<SUBMISSION>
<ACCESSION-NUMBER>0000950152-06-003177
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>17
<PERIOD>20060128
<FILING-DATE>20060413
<DATE-OF-FILING-DATE-CHANGE>20060413
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>DSW Inc.
<CIK>0001319947
<ASSIGNED-SIC>5661
<IRS-NUMBER>310746639
<STATE-OF-INCORPORATION>OH
<FISCAL-YEAR-END>0129
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>001-32545
<FILM-NUMBER>06758858
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>4150 EAST 5TH AVENUE
<CITY>COLUMBUS
<STATE>OH
<ZIP>43219
<PHONE>(614) 237-7100
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>4150 EAST 5TH AVENUE
<CITY>COLUMBUS
<STATE>OH
<ZIP>43219
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>l19155ae10vk.htm
<DESCRIPTION>DSW, INC.     10-K
<TEXT>
<HTML>
<HEAD>
<TITLE>DSW, Inc.     10-K</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-K</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For The Fiscal Year Ended January&nbsp;28, 2006</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission file number 1-32545</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>DSW INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV>


<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
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<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Ohio
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">31-0746639</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or other jurisdiction of
incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer Identification No.)</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">4150 East Fifth Avenue, Columbus, Ohio
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">43219</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(Address of principal executive offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Registrant&#146;s
telephone number, including area code <U>(614)&nbsp;237-7100</U>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt">
Securities registered pursuant to Section 12(b) of the Act:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Title of each class:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Name of each exchange on which registered:</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Class&nbsp;A Common Shares, without par value
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">New York Stock Exchange</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered pursuant to Section&nbsp;12(g) of the Act: None</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule&nbsp;405 of the Securities Act.
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><FONT face="Wingdings">&#111;</FONT> Yes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#254;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the registrant is not required to file reports pursuant to
Section&nbsp;13 or Section 15(d) of the Act.
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><FONT face="Wingdings">&#111;</FONT> Yes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#254;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be
filed by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12&nbsp;months (or for such shorter period that the registrant was required to file such
reports), and (2)&nbsp;has been subject to such filing requirements for the past 90&nbsp;days.
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><FONT face="Wingdings">&#254;</FONT> Yes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of
Regulation&nbsp;S-K is not contained herein, and will not be contained, to the best of
registrant&#146;s knowledge, in definitive proxy or information statements incorporated by
reference in Part&nbsp;III of this Form 10-K or any amendment to this Form 10-K. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule&nbsp;12b-2 of the Act).
See definition of &#147;accelerated filer and large accelerated filer&#148; in Rule&nbsp;12b-2 of the
Exchange Act.
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Large Accelerated Filer &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT><BR>
Accelerated Filer &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#111;</FONT><BR>
Non-accelerated Filer &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><FONT face="Wingdings">&#111;</FONT> Yes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT face="Wingdings">&#254;</FONT> No
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aggregate market value of voting stock held by non-affiliates of the registrant
computed by reference to the price at which such voting stock was last sold, as of July
29, 2005, was $417,292,188.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate the number of shares outstanding of each of the registrant&#146;s classes of common
stock, as of the latest practicable date: 16,198,088 Class&nbsp;A Common Shares and
27,702,667 Class&nbsp;B Common Shares were outstanding at March&nbsp;31, 2006.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>DOCUMENTS INCORPORATED BY REFERENCE</B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Portions of the Company&#146;s Proxy Statement relating to the Annual Meeting of Shareholders
to be held on June&nbsp;14, 2006 are incorporated by reference into Part&nbsp;III.
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>







<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">








<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Item No.</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" style="border-bottom:1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101"><B>PART I</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center">4&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">1. Business</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">4&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">1.A Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">13&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">1.B Unresolved Staff Comments</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">21&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">2. Properties</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">21&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">3. Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">21&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">4. Submission of Matters to a Vote of Security Holders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">22&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108"><B>PART II</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">23&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">5. Market for the Registrant&#146;s Common Equity, Related Shareholder Matters and
Issuer Purchases of Equity Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">23&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">6. Selected Financial Data</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">23&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">7. Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">25&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">7A. Quantitative and Qualitative Disclosures about Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">37&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">8. Financial Statements and Supplementary Data</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">37&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">37&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">9A. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">37&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">9B. Other Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">37&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117"><B>PART III</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">38&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118">10. Directors and Executive Officers of the Registrant</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">38&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119">11. Executive Compensation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">39&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#120">12. Security Ownership of Certain Beneficial Owners and Management and
Related Shareholders Matters</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">39&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#121">13. Certain Relationships and Related Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">39&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122">14. Principal Accountant Fees and Services</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">39&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123"><B>PART IV</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">40&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#124">15. Exhibits, Financial Statement Schedules</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">40&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#125">Signatures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">41&nbsp;</TD>

    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv3w1.txt">Exhibit 3.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv3w2.htm">Exhibit 3.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv4w1.txt">Exhibit 4.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv10w6.txt">Exhibit 10.6</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv10w7.txt">Exhibit 10.7</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv10w11.txt">Exhibit 10.11</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv10w23.htm">Exhibit 10.23</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv10w24.htm">Exhibit 10.24</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv10w45.txt">Exhibit 10.45</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv21w1.txt">Exhibit 21.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv23w1.txt">Exhibit 23.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv24w1.txt">Exhibit 24.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv31w1.txt">Exhibit 31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv31w2.txt">Exhibit 31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv32w1.txt">Exhibit 32.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l19155aexv32w2.txt">Exhibit 32.2</A></FONT></TD></TR>
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">2
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>TABLE OF CONTENTS TO FINANCIAL STATEMENTS AND SCHEDULES</B>
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    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">Report of Independent Registered Public Accounting Firm</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-1</TD>
    <TD>&nbsp;</TD>
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    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301">Consolidated Balance Sheets</A></DIV></TD>
    <TD>&nbsp;</TD>
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    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#302">Consolidated Statements of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
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    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#303">Consolidated Statements of Shareholders&#146; Equity</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-4</TD>
    <TD>&nbsp;</TD>
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    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#304">Consolidated Statements of Cash Flows</A></DIV></TD>
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    <TD nowrap align="right">F-5</TD>
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    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#305">Notes to Consolidated Financial Statements</A></DIV></TD>
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    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>SCHEDULES</B></DIV></TD>
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    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#306">II&#151;Valuation and Qualifying Accounts</A></DIV></TD>
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    <TD nowrap align="right">S-1</TD>
    <TD>&nbsp;</TD>
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    <TD><DIV style="margin-left:15px; text-indent:-15px">Index to Exhibits</DIV></TD>
    <TD>&nbsp;</TD>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All references to &#147;we,&#148; &#147;us,&#148; &#147;our,&#148; &#147;DSW&#148; or the &#147;Company&#148; in this Annual Report on Form 10-K
mean DSW Inc. and and its wholly-owned subsidiary, DSW Shoe Warehouse, Inc. (&#147;DSWSW&#148;), except where
it is made clear that the term only means DSW Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All references to Retail Ventures, or RVI, in this Annual Report on Form 10-K means Retail
Ventures, Inc. and its wholly-owned subsidiaries, except where it is made clear that the term only
means the parent company, RVI. DSW is a controlled subsidiary of Retail Ventures, a publicly
traded company on the New York Stock Exchange under the symbol &#147;RVI.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We own many trademarks and service marks. This Annual Report on Form 10-K contains trade
dress, trade names and trademarks of other companies. Use or display of other parties&#146; trademarks,
trade dress or trade names is not intended to, and does not, imply a relationship with the
trademark or trade dress owner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Forward-Looking Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the statements in this Annual Report on Form 10-K may contain forward-looking
statements which reflect our current views with respect to, among other things, future events and
financial performance. You can identify these forward-looking statements by the use of
forward-looking words such as &#147;outlook,&#148; &#147;believes,&#148; &#147;expects,&#148; &#147;potential,&#148; &#147;continues,&#148; &#147;may,&#148;
&#147;will,&#148; &#147;should,&#148; &#147;seeks,&#148; &#147;approximately,&#148; &#147;predicts,&#148; &#147;intends,&#148; &#147;plans,&#148; &#147;estimates,&#148;
&#147;anticipates&#148; or the negative version of those words or other comparable words. Any forward-looking
statements contained in this Annual Report on Form 10-K are based upon our historical performance
and on current plans, estimates and expectations. The inclusion of this forward-looking information
should not be regarded as a representation by us or any other person that the future plans,
estimates or expectations contemplated by us will be achieved. Such forward-looking statements are
subject to various risks and uncertainties. Accordingly, there are or will be important factors
that could cause our actual results to differ materially from those indicated in these statements.
We believe that these factors include but are not limited to those described under &#147;Risk Factors.&#148;
These factors should not be construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included in this Annual Report on Form 10-K. We do not
undertake any obligation to publicly update or review any forward-looking statement, whether as a
result of new information, future developments or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If one or more of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may vary materially from what we may have
projected. Any forward-looking statements you read in this Annual Report on Form 10-K reflect our
current views with respect to future events and are subject to these and other risks, uncertainties
and assumptions relating to our operations, results of operations, financial condition, growth
strategy and liquidity.
</DIV>
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1. BUSINESS.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Company Overview</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DSW is a leading U.S. specialty branded footwear retailer operating 199 shoe stores in 32
states as of January&nbsp;28, 2006. We offer a wide selection of brand name and designer dress, casual
and athletic footwear for women and men. Our typical customers are brand-, quality- and
style-conscious shoppers who have a passion for footwear and accessories. Our core focus is to
create a distinctive store experience that satisfies both the rational and emotional shopping needs
of our customers by offering them a vast, exciting selection of in-season styles combined with the
convenience and value they desire. We believe this combination of selection, convenience and value
differentiates us from our competitors and appeals to consumers from a broad range of socioeconomic
and demographic backgrounds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since its inception, DSW has evolved into a distinctive, consumer-friendly retail concept that
allows customers to personalize their shopping experience by offering a &#147;sea of shoes&#148; that are
accessible, easy-to-shop, and fulfill a broad range of style and fashion desires. We cater to
customers who take pleasure in the hunt for the perfect shoe and value the shopping experience
itself as an enjoyable pastime. Typical DSW stores are approximately 25,000 square feet, with over
85% of total square footage used as selling space. Over 30,000 pairs of shoes in more than 2,000
styles are displayed on the selling floor of most of our stores, compared to a significantly
smaller product offering at typical department stores. Our stores feature self-service fixtures
that allow customers to view, touch, and try on the product without relying on salespeople to check
availability. Our locations have clear signage, and well-trained sales associates are available to
assist customers as desired. New footwear merchandise is organized by style on the main floor, and
clearance goods are organized by size in the rear of the store. Accessories and impulse items are
featured at the front. The store layout allows customers who do not have time for relaxed browsing
to swiftly identify the shoe styles they are seeking and shop in a targeted, time-efficient manner.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our goal is to further strengthen our position as a leading specialty branded retailer of
adult footwear in the United States. Since 1998, we have accelerated our expansion by
investing in new stores, merchandise development, technology and our people to support further
growth and enhance our performance. In fiscal 2005, we generated $1.14&nbsp;billion in net sales and
$70.1&nbsp;million in operating profit. During the same period, we sold over 27.3&nbsp;million pairs of
shoes. Over the five-fiscal-year period ended January&nbsp;28, 2006, we have grown our DSW store base,
net sales and operating profit at compound annual rates of approximately 21%, 22% and 48%,
respectively. See &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations&#148; and our historical consolidated financial statements and the notes thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also operate leased shoe departments for three non-affiliated retailers and one affiliated
retailer. We entered into supply agreements to merchandise the non-affiliated
shoe departments in Stein Mart, Inc., or Stein Mart, Gordman&#146;s, Inc., or Gordmans, and Frugal
Fannie&#146;s Fashion Warehouse, or Frugal Fannie&#146;s, stores as of July&nbsp;2002, June&nbsp;2004 and September
2003, respectively. We have operated leased shoe departments for Filene&#146;s Basement, a wholly-owned
subsidiary of Retail Ventures, since its acquisition by Retail Ventures in March&nbsp;2000. Effective as
of January&nbsp;30, 2005, we updated and reaffirmed our contractual arrangement with Filene&#146;s Basement.
We own the merchandise, record sales of merchandise net of returns and sales tax, own the fixtures
(except for Filene&#146;s Basement) and provide supervisory assistance in these covered locations. Stein Mart,
Gordmans, Frugal Fannie&#146;s and Filene&#146;s Basement provide the sales associates. We pay a percentage
of net sales as rent. As of January&nbsp;28, 2006, we supplied merchandise to 157 Stein Mart stores, 55
Gordmans stores, one Frugal Fannie&#146;s store and 25 Filene&#146;s Basement stores.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please see our financial statements and the notes thereto in Item&nbsp;8 of this Annual Report on
Form 10-K for financial information about our two segments: DSW stores and leased departments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Corporate History</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated on January&nbsp;20, 1969 and opened our first DSW store in Dublin, Ohio in
July&nbsp;1991. In 1998, Value City Department Stores, Inc., which subsequently became a wholly-owned
subsidiary of Retail Ventures, Inc., purchased DSW and affiliated shoe businesses from
Schottenstein Stores Corporation, or SSC, and Nacht Management, Inc. In December&nbsp;2004, Retail
Ventures carried out a corporate reorganization whereby Value City Department Stores, Inc., a
wholly-owned subsidiary of Retail Ventures, merged with and into Value City Department Stores LLC,
or Value City, another wholly-owned subsidiary of Retail Ventures. In turn, Value City transferred
all the issued and outstanding shares of DSW to Retail Ventures in exchange for a promissory note.
In February&nbsp;2005, we changed our name from Shonac Corporation to DSW Inc. In July&nbsp;2005, we
completed an initial public offering of our Class&nbsp;A Common Shares, selling approximately 16.2
million shares at an offering price of $19.00 per share. As of January&nbsp;28, 2006, Retail Ventures
owned approximately 27.7&nbsp;million of our Class&nbsp;B Common Shares, or in excess of 63.1% of our total
outstanding shares and 93.2% of the combined voting power of our outstanding Common Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Competitive Strengths</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our leading market position is driven by our competitive strengths &#151; the
breadth of our branded product offerings, our distinctive and convenient store layout, the value
proposition offered to our customers and our demonstrated ability to deliver profitable growth on a
consistent basis. Over the past few years, we have broadened our merchandise assortment, honed our
retail operating model and continued our dedication to providing
quality in season products at
attractive prices. We believe we will continue to improve our ability to leverage these
competitive strengths and we believe we will attract and retain talented managers and merchandisers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The Breadth of Our Product Offerings</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our goal is to excite our customers with a &#147;sea of shoes&#148; that fulfill a broad range of style
and fashion needs. We believe that our typical store offers the largest selection of brand name and
designer merchandise of any footwear retailer or typical department store in the nation. We carry
primarily in-season footwear found in specialty and department stores and branded make-ups (shoes
made exclusively for a retailer), with selection at each store geared toward the particular
demographics of the location. A typical DSW store carries approximately 30,000 pairs of shoes in
over 2,000 styles compared to a significantly smaller product offering at typical department
stores. We also offer a complementary selection of handbags, hosiery and other accessories which
appeal to our brand- and fashion-conscious customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our strategy is designed to ensure that a broad and consistent selection of merchandise is
available. We keep merchandise fresh by receiving new shipments at least weekly and by
trying to put new items are on the selling floor within 24 hours of delivery. Our goal is
to provide our customers with a wide selection of in-season branded merchandise every day that
increases our customers&#146; likelihood of finding the right shoe at the right price each time they
visit our stores. The continual turnover of new merchandise encourages customers to visit often and
see the new styles that arrive each week.
</DIV>

