been enacted.

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          Section 10.07. Recording; Certificates and Opinions.
(a) The Issuer will furnish to the Indenture Trustee and the Collateral Agent the opinions
required by Trust Indenture Act Section 314(b). The Issuer will furnish to the Indenture Trustee
and the Collateral Agent the annual opinion required by Trust Indenture Act Section 314(b)(2)
beginning August 16, 2007.

     (b) To the extent required by the Trust Indenture Act, the Issuer will cause Trust Indenture
Act Section 313(b), relating to reports, and Trust Indenture Act Section 314(d), relating to the
release of DSW Class B Common Shares in connection with a substitution of Class A Common Shares
pursuant to Section 3.01(b), to be complied with. Any certificate or opinion required by Trust
Indenture Act Section 314(d) may be made by an Authorized Officer except in cases where Trust
Indenture Act Section 314(d) requires that such certificate or opinion be made by an independent
Person, which Person will be an independent expert reasonably satisfactory to the Indenture
Trustee. Notwithstanding anything to the contrary in this paragraph, the Issuer will not be
required to comply with all or any portion of Trust Indenture Act Section 314(d) if it determines,
in good faith based on advice of counsel, that under the terms of Trust Indenture Act Section
314(d) and/or any interpretation or guidance as to the meaning thereof of the Commission and its
staff, including “no action” letters or exemptive orders, all or any portion of Trust Indenture Act
Section 314(d) is inapplicable to the released Collateral.

[SIGNATURES ON THE FOLLOWING PAGE]

50

 

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

	 	 	 	 	 
	 	RETAIL VENTURES, INC.

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary 	 
	 
	 	HSBC BANK USA, NATIONAL ASSOCIATION,

as Indenture Trustee

 	 
	 	By:  	/s/ Anthony A. Bocchino, Jr.
 	 
	 	 	Name:  	Anthony A. Bocchino, Jr. 	 
	 	 	Title:  	Vice President 	 
	 

 

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 CEDE & CO., AS NOMINEE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION (THE “DEPOSITARY”), THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY. THIS NOTE IS
EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY 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 DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED
EXCEPT IN LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

     UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY 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 DEPOSITARY (AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]

A-1

 

     No. ___   CUSIP No. 761 28Y 201

RETAIL VENTURES, INC.

6.625% MANDATORILY EXCHANGEABLE NOTE DUE SEPTEMBER 15, 2011

PRINCIPAL AMOUNT: $                    

     This Note certifies that                      is the registered Holder of the Note in the aggregate
Principal Amount set forth above. This Note consists of the rights of the Holder under such Note
and obligations of Retail Ventures, Inc., an Ohio corporation (the “Issuer,” which term shall
include any successor corporation under the Indenture). All capitalized terms used herein which
are defined in the Indenture (as defined on the reverse hereof) have the meaning set forth therein.

     The Issuer promises to deliver to the Holder of this Note, with respect to each $50 Principal
Amount, on September 15, 2011 (the “Maturity Date”) (a) a number of Class A common shares, no par
value (“DSW Class A Common Shares”), of DSW Inc., an Ohio corporation (“DSW”) equal to the Exchange
Ratio and/or (b) other Exchange Property if an Adjustment Event or a Reorganization Event has
occurred prior to the Maturity Date, unless on or prior to the Maturity Date there shall have
occurred an Acceleration Event or a Merger Early Full Exchange with respect to such Note, all as
provided in the Indenture and more fully described on the reverse hereof. In lieu of delivering all
or a portion of the DSW Class A Common Shares on the Maturity Date, the Issuer may elect, upon 25
Business Days’ prior notice to the Indenture Trustee, to deliver in exchange for each $50 Principal
Amount of this Note as of the Maturity Date an amount in cash equal to all or a portion of such DSW
Class A Common Shares, as the case may be, as described in Section 3.03 of the Indenture.

     Pursuant to the Collateral Agreement, a number of DSW Class B Common Shares equal to the
Maximum Deliverable Number of DSW Class A Common Shares underlying each Note initially has been
pledged to the Collateral Agent, for the benefit of the Holders, to secure the obligations of the
Issuer under such Note.

     The Issuer promises to pay, on each Coupon Payment Date, in respect of this Note, an amount
(the “Coupon Payment”) equal to 6.625% per year of the Principal Amount hereof. Coupon Payments
for any full period will be computed on the basis of a 360-day year of twelve 30-day months and for
any period other than a full period will be computed on the basis of the actual number of days
elapsed during the period and a 365-day year. Such Coupon Payments will accrue from August 16,
2006 or from the most recent date that Coupon Payments have been made or duly provided for, and
shall be payable to the Person in whose name this Note is registered at 5:00 p.m., New York City
time, on the Coupon Record Date preceding the corresponding Coupon Payment Date, unless such Coupon
Payment Date is the Maturity Date, in which case such Coupon Payment shall be made to the Person
presenting the Notes for mandatory exchange at maturity. Any Coupon Payments not so punctually
paid or duly provided for will forthwith cease to be payable to the Holder on such Coupon Record
Date and may be paid (a) to the Person in whose name this Note (or its Predecessor Note) is
registered at 5:00 p.m., New York City time, on a Special Coupon Record Date or (b) 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.

     Coupon Payments on the Notes will be payable at the office of the Paying Agent in New York
City, by wire transfer of immediately available funds or by check mailed to the address of the
Person entitled thereto as such address appears on the Note Register.

A-2

 

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

A-3

 

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

	 	 	 	 	 
	 	RETAIL VENTURES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

A-4

 

	 	 	 	 	 

CERTIFICATE OF AUTHENTICATION

OF INDENTURE TRUSTEE

     This is one of the Notes referred to in the within mentioned Indenture.

	 	 	 	 	 
	 	
By: HSBC BANK USA, NATIONAL ASSOCIATION,

              as Indenture Trustee 

	 	By:  	 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 

Dated:                                       

A-5

 

(FORM OF REVERSE OF NOTE)

     This Note is governed by an Indenture, dated as of August 16, 2006 (as may be supplemented
from time to time, the “Indenture”), between the Issuer and HSBC Bank USA, National Association, as
Indenture Trustee (including its successors thereunder, the “Indenture Trustee”), to which
Indenture and supplemental indentures thereto reference is hereby made for a description of the
respective rights, limitations of rights, obligations, duties and immunities thereunder of the
Indenture Trustee, the Issuer and the Holders and of the terms upon which the Notes are, and are to
be, executed and delivered.

     This Note is one of a duly authorized issue of 6.625% Mandatorily Exchangeable Notes due
September 15, 2011, or PIES (Premium Income Exchangeable SecuritiesSM) (the “Notes”),
limited in aggregate principal amount of $125,000,000 (or up to $143,750,000 if the Underwriter
exercises in full its option). This Note obligates the Issuer to deliver to the Holder of this
Note, with respect to each $50 Principal Amount, on the Maturity Date (a) a number of DSW Class A
Common Shares equal to the Exchange Ratio and/or (b) other Exchange Property if an Adjustment Event
or a Reorganization Event has occurred prior to the Maturity Date, unless, prior to or on the
Maturity Date, there shall have occurred an Acceleration Event or a Merger Early Full Exchange with
respect to such Note. In lieu of delivering all or a portion of the DSW Class A Common Shares on
the Maturity Date, the Issuer may elect, upon 25 Business Days’ prior notice to the Indenture
Trustee, to deliver in exchange for each $50 Principal Amount of this Note as of the Maturity Date
an amount in cash equal to all or a portion of such DSW Class A Common Shares, as the case may be,
as described in Section 3.03 of the Indenture. Each Holder, by acceptance of this Note, authorizes
and directs the Indenture Trustee to enter into the Collateral Agreement.

     The “Exchange Ratio” with respect to each $50 Principal Amount of this Note is equal to:

     (1) if the Applicable Market Value (as defined below) is greater than or equal to
$34.95 the “Threshold Appreciation Price”), which is 27.50% above $27.41 (the “Initial
Price”), 1.4306 DSW Class A Common Shares;

     (2) if the Applicable Market Value is less than the Threshold Appreciation Price but
greater than the Initial Price, the quotient obtained by dividing $50 by the Applicable
Market Value, which is between 1.4306 and 1.8242 DSW Class A Common Shares.

     (3) if the Applicable Market Value is less than or equal to the Initial Price, 1.8242
DSW Class A Common Shares,

subject to adjustment as provided in the Indenture and rounded upward or downward to the nearest
1/10,000th of a share (or if there is not a nearest 1/10,000th of a share, to the next lower
1/10,000th of a share).

     No fractional DSW Class A Common Shares will be issued upon exchange of this Note, as provided
in Section 3.06 of the Indenture.

     The “Applicable Market Value” means the average of the Volume Weighted Average Price per DSW
Class A Common Share during the 20 consecutive Trading Day period ending on the Valuation Date,
with respect to DSW Class A Common Shares and the meaning set forth in Section 4.04 with respect to
Exchange Property.

     The “Volume Weighted Average Price” of DSW Class A common shares on any date of determination
means the Volume Weighted Average price per DSW Class A Common Share on the

A-6

 

NYSE on such date as displayed on Bloomberg key strokes “DSW Equity VAP” or any successor or
replacement page. If DSW Class A Common Shares are not listed on the NYSE, the volume weighted
average price per DSW Class A Common Share shall be determined by reference to the Bloomberg
Financial Markets page that reports such information with respect to DSW Class A Common Shares for
the national or regional securities exchange or association or the over-the-counter market that is
the primary market for the trading of DSW Class A Common Shares. If such information is not
available on any Bloomberg page, the Volume Weighted Average Price shall be the closing price of
DSW Class A Common Shares.

     The “Closing Price” per share of DSW Class A Common Share on any date of determination means:

     (1) the closing sale price (or, if no closing sale price is reported, the last reported
sale price) per share on the NYSE on such date;

     (2) if the DSW Class A Common Shares are not listed for trading on the NYSE on such
date, the closing sale price (or, if no closing sale price is reported, the last reported
sale price) per share as reported in the composite transactions for the principal United
States national or regional securities exchange or association on which DSW Class A Common
Shares are so listed;

     (3) if the DSW Class A Common Shares are not so listed on a United States national or
regional securities exchange or association, the last sale price per share as reported by
Nasdaq Stock Market;

     (4) if the DSW Class A Common Shares are not so reported, the last quoted bid price for
the DSW Class A Common Shares in the over-the-counter market as reported by Pink Sheets LLC
or similar organization; or

     (5) if such last quoted bid price is not available, the market value of DSW Class A
Common Shares as determined by a nationally recognized investment banking firm retained by
the Issuer for this purpose.

     A “Trading Day” means a day during which:

     (1) trading in DSW Class A Common Shares generally occurs on the principal United
States national or regional securities exchange or association or over-the-counter market on
which DSW Class A Common Shares are listed or admitted to trading; and

     (2) there is no Market Disruption Event.

     A “Market Disruption Event” means:

     (1) a failure by the principal United States national or regional securities exchange
or association or over-the-counter market on which DSW Class A Common Shares are listed or
admitted to trading to open for trading during its regular trading session; or

     (2) the occurrence or existence, prior to 1:00 p.m. on any day during which trading for
DSW Class A Common Shares occurs for an aggregate one half hour period, of any suspension or
limitation imposed on trading (by reason of movements in price exceeding limits permitted by
the securities exchange or association or over-the-counter market or otherwise) in

A-7

 

DSW Class A Common Shares or in any options, contracts or future contracts relating to
DSW Class A Common Shares.

     Upon the occurrence of any Acceleration Event, the Indenture Trustee shall immediately notify
the Collateral Agent of such Acceleration Event and the corresponding Acceleration Date.

     The Notes are issuable only in registered form without coupons in denominations of $50 and any
integral multiple thereof. The transfer of any Note will be registered and Notes may be exchanged
as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents permitted by the Indenture. No service charge shall
be required for any such registration of transfer or exchange, but the Issuer and the Indenture
Trustee may require payment of a sum sufficient to cover any tax or other governmental charges
payable in connection therewith.

     The Issuer agrees to treat, and by its acceptance or acquisition of this Note or beneficial
interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Note
intend and agree to treat this Note as a variable prepaid forward contract rather than as a debt
instrument for all United States federal, state and local tax purposes.

     Subject to certain exceptions, the provisions of the Indenture may be amended with the consent
of the Holders of a majority of the aggregate Principal Amount of the Outstanding Notes.

     This Note shall be governed by, and construed in accordance with, the laws of the State of New
York.

     The Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may
treat the Person in whose name this Note is registered as the owner of this Note for the purpose of
receiving Coupon Payments, for the purpose of exchange and for all other purposes whatsoever,
whether or not such Note be overdue and notwithstanding any notice to the contrary, and neither the
Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary.

     The Notes shall not, prior to the exchange thereof, entitle the Holder to any of the rights of
a holder of DSW Class A Common Shares or other Exchange Property.