<P align="center" style="font-size: 10pt">5
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We strive to improve the quality and breadth of our vendor relationships. We
primarily purchase in-season merchandise directly from more than 300 domestic and foreign vendors.
Our buyers have established strong, mutually beneficial relationships with vendors that view DSW as
a significant distribution channel for their branded offerings. Our suppliers consider us to be an
attractive retail channel due to both the scale and geographic reach of our store base and our
willingness to buy merchandise across a broad selection of styles. The quality of our vendor
relationships allows us to secure an extensive assortment of in-season merchandise and
distinguishes us from other shoe retailers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our Distinctive and Convenient Store Layout</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide our customers with the highest level of convenience based on our belief that
customers should be empowered to control and personalize their shopping experiences. Our store
layout and visual merchandising techniques provide a convenient shopping process, regardless
of the type of shoe-buying experience our customers&#146; desire on a particular trip.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Indulge in Your Passion For Shoes. </I>We cater to the passionate shoe enthusiast and indulge
customers who love to shop. Customers take pleasure in our wide product offering in search of the
products that best suit their needs. Our merchandise is displayed on the selling floor with
self-service fixtures to enable customers to view and touch the merchandise. We believe this
self-service aspect provides our customers with maximum convenience as they are able to browse and
try on the merchandise without feeling rushed or pressured into making a decision too quickly.
Therefore, customers are able to shop at their own pace as they savor the thrill and enjoyment of
indulging their passion for shoes. Although all DSW stores are designed for self-service shopping,
sales associates are available to help customers locate merchandise and to assist as needed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Easy Shopping Experience. </I>DSW also caters to shoppers who are time-constrained and come to our
stores knowing exactly what they want. Our wide selection ensures that they are more likely to find
styles they are seeking at DSW than at other shoe retailers, thereby minimizing the risk of leaving
empty-handed. The stores are also designed for an efficient shopping experience. Our self-service
concept empowers our customers to shop quickly and easily because they do not have to rely on a
salesperson to check for sizes and styles. Typical DSW stores are approximately 25,000 square feet,
with over 85% of total square footage used as selling space. We organize most of our stores on a
single level, which allows customers to view the entire store and product offering as they enter
and move quickly to the area where their desired styles are located. Interiors are well-lit, with
informative signage, and spacious aisles allow ease of movement throughout the store. We display
shoes in a logical manner that groups together similar styles such as dress, casual, seasonal and
athletic merchandise. In our self-liquidating clearance racks, shoes are grouped by size and
displayed in the rear of the store. Of the 199 DSW stores open as of January&nbsp;28, 2006, 166 are
either freestanding or located in shopping centers, which provide customers with direct access to
parking, and the remainder are in shopping malls or downtown locations. For added convenience, we
provide a centralized check-out, which aids customers in quickly locating the cashier for efficient
processing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The Value Proposition Offered to Our Customers</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through our buying organization, we are able to provide our customers with high-quality,
in-season fashions at prices that we believe are competitive with the typical sale price found at
specialty retailers and department stores. We employ a consistent pricing strategy that typically
provides our customers with the same price on our merchandise from the day it is received until it
goes into our planned clearance rotation. Our pricing strategy differentiates us from our
competitors who usually price and promote merchandise at discounts available only for limited time
periods. We find that customers appreciate having the power to shop for value when it is most
convenient for them, rather than waiting for a department store or specialty retailer to have a
sale event. For easy comparison by our customers, we prominently display our price and the
corresponding vendor&#146;s suggested retail price for each pair of shoes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our graduated, self-liquidating clearance process includes moving shoes to the large
clearance racks located in the rear of the store when only a few pairs remain. Because this process
also applies to our fastest-moving merchandise, some of our shoppers benefit from steep price
reductions on our most popular items. This process provides more floor space for new merchandise at
a faster rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that customers value our pricing strategy knowing that no matter when our customers
shop with us, they are typically assured of receiving our best value price on whatever merchandise
they purchase. We believe our everyday value prices are competitive with the typical sale price
found at most of our competitors. During fiscal 2005, the average ticket price for a pair of shoes
(including clearance stock) in a DSW store was approximately $41.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to provide additional value to shoe enthusiasts and other regular customers, we
developed a customer loyalty program called &#147;Reward Your
Style&#148;. This program offers
additional savings to frequent shoppers and encourages repeat sales. We target market to &#147;Reward
Your Style&#148; members throughout the year. We classify these members by frequency
</DIV>