     A copy of the Indenture is available for inspection at the offices of the Indenture Trustee.

A-8

 

ABBREVIATIONS

     The following abbreviations, when used in the inscription on the face of this instrument,
shall be construed as though they were written out in full according to applicable laws or
regulations:

	 	 	 
	TEN COM:

	 	as tenants in common
	 
	 	 
	UNIF GIFT MIN ACT:

	 	                                                             Custodian
               
                                              

          
     
          (cust)         
          
          
          
          
          
(minor)
	 

	 	Under Uniform Gifts to Minors Act of                      
                    
          
          
         

                    
          
          
                    
          
          
                    
          
          
            

	 
	 	 
	TENANT:

	 	as tenants by the entireties
	 
	 	 
	JT TEN:

	 	as joint tenants with right of survivorship and not as
tenants in common

Additional abbreviations may also be used though not in the above list.

     FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

 
(Please insert Social Security or Taxpayer I.D. or other Identifying Number of Assignee)

 
(Please Print or Type Name and Address Including Postal Zip Code of Assignee)

the within Note and all rights thereunder, hereby irrevocably constituting and appointing attorney
                                        , to transfer said Note on the books of Retail Ventures, Inc. with full power of
substitution in the premises.

	 	 	 
	Dated:                                              

	 	Signature                                                                           
      
	 
	 	 
	 

	 	NOTICE: The signature to this assignment
must correspond with the name as it
appears upon the face of the within Notes
in every particular, without alteration or
enlargement or any change whatsoever.

     Signature Guarantee:                                                        
               

A-9

 

ASSIGNMENT FORM

To assign this Note, fill in the form below:

     For value received                                           
hereby sell(s), assign(s) and transfer(s) unto                                                                            
(Please insert social security or other Taxpayer Identification
Number of assignee) the within Note, and hereby irrevocably constitutes and appoints
                                                                                
attorney to transfer said Note on the books of the Issuer, with full
power of substitution in the premises.

Dated:                                         

	 	 	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	Signature(s)	 
	 	 	 
	 	

Signature(s) must be guaranteed by an “eligible guarantor institution” meeting
the requirements of the Note registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program (“STAMP”) or
such other “signature guarantee program” as may be determined by the Note
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.	 
	 	 	 
	 	 	 
	 	Signature Guarantee	 

A-10

 

EXCHANGE INSTRUCTIONS

     The undersigned Holder directs that a certificate for DSW Class A Common Shares deliverable
upon exchange on or after the Maturity Date of this Note be registered in the name of, and
delivered, together with a check in payment for any fractional share, to the undersigned at the
address indicated below unless a different name and address have been indicated below. If shares
are to be registered in the name of a Person other than the undersigned, the undersigned will pay
any transfer tax payable incident thereto.

	 	 	 	 	 
	Dated:                                                                                       

	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Signature
	 

	 	 	 	Signature Guarantee:                                                                        
	 

	 	 	 	(if assigned to another Person)
	 
	 	 	 	 
	If shares are to be registered in
the name of and delivered to a
Person other than the Holder, please
(i) print such Person’s name and
address and (ii) provide a guarantee
of your signature:
	 	 	 	 
	 
	 
	 	 	 	 
	 

	 	 	 	 
	Name

	 	 	 	Name
	 
	 	 	 	 
	Address

	 	 	 	Address
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Social Security or other Taxpayer Identification

Number, if any

	 	 	 	 

A-11

 

EXHIBIT B

NOTICE FROM INDENTURE TRUSTEE

TO HOLDERS

(Transfer of Collateral upon Occurrence of an Acceleration Event)

[HOLDER]

                                                            

                                                            

Attention:

Telecopy:                                         

Re: 6.625% Mandatorily Exchangeable Notes, due September 15, 2011,
or PIES (Premium Income Exchangeable Securities) of Retail Ventures,
Inc., an Ohio corporation (the “Company”)

     Please refer to the Indenture, dated as of August 16, 2006 (the “Indenture”; unless otherwise
defined herein, terms defined in the Indenture are used herein as defined therein), among the
Company and the undersigned, as Indenture Trustee.

     We hereby notify you that an Acceleration Event has occurred.

     [Pursuant to Section 5.04 of the Indenture, we hereby request written transfer instructions
with respect to the DSW Class A Common Shares or other Marketable Securities (the “Released
Property”). Upon receipt of your instructions and upon transfer to us of your Notes effected
through book-entry or by delivery to us of your Notes, we shall transfer the Released Property by
book-entry transfer or other appropriate procedures, in accordance with your instructions. In the
event you fail to effect such transfer or delivery, the Released Property, the Acceleration
Additional Cash Amounts, and any dividends or other distributions thereon, shall be held in our
name, or in the name of a nominee in trust for your benefit, until such time as such Notes are
transferred or your Note is surrendered or satisfactory evidence is provided that such Note has
been destroyed, lost or stolen, together with any indemnification that we or the Issuer may
require.]

	 	 	 	 	 
	 	 	 
	Date: 	By:  	HSBC BANK USA, NATIONAL ASSOCIATION
 	 
	 
	 	By:	  	 
	 	 	Name: 	 	 
	 	 	Title: 	 
	 

B-1EX-4.2

 

Exhibit 4.2

EXECUTION COPY

 

 

COLLATERAL AGREEMENT

Among

RETAIL VENTURES, INC.

As Pledgor,

HSBC BANK USA, NATIONAL ASSOCIATION,

As Collateral Agent,

HSBC BANK USA, NATIONAL ASSOCIATION,

As Indenture Trustee

and

HSBC BANK USA, NATIONAL ASSOCIATION,

As Securities Intermediary

Dated as of

August 16, 2006

 

 

 

 

          The following Table of Contents has been inserted for convenience of reference only and does
not constitute a part of the Collateral Agreement.

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	SECTION	 	 	 	 
	 
	 	 	 	 	 	 
	1.
	 	The Security Interests	 	 	1	 
	 
	 	 	 	 	 	 
	2.
	 	Definitions	 	 	2	 
	 
	 	 	 	 	 	 
	3.
	 	Representations and Warranties of the Pledgor	 	 	7	 
	 
	 	 	 	 	 	 
	4.
	 	Representations, Warranties and Agreements of the Collateral Agent and the Securities Intermediary	 	 	8	 
	 
	 	 	 	 	 	 
	5.
	 	Certain Covenants of the Pledgor	 	 	9	 
	 
	 	 	 	 	 	 
	6.
	 	Administration of the Collateral	 	 	13	 
	 
	 	 	 	 	 	 
	7.
	 	Income and Voting Rights on Collateral	 	 	18	 
	 
	 	 	 	 	 	 
	8.
	 	Remedies upon the Occurrence of an Acceleration Event	 	 	18	 
	 
	 	 	 	 	 	 
	9.
	 	The Collateral Agent and the Securities Intermediary	 	 	22	 
	 
	 	 	 	 	 	 
	10.
	 	Amendment	 	 	26	 
	 
	 	 	 	 	 	 
	11.
	 	Miscellaneous	 	 	28	 
	 
	 	 	 	 	 	 
	12.
	 	Termination of Collateral Agreement	 	 	29	 
	 
	 	 	 	 	 	 
	Exhibit A — Certificate for Substituted Collateral	 	 	 	 
	 
	 	 	 	 	 	 
	Exhibit B — Certificate for Additional Collateral	 	 	 	 

i

 

COLLATERAL AGREEMENT

          THIS COLLATERAL AGREEMENT (the “Agreement), dated as of August 16, 2006, among Retail
Ventures, Inc., an Ohio corporation (the “Pledgor”), HSBC Bank USA, National Association, as
collateral agent (in such capacity, the “Collateral Agent”) for the benefit of HSBC Bank USA,
National Association, as indenture trustee under the Indenture (in such capacity, together with its
successors in such capacity, the “Indenture Trustee”), the Indenture Trustee and HSBC Bank USA,
National Association, as securities intermediary in respect of the Collateral Account (as defined
below) (in such capacity, the “Securities Intermediary”).

WITNESSETH:

          WHEREAS, pursuant to the Indenture (the “Indenture”), dated as of the date hereof, between
Pledgor and the Indenture Trustee, the Pledgor has issued 6.625% Mandatorily Exchangeable Notes due
September 15, 2011 in aggregate principal amount of $125,000,000 ($143,750,000 if the Underwriter’s
option to purchase additional notes is exercised in full) (such notes, inclusive of all notes
issued pursuant to Underwriter’s option, the “Notes”), which require the Pledgor to deliver (x) a
specified number of Class A common shares, no par value per share (the “DSW Class A Common
Shares”), of DSW Inc., an Ohio corporation (“DSW”) or (y) a specified number of units of other
property, if applicable, or (z) the cash value thereof;

          NOW, THEREFORE, to secure the performance by the Pledgor of its obligations under the Notes
and to secure the observance and performance of the covenants and agreements contained herein and
in the Indenture, the parties hereto agree as follows:

     1. The Security Interests.

          In order to secure the Pledgor’s obligation to deliver the DSW Class A Common Shares to the
holders of the Notes in accordance with the terms of the Notes:

          (a) Security Interests. The Pledgor hereby grants and pledges unto the Collateral Agent,
as agent of and for the benefit of the Indenture Trustee, for the benefit of the Holders from time
to time of the Notes, a security interest in and to, and a lien upon, all of the Pledgor’s right,
title and interest in and to:

          (i) stock certificate number B-2 evidencing the Firm Share Base Amount (as defined
herein);

          (ii) the Pledged Items described in Sections 1(b) and (c);

          (iii) all additions to and substitutions for such Pledged Items (including, without
limitation, any securities, instruments, cash or other property delivered, pledged or
purchased pursuant to Section 5(i), 6(b) or (c));

          (iv) all income, collections and proceeds (as defined in the UCC (as defined below),
including for the avoidance of doubt, any securities, instruments or other property
distributed or distributable with respect to any items described in Section 1(a)(i),

 

 

(ii), (iii) or (iv), including, without limitation, any dividends, distributions or
other property received or receivable on account of a merger, consolidation, conversion or
similar change in the corporate identity or structure of the issuer of any of the items
described in Section 1(a)(i), (ii), (iii) or (iv)), received or to be received, or derived
or to be derived, now or any time hereafter from or in connection with any Pledged Items
(whether such proceeds arise before or after the commencement of any proceeding under any
applicable bankruptcy, insolvency or other similar law, by or against the Pledgor with
respect to the Pledgor) (the “Proceeds”);

          (v) the Collateral Account, all securities and other financial assets (each as defined
in Section 8-102 of the UCC) and other funds, property or assets from time to time held
therein or credited thereto and all security entitlements in respect thereof; and

          (vi) all powers and rights now owned or hereafter acquired under or with respect to the
Pledged Items,

(such Pledged Items, additions, substitutions, income, Proceeds, collections, powers and rights
described in clauses (i) through (vi) above being herein collectively called the “Collateral”).
The Collateral Agent shall have all of the rights, remedies and recourses with respect to the
Collateral afforded a secured party by the UCC, in addition to, and not in limitation of, the other
rights, remedies and recourses afforded to the Collateral Agent by this Agreement. Notwithstanding
anything contained herein to the contrary, those items of Collateral described in the foregoing
Sections 1(a)(iii) and (a)(v) shall at no time include any assets which constitute collateral of
the Pledgor’s revolving credit lenders.

          (b) Initial Pledge Date. On the date hereof, the Pledgor shall deliver to the Collateral
Agent in pledge hereunder Eligible Collateral (as defined below) consisting of 4,560,500 DSW Class
B Common Shares (the “Firm Share Base Amount”), in the manner provided in Section 6(d).

          (c) Option Closing Date. At the date of delivery of any additional Notes upon the
Underwriter’s exercise of its option to purchase additional Notes, the Pledgor shall deliver to the
Collateral Agent in pledge hereunder Eligible Collateral consisting of a number of shares of DSW
Class B Common Shares equal to the Maximum Deliverable Number of DSW Class A Common Shares with
respect to the principal amount of the additional Notes sold on such date (the “Additional Share
Base Amount”), in the manner provided in Section 6(d).

          (d) The parties hereto expressly agree that all rights, assets and property (including,
without limitation, cash) at any time held or credited to the Collateral Account shall be treated
as financial assets (as defined in Section 8-102 of the UCC).

     2. Definitions.

          Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to
them in the Indenture. In addition, the following terms, as used herein, shall have the following
meanings:

2

 

          “Acceleration Additional Cash Amounts” has the meaning set forth in Section 5.02(b) of the
Indenture.

          “Acceleration Event” has the meaning set forth in Section 5.02(a) of the Indenture.

          “Additional Share Base Amount” has the meaning specified in Section 1(c).

          “Adjustment Event” has the meaning set forth in Section 4.02 of the Indenture.

          “Agreement” has the meaning specified in the preliminary paragraph hereof.

          “Applicable Market Value” has the meaning specified in Section 1.01(c) of the Indenture.

          “Authorized Representative” of the Pledgor means any officer or other representative as to
whom Pledgor shall have delivered notice to the Collateral Agent that such officer or other
representative is authorized to act hereunder on behalf of Pledgor.

          “Business Day” means any day other than a Saturday or Sunday or any other day on which banking
institutions and trust companies in New York City, New York are permitted or required by any
applicable law to close.

          “Cash Exchange Amount” has the meaning specified in Section 1.01(c) of the Indenture.

          “Collateral” has the meaning specified in Section 1(a).

          “Collateral Account” has the meaning specified in Section 6(d).

          “Collateral Agent” means the financial institution identified as such in the preliminary
paragraph hereof, or any successor appointed in accordance with Section 9.

          “Collateral Event of Default” has the meaning specified in Section 6(e).

          “Control” means “control” as defined in Section 8-106 and Section 9-106 of the UCC.

          “Coupon Collateral” has the meaning specified in Section 5(i).

          “Delivery Date” has the meaning specified in Section 8(a)(i).

          “DSW” has the meaning specified in the Recitals.

          “DSW Class A Common Shares” has the meaning specified in the Recitals.

          “DSW Class B Common Shares” means the Class B common shares, no par value per share, of DSW.

3

 

          “DTC” means The Depository Trust Company, New York, New York, and any successor thereto.

          “Eligible Collateral” means:

     (i) DSW Class B Common Shares;

     (ii) DSW Class A Common Shares;

     (iii) from and after any Adjustment Event or Reorganization Event, Marketable
Securities, Cash Equivalents or any other Exchange Property; and

     (iv) any cash and/or U.S. treasury securities delivered pursuant to Section 5(i),

provided, in each case, that (A) the Pledgor has good and marketable title thereto, free of all
Liens (other than the Liens created by this Agreement) and Transfer Restrictions (except for the
Permitted Transfer Restrictions) and (B) the Collateral Agent has a valid, first priority,
perfected security interest therein and first lien thereon and Control with respect thereto.

          “Event of Default” means the occurrence of an event described in Section 5.01 of the Indenture
or a Collateral Event of Default.

          “Exchange Number” has the meaning set forth in Section 1.01(c) of the Indenture.

          “Exchange Property” has the meaning set forth in Section 1.01(c) of the Indenture.

          “Exchange Request” means the irrevocable instruction by the Pledgor to DSW, dated August 16,
2006, to exchange DSW Class B Common Shares for DSW Class A Common Shares pursuant to the
provisions therein, such Exchange Request having been made pursuant to the Exchange Agreement,
dated as of July 5, 2005, by and between the Pledgor and DSW.

          “Firm Share Base Amount” has the meaning specified in Section 1(b).

          “Indenture” has the meaning specified in the Recitals.

          “Indenture Trustee” has the meaning specified in the preliminary paragraph hereof.

          “Investment Property” means “investment property” as defined in Section 9-102(a)(49) of the
UCC.

          “Lien” means any lien, mortgage, security interest, pledge, charge or encumbrance of any kind.

          “Location” means, with respect to any party, the place such party is “located” within the
meaning of Section 9-307 of the Uniform Commercial Code as in effect in each jurisdiction that may
be deemed applicable to such party.

4

 

          “Maximum Deliverable Number” means, on any date,

     (i) with respect to the DSW Class A Common Shares, (x) the Share Base Amount, divided
or multiplied, as the case may be, successively by (y) each number by which the Exchange
Ratio shall have been divided or multiplied, as the case may be, on or prior to such date in
respect of any Dilution Event provided for under Article 4 of the Indenture; and

     (ii) following an Adjustment Event or a Reorganization Event, with respect to Exchange
Property (and/or Merger Cash Consideration), (x) the Maximum Deliverable Number of DSW Class
A Common Shares or the Maximum Deliverable Number of units of Exchange Property (and/or
Merger Cash Consideration) immediately prior to such date multiplied by (y) the number of
units of Exchange Property (and/or Merger Cash Consideration), the composition of which
shall be determined pursuant to Article 4 of the Indenture, received in the Adjustment Event
or the Reorganization Event for each DSW Class A Common Share or each such existing unit of
Exchange Property, as the case may be, and following any Dilution Event provided for under
Article 4 with respect thereto, the Maximum Deliverable Number of units of Exchange Property
immediately prior to such date divided or multiplied, as the case may be, successively by
each number by which the Exchange Ratio shall have been divided or multiplied, as the case
may be, on or prior to such date in respect of any Dilution Event provided for under Article
4 of the Indenture.

          “Merger Cash Consideration” has the meaning specified in Section 1.01(c) of the Indenture.

          “Notes” has the meaning specified in the Recitals.

          “Other Liens” has the meaning specified in Section 4(e).

          “Outstanding Notes”  has the meaning specified in Section 1.01(c) of the Indenture, subject to
Section 1.19 of the Indenture.

          “Permitted Transfer Restrictions” has the meaning specified in Section 3(e).

          “Pledged Items” means, as of any date, any and all securities and instruments delivered by the
Pledgor to be held by the Collateral Agent under this Agreement as Collateral, and any security
entitlement in respect thereof.

          “Pledged Shares” means, as of any date, any and all Pledged Items that are DSW Class A Common
Shares or DSW Class B Common Shares.

          “Pledgor” has the meaning specified in the preliminary paragraph hereof.

          “Prior Collateral” has the meaning specified in Section 6(b).

          “Proceeds” has the meaning specified in Section 1(a)(iii).

5

 

          “Reorganization Event” has the meaning specified in Section 4.03 of the Indenture.

          “Responsible Officer” means, when used with respect to the Collateral Agent or the Securities
Intermediary, any officer located in the division or department of the Collateral Agent or
Securities Intermediary directly responsible for performing the obligations of the Collateral Agent
or Securities Intermediary under this Agreement, and also means, with respect to any matter
relating to this Agreement or the Collateral, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.

          “Securities Act” has the meaning specified in Section 3(e).

          “Securities Intermediary” has the meaning specified in the preliminary paragraph hereof.

          “Share Base Amount” means the Firm Share Base Amount plus each Additional Share Base Amount.

          “Transfer Restriction” means, with respect to any item of Collateral, any condition to or
restriction on the ability of the holder thereof to sell, assign or otherwise transfer such item of
Collateral to the Holders of Notes or to enforce the provisions thereof or of any document related
thereto, whether set forth in such item of Collateral itself or in any document related thereto,
including, without limitation:

     (i) any requirement that any sale, assignment or other transfer or enforcement of item
of Collateral be consented to or approved by any Person, including, without limitation, the
issuer thereof or any other obligor thereon;

     (ii) any limitations on the type or status, financial or otherwise, of any purchaser,
pledgee, assignee or transferee of such item of Collateral;

     (iii) any requirement of the delivery of any certificate, consent, agreement, opinion
of counsel, notice or any other document of any Person to the issuer of, any other obligor
on or any registrar or transfer agent for, such item of Collateral, prior to the sale,
pledge, assignment or other transfer or enforcement of such item of Collateral; and

     (iv) any registration or qualification requirement for such item of Collateral pursuant
to any federal or state securities law;

provided that (A) the required delivery of any assignment from the seller, pledgor, assignor or
transferor of such item of Collateral, together with any evidence of the corporate or other
authority of such Person, (B) any condition or restriction imposed by DTC generally in respect of
securities held by it and (C) any condition or restriction imposed hereunder or under the
Indenture, shall not constitute a “Transfer Restriction.”

          “UCC” means the Uniform Commercial Code as in effect in the State of New York from time to
time.

6

 

     3. Representations and Warranties of the Pledgor.

          The Pledgor hereby represents and warrants to the Collateral Agent and the Indenture Trustee
that:

          (a) Corporate Existence and Power. The Pledgor is a corporation, duly incorporated,
validly existing and in good standing under the laws of the State of Ohio, and has all corporate
power and authority and all material governmental licenses, authorizations, consents and approvals
required to enter into, and perform its obligations under, this Agreement.

          (b) Authorization and Non-Contravention. The execution, delivery and performance by the
Pledgor of this Agreement have been duly authorized by all necessary corporate action on the part
of the Pledgor (no action by the shareholders of the Pledgor being required) and do not and will
not violate, contravene or constitute a default under any provision of applicable law or regulation
or of the amended and restated articles of incorporation and the amended and restated code of
regulations of the Pledgor or of any material agreement, judgment, injunction, order, decree or
other instrument binding upon the Pledgor.

          (c) Binding Effect. This Agreement constitutes a valid and binding agreement of the
Pledgor enforceable against the Pledgor in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
generally and by general equitable principles.

          (d) Solvency. The Pledgor is presently solvent and able to pay, and paying its debts as
they become due, and anticipates that it will continue to be able to pay its debts as they become
due for the foreseeable future.

          (e) No Transfer Restrictions. No Transfer Restrictions exist with respect to or otherwise
apply to the assignment of, or transfer by the Pledgor of possession of, any items of Collateral to
the Collateral Agent hereunder, or the subsequent sale or transfer of such items of Collateral by
the Collateral Agent pursuant to the terms hereof; provided that DSW Class B Common Shares and any
other securities (other than to the extent that the DSW Class A Common Shares have been registered
under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Registration
Statement No. 333-134227) that constitute items of Collateral may be subject to restrictions on
transfer pursuant to Rule 144 under the Securities Act and other applicable federal and state
securities laws and the certificates representing such securities may contain legends referring to
such restrictions (the “Permitted Transfer Restrictions”).

          (f) Title to Collateral; Perfected Security Interest. The Pledgor:

     (i) owns the Pledged Items, free of all Liens (other than the Lien created by this
Agreement) and Transfer Restrictions (except for the Permitted Transfer Restrictions); and

     (ii) is not and will not become a party to or be otherwise bound by any agreement,
other than this Agreement and the Indenture, that (x) restricts in any manner the rights of
any present or future owner of the Collateral with respect thereto or (y)

7

 

provides any Person other than Pledgor or any securities intermediary through which any
Collateral is held (but, in the case of any such securities intermediary, only with respect
to Collateral held though it) with Control with respect to any Collateral.

          Upon delivery or transfer to the Collateral Agent of Pledged Items as described in Sections
1(b) and (c), the Collateral Agent will have obtained, for the benefit of the Indenture Trustee, a
valid and first priority perfected security interest in such Collateral, in respect of which the
Collateral Agent will have Control, subject to no other Lien. None of the Collateral is or shall be
pledged by the Pledgor as collateral for any other purpose.

          (g) No Financing Statements. Except for those being terminated or amended to release
relevant Collateral in connection with the issuance of the Notes, no financing statement, security
agreement or similar or equivalent document or instrument covering all or any part of the
Collateral is on file or of record in any jurisdiction in which such filing or recording would be
effective to perfect a lien, security interest or other encumbrance of any kind on such Collateral.

          (h) No Filing Required. Except for the filing of financing statements as described in
Section 5(d), no registration, recordation or filing with any governmental body, agency or official
is required in connection with the execution and delivery of this Agreement or necessary for the
validity or enforceability hereof or for the perfection or enforcement of the security interests
granted hereunder.

          (i) Enforcement. The Pledgor has not performed and will not perform any acts that could
reasonably be expected to prevent the Collateral Agent from enforcing any of the terms of this
Agreement or that could reasonably be expected to limit the Collateral Agent in any such
enforcement.

          (j) Location. The Location of the Pledgor is the State of Ohio.

     4. Representations, Warranties and Agreements of the Collateral Agent and the Securities
Intermediary.

          The Collateral Agent and the Securities Intermediary represent, warrant to and agree with the
Pledgor and the Indenture Trustee that:

          (a) Corporate Existence and Power. Each of the Collateral Agent and the Securities
Intermediary is a national banking association, duly organized, validly existing and in good
standing under the laws of the United States of America, and has all power and authority and all
material governmental licenses, authorizations, consents and approvals required to enter into, and
perform its obligations under, this Agreement.

          (b) Authorization and Non-Contravention. The execution, delivery and performance by the
Collateral Agent and the Securities Intermediary of this Agreement have been duly authorized by all
necessary action on the part of the Collateral Agent and the Securities Intermediary (no action by
the shareholders of the Collateral Agent or the Securities Intermediary being required) and do not
and will not violate, contravene or constitute a default under any provision of applicable law or
regulation or of the charter or by-laws of the Collateral

8

 

Agent or the Securities Intermediary or of any material agreement, judgment, injunction,
order, decree or other instrument binding upon the Collateral Agent or the Securities Intermediary.

          (c) Binding Effect. This Agreement constitutes a valid and binding agreement of the
Collateral Agent and the Securities Intermediary enforceable against the Collateral Agent and the
Securities Intermediary in accordance with its terms except as such enforceability may be limited
by applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and by
general equitable principles.