<P align="center" style="font-size: 10pt">6
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and use direct mail and on-line communication to stimulate further sales and traffic. As of
January&nbsp;28, 2006, over 6.8&nbsp;million members enrolled in the &#147;Reward Your Style&#148; loyalty program had
purchased merchandise in the previous two fiscal years, up from approximately 5.5&nbsp;million members
as of January&nbsp;29, 2005. In fiscal 2005, approximately 60% of DSW store net sales were generated by
shoppers in the loyalty program, and these shoppers spent an average of 19% more per purchase than
customers who were not enrolled.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Demonstrated Ability to Consistently Deliver Profitable Growth</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since 1998, we have focused our operating model on selection, convenience and value. We
believe that the profitable growth we have achieved in the past is attributable to our operating
model and management&#146;s focus on store-level profitability and economic payback.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over the five fiscal years ended January&nbsp;28, 2006, our net sales and operating profit have
grown at compound annual growth rates of 22% and 48%, respectively. In addition, for all our annual
new store classes since 1996, we have achieved positive operating cash flow within two years of
opening. We intend to continue to focus on net sales, operating profit and cash flow per annual new
store class as we pursue our growth strategy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Growth Strategy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We plan to continue to strengthen our position as a leading specialty branded footwear
retailer by pursuing the following three primary strategies for growth in sales and profitability
&#151; expanding our store base, driving sales through enhanced merchandising and leveraging our
operating model. For additional information regarding our growth strategy, see &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations &#151; Overview &#151; Expansion
Strategy.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Expanding Our Store Base</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our specialty retail concept has broad national appeal and provides substantial
opportunity for new store expansion. Over the five-fiscal-year period ended January&nbsp;28, 2006, we
have rapidly expanded our store base by opening 124 DSW stores, including 29 new stores in fiscal
2005. As of March&nbsp;31, 2006, we operated 201 shoe stores in 33 states and have signed leases for an
additional 21 stores, 16 of which we expect to open in fiscal 2006. We plan to open approximately
30 stores in each fiscal year from fiscal 2006 through fiscal 2010 and believe that opening stores
at this rate will not compromise our new store economics. We plan to open stores both in markets in
which we currently operate and in new markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on an internal planning model created in fiscal 2005, we believe that we have the
long-term potential to operate over 400 stores in the United States, including the 199 stores
existing as of January&nbsp;28, 2006. Our long-range planning model is based on an examination of each
metropolitan area we currently serve or desire to serve. The objective of the analysis is to
understand the demand for our products in each market over time, and our ability to capture that
demand. The analysis also looks at our current penetration levels in the markets we serve, and our
expected deepening of those penetration levels as we continue to grow our brand and become the shoe
retailer of choice in our markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Site Selection. </I>In general, our evaluation of potential new stores focuses on store size,
configuration, location, and lease terms. Beginning in fiscal 2005, we also began to enhance our
methodologies of selecting sites by incorporating additional statistical factors. This has allowed
us to develop a deeper understanding of the center types and trade areas we wish to serve over
time. It has also allowed us to better understand key leading indicators of our success in a
market. We believe these enhancements will provide us with a deeper knowledge of the
characteristics of a successful DSW location, and in turn, help us develop a quality real estate
portfolio that meets our financial expectations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>New Store Model. </I>After we approve a site, we negotiate lease terms and begin planning the
store layout and design. We typically devote approximately six weeks from the time we take
possession to prepare a store for its opening. During fiscal 2005 the average investment required
to open a new DSW store was approximately $1.4&nbsp;million per store. Of this amount, in fiscal 2005,
gross inventory typically accounted for approximately $680,000, fixtures and leasehold improvements
typically accounted for approximately $460,000 (prior to tenant allowances) and pre-opening
advertising and other pre-opening expenses typically accounted for approximately $280,000. All our
stores are leased.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Driving Sales Through Enhanced Merchandising</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to increase the number of customer transactions and average transaction value by
continually refining our merchandise mix. Our merchandising group constantly monitors current
fashion trends as well as historical sales trends to
</DIV>

<P align="center" style="font-size: 10pt">7
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">identify popular styles and styles that may
become popular in the upcoming season. We track store performance and sales
trends on a weekly basis and have a flexible incremental buying process that enables us to
order styles frequently throughout each season, in contrast to department stores, which typically
make one large purchase at the beginning of the season.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Expanding Vendor Relationships. </I>We have established strong vendor relationships that allow us
to gain favorable access to high quality, brand name merchandise at attractive prices. These
favorable relationships also allow us to make opportunistic in-season
merchandise purchases that
may be offered to us from time to time. We intend to capitalize on the success of our existing
vendor relationships as well as identify and develop new supply sources, in particular to enhance
our offering of designer brands.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Increasing Sales Within Existing Merchandise Categories. </I>In order to further increase sales
within our existing women&#146;s, men&#146;s and athletic shoe categories, we aim to increase the quality and
breadth of existing vendor offerings and to keep our product mix fresh and on target by
testing new fashions and actively monitoring sell-through rates in our stores. Additionally, we
employ marketing initiatives, including broad advertising campaigns, the &#147;Reward Your Style&#148;
loyalty program and sales of gift cards to encourage repeat visits and attract new customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Extending Into New Product Categories. </I>While shoes are the main focus of DSW, we believe
offering a complementary assortment of handbags, hosiery and other accessories is an important
driver of profitable sales. We will continue to explore new, related product categories that we
believe could enhance sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Leveraging Our Operating Model</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As we grow our business and fill in markets to their full potential, we believe we will
continue to improve our profitability by leveraging our cost structure, particularly in the areas
of advertising, regional management, distribution and overhead functions. Additionally, we intend
to continue investing in our infrastructure to improve our operating and financial performance.
Most significantly, we believe continued investment in information systems will enhance our
efficiency in areas such as merchandise planning and allocation, inventory management, distribution
and point of sale functions, among others.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>DSW Store Locations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January&nbsp;28, 2006 we operated 199 DSW stores in 32 states in the United States. The
table below shows the locations of our DSW stores by region as of January&nbsp;28, 2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD colspan="2" nowrap align="left" style="border-bottom: 1px solid #000000">Northeast</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="center" style="border-bottom: 1px solid #000000">West</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="center" style="border-bottom: 1px solid #000000">Central</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="center" style="border-bottom: 1px solid #000000">Southeast</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Connecticut
</DIV></TD>
    <TD align="right" valign="bottom">3</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Arizona
</TD>
    <TD align="right" valign="bottom">5</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>

    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Illinois
</TD>
    <TD align="right" valign="bottom">10</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>

    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Alabama
</TD>
    <TD align="right" valign="bottom">1</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Delaware
</DIV></TD>
    <TD align="right" valign="bottom">1</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>

    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">California
</TD>
    <TD align="right" valign="bottom">14</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Indiana
</TD>
    <TD align="right" valign="bottom">6</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Florida
</TD>
    <TD align="right" valign="bottom">15</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Maine
</DIV></TD>
    <TD align="right" valign="bottom">1</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Colorado
</TD>
    <TD align="right" valign="bottom">6</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Iowa
</TD>
   <TD align="right" valign="bottom">1</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>

    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Georgia
</TD>
   <TD align="right" valign="bottom">7</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Maryland
</DIV></TD>
    <TD align="right" valign="bottom">6</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>

    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Nevada
</TD>
    <TD align="right" valign="bottom">3</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>

    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Kansas
</TD>
    <TD align="right" valign="bottom">3</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">North Carolina
</TD>
    <TD align="right" valign="bottom">4</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Massachusetts
</DIV></TD>
    <TD align="right" valign="bottom">8</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Texas
</TD>
    <TD align="right" valign="bottom">19</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Michigan
</TD>
    <TD align="right" valign="bottom">11</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Tennessee
</TD>
    <TD align="right" valign="bottom">3</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">New Hampshire
</DIV></TD>
    <TD align="right" valign="bottom">1</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Minnesota
</TD>
    <TD align="right" valign="bottom">5</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Virginia
</TD>
    <TD align="right" valign="bottom">9</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">New Jersey
</DIV></TD>
    <TD align="right" valign="bottom">8</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Missouri
</TD>
    <TD align="right" valign="bottom">4</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">New York
</DIV></TD>
    <TD align="right" valign="bottom">17</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Nebraska
</TD>
    <TD align="right" valign="bottom">1</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Pennsylvania
</DIV></TD>
    <TD align="right" valign="bottom">10</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Ohio
</TD>
    <TD align="right" valign="bottom">11</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rhode Island
</DIV></TD>
    <TD align="right" valign="bottom">1</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Oklahoma
</TD>
    <TD align="right" valign="bottom">1</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Wisconsin
</TD>

    <TD nowrap align="right" valign="bottom">4</TD>

    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Merchandising</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Strategy</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DSW stores offer a wide selection of high quality, in-season and fashion-oriented footwear,
handbags and accessories with everyday prices that we believe are competitive with the typical sale
price found at specialty retailers and department stores. Our merchandising group continually
monitors current fashion trends, as well as historical sales trends, to identify popular styles and
those that may become popular in the upcoming season. We believe that our stores offer the largest
selection of brand name and designer merchandise of any footwear retailer or typical department
store in the nation. We primarily carry in-season footwear found in specialty and department stores
and branded make-ups (shoes made exclusively for a retailer), with selection at each store geared
towards the particular demographics of the location. A typical DSW store carries over 2,000 shoe
</DIV>