          (d) Other Agreements. Neither the Collateral Agent nor the Securities Intermediary in
their capacity as Collateral Agent or Securities Intermediary has or will enter into any agreement
pursuant to which any Person other than the Pledgor, the Collateral Agent, the Indenture Trustee,
the Securities Intermediary or any securities intermediary through which any Collateral is held
(but, in the case of the Securities Intermediary or any such securities intermediary, only in
respect of Collateral held through it) has or will have Control with respect to any Collateral.

          (e) Other Liens. Each of the Collateral Agent and the Securities Intermediary hereby
agrees that all Liens held by it (other than Liens arising hereunder) in any of the Collateral
securing any obligation to the Collateral Agent or the Securities Intermediary (either in such
capacity or in any other capacity) (collectively, “Other Liens”) shall be subordinate and junior to
the liens, pledges and security interests in the Collateral arising hereunder and neither the
Collateral Agent nor the Securities Intermediary will take any action to enforce any Other Liens so
long as any obligation under the Indenture or hereunder (whether or not then due) shall remain
unsatisfied.

     5. Certain Covenants of the Pledgor.

          The Pledgor agrees that, so long as any of its obligations under the Notes or the Indenture
remain outstanding:

          (a) Title to Collateral. The Pledgor shall, subject to the terms of this Agreement, at all
times hereafter owns the Collateral pledged hereunder, free of all Liens (other than the Liens
created by this Agreement) and Transfer Restrictions (except for the Permitted Transfer
Restrictions), and, subject to the terms of this Agreement, will at all times hereafter have good,
right and lawful authority to assign, transfer and pledge such Collateral and all such additions
thereto and substitutions therefor under this Agreement. The Pledgor shall warrant and defend the
Pledgor’s title to the Collateral, subject to the rights of the Collateral Agent, against the
claims and demands of all Persons.

          (b) Collateral Requirement. The Pledgor shall cause the Collateral to include at least
that number of DSW Class A Common Shares, DSW Class B Common Shares or any combination thereof that
is equal to at least the Maximum Deliverable Number of DSW Class A Common Shares and, upon the
occurrence of an Adjustment Event or Reorganization Event, the Maximum Deliverable Number of units
of Exchange Property (and/or Merger Cash Consideration) at all times, and shall pledge additional
or substitute Collateral in the manner described in Section 6(d) as necessary to cause such
requirement to be met.

9

 

          (c) Pledge upon Adjustment Event or Reorganization Event. Upon the occurrence of
an Adjustment Event or a Reorganization Event, the Pledgor shall immediately cause to be delivered
to the Collateral Agent, in the manner provided in Section 6(d), the Exchange Property (and/or
Merger Cash Consideration) resulting from such Adjustment Event or Reorganization Event in an
amount at least equal to the Maximum Deliverable Number thereof, to be held as additional
Collateral hereunder, and the Collateral Agent shall maintain a perfected security interest in such
Exchange Property, as to which the Collateral Agent shall have Control.

          (d) Further Assurances. The Pledgor shall, at its expense and in such manner and form
as may be required by applicable law (having a description of Collateral as described herein),
give, execute, deliver, file and record any financing statement, notice, instrument, document,
agreement or other papers that may be necessary in order to create, preserve, perfect, substantiate
or validate any security interest granted pursuant hereto, to create or maintain Control with
respect to any such security interest in the Collateral or to enable the Collateral Agent to
exercise and enforce its rights and the rights of the Indenture Trustee hereunder with respect to
such security interest. To the extent permitted by applicable law, the Pledgor hereby authorizes
the Collateral Agent to file, in the name and at the expense of the Pledgor or otherwise, UCC
financing or continuation statements which may be required by applicable law or may be necessary or
appropriate to further perfect, or maintain the perfection of the security interests granted hereby
(having a description of Collateral as described herein).

          (e) Consolidation/Merger. The Pledgor shall not consolidate with or, merge with or
into, or sell, lease, convey or transfer all or substantially all of its assets to, any other
Person except as permitted pursuant to Article 9 of the Indenture. Upon any consolidation or
merger, or any sale, lease, conveyance or transfer of all or substantially all of the assets of the
Pledgor in accordance with Section 9.01 of the Indenture and this Section 5(e), the successor
entity formed by such consolidation or into which the Pledgor is merged or to which such sale,
lease, conveyance or transfer is made shall succeed to, and be substituted for, and may exercise
every right and power, and will be subject to all obligations and duties, of the Pledgor under this
Agreement with the same effect as if such successor entity had been named as the Pledgor herein,
and the predecessor entity shall be relieved of any further obligation under this Agreement.

          (f) Change of Name or Location. The Pledgor agrees that it shall not change its name
or Location, unless (x) the Pledgor shall have given the Collateral Agent not less than 30 days’
prior notice thereof and (y) such change shall not cause any of the security interests granted
hereunder to become unperfected, cause the Collateral Agent to cease to Control any of the
Collateral consisting of Investment Property or subject any Collateral to any other Lien.

          (g) Other Liens. The Pledgor agrees that it shall not (i) create or permit to exist
any Lien (other than the Liens created by this Agreement) or any Transfer Restriction (other than
the Permitted Transfer Restrictions) upon or with respect to the Collateral, (ii) sell or otherwise
dispose of, or grant any option with respect to, any of the Collateral or (iii) enter into or
consent to any agreement pursuant to which any Person other than Pledgor, the Collateral Agent, the
Securities Intermediary, and any other securities intermediary through which any of the Collateral
is held (but, in the case of the Securities Intermediary or any such other securities

10

 

intermediary, only in respect of Collateral held through it) has or will have Control in
respect of any Collateral.

          (h) Exchange. The Pledgor hereby represents, warrants, covenants and agrees that:

          (i) it has irrevocably instructed DSW pursuant to the Exchange Request, that upon
surrender by the Indenture Trustee to DSW of the certificate or certificates representing
the DSW Class B Common Shares, accompanied by the required notice, (A) to issue, prior to
the close of business on the day on which the certificate(s) and required notice are
delivered, a number of DSW Class A Common Shares equal to the number indicated in the
required notice (which number shall equal the Exchange Number unless the Issuer has
previously substituted DSW Class A Common Shares for DSW Class B Common Shares pursuant to
Section 3.01(b) of the Indenture and as provided in Section 6(b) hereof, in which case the
number shall equal the Exchange Number less the number of shares so substituted) in exchange
for an equal number of DSW Class B Common Shares that are Pledged Items and (B) to deposit
such DSW Class A Common Shares that are Pledged Items with DTC, credited to the Collateral
Agent, and

          (ii) that such irrevocable instruction is valid, legally binding and enforceable
against the Pledgor and in full force and effect.

     The Pledgor hereby covenants and agrees to take all actions required under Section 6(d)
and any other actions necessary to create for the benefit of the Collateral Agent a valid,
first priority perfected security interest in, and a first lien upon, such DSW Class A
Common Shares, as to which, the Collateral Agent will have Control. In addition, upon any
such exchange, the Pledgor hereby represents and warrants to the Collateral Agent that: (x)
other than Permitted Transfer Restrictions, no Transfer Restrictions exist with respect to
or otherwise apply to the assignment of, or transfer by the Pledgor of possession of, any
such DSW Class A Common Shares to the Collateral Agent under the Collateral Agreement and no
Transfer Restrictions exist with respect to the subsequent sale or transfer of such shares
by the Collateral Agent pursuant to the terms of this Agreement and (y) upon such exchange,
the Pledgor will own such DSW Class A Common Shares, free of all Liens (other than the Lien
created by this Agreement and Pledgor’s obligations to deliver DSW Class A Common Shares to
holders of the Notes pursuant to the Indenture); upon delivery of such DSW Class A Common
Shares to the Collateral Agent, the Collateral Agent will have obtained, for the benefit of
the Indenture Trustee, a valid, first priority perfected security interest in, and a first
lien upon, such DSW Class A Common Shares subject to no other Lien, as to which the
Collateral Agent shall have Control over all applicable Investment Property; and none of
such DSW Class A Common Shares are or shall be pledged by the Pledgor as collateral for any
other purpose. The Pledgor agrees that the Collateral Agent shall deliver to the Indenture
Trustee the certificate or certificates representing the DSW Class B Common Shares and the
Indenture Trustee may surrender such certificate or certificates to DSW for exchange
pursuant to the Exchange Request.

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          (i) Coupon Collateral. In connection with a sale, lease, conveyance or transfer of
all or substantially all of the assets of the Pledgor to another entity pursuant to which the
Pledgor has elected to comply with Section 9.03 of the Indenture in lieu of complying with Section
9.01 of the Indenture, the Pledgor shall deliver:

     (A) to the Collateral Agent, for the benefit of the Indenture Trustee for the benefit
of the Holders of the Notes, for deposit in the Collateral Account cash in U.S. dollars,
U.S. treasury securities or a combination thereof consisting of Eligible Collateral (the
“Coupon Collateral”) in an amount that shall be sufficient, in the opinion of a nationally
recognized investment bank, appraisal firm or firm of independent public accountants, to pay
all remaining Coupon Payments on the Notes through and including the Maturity Date (such
amount, the remaining coupon payment value); and

     (B) instructions to the Indenture Trustee and the Collateral Agent to apply the
deposited money toward the payment of such Coupon Payments on each Coupon Payment Date and
at the Maturity Date.

          Such Coupon Collateral shall be held in the Collateral Account in a segregated sub-account and
shall be used to pay to the Holders entitled to receipt thereof pursuant to the Indenture on each
Coupon Payment Date and on the Maturity Date, the Coupon Payments due and payable on such date. On
each such Coupon Payment Date and on the Maturity Date, the Collateral Agent shall deliver to the
Indenture Trustee, for distribution to the Holders in accordance with the Indenture, an amount of
cash sufficient to make the Coupon Payments due and payable on such date. The Pledgor hereby
covenants and agrees to take all actions that may be required by applicable law or as may be
necessary to create for the benefit of the Collateral Agent a valid, first priority perfected
security interest in, and a first lien upon, such Coupon Collateral, as to which, in the case of
Investment Property, the Collateral Agent will have Control. In addition, upon any such delivery
of Coupon Collateral to the Collateral Agent, the Pledgor hereby represents and warrants to the
Collateral Agent that: (x) no Transfer Restrictions exist with respect to or otherwise apply to
the assignment of, or transfer by the Pledgor of possession of, any such Coupon Collateral to the
Collateral Agent under the Collateral Agreement, or the subsequent sale or transfer of such Coupon
Collateral by the Collateral Agent pursuant to the terms of this Agreement and (y) the Pledgor has
good and marketable title to such Coupon Collateral, free of all Liens (other than the Lien created
by this Agreement); upon delivery of such Coupon Collateral to the Collateral Agent, the Collateral
Agent will have obtained, for the benefit of the Indenture Trustee, a valid, first priority
perfected security interest in, and a first lien upon, such Coupon Collateral subject to no other
Lien, as to which the Collateral Agent shall have Control over all applicable Investment Property;
and none of such Coupon Collateral is or shall be pledged by the Pledgor as collateral for any
other purpose, and the Pledgor shall have delivered an Officer’s Certificate and an Opinion of
Counsel with respect to the foregoing. Notwithstanding anything to the contrary contained in this
Agreement, the Coupon Collateral shall not be released to the Pledgor until there are no
obligations outstanding under the Notes, the Indenture or this Agreement (including, without
limitation, the payment in full of all Coupon Payments due and payable through and including the
Maturity Date). The Pledgor shall cause the Coupon Collateral to include cash and/or U.S. treasury
securities equal to at least the remaining coupon payment value at all times, and shall pledge
additional Coupon Collateral as necessary to cause such requirement to be met. For avoidance of
doubt, references

12

 

to “Exchange Property” herein do not include any cash and/or U.S. treasury securities
delivered pursuant to this Section 5(i).

     6. Administration of the Collateral.

          (a) Determination of Sufficiency of Collateral. If the Pledgor determines that a
Collateral Event of Default has occurred, the Pledgor shall promptly notify the Collateral Agent
thereof. The Collateral Agent shall determine on each Business Day whether the Collateral Agent
has received notice of a Collateral Event of Default. The Pledgor shall, on a day that is not less
than three Business Days prior to the scheduled date on which an Adjustment Event or a
Reorganization Event is to occur, deliver to the Collateral Agent a written notice stating that (i)
such Adjustment Event or Reorganization Event is scheduled to occur, (ii) the date on which such
Adjustment Event or Reorganization Event is scheduled to occur and (iii) the additional amount and
type of Exchange Property that would be required to be pledged as Collateral hereunder as of such
scheduled date. If such Adjustment Event or Reorganization Event shall have been cancelled or
postponed, the Pledgor shall, immediately upon acquiring knowledge of such cancellation or
postponement, deliver to the Collateral Agent a written notice that, (x) in the event such
Adjustment Event or Reorganization Event has been cancelled, shall state that the previous notice
from the Pledgor relating to such event shall be deemed to be void or (y) in the event such
Adjustment Event or Reorganization Event has been postponed, shall amend the scheduled date for
such Adjustment Event of Reorganization specified in the previous notice to reflect the new
scheduled date and shall also amend the amount or type of Exchange Property required to be pledged
if necessary. The Pledgor shall also, on a day that is not less than three Business Days prior to
the scheduled date on which a Dilution Event is scheduled to occur, deliver to the Collateral Agent
a written notice stating that (i) such Dilution Event is scheduled to occur, (ii) the date on which
such Dilution Event is scheduled to occur and (iii) the effect of such Dilution Event.

          (b) Substitution of Collateral. The Pledgor may substitute Collateral in accordance
with the following provisions:

          (i) The Pledgor shall have the right at any time and from time to time to deposit
Eligible Collateral consisting of DSW Class A Common Shares with the Collateral Agent in
substitution for Pledged Items consisting of an equivalent number of DSW Class B Common
Shares previously deposited hereunder (“Prior Collateral”) and to obtain the release from
the Lien hereof of such Prior Collateral in accordance with the provisions of Sections
6(b)(ii) and (iii) below. For the avoidance of doubt, the Pledgor shall not have the right
at any time to deposit Eligible Collateral consisting of DSW Class B Common Shares with the
Collateral Agent in substitution for Pledged Items consisting of an equivalent number of DSW
Class A Common Shares previously deposited hereunder.

          (ii) If the Pledgor wishes to deposit Eligible Collateral consisting of DSW Class A
Common Shares with the Collateral Agent in substitution for Prior Collateral consisting of
an equivalent number of DSW Class B Common Shares, the Pledgor shall (A) give written notice
to the Collateral Agent, at least one Business Day prior to the date of substitution,
identifying the number of DSW Class B Common Shares

13

 

comprising the Prior Collateral to be released from the Lien hereof, and (B) deliver to
the Collateral Agent concurrently with such Eligible Collateral consisting of DSW Class A
Common Shares a certificate of the Pledgor substantially in the form of Exhibit A hereto and
dated the date of such delivery, (1) identifying the items of Eligible Collateral consisting
of DSW Class A Common Shares being substituted for the Prior Collateral consisting of an
equivalent number of DSW Class B Common Shares and the Prior Collateral consisting of an
equivalent number of DSW Class B Common Shares that is to be transferred to the Pledgor and
(2) certifying that the representations and warranties contained in such Exhibit A hereto
are true and correct on and as of the date thereof. The Pledgor hereby covenants and agrees
to take all actions required under Section 6(d) and any other actions necessary to create
for the benefit of the Collateral Agent a valid, first priority perfected security interest
in, and a first lien upon, such Eligible Collateral deposited with the Collateral Agent in
substitution for Prior Collateral as to which, in the case of Eligible Collateral consisting
of Investment Property, the Collateral Agent will have Control.

          (iii) No such substitution shall be made unless and until the Collateral Agent shall
have (A) received written confirmation from the Pledgor that the aggregate number of Pledged
Shares is equal to at least the Maximum Deliverable Number of DSW Class A Common Shares at
the time of such proposed substitution, after giving effect to the proposed substitution,
which determination shall be made promptly, and (B) confirmed receipt of the Eligible
Collateral being substituted for the Prior Collateral.

          (c) Additional Collateral. The Pledgor may pledge additional Collateral hereunder at
any time. Concurrently with the delivery of any additional Eligible Collateral, the Pledgor shall
deliver a certificate of the Pledgor substantially in the form of Exhibit B hereto and dated the
date of such delivery, (i) identifying the additional items of Eligible Collateral being pledged
and (ii) certifying that with respect to such items of additional Eligible Collateral the
representations and warranties contained in such Exhibit B hereto are true and correct on and as of
the date thereof. The Pledgor hereby covenants and agrees to take all actions required under
Section 6(d) and any other actions necessary to create for the benefit of the Collateral Agent a
valid, first priority perfected security interest in, and a first lien upon, such additional
Eligible Collateral, as to which, in the case of Eligible Collateral consisting of Investment
Property, the Collateral Agent will have Control.

          (d) Delivery of Collateral. Any delivery of any securities or security entitlements
(each as defined in Section 8-102 of the UCC) as Collateral to the Collateral Agent by or on behalf
of the Pledgor shall be effected:

          (i) in the case of Collateral consisting of certificated securities registered in the
name of the Pledgor, by delivery of certificates representing such securities to the
Collateral Agent, accompanied by any required transfer tax stamps, and in suitable form for
transfer by delivery or accompanied by duly executed instruments of transfer or assignment
in blank (including any related documentation required by the transfer agent for such
securities in connection with effecting or registering transfer), with signatures
appropriately guaranteed, all in form and substance satisfactory to the Collateral Agent;

14

 

          (ii) in the case of Collateral consisting of uncertificated securities registered in
the name of the Pledgor, by transmission by the Pledgor of an instruction to the issuer of
such securities instructing such issuer to register such securities in the name of the
Collateral Agent or its nominee, accompanied by any required transfer tax stamps, and the
issuer’s compliance with such instructions;

          (iii) in the case of securities in respect of which security entitlements are held by
the Pledgor through a securities intermediary, by the crediting of such securities,
accompanied by any required transfer tax stamps, to a securities account of the Collateral
Agent at the Securities Intermediary or, at the option of the Collateral Agent, at another
securities intermediary satisfactory to the Collateral Agent;

          (iv) in the case of cash, by wire transfer in immediately available funds to the
Collateral Account; or

          (v) in any case, by complying with such reasonable alternative delivery instructions as
agreed to by the Collateral Agent and the Pledgor, which the Collateral Agent shall provide
to the Pledgor in writing.

          Upon delivery of any Pledged Item under this Agreement, the Collateral Agent is hereby
instructed to accept such Pledged Item and any certificates delivered pursuant to Sections 6(b),
6(c), 6(d) or otherwise pursuant to the terms hereof and the Pledgor shall confirm in writing that
they comply as to form with the requirements for Eligible Collateral. The Collateral Agent shall
cause all Collateral constituting of cash or securities entitlements held hereunder to be credited
to a securities account (as defined in Section 8-502(a) of the UCC) with account number 10-879640
established in the name of the Collateral Agent at the Securities Intermediary (the “Collateral
Account”). At any time following the delivery of Collateral, and upon the occurrence and
continuance of a Collateral Event of Default, the Collateral Agent may cause all Collateral in the
form of certificates indorsed in blank (x) to be re-registered on the books of the applicable
transfer agent in the name of the Collateral Agent or its nominee, and shall thereafter maintain
all such Collateral in such form until the termination of this Agreement or release of such
Collateral as provided herein or (y) to be deposited with DTC and thereafter hold such securities
in a separate, non-commingled securities account of the Collateral Agent. The Pledgor hereby
designates the Collateral Agent as the person in whose name any Collateral consisting of
uncertificated securities held through the Federal Reserve System shall be recorded.

          (e) A “Collateral Event of Default” shall mean, at any time, the occurrence of any of the
following:

          (i) the failure (other than any failure resulting from the Collateral Agent not
maintaining possession of any certificated securities that were duly assigned and
transferred to the Collateral Agent as provided herein and the Pledgor obtaining possession
thereof) at any time of the security interests granted hereunder to constitute valid and
perfected security interests in all of the Collateral, subject to no prior or equal Lien,
and, with respect to any Collateral consisting of securities or security entitlements, as to
which the Collateral Agent has Control, or in each case, assertion of such by the Pledgor in
writing;

15

 

          (ii) the failure of the Collateral to include at least that number of DSW Class A
Common Shares, DSW Class B Common Shares or combination thereof equal to at least the
Maximum Deliverable Number of DSW Class A Common Shares and, from and after any Adjustment
Event or Reorganization Event, the Maximum Deliverable Number of units of Exchange Property;

          (iii) the Pledgor’s instruction to DSW referred to in Section 5(h) shall cease to be in
full force and effect; or

          (iv) the Coupon Collateral deposited pursuant to Section 5(i) shall become
insufficient, in the opinion of a nationally recognized investment bank, appraisal firm or
firm of independent public accountants, reasonably acceptable to the Pledgor, to pay the
remaining coupon payment value.

          (f) Release of Excess Collateral. If on any Business Day the Collateral Agent is
advised by the Pledgor in writing that the number of Pledged Shares exceeds the Maximum Deliverable
Number of DSW Class A Common Shares as of such day, or if any Adjustment Event or Reorganization
Event has occurred prior to such Business Day, that the number of units of Exchange Property
pledged hereunder as Collateral exceeded the Maximum Deliverable Number of units of Exchange
Property as of such day, and no Event of Default or failure by the Pledgor to meet any of its
obligations under Section 5 or 6 hereof has occurred and is continuing, the Pledgor may obtain the
release from the Lien hereof of any such excess Collateral, upon delivery to the Collateral Agent
of a written notice from an Authorized Representative of the Pledgor indicating the items of
Collateral to be released and certifying that such release would not result in a Collateral Event
of Default.

          (g) Investment of Cash Collateral. The Collateral Agent shall, at the written
direction of the Pledgor, invest and, if applicable, reinvest any cash Collateral received by it
pursuant to any Adjustment Event or Reorganization Event or pursuant to Section 5(i) in direct
obligations of the United States of America maturing on or before the Maturity Date.

          (h) Delivery of Exchange Property.

          (i) On the Maturity Date unless (x) a Merger Early Full Exchange has occurred, (y) the
Pledgor shall have delivered the Cash Exchange Amount pursuant to Section 3.03 of the
Indenture or (z) an Acceleration Event has occurred, the Collateral Agent shall deliver to
the Indenture Trustee pursuant to the written instructions of the Pledgor and Section
6(h)(iii), for pro rata distribution to the Holders of the Notes pursuant to the Notes, the
amount and type of Collateral required to be delivered pursuant to Section 3.04 of the
Indenture in full satisfaction of the Pledgor’s delivery obligations thereunder.

          (ii) On the third Business Day prior to the Maturity Date unless (w) the Pledgor has
substituted a number of DSW Class A Common Shares equal to the Maximum Deliverable Number of
DSW Class A Common Shares for a number of DSW Class B Common Shares pursuant to Section
3.01(b) of the Indenture and as provided in Section 6(b) hererof, (x) a Merger Early Full
Exchange has occurred, (y) the Pledgor

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shall have delivered the Full Cash Exchange Amount pursuant to Section 3.03(a) of the
Indenture or (z) an Acceleration Event has occurred, the Collateral Agent is hereby directed
to and shall deliver to the Indenture Trustee the certificate(s) representing the DSW Class
B Common Shares held as Collateral and, pursuant to the Exchange Request, the Indenture
Trustee shall surrender to DSW such certificate(s), along with the required notice, and, as
provided in Section 5(h) hereof, DSW shall exchange a number of DSW Class B Common Shares
equal to the number indicated in the required notice (which number shall equal the Exchange
Number unless the Issuer has previously substituted DSW Class A Common Shares for DSW Class
B Common Shares pursuant to Section 3.01(b) of the Indenture and as provided in Section 6(b)
hereof, in which case the number shall equal the Exchange Number less the number of shares
so substituted) for an equal number of DSW Class A Common Shares to be held by the
Collateral Agent as Collateral until the Notes are exchanged and shall deposit such DSW
Class A Common Shares with DTC, credited to an account of the Collateral Agent, and deliver
a certificate representing remaining Class B Common Shares, if any, to the Indenture
Trustee, which shall then deliver such certificate to the Collateral Agent.

          (iii) On the Maturity Date unless advised by the Pledgor in writing that (x) a Merger
Early Full Exchange has occurred, (y) the Pledgor shall have delivered the Cash Exchange
Amount pursuant to Section 3.03 of the Indenture or (z) an Acceleration Event has occurred,
the Collateral Agent is hereby directed and shall, in full satisfaction of the Pledgor’s
obligation under the Indenture to deliver DSW Class A Common Shares and/or other Exchange
Property, if applicable, on such day, deliver to the Indenture Trustee through DTC, for the
benefit of the Holders of the Notes, the number of DSW Class A Common Shares or units of
such other Exchange Property, as the case may be, which the Pledgor is obligated to deliver
under the Indenture free of any Transfer Restrictions.

          (iv) On a Merger Early Exchange Date, the Collateral Agent is hereby directed to and
shall deliver out of any cash then held as the Collateral to the Indenture Trustee, for pro
rata distribution to the Holders of Notes pursuant to the Notes, the amount of cash required
to be delivered pursuant to Section 4.05 of the Indenture.

          In each case, upon any such delivery, the Indenture Trustee shall hold such DSW Class A Common
Shares and/or other Exchange Property, if applicable, absolutely and free from any claim or right
whatsoever (including, without limitation, any claim or right of the Pledgor).