<P align="center" style="font-size: 10pt">8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">styles, compared to a significantly smaller product offering at typical department stores. Our goal
is to offer a wide selection of
on-trend branded merchandise that greatly increases our customers&#146; likelihood of finding the
right shoe at the right price in one trip.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our wide selection of merchandise from moderate-priced brands to higher-end
designer goods contributes to a distinctive shopping experience for our customers. This breadth of
brands differentiates us from price-oriented retailers and builds strong customer loyalty. We
purchase in-season designer and branded merchandise both on a planned and opportunistic basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the main portion of each of our stores, the shoes are organized by style in order to
highlight the breadth of our merchandise assortment. However, when only a few pairs of a style
remain, we place those shoes on a clearance rack organized by size in the rear of the store and
reduce their prices periodically. Our clearance approach has been successful in creating additional
excitement and traffic in our stores and in moving the remaining merchandise quickly. It also
creates available floor space for new styles and a wider selection of shoes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Merchandise Mix</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We separate our DSW merchandise into four total categories &#151; women&#146;s dress and casual
footwear; men&#146;s dress and casual footwear; athletic footwear; and accessories. While shoes are the
main focus of DSW, we also offer a complementary assortment of handbags, hosiery and other
accessories. The following table sets forth the approximate percentage of our sales attributable to
each DSW merchandise category in fiscal 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Category</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Percent of Net Sales</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Women&#146;s</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">64</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Men&#146;s</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">17</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Athletic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">13</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accessories and Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Buying, Planning and Allocation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of January&nbsp;28, 2006, our merchandising group consists of a Vice
Chairman and Chief
Merchandising Officer, two Vice President General Merchandising Managers, a Vice President Planning
and Allocation, a Corporate Merchandise Manager, two divisional merchandise managers, and three
senior buyers. For each major product category, there is a buyer, an assistant buyer, a merchandise
planner and a store planner whose responsibility is allocation. We begin the buying process for our
DSW stores in January for the following fall merchandise and in June for the following spring
merchandise. Once our buyers determine the styles and merchandise mix for an upcoming season, they
focus on purchasing the required quantities at the lowest cost and the highest quality available,
as well as within the most advantageous flow or timetable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our planning and allocation group serves as strategic partner to, and exercises financial
control over, the buying team. Each buyer&#146;s purchasing plan is reviewed on a monthly basis by the
Vice Chairman and Chief Merchandising Officer and the Vice President Planning and Allocation.
Monthly updates based on seasonal trends are incorporated into the buying plan. We believe this
organizational scheme helps maximize our buying opportunities while maintaining appropriate
organizational and financial control. Since October&nbsp;2003, all functional areas within planning and
allocation have been supported by a software package that integrates financial analysis into the
planning and allocation process. While this software is already yielding positive results, we
believe that continued use of this software will yield additional improvements in our planning and
allocation functions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merchandise planning at the category level, for pre-season planning and in-season adjustments,
is developed through strong relationships with our buying organization. Channel planning at the
store level tailors the assortment of merchandise by store based on each store&#146;s customer
demographics and balances the merchandise mix by factoring in volume and space management
objectives. Allocation management, which directs the flow of merchandise from our distribution
center to the individual stores, allows us to quickly respond and adjust assortments based on
trend, store and style specific sales patterns. Our allocation decisions are based not only on
quantity and assortment, but also include consideration of price, vendor, color and other style
characteristics. We believe that this approach to planning and allocation allows us to optimize our
ability to deliver the right merchandise to the right store at the right time, thereby increasing
sales and reducing the need for markdowns.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Vendor Relationships</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe we have good relationships with our vendors. We purchase merchandise directly from
more than 300 domestic and foreign vendors as of January&nbsp;28, 2006. Our vendors include suppliers
who either manufacture their own merchandise or
supply merchandise manufactured by others, or both. Most of DSW&#146;s domestic vendors import a
large portion of their merchandise from abroad. We have implemented quality control programs under
which our DSW buyers and store managers inspect incoming merchandise for fit, color and material,
as well as for overall quality of manufacturing. As the number of DSW locations increases and
our sales volumes grow, we believe there will continue to be adequate sources available to acquire
a sufficient supply of quality goods in a timely manner and on satisfactory economic terms. After
giving effect to consolidation among our vendors, during fiscal 2005, merchandise supplied by our
three top vendors accounted for approximately 22% of our net sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that many vendors view us as a significant distribution channel for their branded
offerings and appreciate our uncomplicated purchasing program. Our vendor relationships result in
greater access to high quality, in-season merchandise at attractive prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Marketing and Advertising</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Strategy</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our marketing strategy for DSW focuses on communicating the selection, convenience and value
offered by DSW through the use of the slogan &#147;Indulge in your passion for shoes.&#148; We utilize
television, radio and print media advertising as well as in-store promotions. In fiscal 2005, we
spent $38.0&nbsp;million, or 3.3% of our net sales, on advertising, excluding costs to promote each new
store opening, which are included in pre-opening expenses. We also
maintain a gift card program with the intent to
generate additional sales by reaching new customers and increasing awareness of the DSW concept.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Reward Your Style&#148;</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In early 1998, we introduced the &#147;Reward Your Style&#148; customer loyalty program at DSW. The
&#147;Reward Your Style&#148; program seeks to motivate members to shop at DSW by offering them a $25 reward
certificate for every $250 they spend. In addition to customer rewards, the program regularly
communicates with customers through direct mail, e-mail and the DSW website. Messages include
fashion updates, new arrivals and other shopping information. As of January&nbsp;28, 2006, over 6.8
million members enrolled in the &#147;Reward Your Style&#148; program had purchased merchandise in the
previous two fiscal years and, in fiscal 2005, approximately 60% of DSW store net sales were
generated by shoppers in the loyalty program. We believe that this program has successfully
increased the shopping frequency and average transaction size of our customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While the program develops customer loyalty, it also provides us with valuable market
intelligence and purchasing information regarding our most frequent customers. We carefully analyze
the members&#146; transaction activity and use this information to directly advertise, to encourage
repeat shopping and to communicate with our customers. By understanding the
characteristics of our best DSW customers, we are able to identify other existing customers in
lower spending groups with similar profiles and target communications and advertisements to
increase the attractiveness of our offerings to them, which we
believe results in increases in their spending
level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Staffing and Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At DSW, store associates receive training to maximize the customer shopping experience in our
self-service environment. Training components consist of customer service, maintaining neat, clean
and orderly store conditions for ease of shopping, efficient checkout process and friendly service.
We also maintain a store management training program to develop the skills of management personnel
and to provide an ongoing talent pool for future store expansion. We prefer to fill store
management and field supervisor positions through internal promotions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DSW stores are organized into the West, Central, Northeast and Southeast geographic regions. Each region is supported by a Regional Vice President or Director, who supervises
senior district, district and area managers headquartered in the respective region, district or
area. The Regional Vice Presidents and Directors spend the majority of their time in their stores
to ensure adherence to merchandising, operational and personnel standards. The typical staff for a
DSW store consists of a store manager and two assistant managers who supervise 15 to 25 full-and
part-time hourly associates. Each store manager reports directly to a district or area manager,
each of whom in turn reports to one of four Regional Vice Presidents or Regional Directors, who in
turn report to the Chief Operating Officer. Our DSW store managers are responsible on a day-to-day
basis for customer relations, personnel hiring and scheduling, and all other operational matters
arising in the stores. Our store managers are an important source of information concerning local
market conditions, trends and customer preferences. We provide bonuses to our store
managers which are largely based on store profitability and inventory control.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Distribution</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DSW&#146;s distribution center is located in an approximately 700,000 square foot facility in
Columbus, Ohio. The design of the distribution center facilitates the prompt delivery of priority
purchases and fast-selling footwear to stores so we can take full advantage of each selling season.
This distribution center facility uses a warehouse management system, upgraded in 2003, and
material handling equipment, including automated conveyor systems, to separate and collate
shipments to our stores. We use a cross dock conveyor system which enhances the movement of
merchandise through the distribution facility using vendor advance shipment notifications, or ASNs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have invested in technology and have made process improvements in our distribution center.
As a result,we believe that our current receiving and distribution process and infrastructure will
support our anticipated growth for our expanding retail store base for the foreseeable future. We
continue to examine how goods flow to stores and plan to continue to refine this process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our inventory is shipped directly from suppliers to a single centralized distribution
center in Columbus, Ohio, where the inventory is then processed,
sorted and shipped to one of 11
pool locations located throughout the country and then on to our stores. Over time, we expect to
increase the amount of merchandise that bypasses the distribution center on initial allocations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Management Information and Control Systems</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe a high level of automation is essential to maintaining and improving our
competitive position and executing our expansion strategy. We rely upon computer systems to provide
information for all areas of our business, including merchandise planning and allocation, inventory
control, distribution, warehouse operations, financial planning, store billing, point of sale and
automated payroll and accounting. We focus on leveraging our technology infrastructure and systems
whenever appropriate to simplify our processes and increase our efficiency. We continually update
our technical infrastructure for our stores, corporate headquarters and distribution center.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to promote our continued growth, we have undertaken several major initiatives to
build upon the merchandise management system and warehouse management systems that support DSW. An
electronic data interchange, or EDI, project is underway to utilize product UPC barcodes and
electronic exchange of purchase orders, ASNs and invoices with our top
vendors. As of January&nbsp;28, 2006, approximately 80% of our footwear product is processed using UPC
bar codes, which has reduced processing costs and improved flow of goods through the distribution
center to the stores. EDI purchase orders and ASNs were piloted with key vendors in early 2004.
They accounted for approximately 40% of the volume of our shipments as of the end of fiscal 2005,
and we expect they will represent approximately 70% of volume by the end of fiscal 2006. This will speed the flow of
goods from the vendor to DSW stores, as well as reduce the amount of inventory needed in our
warehouse. Additionally, new merchandise planning and merchandise allocation systems were
implemented in 2003 to improve inventory productivity and store assortments and reduce supply chain
cycle time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We utilize point of sale, or POS, registers with full scanning capabilities to increase speed
and accuracy at customer checkouts and facilitate inventory restocking. In October&nbsp;2004, we
launched an application that provides us with the ability to look up a customer&#146;s &#147;Reward Your
Style&#148; number at POS registers. In fiscal 2005, the POS system was further upgraded with debit card
terminals and signature capture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use enterprise data warehouse and customer relationship management software to manage the
&#147;Reward Your Style&#148; program. We expect this will allow us to support, expand and integrate &#147;Reward
Your Style&#148; with the POS system to improve the customer experience while reducing costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information technology support is provided to us as a shared service under the shared services
agreement, described in Item&nbsp;7 below, by Retail Ventures&#146; information technology department for a
period that ends at the end of fiscal 2007 and will extend automatically unless terminated by one
of the parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Industry Overview and Competition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to NPD Fashionworld<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, a market research company, for the twelve months ended January
2006, DSW captured 2.3% of the $36.6&nbsp;billion adult footwear market. Based on our unique retail
format and the high quality, in-season selection of our shoe merchandise, we believe that DSW
provides a distinct shoe-shopping destination for our customers. We view our primary competitors to
be department stores. According to NPD Fashionworld<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, for the twelve months ended January&nbsp;2006,
department stores represented 12.4% of the footwear market based on dollar volume, decreasing from
13.0% for
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the same period a year ago. DSW also competes with mall-based company stores, national
chains, independent shoe retailers, single-brand specialty retailers and brand-oriented
discounters.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe shoppers prefer our wide selection of on-trend merchandise compared to
product offerings of typical traditional department stores, mall-based company stores, national
chains, single-brand specialty retailers and independent shoe retailers because those retailers
generally offer a more limited selection at higher average prices and in a less convenient format
than we do. In addition, we also believe that we successfully compete
against retailers who have
attempted to duplicate our format because they typically offer assortments with fewer recognizable
brands and more styles from prior seasons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although our prices are value-oriented, our core customer is not the low-price shoe buyer.
Therefore, we do not view non-brand-oriented discount retailers as our prime competitors. These
non-brand-oriented discount retailers may offer footwear at lower price points; however, they
generally offer lower quality, private label shoes. In contrast, we
serve customers who are
typically brand-, quality- and style-conscious shoppers. As such, we believe they prefer our value
offerings to those of the non-brand oriented discount stores. In addition, we believe we will
increase our market share as discount shoppers realize that they can buy higher quality brands and
more fashionable shoes in our stores&#146; clearance sections for prices only slightly higher than what
they are willing to spend at a discount store.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Leased Shoe Department Businesses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have operated leased shoe departments for Filene&#146;s Basement, a wholly-owned subsidiary of
Retail Ventures, since its acquisition by Retail Ventures in March&nbsp;2000. Effective as of January
30, 2005, we updated and reaffirmed our contractual arrangement with Filene&#146;s Basement. Under the
new agreement, we own the merchandise, record sales of merchandise net of returns and sales tax and
provide supervisory assistance in all covered locations. We pay a percentage of net sales as rent.
Filene&#146;s Basement provides the fixtures and sales associates. As of January&nbsp;28, 2006, we operated
leased shoe departments in 25 Filene&#146;s Basement locations. In three of these locations, Filene&#146;s
Basement licenses and uses the name DSW in connection with its leased shoe department.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also operate leased shoe departments for three non-affiliated retailers. We entered into
supply agreements to merchandise the shoe departments in Stein Mart, Gordmans and Frugal Fannie&#146;s
stores as of July&nbsp;2002, June&nbsp;2004 and September&nbsp;2003, respectively. We own the merchandise, record
sales of merchandise net of returns and sales tax, provide fixtures and provide supervisory
assistance in these covered locations. Stein Mart, Gordmans and Frugal Fannie&#146;s provide the sales
associates. We pay a percentage of net sales as rent. As of January&nbsp;28, 2006, we supplied
merchandise to 157 Stein Mart stores, 55 Gordmans stores and one Frugal Fannie&#146;s store.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of January&nbsp;28, 2006, our leased shoe department segment was supported by a store field
operations group, a merchandising group and a planning and allocation
group that are separate from the
DSW stores segment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The leased business store field operations is supported by a Vice President of Leased
Businesses, who supervises district and area managers headquartered in the specific district or
area. The managers spend their time in the lessor&#146;s stores assisting the lessor&#146;s staff with
merchandise and operational matters. Each district and area manager reports directly to the Vice
President of Leased Businesses who reports to the Chief Operating Officer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The merchandise group consists of a Divisional Merchandise Manager of Leased Businesses, who
supervises the buying staff. The Divisional Merchandise Manager reports directly to the Chief
Merchandising Officer. The planning and allocation group consists of a Manager of Planning &#038;
Allocation Leased, who supervises merchandise and store planners.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Intellectual Property</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have registered a number of trademarks and service marks in the United States and
internationally, including DSW<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, DSW Shoe Warehouse<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and Reward Your Style<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. The renewal dates for
these U.S. trademarks are April&nbsp;25, 2015, May&nbsp;23, 2015, and June&nbsp;22, 2009, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our trademarks and service marks, especially those related to the DSW concept,
have significant value and are important to building our name recognition. We aggressively protect
our patented fixture designs, as well as our packaging, store design elements, marketing slogans
and graphics. To protect our brand identity, we have also protected the DSW trademark in several
foreign countries.
</DIV>