          (i) Release of Pledged Items if Notes Exchanged for Cash. On the Maturity Date, if
the Pledgor elects to deliver the Cash Exchange Amount in exchange for the Notes pursuant to
Section 3.03 of the Indenture, promptly following receipt of a notice from the Indenture Trustee to
the effect that the Pledgor has delivered to it the Cash Exchange Amount required to be delivered
by it in exchange for the Notes pursuant to Section 3.03 of the Indenture, the Collateral Agent is
hereby directed and shall release to the Pledgor all the Pledged Items then held by the Collateral
Agent hereunder, and the Pledgor shall hold such Pledged Items absolutely and free from any claim
or right whatsoever (including, without limitation, any claim or right of the Collateral Agent, the
Indenture Trustee or the Holders of the Notes).

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     7. Income and Voting Rights on Collateral.

          (a) All income, dividends, interest and, if any, principal and premium relating to any
Collateral made or accrued thereon shall be retained by the Collateral Agent, and any such payments
that are received by the Pledgor shall be received in trust for the benefit of the Indenture
Trustee, shall be segregated from other funds of the Pledgor and shall forthwith be paid over to
the Collateral Agent. Any such payments so retained by, or paid over to, the Collateral Agent shall
be held by the Collateral Agent as Collateral hereunder.

          (b) Unless an Event of Default has occurred and is continuing,

          (i) the Pledgor shall have the right, from time to time, to vote and to give all
approvals, consents, ratifications and waivers with respect to the Collateral (including all
DSW Class A Common Shares and DSW Class B Common Shares), and the Collateral Agent is hereby
directed to and shall promptly deliver to the Pledgor such proxies, powers of attorney,
consents, ratifications and waivers in respect of any of the Collateral that is registered
in the name of the Collateral Agent or its nominee and shall further deliver such documents
and instruments as shall be specified in a written request by the Pledgor; and

          (ii) the Pledgor shall have the right to direct the Collateral Agent as to whether to
tender any Collateral in any tender offer or exchange offer related to such Collateral;
provided that the Collateral Agent shall maintain a perfected security interest in the
proceeds of any such tender offer or exchange offer and, with respect to any such proceeds
consisting of Investment Property, as to which the Collateral Agent shall have Control.

          If an Event of Default shall have occurred and be continuing, the Collateral Agent shall have
the right to the extent permitted by law, and the Pledgor shall take all such action as may be
necessary or appropriate to give effect to such right as requested by the Collateral Agent, to vote
and to give all approvals, consents, ratifications and waivers, and take any other action with
respect to any or all of the Collateral with the same force and effect as if the Collateral Agent
were the absolute and sole owner thereof.

     8. Remedies upon the Occurrence of an Acceleration Event.

          (a) Upon the occurrence of an Acceleration Event, the Collateral Agent may exercise on behalf
of the Indenture Trustee all the rights of a secured party under the UCC (whether or not in effect
in the jurisdiction where such rights are exercised) and, in addition, without being required to
give any notice, except as herein provided or as may be required by mandatory provisions of law,
shall:

          (i) to the extent permitted by applicable law, deliver all Collateral consisting of
Pledged Shares and other Exchange Property, if applicable (but not, in either case, in
excess of the number of DSW Class A Common Shares or units of other Exchange Property
deliverable upon exchange under the Notes at such time) to the Indenture Trustee, for pro
rata distribution to the Holders of the Notes pursuant to the Notes, on the Acceleration
Date or as soon as practicable thereafter, to the extent

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permitted by law (the “Delivery Date”), whereupon the Holders of the Notes shall hold
such DSW Class A Common Shares or other Exchange Property, if applicable, free from any
claim or right of whatsoever kind, including any equity or right of redemption of the
Pledgor which may be waived, and the Pledgor, to the extent permitted by law, hereby
specifically waives all rights of redemption, stay or appraisal which Pledgor has or may
have under any law now existing or hereafter adopted; provided that prior to any such
delivery, the Collateral Agent shall notify the Indenture Trustee and the Indenture Trustee
shall exchange all DSW Class B Common Shares constituting such Pledged Shares for DSW Class
A Common Shares pursuant to the Exchange Request; and

          (ii) if such delivery shall be insufficient to satisfy in full all of the obligations
of Pledgor under the Notes, the Indenture and this Agreement, to the extent permitted by
law, sell all of the remaining Collateral, or such lesser portion thereof as may be
necessary to generate proceeds sufficient to satisfy in full all of the obligations of
Pledgor under the Notes, the Indenture and this Agreement, at public or private sale or at
any broker’s board or on any securities exchange, for cash, upon credit or for future
delivery, and at such price or prices as the Collateral Agent may deem satisfactory;
provided that prior to any such sale, the Collateral Agent shall notify the Indenture
Trustee and the Indenture Trustee shall exchange all DSW Class B Common Shares constituting
such remaining Collateral for DSW Class A Common Shares pursuant to the Exchange Request;
provided further that the Pledgor may elect to satisfy its obligations under the Notes, the
Indenture and this Agreement with respect to Acceleration Additional Cash Amounts by
delivering, in lieu of such sale, the number of remaining Pledged Shares and/or units of
other Exchange Property, if applicable, required to satisfy in full its obligations with
respect to Acceleration Additional Cash Amounts; in such event, the value of such Pledged
Shares and other Exchange Property shall be calculated pursuant to the definition of
Applicable Market Value provided in Section 5.02(b) of the Indenture.

          The Pledgor covenants and agrees, at the request of the Collateral Agent, to execute and
deliver such documents and take such other action as the Collateral Agent deems necessary or
advisable in order that any such sale may be made in compliance with law. Upon any such sale, the
Collateral Agent shall have the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser at any such sale shall hold the Collateral so sold absolutely
and free from any claim or right of whatsoever kind, including any equity or right of redemption of
the Pledgor which may be waived, and the Pledgor, to the extent permitted by law, hereby
specifically waives all rights of redemption, stay or appraisal which Pledgor has or may have under
any law now existing or hereafter adopted. The notice (if any) of such sale required by Article 9
of the UCC shall: (1) in case of a public sale, state the time and place fixed for such sale, (2)
in case of sale at a broker’s board or on a securities exchange, state the board or exchange at
which such sale is to be made and the day on which the Collateral, or the portion thereof so being
sold, will first be offered for sale at such board or exchange, and (3) in the case of a private
sale, state the day after which such sale may be consummated. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places as the Collateral
Agent may fix in the notice of such sale. At any such sale the Collateral may be sold in one lot
as an entirety or in separate parcels, as the Collateral Agent may determine. The Collateral Agent
shall not be obligated to make any such sale pursuant to any such notice. The

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Collateral Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the same may be so adjourned. In
case of any sale of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Collateral Agent until the selling price is paid by the
purchaser thereof, but the Collateral Agent shall not incur any liability in case of the failure of
such purchaser to take up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice. The Collateral Agent, instead of exercising the
power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the security interests hereunder and sell the Collateral, or any portion thereof, under a
judgment or decree of a court or courts of competent jurisdiction.

          (b) Power of Attorney. The Collateral Agent is hereby irrevocably appointed
the true and lawful attorney of the Pledgor with full power and authority, in the
name and stead of the Pledgor, to do all of the following:

          (i) upon any delivery or sale of all or any part of any Collateral made either under
the power of delivery or sale given hereunder or under judgment or decree in any judicial
proceedings for foreclosure or otherwise for the enforcement of this Agreement, to make all
necessary deeds, bills of sale and instruments of assignment, transfer or conveyance of the
property thus delivered or sold;

          (ii) subject to Section 7(b), upon the occurrence of an Adjustment Event or
Reorganization Event while any DSW Class A Common Shares or DSW Class B Common Shares are
Pledged Items, to take any necessary actions with respect to such shares to cause the
Pledged Items to conform to the requirements of this Agreement following the occurrence of
the Adjustment Event or Reorganization Event, including, without limitation, the tender of
such shares; and

          (iii) to the extent permitted by law, to exercise, at any time and from time to time
while an Event of Default has occurred and is continuing, all or any of the following powers
with respect to all or any of the Collateral: (1) to demand, sue for, collect, receive and
give acquittance for any and all monies due or to become due upon or by virtue thereof, (2)
to settle, compromise, compound, prosecute or defend any action or proceeding with respect
thereto, (3) to sell, transfer, assign or otherwise deal in or with the same or the proceeds
or avails thereof, as fully and effectually as if the Collateral Agent were the absolute
owner thereof (including, without limitation, the giving of instructions and entitlement
orders in respect thereof) and (4) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference thereto; provided that the
Collateral Agent shall give Pledgor not less than ten days’ prior written notice of the time
and place of any sale or other intended disposition of any of the Collateral, except any
Collateral that threatens to decline speedily in value, including, without limitation,
equity securities, or is of a type customarily sold on a recognized market.

          The Collateral Agent and Pledgor agree that the notice provided for in the proviso of Section
8(b)(iii) constitutes “reasonable authenticated notification” within the meaning of

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Section 9-611 of the UCC. The grant of the foregoing power of attorney shall not be deemed to
be a grant of a power of attorney to vote or grant proxies with respect to any DSW Class A Common
Shares or DSW Class B Common Shares, except as provided in Section 7(b). For such purposes the
Collateral Agent may execute all necessary documents and instruments. This power of attorney shall
be deemed coupled with an interest, and the Pledgor hereby ratifies and confirms all that its
attorneys acting under such power, or such attorneys’ successors or agents, shall lawfully do so by
virtue of this Agreement. If so requested by the Collateral Agent, the Indenture Trustee or any
purchaser of the Collateral or a portion thereof, the Pledgor shall further ratify and confirm any
such delivery or sale by executing and delivering to the Collateral Agent, the Indenture Trustee or
such purchaser or purchasers at the expense of the Pledgor all proper deeds, bills of sale,
instruments of assignment, conveyance or transfer and releases as may be designated in any such
request. The Pledgor’s obligations and authorizations hereunder shall not be terminated by
operation of law or the occurrence of any event whatsoever or the occurrence of any other event.

          (c) Application of Collateral and Proceeds. Upon the occurrence of an Acceleration Event, the Collateral Agent may, subject to the
proviso of Section 8(a)(ii), proceed to realize upon the security interest in the Collateral
against any one or more of the types of Collateral, at any one time, as the Collateral Agent shall
determine in its sole discretion. The proceeds of any sale of, or other realization upon, or other
receipt from, any of the Collateral remaining after delivery to the Indenture Trustee pursuant to
Section 8(a)(i) shall be applied by the Collateral Agent, to the extent permitted by applicable
law, in the following order of priorities:

          (i) first, to the payment to the Collateral Agent of the expenses of such sale or other
realization, including reasonable compensation to the Collateral Agent and its agents and
counsel, and all expenses, liabilities and advances incurred or made by the Collateral Agent
in connection therewith, including brokerage fees in connection with the sale by the
Collateral Agent of any Pledged Item;

          (ii) second, to the payment to the Indenture Trustee of any expenses incurred in
connection with the Acceleration Event and such sale or other realization, including
reasonable compensation to the Indenture Trustee and its agents and counsel, and all
expenses, liabilities and advances incurred or made by the Indenture Trustee in connection
therewith; and

          (iii) third, to the payment to the Indenture Trustee, for pro rata distribution to the
Holders of Notes pursuant to the Notes, of an amount equal to: (A) the Applicable Market
Value per DSW Class A Common Share (as calculated pursuant to Section 5.02(b) of the
Indenture) multiplied by the aggregate number of DSW Class A Common Shares equal to (1) the
aggregate number of DSW Class A Common Shares required to be delivered under the Notes minus
(2) the aggregate number of DSW Class A Common Shares delivered by the Collateral Agent to
the Indenture Trustee on the Delivery Date as described above; or (B) from and after an
Adjustment Event or Reorganization Event, the Applicable Market Value of the Exchange
Property (as calculated pursuant to Section 5.02(b) of the Indenture) multiplied by the
aggregate number of units of Exchange Property equal to: (1) the aggregate number thereof

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required to be delivered under the Notes minus (2) the aggregate number of units delivered
by the Collateral Agent to the Indenture Trustee on the Delivery Date as described above;

          (iv) fourth, to the payment to the Indenture Trustee, for pro rata distribution to the
Holders of Notes pursuant to the Notes, of an amount equal to the aggregate amount of
Acceleration Additional Cash Amounts;

          (v) finally, if all of the obligations of the Pledgor hereunder and under the
outstanding Notes, the Indenture and this Agreement, including, without limitation, the
obligation with respect to the fees, costs and expenses of the Collateral Agent and the
Indenture Trustee, have been fully discharged or sufficient funds have been set aside by the
Collateral Agent at the request of the Pledgor for the discharge thereof, any remaining
proceeds shall be released to the Pledgor.

          (d) Agreement to Pay Attorneys’ Fees and Expenses. Upon the occurrence of an Acceleration Event, the Pledgor agrees that it will pay or
reimburse the Collateral Agent, the Securities Intermediary and the Indenture Trustee on demand for
the reasonable expenses for the enforcement of performance or observance of any obligation or
agreement on the part of the Pledgor herein contained, including the reasonable fees of attorneys
employed by them. All such costs and expenses shall be deducted from the proceeds of any sale of
the Collateral in accordance with Section 8(c) hereof, and, if there is no sale of the Collateral,
or such proceeds are insufficient therefor, shall be paid promptly from the Pledgor’s own funds.