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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Associates</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January&nbsp;28, 2006, we employed approximately 4,950 associates. None of our associates is
covered by any collective bargaining agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer competitive wages, comprehensive medical and dental insurance, vision care,
company-paid and supplemental life insurance programs, associate-paid long-term and short-term
disability insurance and a 401(k) plan to our full-time associates and some of our part-time
associates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not experienced any work stoppages, and we consider our relations with our associates
to be good.
</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1A. RISK FACTORS.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Safe Harbor Under the Private Securities Litigation Reform Act of 1995</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain information in this Annual Report on Form 10-K, particularly information regarding
future economic performance and finances, and plans, expectations and objectives of management, is
forward-looking. The following factors, in addition to other possible factors not listed, could
affect our actual results and cause such results to differ materially from those expressed in
forward-looking statements:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Relating to Our Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We intend to continue to open approximately 30 new DSW stores per year from fiscal 2006 to fiscal
2010, which could strain our resources and have a material adverse effect on our business and
financial performance.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our continued and future growth largely depends on our ability to successfully open and
operate new DSW stores on a profitable basis. During fiscal 2005, fiscal 2004 and fiscal 2003, we
opened 29, 30 (net of one store closing during that period) and 16 new DSW stores, respectively. We
intend to open approximately 30 stores per year in each fiscal year from fiscal 2006 through fiscal
2010. As of March&nbsp;31, 2006, we have signed leases for an additional 21 stores. During fiscal 2005,
the average investment required to open a typical new DSW store was approximately $1.4&nbsp;million.
This continued expansion could place increased demands on our financial, managerial, operational
and administrative resources. For example, our planned expansion will require us to increase
the number of people we employ as well as to monitor and upgrade our management
information and other systems and our distribution facilities. These increased demands and
operating complexities could cause us to operate our business less
efficiently, have a material adverse affect on
our operations and financial performance and slow our growth.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be unable to open all the stores contemplated by our growth strategy on a timely basis, and
new stores we open may not be profitable or may have an adverse impact on the profitability of
existing stores, either of which could have a material adverse effect on our business, financial
condition and results of operations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to open approximately 30 stores per year in each fiscal year from fiscal 2006
through fiscal 2010. However, we may not achieve our planned expansion on a timely and profitable
basis or achieve results in new locations similar to those achieved in existing locations in prior
periods. Our ability to open and operate new DSW stores successfully on a timely and profitable
basis depends on many factors, including, among others, our ability to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>identify suitable markets and sites for new store locations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>negotiate favorable lease terms;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>build-out or refurbish sites on a timely and effective basis;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain sufficient levels of inventory to meet the needs of new stores;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain sufficient financing and capital resources or generate sufficient cash flows from operations to fund growth;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>open new stores at costs not significantly greater than those anticipated;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>successfully open new DSW stores in regions of the United States in which we currently have few or no stores;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>control the costs of other capital investments associated with store openings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>hire, train and retain qualified managers and store personnel; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>successfully integrate new stores into our existing
infrastructure, operations, management and distribution systems or adapt such infrastructure, operations and systems to
accommodate our growth.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result, we may be unable to open new stores at the rates expected or at all. If we fail
to successfully implement our growth strategy, the opening of new DSW stores could be delayed or
prevented, could cost more than anticipated and could divert resources from other areas of our
business, any of which could have a material adverse effect on our business, financial condition
and results of operations.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that we open new DSW stores in our existing markets, we may experience reduced
net sales in existing stores in those markets. As the number of our stores increases, our stores
will become more concentrated in the markets we serve. As a result, the number of customers and
financial performance of individual stores may decline and the average sales
per square foot at our stores may be reduced. This could have a material adverse effect on our
business, financial condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We rely on our good relationships with vendors to purchase brand name and designer merchandise at
favorable prices. If these relationships were to be impaired, we may not be able to obtain a
sufficient selection of merchandise at attractive prices, and we may not be able to respond
promptly to changing fashion trends, either of which could have a
material adverse affect on our
competitive position, our business and financial performance.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not have long-term supply agreements or exclusive arrangements with any vendors and,
therefore, our success depends on maintaining good relations with our vendors. Our growth strategy
depends to a significant extent on the willingness and ability of our vendors to supply us with
sufficient inventory to stock our stores. If we fail to strengthen our relations with our
existing vendors or to enhance the quality of merchandise they supply us, and if we cannot maintain
or acquire new vendors of in-season brand name and designer merchandise, our ability to obtain a
sufficient amount and variety of merchandise at favorable prices may be limited, which could have a
negative impact on our competitive position. In addition, our inability to stock our DSW stores
with in-season merchandise at attractive prices could result in lower net sales and decreased
customer interest in our stores, which, in turn, would adversely affect our financial performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal 2005, taking into account industry consolidation, merchandise supplied to DSW by
three key vendors accounted for approximately 22% of our net sales. The loss of or a reduction in
the amount of merchandise made available to us by any one of these key vendors could have an
adverse effect on our business.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be unable to anticipate and respond to fashion trends and consumer preferences in the
markets in which we operate, which could have a material adverse
affect on our business, financial condition and
results of operations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our merchandising strategy is based on identifying each region&#146;s customer base and having the
proper mix of products in each store to attract our target customers in that region. This requires
us to anticipate and respond to numerous and fluctuating variables in fashion trends and other
conditions in the markets in which our stores are situated. A variety of factors will affect our
ability to maintain the proper mix of products in each store, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>variations in local economic conditions, which could affect our customers&#146; discretionary spending;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unanticipated fashion trends;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our success in developing and maintaining vendor relationships that provide us access to
in-season merchandise at attractive prices;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our success in distributing merchandise to our stores in an efficient manner; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in weather patterns, which in turn affect consumer preferences.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are unable to anticipate and fulfill the merchandise needs of each region, we may
experience decreases in our net sales and may be forced to increase markdowns in relation to
slow-moving merchandise, either of which could have a material adverse effect on our business, financial
condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our comparable store sales and quarterly financial performance may fluctuate for a variety of
reasons, which could result in a decline in the price of our Class&nbsp;A Common Shares.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is sensitive to customers&#146; spending patterns, which in turn are subject to
prevailing regional and national economic conditions and the general level of economic activity.
Our comparable store sales and quarterly results of operations have fluctuated in the past, and we
expect them to continue to fluctuate in the future. A variety of other factors affect our
comparable store sales and quarterly financial performance, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in our merchandising strategy;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>timing and concentration of new DSW store openings and related pre-opening and other start-up costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>levels of pre-opening expenses associated with new DSW stores;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in our merchandise mix;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in and regional variations in demographic and population characteristics;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>timing of promotional events;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>seasonal fluctuations due to weather conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>actions by our competitors; and</TD>
</TR>


</TABLE>
</DIV>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general U.S. economic conditions and, in particular, the retail sales environment.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accordingly, our results for any one fiscal quarter are not necessarily indicative of the results
to be expected for any other quarter, and comparable store sales for any particular future period
may decrease. Our future financial performance may fall below the expectations of securities
analysts and investors. In that event, the price of our Class&nbsp;A Common Shares would likely decline.
For more information on our quarterly results of operations, see &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We rely on a single distribution center. The loss or disruption of our centralized distribution
center could have a material adverse effect on our business and operations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our inventory is shipped directly from suppliers to a single centralized distribution
center in Columbus, Ohio, where the inventory is then processed,
sorted and shipped to one of 11
pool locations located throughout the country and then on to our stores. Our operating results
depend on the orderly operation of our receiving and distribution process, which in turn depends on
third-party vendors&#146; adherence to shipping schedules and our effective management of our
distribution facilities. We may not anticipate all the changing demands that our expanding
operations will impose on our receiving and distribution system, and events beyond our control,
such as disruptions in operations due to fire or other catastrophic events, labor disagreements or
shipping problems, may result in delays in the delivery of merchandise to our stores.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While we believe that our distribution center is adequate to meet our foreseeable needs, we
may need to increase our distribution capacity in the future to accommodate our expanding retail
business. Because our ability to expand our distribution facilities at our current site is
limited, we may need to acquire, construct or lease additional distribution facilities in other
geographic locations to accommodate our planned expansion. We may also need to invest in
additional information technology to achieve a unified receiving and distribution system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While we maintain business interruption and property insurance, in the event our distribution
center were to be shut down for any reason or if we were to incur higher costs and longer lead
times in connection with a disruption at our distribution center, our insurance may not be
sufficient, and insurance proceeds may not be timely paid to us.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We are dependent on Retail Ventures to provide us with many key services for our business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From 1998 until our initial public offering in July&nbsp;2005, we were operated as a wholly-owned
subsidiary of Value City Department Stores, Inc. or Retail Ventures, and many key services required
by DSW for the operation of our business are currently provided by Retail Ventures and its
subsidiaries. We have entered into agreements with Retail Ventures related to the separation of our
business operations from Retail Ventures including, among others, a master separation agreement and
a shared services agreement. Under the terms of the shared services agreement, which was effective
as of January&nbsp;30, 2005, Retail Ventures provides us with key services relating to import
administration, risk management, information technology, tax, logistics, legal services, financial
services, shared benefits administration and payroll. Additionally,
Retail Ventures maintains insurance for us and for our
directors, officers, and employees. In turn, we provide several subsidiaries of Retail Ventures
with services relating to planning and allocation support, distribution services and transportation
management, site research, lease negotiation, store design and construction management. The initial
term of the shared services agreement will expire at the end of fiscal 2007 and will be extended
automatically for additional one-year terms unless terminated by one of the parties. We expect some
of these services to be provided for longer or shorter periods than the initial term. We believe it
is necessary for Retail Ventures to provide these services for us under the shared services
agreement to facilitate the efficient operation of our business as we transition to becoming an
independent public company. We, as a result, are dependent on our relationship with Retail Ventures
for shared services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Once the transition periods specified in the shared services agreement have expired and are
not renewed, or if Retail Ventures does not or is unable to perform its obligations under the
shared services agreement, we will be required to provide these services ourselves or to obtain
substitute arrangements with third parties. We may be unable to provide these services because of
financial or other constraints or be unable to timely implement substitute arrangements on terms
that are favorable to us, or at all, which could have an adverse effect on our business, financial
condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our failure to retain our existing senior management team and to continue to attract qualified new
personnel could adversely affect our business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business requires disciplined execution at all levels of our organization to ensure that
we continually have sufficient inventories of assorted brand name merchandise at below traditional
retail prices. This execution requires an experienced and talented management team. If we were to
lose the benefit of the experience, efforts and abilities of any of our key executive and buying
personnel, our business could be materially adversely affected. We have entered into employment
agreements with
</DIV>

<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">several of these officers. Furthermore, our ability to manage our retail expansion
will require us to continue to train, motivate and manage our employees and to attract, motivate
and retain additional qualified managerial and merchandising
personnel. Competition for these types of personnel is intense, and we may not be successful in
attracting, assimilating and retaining the personnel required to grow and operate our business
profitably.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be unable to compete favorably in our highly competitive market.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The retail footwear market is highly competitive with few barriers to entry. We compete
against a diverse group of retailers, both small and large, including locally owned shoe stores,
regional and national department stores, specialty retailers and discount chains. Some of our
competitors are larger and have substantially greater resources than we do. Our success depends on
our ability to remain competitive with respect to style, price, brand availability and customer
service. The performance of our competitors, as well as a change in their pricing policies,
marketing activities and other business strategies, could have a material adverse effect on our
business, financial condition, results of operations and our market share.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>A decline in general economic conditions, or the outbreak or escalation of war or terrorist acts,
could lead to reduced consumer demand for our footwear and accessories.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer spending habits, including spending for the footwear and related accessories that we
sell, are affected by, among other things, prevailing economic conditions, levels of employment,
salaries and wage rates, prevailing interest rates, income tax rates and policies, consumer
confidence and consumer perception of economic conditions. In addition, consumer purchasing
patterns may be influenced by consumers&#146; disposable income. A general slowdown in the U.S. economy
or an uncertain economic outlook could adversely affect consumer spending habits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer confidence is also affected by the domestic and international political situation.
The outbreak or escalation of war, or the occurrence of terrorist acts or other hostilities in or
affecting the United States, could lead to a decrease in spending by consumers. In the event of an
economic slowdown, we could experience lower net sales than expected on a quarterly or annual basis
and be forced to delay or slow our retail expansion plans.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We rely on foreign sources for our merchandise, and our business is therefore subject to risks
associated with international trade.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We purchase merchandise from domestic and foreign vendors. In addition, many of our domestic
vendors import a large portion of their merchandise from abroad, primarily from China, Brazil and
Italy. We believe that almost all the merchandise we purchased during fiscal 2005 was manufactured
outside the United States. For this reason, we face risks inherent in purchasing from foreign
suppliers, such as:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>economic and political instability in countries where these suppliers are located;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>international hostilities or acts of war or terrorism affecting the United States or
foreign countries from which our merchandise is sourced;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increases in shipping costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>transportation delays and interruptions, including increased inspections of import
shipments by domestic authorities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>work stoppages;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse fluctuations in currency exchange rates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>U.S. laws affecting the importation of goods, including duties, tariffs and quotas and other non-tariff barriers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>expropriation or nationalization;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in local government administration and governmental policies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in import duties or quotas;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>compliance with trade and foreign tax laws; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>local business practices, including compliance with local laws and with domestic and international labor standards.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We require our vendors to operate in compliance with applicable laws and regulations and our
internal requirements. However, we do not control our vendors or their labor and business
practices. The violation of labor or other laws by one of our vendors could have an adverse effect
on our business.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our secured revolving credit facility could limit our operational flexibility.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into a $150&nbsp;million secured revolving credit facility with a term expiring
July&nbsp;2010. Under this facility, we and our subsidiary, DSW Shoe Warehouse, Inc., or DSWSW, are
named as co-borrowers. This facility is subject to a borrowing base restriction and provides for
borrowings at variable interest rates based on the London Interbank Offered Rate,
</DIV>

<P align="center" style="font-size: 10pt">16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or LIBOR, the
prime rate and the Federal Funds effective rate, plus a margin. Our obligations under our secured
revolving credit facility are secured by a lien on substantially all our personal property and a
pledge of our shares of DSWSW. In
addition, the secured revolving credit facility contains usual and customary restrictive
covenants relating to our management and the operation of our business. These covenants, among
other things, restrict our ability to grant liens on our assets, incur additional indebtedness,
open or close stores, pay cash dividends and redeem our stock, enter into transactions with
affiliates and merge or consolidate with another entity. In addition, if at any time we utilize
over 90% of our borrowing capacity under this facility, we must comply with a fixed charge coverage
ratio test set forth in the facility documents. These covenants could restrict our operational
flexibility, and any failure to comply with these covenants or our payment obligations would limit
our ability to borrow under the secured revolving credit facility and, in certain circumstances,
may allow the lenders thereunder to require repayment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>From the time of our acquisition by Value City in 1998 until the completion of our initial public
offering in July&nbsp;2005, DSW was not operated as an entity separate from Value City and Retail
Ventures, and, as a result, our historical and pro forma financial information may not be
indicative of DSW&#146;s historical financial results or future financial performance.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our consolidated financial information included in this Annual Report on Form 10-K may not be
indicative of our future financial performance. This is because these statements do not necessarily
reflect the historical financial condition, results of operations and cash flows of DSW as they
would have been had we been operated during the periods presented as a separate, stand-alone
entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our consolidated financial information assumes that DSW, for the periods presented, had
existed as a separate legal entity, and has been derived from the consolidated financial statements
of Retail Ventures. Some costs have been reflected in the consolidated financial statements that
are not necessarily indicative of the costs that we would have incurred had we operated as an
independent, stand-alone entity for all periods presented. These costs include allocated portions
of Retail Ventures&#146; corporate overhead, interest expense and income taxes.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We face security risks related to our electronic processing and transmission of confidential
customer information. On March&nbsp;8, 2005, Retail Ventures announced the theft of credit card and
other purchase information relating to DSW customers. This security
breach could materially adversely affect
our reputation and business and subject us to liability.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on commercially available encryption software and other technologies to provide
security for processing and transmission of confidential customer information, such as credit card
numbers. Advances in computer capabilities, new discoveries in the field of cryptography, or other
events or developments, including improper acts by third parties, may result in a compromise or
breach of the security measures we use to protect customer transaction data. Compromises of these
security systems could have a material adverse effect on our reputation and business, and may
subject us to significant liabilities and reporting obligations. A party who is able to circumvent
our security measures could misappropriate our information, cause interruptions in our operations,
damage our reputation and customers&#146; willingness to shop in our stores and subject us to possible
liability. We may be required to expend significant capital and other resources to protect against
these security breaches or to alleviate problems caused by these breaches.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As previously reported, on March&nbsp;8, 2005, Retail Ventures announced that it had learned of the
theft of credit card and other purchase information from a  portion of
our customers. On April&nbsp;18, 2005, Retail Ventures issued the
findings from its investigation into the theft. The theft covered transaction information involving
approximately 1.4&nbsp;million credit cards and data from transactions involving approximately 96,000
checks.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DSW and RVI contacted and continue to cooperate with law enforcement and other authorities
with regard to this matter.
DSW is involved in several
legal proceedings arising out of this incident which seek unspecified
monetary damages, credit monitoring and other relief. After
consultation with counsel, we believe that the damages arising out of
these legal proceedings
will not exceed the reserves we have currently recorded.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with this matter, we entered into a consent order with the Federal
Trade Commission (&#147;FTC&#148;), which has jurisdiction over consumer protection matters. The FTC
published the final order on March&nbsp;14, 2006, and copies of the complaint and consent order are
available from the FTC&#146;s Web site at http://www.ftc.gov and also from the FTC&#146;s Consumer Response
Center, Room&nbsp;130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not admitted any wrongdoing or that the facts alleged in the FTC&#146;s proposed unfairness
complaint are true. Under the consent order, DSW will pay no fine or damages. DSW has
agreed, however, to maintain a comprehensive information security program and to undergo a biannual
assessment of such program by an independent third party.
</DIV>

<P align="center" style="font-size: 10pt">17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance that there will not be additional proceedings or claims brought
against us in the future. We have contested and will continue to vigorously contest the claims made
against us and will continue to explore our defenses and possible claims against others.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that the potential exposures for losses related to this
theft, including exposure under currently pending proceedings, range from approximately $6.5
million to approximately $9.5&nbsp;million. Because of many factors, including the early development of
information regarding the theft and recoverability under insurance policies, there is no amount in
the estimated range that represents a better estimate than any other amount in the range.
Therefore, in accordance with Financial Accounting Standard No.&nbsp;5, &#147;Accounting for Contingencies,&#148;
we accrued a charge to operations in the first quarter of fiscal 2005 equal to the low end of the
range set forth above. As the situation develops and more information becomes available to us, the
amount of the reserve may increase or decrease accordingly. The amount of any such change may be
material. As of January 28, 2006, the balance of the associated
accrual for potential exposure was $4.8 million.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We are controlled directly by Retail Ventures and indirectly by SSC, whose interests may
differ from other shareholders.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January&nbsp;28, 2006, Retail Ventures, a public corporation, owns 100% of our Class&nbsp;B Common
Shares, which represents approximately 63.1% of our outstanding Common Shares. These shares
collectively represent approximately 93.2% of the combined voting power of our outstanding Common
Shares.  As of January&nbsp;28, 2006, SSC owns approximately 48.2% of the
outstanding common shares of Retail Ventures and beneficially owns 59.0% of the
outstanding common shares of Retail Ventures (assumes issuance of (i)
8,333,333 shares of Retail Ventures common stock issuable upon the
exercise of convertible warrants, (ii) 1,388,752 shares of Retail
Ventures common stock issuable upon the exercise of term loan
warrants, and (iii) 685,417 shares of Retail Ventures common stock
issuable pursuant to the term loan warrants). SSC, a privately held corporation, is controlled by Jay L.
Schottenstein, the Chairman of the Board of Directors of DSW and Retail Ventures and the Chief
Executive Officer of DSW, and members of his immediate family. Given their respective ownership
interests, Retail Ventures and, indirectly, SSC, control or substantially influence the outcome of
all matters submitted to our shareholders for approval, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the election of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>mergers or other business combinations; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acquisitions or dispositions of assets.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The interests of Retail Ventures or SSC may differ from or be opposed to the interests of our
other shareholders, and their control may have the effect of delaying or preventing a change in
control that may be favored by other shareholders.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SSC and Retail Ventures or its affiliates may compete directly against us.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate opportunities may arise in the area of potential competitive business activities
that may be attractive to Retail Ventures, SSC and us in the area of employee recruiting and
retention. Any competition could intensify if Value City begins to carry an assortment of shoes in
its stores similar to those found in our stores, target customers similar to ours or adopt a
similar business model or strategy for its shoe businesses. Given that Value City is a wholly-owned
subsidiary of Retail Ventures and DSW is not wholly-owned, Retail Ventures and SSC may be inclined
to direct relevant corporate opportunities to them rather than us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated articles of incorporation provide that Retail Ventures and SSC are
under no obligation to communicate or offer any corporate opportunity to us. In addition, Retail
Ventures and SSC have the right to engage in similar activities as us, do business with our
suppliers and customers and, except as limited by the master separation agreement, employ or
otherwise engage any of our officers or employees. SSC and its affiliates engage in a variety of
businesses, including, but not limited to, business and inventory liquidations and real estate
acquisitions. The provisions also outline how corporate opportunities are to be assigned in the
event that our, Retail Ventures&#146; or SSC&#146;s directors and officers learn of corporate opportunities.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Some of our directors and officers also serve as directors and officers of Retail Ventures, and may
have conflicts of interest because they may own Retail Ventures stock or options to purchase Retail
Ventures stock, or they may receive cash- or equity-based awards based on the performance of Retail
Ventures.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of our directors and officers also serve as directors or officers of Retail Ventures and
may own Retail Ventures stock or options to purchase Retail Ventures stock, or they may be entitled
to participate in the Retail Ventures incentive plans. Jay L. Schottenstein is our Chief Executive
Officer and Chairman of the Board of Directors and Chairman of the Board of Directors of Retail
Ventures; Heywood Wilansky is a director of DSW and Chief Executive Officer of Retail Ventures;
Harvey L. Sonnenberg is a director of DSW and of Retail Ventures; James A. McGrady is a Vice
President of DSW and the Executive Vice President, Chief Financial Officer, Secretary and Treasurer
of Retail Ventures; and Steven E. Miller is Senior Vice President and Controller of both DSW and
Retail Ventures. The Retail Ventures Plans provide cash- and equity-based
</DIV>