     9. The Collateral Agent and the Securities Intermediary.

          The Indenture Trustee hereby appoints HSBC Bank USA, National Association, to act as its
collateral agent hereunder, with all of the rights, power, duties and obligations as set forth
herein. The Collateral Agent accepts its duties and responsibilities hereunder as collateral agent
for the Indenture Trustee. The duties and responsibilities of the Collateral Agent and Securities
Intermediary hereunder are subject to the following terms and conditions:

          (a) Performance of Duties; Force Majeure. Each of the Collateral Agent and the Securities Intermediary undertakes to perform such
duties and only such duties as are expressly set forth herein and, beyond the exercise of
reasonable care in the performance of such duties, no implied covenants or obligations shall be
read into this Agreement against the Collateral Agent and the Securities Intermediary. No provision
hereof shall be construed to relieve the Collateral Agent and the Securities Intermediary from
liability for their own grossly negligent action, grossly negligent failure to act, recklessness or
their own willful misconduct, subject to the following:

          (i) The Collateral Agent and the Securities Intermediary may consult with counsel, and
the advice or opinion of such counsel shall be full and complete
authorization and protection in respect of an action taken or suffered hereunder in
good faith and in accordance with such advice or opinion of counsel.

          (ii) The Collateral Agent and the Securities Intermediary shall not be liable with
respect to any action taken, suffered or omitted by it in good faith (i)

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reasonably believed
by it to be authorized or within the discretion or rights or powers conferred on it by this
Agreement or (ii) in accordance with any direction or request of the Indenture Trustee.

          (iii) Each of the Collateral Agent and the Securities Intermediary shall not be liable
for any error of judgment made in good faith by any of its officers, unless it was grossly
negligent in ascertaining the pertinent facts.

          (iv) The Collateral Agent and the Securities Intermediary shall not be liable for any
claims, losses, liabilities, damages or expenses (including attorneys’ fees and expenses)
due to forces beyond the reasonable control of the Collateral Agent and the Securities
Intermediary, including without limitation strikes, work stoppages, acts of war or
terrorism, insurrection, revolution, nuclear or natural catastrophes or acts of God, and
interruptions, loss or malfunctions of utilities, communications or computer (software and
hardware) services; provided that this provision shall not protect the Collateral Agent and
the Securities Intermediary against any liability to which they would otherwise be subject
by reason of their willful misfeasance, bad faith or gross negligence in the performance of
their duties or by reason of their reckless disregard of their obligations and duties
hereunder.

          (v) In the absence of bad faith on its part, each of the Collateral Agent and the
Securities Intermediary may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any note, notice, resolution, consent,
certificate, affidavit, letter, telegram, teletype message, statement, order or other
document believed by it to be genuine and correct and to have been signed or sent by the
proper Person or Persons.

          (vi) No provision of this Agreement shall require the Collateral Agent and the
Securities Intermediary to expend or risk their own funds or otherwise incur any financial
liability in the performance of any of their duties hereunder, or in the exercise of any of
their rights or powers hereunder, if they shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.

          (vii) Each of the Collateral Agent and the Securities Intermediary may perform any
duties hereunder either directly or by or through agents or attorneys, and each of the
Collateral Agent and the Securities Intermediary shall not be responsible for any willful
misconduct or gross negligence on the part of any agent or attorney that is not a subsidiary
or affiliate of the Collateral Agent or the Securities Intermediary, respectively, and that
is appointed with due care by it hereunder. In furtherance thereof, any subsidiary owned or
controlled by the Collateral Agent and the Securities Intermediary, or its successors, as
agent for the Collateral Agent and the Securities
Intermediary, may perform any or all of the duties of the Collateral Agent relating to
the determination of sufficiency of Collateral hereunder.

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          (viii) In no event shall the Collateral Agent and the Securities Intermediary be
personally liable for any taxes or other governmental charges imposed upon or in respect of
(x) the Collateral or (y) the income or other distributions thereon.

          (ix) Unless and until the Collateral Agent shall have received notice from the Pledgor,
or unless and until a Responsible Officer of the Collateral Agent shall have actual
knowledge to the contrary, the Collateral Agent shall be entitled to deem and treat all
Collateral delivered to it hereunder as Eligible Collateral hereunder, provided that the
Collateral Agent has carried out the duties specified in Section 6 with respect to such
Collateral at the time of delivery thereof.

          (x) The Pledgor shall indemnify the Collateral Agent and the Securities Intermediary,
their officers and agents for, and hold the Collateral Agent and the Securities Intermediary
and their officers and agents harmless against, any loss, liability or expense (including
the reasonable costs and expenses of defending against any claims of liability) arising out
of or in connection with the Collateral Agent and the Securities Intermediary’s acting as
the Collateral Agent and the Securities Intermediary hereunder, except such loss, liability
or expense with respect to which the Collateral Agent and the Securities Intermediary (or
such officer or agent, as the case may be) would not be relieved of liability under Section
9(a)(iv) hereof. The obligation of Pledgor under this Section 9(a)(x) shall survive the
termination of this Agreement and the resignation or removal of the Collateral Agent and the
Securities Intermediary. The Collateral Agent and the Securities Intermediary shall be under
no obligation to exercise any of the rights, powers, duties or obligations vested in or
placed upon them by this Agreement at the request or direction of Pledgor, unless Pledgor
shall have provided to the Collateral Agent and the Securities Intermediary security and/or
indemnity reasonably satisfactory to the Collateral Agent and the Securities Intermediary,
against the costs, expenses and liabilities which they may reasonably expect to incur and
liabilities which it may reasonably expect to incur in compliance with such request or
direction.

          The Collateral Agent and the Securities Intermediary shall not be responsible for the
correctness of the recitals and statements herein which are made by the Pledgor or for any
statement or certificate delivered by the Pledgor pursuant hereto. Except as specifically provided
herein, the Collateral Agent and the Securities Intermediary shall not be responsible for the
validity, sufficiency, collectibility or marketability of any Collateral given to or held by it
hereunder or for the validity or sufficiency of the Indenture, the Notes or the Lien on the
Collateral purported to be created hereby.

          (b) Knowledge. The Collateral Agent and the Securities Intermediary shall not be deemed to
have knowledge of any Event of Default (except a Collateral Event of Default), unless and until a
Responsible Officer of the Collateral Agent or the Securities Intermediary shall have actual
knowledge thereof or shall have received written notice thereof.

          (c) Merger. Any corporation or association into which the Collateral Agent and the
Securities Intermediary may be converted or merged, or with which it may be consolidated, or to
which it may sell or transfer its agency business and assets as a whole or substantially as a
whole, or any corporation or association resulting from any such conversion,

24

 

sale, merger, consolidation or transfer to which it is a party, shall, subject to the prior
written consent of the Indenture Trustee, be and become a successor Collateral Agent and Securities
Intermediary hereunder and vested with all of the title to the Collateral and all of the powers,
discretions, immunities, privileges and other matters as was its predecessor without, except as
provided above, the execution or filing of any instrument or any further act, deed or conveyance on
the part of any of the parties hereto, anything herein to the contrary notwithstanding.

          (d) Resignation. The Collateral Agent and any successor Collateral Agent and the
Securities Intermediary and any successor Securities Intermediary may at any time resign by giving
30 days’ written notice by registered or certified mail to the Pledgor and notice to the Indenture
Trustee in accordance with the provisions of Section 11(d). Such resignation shall take effect upon
the appointment of a successor Collateral Agent and/or Securities Intermediary, as the case may be,
by the Indenture Trustee. Resignation by the Collateral Agent or any successor Collateral Agent or
the Securities Intermediary or any successor Securities Intermediary shall not affect its rights
hereunder, including without limitation, the rights under Sections 9(a)(x) and 9(h).

          (e) Removal. Each of the Collateral Agent and the Securities Intermediary may be removed
at any time by an instrument or concurrent instruments in writing delivered to the Collateral Agent
or the Securities Intermediary, as the case may be, and to the Pledgor and signed by the Indenture
Trustee. Such removal shall take effect upon the appointment of a successor Collateral Agent or
Securities Intermediary, as the case may be, by the Indenture Trustee. The removal of the
Collateral Agent or any successor Collateral Agent or the Securities Intermediary or any successor
Securities Intermediary shall not affect its rights hereunder, including without limitation, the
rights under Sections 9(a)(x) and 9(h).

          (f) Appointment of Successor.

          (i) If the Collateral Agent or the Securities Intermediary hereunder shall resign or be
removed, or be dissolved or shall be in the course of dissolution or liquidation or
otherwise become incapable of action hereunder, or if the Collateral Agent or the Securities
Intermediary shall be taken under the control of any public officer or officers or of a
receiver appointed by a court, a successor may be appointed by the Indenture Trustee by an
instrument or concurrent instruments in writing signed by the Indenture Trustee or by its
attorneys in fact fully authorized. A copy of such instrument or concurrent instruments
shall be sent by registered mail to the Pledgor.

          (ii) Every such temporary or permanent successor Collateral Agent and Securities
Intermediary appointed pursuant to the provisions hereof shall be a trust company or bank in
good standing, having a reported capital and surplus of not less than $100,000,000 and
capable of holding the Collateral in the State of New York, if there be such an institution
willing, qualified and able to accept the duties of the Collateral Agent and the Securities
Intermediary hereunder upon customary terms.

          (g) Acceptance by Successor. Every temporary or permanent successor Collateral Agent and
Securities Intermediary appointed hereunder shall execute, acknowledge and deliver to its
predecessor and also to the Pledgor an instrument in writing accepting such

25

 

appointment hereunder, whereupon such successor, without any further act, deed or conveyance,
shall become fully vested with all the estates, properties, rights, powers, duties and obligations
of its predecessors. Such predecessor shall, nevertheless, on the written request of its successor
or the Pledgor, execute and deliver an instrument transferring to such successor all the estates,
properties, rights and powers of such predecessor hereunder. Every predecessor Collateral Agent
and Securities Intermediary shall deliver all Collateral held by it as the Collateral Agent and
Securities Intermediary hereunder to its successor. Should any instrument in writing from the
Pledgor be reasonably required by a successor Collateral Agent or Securities Intermediary for more
fully and certainly vesting in such successor the estates, properties, rights, powers, duties and
obligations hereby vested or intended to be vested in the predecessor, any and all such instruments
in writing shall, at the request of the temporary or permanent successor Collateral Agent or
Securities Intermediary, be forthwith executed, acknowledged and delivered by the Pledgor.

          (h) Compensation and Reimbursement. The Pledgor agrees: (i) to pay to the Collateral
Agent and the Securities Intermediary from time to time reasonable compensation for all services
rendered by them hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust); and (ii) to reimburse the Collateral
Agent and the Securities Intermediary upon their request for all reasonable expenses, disbursements
and advances reasonably incurred or made by the Collateral Agent and the Securities Intermediary in
accordance with any provision of this Agreement (including the reasonable compensation, fees,
expenses and disbursements of their agents, accountants and counsel), except any expense,
disbursement or advances with respect to which the Collateral Agent and the Securities Intermediary
would not be relieved of liability under Section 9(a)(iv).

     10. Amendment.

          (a) Amendment Without Consent of Holders. Without the consent of any Holders, the Pledgor,
when authorized by a Board Resolution, the Collateral Agent, the Securities Intermediary and the
Indenture Trustee, at any time and from time to time, may amend this Agreement, in form
satisfactory to the Pledgor, the Collateral Agent, the Securities Intermediary and the Indenture
Trustee, to:

          (i) evidence the succession of another Person to the Pledgor and the assumption by any
such successor of the covenants of the Pledgor;

          (ii) evidence and provide for the acceptance of appointment hereunder by a successor
Collateral Agent, Securities Intermediary or Indenture Trustee;

          (iii) add to the covenants of the Pledgor for the benefit of the Holders of the Notes,
or to surrender any right or power herein conferred upon the Pledgor, provided such
covenants or such surrender shall not adversely affect the validity, perfection or priority
of the Pledge created hereunder; or

          (iv) cure any ambiguity, to cure, correct or supplement any provisions of this
Agreement that may be defective or inconsistent with any other such provisions of

26

 

this Agreement, or to make any other change to this Agreement that the Pledgor, the
Collateral Agent, the Securities Intermediary and the Indenture Trustee determine is not
inconsistent with this Agreement, the Indenture and the Notes, provided that, in all such
cases, such action shall not materially adversely affect the interests of the Holders and
provided that any such actions shall not adversely affect the validity, perfection or
priority of the Pledge created hereunder.