<P align="center" style="font-size: 10pt">18
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">compensation to employees
based on Retail Ventures&#146; performance. These employment arrangements and ownership interests
or cash- or equity-based awards could create, or appear to create, potential conflicts of
interest when directors or officers who own Retail Ventures stock or stock options or who
participate in the Retail Ventures Plans are faced with decisions that could have different
implications for Retail Ventures than they do for us. These potential conflicts of interest may not
be resolved in our favor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We do not expect to pay dividends in the foreseeable future.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate that future earnings will be used principally to finance our retail expansion.
Thus, we do not intend to pay cash dividends on our Common Shares in the foreseeable future.
Provisions in our secured revolving credit facility may also restrict us from declaring dividends.
Our board of directors will have sole discretion to determine the dividend amount, if any, to be
paid. Our board of directors will consider a number of factors, including applicable provisions of
Ohio corporate law, our financial condition, capital requirements, funds generated from operations,
future business prospects, applicable contractual restrictions and any other factors our board may
deem relevant.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If our existing shareholders or holders of rights to purchase our Common Shares sell the shares
they own, or if Retail Ventures distributes its Common Shares to its shareholders, it could
adversely affect the price of our Class&nbsp;A Common Shares.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market price of our Class&nbsp;A Common Shares could decline as a result of market sales by our
existing shareholders, including Retail Ventures, or a distribution of our Common Shares to Retail
Ventures&#146; shareholders or the perception that such sales or distributions will occur. These sales
or distributions also might make it difficult for us to sell equity securities in the future at a
time and at a price that we deem appropriate. We cannot predict the size of future sales of our
Common Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of January&nbsp;28, 2006, there were 16,173,075 Class&nbsp;A Common Shares of DSW outstanding. Additionally, we have issued 148,313 restricted Class&nbsp;A
Common Shares and stock units pursuant to the terms of DSW&#146;s equity incentive plan. The remaining
27,702,667 Class&nbsp;B Common Shares outstanding are restricted securities within the meaning of Rule
144 under the Securities Act but will be eligible for resale subject to applicable volume, manner
of sale, holding period and other limitations of Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SSC, Cerberus Partners L.P., or Cerberus, and Millennium Partners, L.P., or Millennium, have
the right to acquire Class&nbsp;A Common Shares of DSW from Retail Ventures pursuant to warrant
agreements they have with Retail Ventures. All these Common Shares are eligible for future sale,
subject to the applicable volume, manner of sale, holding period and other limitations of Rule&nbsp;144.
Retail Ventures has registration rights with respect to its DSW Common Shares in specified
circumstances pursuant to the master separation agreement. In addition, SSC and Cerberus (and any
party to whom either of them transfers at least 15% of their interest in registrable DSW Common
Shares) have the right to require that we register for resale in specified circumstances the Class
A Common Shares issued to them upon exercise of their warrants, and each of these entities and
Millennium will be entitled to participate in registrations initiated by the other entities.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our amended articles of incorporation, amended and restated code of regulations and Ohio state law
contain provisions that may have the effect of delaying or preventing a change in control of DSW.
This could adversely affect the value of your shares.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our amended articles of incorporation authorizes our board of directors to issue up to
100,000,000 preferred shares and to determine the powers, preferences, privileges, rights,
including voting rights, qualifications, limitations and restrictions on those shares, without any
further vote or action by the shareholders. The rights of the holders of our Class&nbsp;A Common Shares
will be subject to, and may be adversely affected by, the rights of the holders of any preferred
shares that may be issued in the future. The issuance of preferred shares could have the effect of
delaying, deterring or preventing a change in control and could adversely affect the voting power
of the Class&nbsp;A Common Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, provisions of our amended articles of incorporation, amended and restated code of
regulations and Ohio law, together or separately, could discourage potential acquisition proposals,
delay or prevent a change in control and limit the price that certain investors might be willing to
pay in the future for our Common Shares. Among other things, these provisions establish a staggered
board, require a supermajority vote to remove directors, and establish certain advance notice
procedures for nomination of candidates for election as directors and for shareholder proposals to
be considered at shareholders&#146; meetings.
</DIV>



<P align="center" style="font-size: 10pt">19
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Risks Relating to our Relationship with and Separation from Retail Ventures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>The agreements we entered into with Retail Ventures in connection with our initial public
offering could restrict our operations and adversely affect our financial condition.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and Retail Ventures have entered into a number of agreements governing our separation from
and our future relationship with Retail Ventures, including a master separation agreement and a
shared services agreement, in the context of our relationship to Retail Ventures as a wholly-owned
subsidiary. Accordingly, the terms and provisions of these agreements may be less favorable to us
than terms and provisions we could have obtained in arm&#146;s length negotiations with unaffiliated
third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and Retail Ventures have entered into a tax separation agreement. The tax separation
agreement governs the respective rights, responsibilities, and obligations of Retail Ventures and
us with respect to tax liabilities and benefits, tax attributes, tax contests and other matters
regarding taxes and related tax returns. Although Retail Ventures has
informed us that it does not currently intend or plan to
undertake a spin-off of our stock to Retail Ventures&#146;
shareholders (it continues to evaluate financing options in
light of market conditions and other factors), we
and Retail Ventures&#146; have
agreed to set forth our respective rights, responsibilities and obligations with respect to any
possible spin-off in the tax separation agreement. If Retail Ventures were to decide to pursue a
possible spin-off, we have agreed to cooperate with Retail Ventures and to take any and all actions
reasonably requested by Retail Ventures in connection with such a transaction. We have also agreed
not to knowingly take or fail to take any actions that could reasonably be expected to preclude
Retail Ventures&#146; ability to undertake a tax-free spin-off. In addition, we generally would be
responsible for any taxes resulting from the failure of a spin-off to qualify as a tax-free
transaction to the extent such taxes are attributable to, or result from, any action or failure to
act by us or certain transactions in our stock (including transactions over which we would have no
control, such as acquisitions of our stock and the exercise of warrants, options, exchange rights,
conversion rights or similar arrangements with respect to our stock) following or preceding a
spin-off. We would also be responsible for a percentage (based on the relative market
capitalizations of DSW and Retail Ventures at the time of such spin-off) of such taxes to the
extent such taxes are not otherwise attributable to DSW or Retail Ventures. Our agreements in
connection with such tax matters last indefinitely.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be prevented from issuing stock to raise capital, to effectuate acquisitions or to provide
equity incentives to members of our management and board of directors.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beneficial ownership of at least 80% of the total voting power and 80% of each class of
nonvoting capital stock is required in order for Retail Ventures to effect a tax-free spin-off of
DSW or certain other tax-free transactions. Although Retail Ventures has informed us that it does
not currently intend or plan to undertake a spin-off of our stock to
Retail Ventures&#146; shareholders (it continues to evaluate financing options in
light of market conditions and other factors),
under the terms of our tax separation agreement, we have agreed that for so long as Retail Ventures
continues to own greater than 50% of the voting control of our outstanding stock, we will not
knowingly take or fail to take any action that could reasonably be expected to preclude Retail
Ventures&#146; ability to undertake a tax-free spin-off. In addition, Retail Ventures is subject to (a)
contractual obligations with its lenders to retain ownership of at least 55% by value of the Common
Shares of DSW for so long as the Value City non-convertible loan facility remains outstanding and (b)
contractual obligations with its warrantholders to retain enough DSW Common Shares to be able to
satisfy its obligations to deliver such shares to its warrantholders if the warrantholders elect to
exercise their warrants in full for DSW Class&nbsp;A Common Shares. For purposes of determining Retail
Ventures&#146; ownership interest in DSW, DSW Common Shares transferred by Retail Ventures to the
warrantholders upon exercise of their warrants will not be subtracted from Retail Ventures&#146;
ownership. These restrictions may prevent us from issuing additional equity securities to raise
capital, to effectuate acquisitions or to provide management or director equity incentives.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our prior and continuing relationship with Retail Ventures exposes us to risks attributable to
Retail Ventures&#146; businesses.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail Ventures is obligated to indemnify us for losses that a party may seek to impose upon
us or our affiliates for liabilities relating to the Retail Ventures business that are incurred
through a breach of the master separation agreement or any ancillary agreement by Retail Ventures
or its non-DSW affiliates, if such losses are attributable to Retail Ventures in connection with
our initial public offering or are not expressly assumed by us under the master separation
agreement. Any claims made against us that are properly attributable to Retail Ventures or Value
City in accordance with these arrangements requires us to exercise our rights under the master
separation agreement to obtain payment from Retail Ventures. We are exposed to the risk that, in
these circumstances, Retail Ventures cannot, or will not, make the required payment. If this were
to occur, our business and financial performance could be adversely affected.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Possible future sales of Class&nbsp;A Common Shares by Retail Ventures, SSC, Cerberus and Millennium
could adversely affect prevailing market prices for the Class&nbsp;A Common Shares.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Class&nbsp;B Common Shares held by Retail Ventures are subject to liens in favor of SSC and
Cerberus. However, Retail Ventures may sell any and all of the Common Shares held by it upon the
consent of these lenders, subject to applicable securities laws and the restrictions set forth
below. In addition, SSC, Cerberus and Millennium have the right to acquire from
</DIV>