          (b) Amendment With Consent of Holders. With the consent of the Holders of not less than a
majority of the Outstanding Notes, by Act of such Holders delivered to the Pledgor, the Indenture
Trustee, the Collateral Agent and the Securities Intermediary, the Pledgor, when duly authorized by
a Board Resolution, the Indenture Trustee, the Collateral Agent and the Securities Intermediary may
amend this Agreement for the purpose of modifying in any manner the provisions of this Agreement;
provided, however, that no such amendment shall, without the consent of each Holder of the
Outstanding Notes affected thereby (in addition to a majority of the Outstanding Notes):

          (i) change the amount or type of Collateral required to be pledged to secure the
Pledgor’s performance under the Notes (except as set forth in Article 4 of the Indenture);
or

          (ii) otherwise effect any action that would require the consent of the Holder of each
Outstanding Notes affected thereby pursuant to the Indenture if such action were effected by
a modification or amendment of the provisions of the Indenture; or

          (iii) reduce the above-stated percentage of Principal Amount of Outstanding Notes the
consent of the Holders of which is required for the modification or amendment of the
provisions of this Agreement.

          It shall not be necessary for any Act of Holders under this Section to approve the particular
form of any proposed amendment, but it shall be sufficient if such Act shall approve the substance
thereof.

          (c) Execution of Amendments. In executing any amendment permitted by this Section, the
Collateral Agent, the Securities Intermediary and the Indenture Trustee shall be entitled to
receive and, subject to Section 7.01 of the Indenture with respect to the Indenture Trustee, shall
be fully authorized and protected in relying upon, an Opinion of Counsel stating that the execution
of such amendment is authorized or permitted by this Agreement and that all conditions precedent,
if any, to the execution and delivery of such amendment have been satisfied. The Collateral Agent,
the Securities Intermediary and Indenture Trustee may, but shall not be obligated to, enter into
any such amendment which affects their own respective rights, duties or immunities under this
Agreement or otherwise.

          (d) Effect of Amendments. Upon the execution of any amendment under this Section, this
Agreement shall be modified in accordance therewith, and such amendment shall form a part of this
Agreement for all purposes; and every Holder of Notes theretofore or

27

 

thereafter authenticated, executed on behalf of the Holders and delivered under the Indenture
shall be bound thereby.

     11. Miscellaneous.

          (a) Benefit of Agreement; Successors and Assigns. Whenever any of the parties hereto is
referred to, such reference shall be deemed to include the successors and assigns of such party.
All the covenants and agreements herein contained by or on behalf of the Pledgor, the Collateral
Agent and the Securities Intermediary shall bind, and inure to the benefit of, their respective
successors and assigns whether so expressed or not, and shall be enforceable by and inure to the
benefit of the Indenture Trustee and its successors and assigns.

          (b) Separability. To the extent permitted by law, the unenforceability or invalidity of
any provision or provisions of this Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.

          (c) Amendments and Waivers. Subject to Section 10, any term, covenant, agreement or
condition of this Agreement may be amended or compliance therewith may be waived (either generally
or in a particular instance and either retrospectively or prospectively) but only by a writing
signed by the Collateral Agent, the Securities Intermediary (to the extent such amendment or waiver
affects any of its rights or obligations hereunder), the Pledgor and the Indenture Trustee.

          (d) Notices.

          (i) Any notice provided for herein, unless otherwise specified, shall be in writing
(including transmittals by telex or telecopier) and shall be given to a party at the address
set forth opposite such party’s name on the signature pages hereto or at such other address
as may be designated by notice duly given in accordance with this Section 11(d) to each
other party hereto.

          (ii) Each such notice given pursuant to Section 11(d)(i) shall be effective (A) if sent
by certified mail (return receipt requested), 72 hours after being deposited in the United
States mail, postage prepaid; (B) if given by telex or telecopier, when such telex or
telecopied notice is transmitted; or (C) if given by any other means, when delivered at the
address specified in this Section 11(d).

          (e) Governing Law. This Agreement shall in all respects be governed by and construed in
accordance with the laws of the State of New York; provided that as to Pledged Items located in any
jurisdiction other than the State of New York, the Collateral Agent on behalf of the Indenture
Trustee, shall have all of the rights to which a secured party is entitled under the laws of such
other jurisdiction. The parties hereto hereby agree that the “securities intermediary’s
jurisdiction” (within the meaning of Section 8-110(e) and Section 9-305 of the UCC) in respect of
the Collateral Account and any security entitlements in respect of financial assets held therein or
credited thereto is the State of New York.

28

 

          (f) Counterparts. This Agreement may be executed, acknowledged and delivered in any number
of counterparts and such counterparts taken together shall constitute one and the same instrument.

          (g) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF.

          Nothing in this Section 11(g) shall affect the right of any party hereto to serve process in
any manner permitted by law, or limit any right to bring proceedings against any other party hereto
in the courts of any jurisdiction or to enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction.

          (h) Non-Contravention of UCC. Notwithstanding anything to the contrary contained in
any provision herein, all provisions are subject to non-waivable rights of the Pledgor and duties
of the Collateral Agent under the UCC. All provisions are to be construed, interpreted and
enforced in accordance with these rights of the Pledgor and duties of the Collateral Agent under
the UCC.

     12. Termination of Collateral Agreement.

          This Agreement and the rights hereby granted by the Pledgor in the Collateral shall cease,
terminate and be void upon fulfillment of all of the obligations of the Pledgor under all
Outstanding Notes, and under the Indenture and this Agreement and the Pledgor shall have no further
liability or obligation hereunder upon such termination. Any Collateral remaining at the time of
such termination shall be fully released and discharged from the Lien hereof and delivered to the
Pledgor by the Collateral Agent, accompanied by such documents of termination and release as
Pledgor may reasonably request, all at the expense of the Pledgor.

29

 

          IN WITNESS WHEREOF, each of the Pledgor, the Indenture Trustee, the Collateral Agent and the
Securities Intermediary has caused this Agreement to be duly executed on its behalf as of the date
hereof.

	 	 	 	 	 
	 	PLEDGOR:

RETAIL VENTURES, INC.

 	 
	 	By:  	/s/ James A. McGrady
 	 
	 	 	Name:  	James A. McGrady 	 
	 	 	Title:  	Executive Vice President, Chief Financial Officer, Treasurer and
Secretary 	 
	 

Address for Notices:

Retail Ventures, Inc.

3241 Westerville Road

Columbus, Ohio 43224

Fax: 614-473-2721

Attention: James A. McGrady

Executive Vice President, CFO, Treasurer and

Secretary

COPY TO:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY 10036

Fax: 917-777-2588

Attn: Robert M. Chilstrom

 

 

	 	 	 	 	 
	 	HSBC BANK USA, NATIONAL ASSOCIATION 

as Indenture Trustee

 	 
	 	By:  	/s/ Anthony A. Bocchino, Jr.
 	 
	 	 	Name:  	Anthony A. Bocchino, Jr. 	 
	 	 	Title:  	Vice President

 	 
	 	Address for Notices: 

	 
	 	HSBC Bank USA, National Association

452 Fifth Avenue

New York, NY 10018

Fax: 212-525-1300

Corporate Trust and Loan Agency
	 

	 	 	 	 	 
	 	HSBC BANK USA, NATIONAL ASSOCIATION

as Collateral Agent

 	 
	 	By:  	/s/ Anthony A. Bocchino, Jr.
 	 
	 	 	Name:  	Anthony A. Bocchino, Jr. 	 
	 	 	Title:  	Vice President

 	 
	 	
Address for Notices:	 
	 	
HSBC Bank USA, National Association

452 Fifth Avenue

New York, NY 10018

Fax: 212-525-1300

Corporate Trust and Loan Agency
 	 

 

 

	 	 	 	 	 
	 	HSBC BANK USA, NATIONAL ASSOCIATION

as Securities Intermediary

 	 
	 	By:  	/s/ Anthony A. Bocchino, Jr.
 	 
	 	 	Name:  	Anthony A. Bocchino, Jr. 	 
	 	 	Title:  	Vice President 	 
	 	
Address for Notices: 
	 
	 	
HSBC Bank USA, National Association

452 Fifth Avenue

New York, NY 10018

Fax: 212-525-1300

Corporate Trust and Loan Agency
 	 

 

 

Exhibit A

to

Collateral Agreement

CERTIFICATE FOR SUBSTITUTED COLLATERAL

     Retail Ventures, Inc. (the “Pledgor”), hereby certifies, pursuant to Section 6(b) of the
Collateral Agreement dated as of August 16, 2006 among the Pledgor, HSBC Bank USA, National
Association, as Collateral Agent, HSBC Bank USA, National Association, as Indenture Trustee, and
HSBC Bank USA, National Association, as Securities Intermediary (the “Collateral Agreement”; terms
defined in the Collateral Agreement being used herein as defined therein), that:

     1. The Pledgor is delivering the following items of Eligible Collateral consisting of DSW
Class A Common Shares to the Collateral Agent to be held by the Collateral Agent as substituted
Collateral (the “Substituted Collateral”) and Pledgor hereby grants to the Collateral Agent, as
agent of and for the benefit of the Indenture Trustee, for the benefit of the Holders from time to
time of the Notes, a security interest in and to all of Pledgor’s right, title and interest in the
Substituted Collateral:

                          DSW Class A Common Shares

     2. The Pledgor requests that the Collateral Agent transfer to the Pledgor the following Prior
Collateral, pursuant to Section 6(b) of the Collateral Agreement:

                          DSW Class B Common Shares

     3. The Pledgor hereby represents and warrants to the Collateral Agent that:

     (a) Consents to Transfer. No Transfer Restrictions (other than Permitted Transfer
Restrictions) exist with respect to or otherwise apply to the assignment of, or transfer by the
Pledgor of possession of, any items of Substituted Collateral to the Collateral Agent under the
Collateral Agreement, or the subsequent sale or transfer of such items of Substituted Collateral by
the Collateral Agent pursuant to the terms of the Collateral Agreement.

     (b) Title to Collateral; Perfected Security Interest. The Pledgor has good and
marketable title to the Substituted Collateral, free of all Liens (other than the Lien created by
the Collateral Agreement). Upon delivery of the Collateral to the Collateral Agent, the Collateral
Agent will have obtained a valid, first priority perfected security interest in, and a first lien
upon, such Substituted Collateral subject to no other Lien, as to which the Collateral Agent shall
have Control over all applicable Investment Property. None of such Substituted Collateral is or
shall be pledged by the Pledgor as collateral for any other purpose.

     (c) Validity of Shares. The Substituted Collateral consists of DSW Class A Common
Shares which have been duly authorized, validly issued, fully paid and non-assessable.

     This Certificate may be relied upon by the Indenture Trustee as fully and to the same extent
as if this Certificate had been specifically addressed to the Indenture Trustee.

A-1

 

     IN WITNESS WHEREOF, the undersigned has executed this Certificate this            day ___, of
                 , 20__.

	 	 	 	 	 
	 	RETAIL VENTURES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

A-2

 

Exhibit B

to

Collateral Agreement

CERTIFICATE FOR ADDITIONAL COLLATERAL

          Retail Ventures, Inc. (the “Pledgor”), hereby certifies, pursuant to Section 6(c) of the
Collateral Agreement dated as of August 16, 2006 among the Pledgor, HSBC Bank USA, National
Association, as Collateral Agent, HSBC Bank USA, National Association, as Indenture Trustee, and
HSBC Bank USA, National Association, as Securities Intermediary (the “Collateral Agreement”; terms
defined in the Collateral Agreement being used herein as defined therein), that:

          1. The Pledgor is delivering the following items of Eligible Collateral to the Collateral
Agent to be held as additional Collateral (the “Additional Collateral”) and the Pledgor hereby
grants to the Collateral Agent, as agent of and for the benefit of the Indenture Trustee, for the
benefit of the Holders from time to time of the Notes, a security interest in and to all of
Pledgor’s right, title and interest in the Additional Collateral:

          2. The Pledgor hereby represents and warrants to the Collateral Agent that:

          (a) Consents to Transfer. No Transfer Restrictions (other than the Permitted Transfer
Restrictions) exist with respect to or otherwise apply to the assignment of, or transfer by the
Pledgor of possession of, any items of Additional Collateral to the Collateral Agent under the
Collateral Agreement, or the subsequent sale or transfer of such items of Additional Collateral by
the Collateral Agent pursuant to the terms of the Collateral Agreement.

          (b) Title to Collateral; Perfected Security Interest. The Pledgor has good and
marketable title to the Additional Collateral, free of all Liens (other than the Lien created by
the Collateral Agreement). Upon delivery of the Collateral to the Collateral Agent, the Collateral
Agent will have obtained a valid, first priority perfected security interest in, and a first lien
upon, such additional Collateral subject to no other Lien, as to which the Collateral Agent shall
have Control over all applicable Investment Property. None of such Additional Collateral is or
shall be pledged by the Pledgor as collateral for any other purpose.

          This Certificate may be relied upon by the Indenture Trustee as fully and to the same extent
as if this Certificate had been specifically addressed to the Indenture Trustee.

B-1

 

     IN WITNESS WHEREOF, the undersigned has executed this Certificate this              day ___, of
                    , 20__.

	 	 	 	 	 
	 	RETAIL VENTURES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

B-2

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