<P align="center" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Retail Ventures Class&nbsp;A Common Shares of DSW. Sales or distribution by Retail Ventures, SSC,
Cerberus and Millennium of a substantial number of Class&nbsp;A Common Shares in the public market or to
their respective shareholders, or the perception that such SSC, Cerberus and Millennium sales or
distributions could occur, could adversely affect prevailing market prices for the Class&nbsp;A Common
Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail Ventures has advised us that its current intent is to continue to hold all the Common
Shares owned by it, except to the extent necessary to satisfy obligations under warrants it has
granted to SSC, Cerberus, and Millennium, although it continues to evaluate financing options in
light of market conditions and other factors. In addition, Retail Ventures is subject to (a)
contractual obligations with its lenders to retain ownership of at least 55% by value of the Common
Shares of DSW for so long as the Value City non-convertible loan facility remains outstanding and (b)
contractual obligations with its warrantholders to retain enough DSW Common Shares to be able to
satisfy its obligations to deliver such shares to its warrantholders if the warrantholders elect to
exercise their warrants in full for DSW Class&nbsp;A Common Shares. For purposes of determining Retail
Ventures&#146; ownership interest in DSW, DSW Common Shares transferred by Retail Ventures to the
warrantholders upon exercise of their warrants will not be subtracted from Retail Ventures&#146;
ownership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Retail Ventures were to require funds to service or refinance its indebtedness or to fund
its operations in the future and could not obtain capital from alternative sources, it could seek
to sell some or all of the Common Shares of DSW that it holds in order to obtain such funds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Similarly, SSC, Cerberus and Millennium are not subject to any contractual obligation to
retain Class&nbsp;A Common Shares they may acquire from Retail Ventures. As a result, there can be no
assurance concerning the period of time during which Retail Ventures, SSC, Cerberus and Millennium
will maintain their respective beneficial ownership of Common Shares in the future. Retail
Ventures, SSC and Cerberus (and any party to whom either of them transfers at least 15% of their
interest in registrable DSW Common Shares) will have registration rights with respect to their
respective Common Shares, which would facilitate any future distribution, and SSC, Cerberus and
Millennium will be entitled to participate in the registrations initiated by the other entities.
</DIV>
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM
1B. UNRESOLVED STAFF COMMENTS.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 2. PROPERTIES.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All DSW stores, our principal executive office and all our distribution, warehouse and office
facilities are leased or subleased. As of January&nbsp;28, 2006, we leased or subleased 15 DSW stores
and our main warehouse facility from entities affiliated with SSC. The remaining DSW stores are
leased from unrelated entities. Most of the DSW store leases provide for a minimum annual rent plus
a percentage of gross sales over specified breakpoints. Most of our leases are for a fixed term
with options for three to five extension periods, each of which is
for a period of four or five years, exercisable at our option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of January&nbsp;28, 2006, we operated 199 DSW stores. See the table on page 8 for a listing of
the states where our DSW stores are located.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
warehouse and distribution facility is located in an approximately 700,000 square foot
facility in Columbus, Ohio. The lease expires in December&nbsp;2016 and has three renewal options with
terms of five years each. While we believe that this facility is
adequate to meet our foreseeable needs, we may need to increase our
distribution capacity in the future to accommodate our expanding retail
business. Our principal executive office is also located on
the site of our main warehouse and distribution facility in Columbus, Ohio.
</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 3. LEGAL PROCEEDINGS.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
previously reported, on March&nbsp;8, 2005, Retail Ventures announced that it had learned of the
theft of credit card and other purchase information from a portion of
DSW customers. On April&nbsp;18, 2005, Retail Ventures issued the
findings from its investigation into the theft. The theft covered transaction information involving
approximately 1.4&nbsp;million credit cards and data from transactions involving approximately 96,000
checks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DSW and RVI contacted and continue to cooperate with law enforcement and other authorities
with regard to this matter. To mitigate potential negative effects on our business and financial
performance, RVI and DSW are working with credit card companies and their acquiring bank and
contacted as many affected customers as possible. In addition, DSW and RVI worked with a leading
computer security firm to minimize the risk of any future data theft. DSW is involved in several
legal proceedings arising out of this incident which seek unspecified
monetary damages, credit monitoring and other relief. After
consultation with counsel, we believe the damages arising out of
these legal proceedings will not exceed the reserves we have currently recorded.
</DIV>

<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with this matter, we entered into a consent order with the Federal Trade
Commission (&#147;FTC&#148;), which has jurisdiction over consumer protection matters. The FTC published the
final order on March&nbsp;14, 2006, and copies of the complaint and consent order are available from the
FTC&#146;s Web site at http://www.ftc.gov and also from the FTC&#146;s Consumer Response Center, Room&nbsp;130,
600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not admitted any wrongdoing or that the facts alleged in the FTC&#146;s proposed unfairness
complaint are true. Under the consent order, DSW will pay no fine or damages. DSW has agreed,
however, to maintain a comprehensive information security program, and to undergo a biannual
assessment of such program by an independent third party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance that there will not be additional proceedings or claims brought
against DSW in the future. We have contested and will continue to vigorously contest the claims
made against us and will continue to explore our defenses and possible claims against others.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that the potential exposure for losses related to this
theft, including exposure under currently pending proceedings, ranges from approximately $6.5
million to approximately $9.5&nbsp;million. Because of many factors, including the early development of
information regarding the theft and recoverability under insurance policies, there is no amount in
the estimated range that represents a better estimate than any other amount in the range.
Therefore, in accordance with Financial Accounting Standard No.&nbsp;5, <I>Accounting for Contingencies</I>, we
accrued a charge to operations in the first quarter of fiscal 2005 equal to the low end of the
range set forth above. As the situation develops and more information becomes available, the amount
of the reserve may increase or decrease accordingly. The amount of any such change may be material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although difficult to quantify, since the announcement of the theft, we have not discerned any
material negative effect on sales trends we believe is attributable to the theft. However, this may
not be indicative of the long-term developments regarding this matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are involved in various other legal proceedings that are incidental to the conduct of our
business. We estimate the range of liability related to pending
litigation where the amount of the range of loss can be estimated. We
recorded our best estimate of a loss when the loss is considered
probable. Where a liability is probable and there is a range of estimated loss, we recorded the
most likely estimated liability related to the claim. In the opinion of management, the amount of any liability with respect to these
proceedings will not be material. As additional information becomes
available, we will assess the potential liability related to our
pending litigation and revise the estimates. Revisions in our
estimates and potential liability could materially impact our results
of operations and financial condition.
</DIV>


<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 5.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>MARKET FOR THE REGISTRANT&#146;S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We completed our initial public offering on July&nbsp;5, 2005. Our Class&nbsp;A Common Shares are
listed for trading under the ticker symbol &#147;DSW&#148; on the New York Stock Exchange. The following
table sets forth the high and low sales prices of our Class&nbsp;A Common Shares as reported on the NYSE
Composite Tape during the periods indicated. As of March&nbsp;31,
2006, there were 5 holders of record
of our Class A Common Shares and one holder of record of our Class&nbsp;B Common Shares.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Low</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fiscal 2005:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23.11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fiscal 2006:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter<BR></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">31.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26.32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(through March&nbsp;31, 2006)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not anticipate paying cash dividends on our Common Shares during fiscal 2006. Presently,
we expect that all of our future earnings will be retained for development of our business. The
payment of any future dividends will be at the discretion of our board of directors and will depend
upon, among other things, future earnings, operations, capital requirements, our general financial
condition and general business conditions. Our credit facility restricts the payment of dividends
by us, other than dividends paid in stock of the issuer or paid to another affiliate, and cash
dividends can only be paid to Retail Ventures by us up to the aggregate amount of $5.0&nbsp;million
less the amount of any borrower advances made to Retail Ventures by us or our subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2005, we incurred intercompany indebtedness to fund a $165.0&nbsp;million dividend to
Retail Ventures. Additionally, in May&nbsp;2005, we incurred intercompany indebtedness to fund a $25
million dividend to Retail Ventures. In July&nbsp;2005, we repaid both of these notes in full from the
net proceeds of our initial public offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DSW
made no purchases of its Common
Shares during the fourth quarter of fiscal 2005.
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 6. SELECTED FINANCIAL DATA.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods indicated, various selected financial
information. Such selected consolidated financial data should be read in conjunction with our
Consolidated Financial Statements, including the notes thereto, set forth in Item&nbsp;8 of this Annual
Report on Form 10-K and &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations&#148; set forth in Item&nbsp;7 of this Annual Report on Form 10-K.
</DIV>

<P align="center" style="font-size: 10pt">23
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>For the Fiscal Year Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2/2/02</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2/1/03</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>1/31/04</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>1/29/05</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>1/28/06</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18"><B>(Dollars in thousands except net sales per average gross square foot)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Statement of Income Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net sales<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">523,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">644,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">791,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">961,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,144,061</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">123,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">158,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">202,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">270,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">315,719</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating profit<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">70,112</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,181</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance Sheet Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">232,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">295,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">291,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">395,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">507,715</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Working capital<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">87,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">103,244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">138,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">238,528</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current ratio<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long term obligations<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">54,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">35,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">55,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Number of DSW stores:<SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">New stores</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Closed/re-categorized stores<SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">End of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Comparable DSW stores (units)<SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">DSW Total square footage <SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,583,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,180,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,571,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,372,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,061,642</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Average gross square footage<SUP style="font-size: 85%; vertical-align: text-top">(9)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,217,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,364,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,010,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,721,129</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net sales per average gross sq. ft.<SUP style="font-size: 85%; vertical-align: text-top">(10)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Number of leased shoe departments at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total comparable store sales change<SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes net sales of leased shoe departments.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Results for the fiscal year ended January&nbsp;28, 2006 include a $6.5&nbsp;million pre-tax
charge, and a $3.9&nbsp;million after-tax charge in operating profit and net income,
respectively, related to the reserve for estimated losses associated with the theft of
credit card and other purchase information.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Working capital represents current assets less current liabilities.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Current ratio represents current assets divided by current liabilities.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Comprised of borrowings under the Value City revolving credit facility.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Number of DSW stores for each fiscal period presented prior to fiscal 2005 includes two
combination DSW/Filene&#146;s Basement stores which were re-categorized as leased shoe
departments at the beginning of fiscal 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Comparable DSW stores and comparable leased shoe departments are those units that have
been in operation for at least 14&nbsp;months at the beginning of the fiscal year. Stores or
leased shoe departments, as the case may be, are added to the comparable base at the
beginning of the year and are dropped for comparative purposes in the month that they are
closed.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>DSW total square footage represents the total amount of square footage for DSW stores
only; it does not reflect square footage of leased shoe departments.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Average gross square footage represents the monthly average of square feet for DSW
stores only for each period presented and consequently reflects the effect of opening
stores in different months throughout the period.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">24
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Net sales per average gross square foot is the result of dividing net sales for DSW
stores only for the period presented by average gross square foot calculated as described
in footnote 9 above.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 7.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This management&#146;s discussion and analysis of financial condition and results of operations
contains forward-looking statements that involve risks and uncertainties. Please see
&#147;Forward-Looking Information&#148; for a discussion of the uncertainties, risks and assumptions
associated with these statements. You should read the following discussion in conjunction with our
historical consolidated financial statements and the notes thereto appearing elsewhere in this
Annual Report on Form 10-K. The results of operations for the periods reflected herein are not
necessarily indicative of results that may be expected for future periods, and our actual results
may differ materially from those discussed in the forward-looking statements as a result of various
factors, including but not limited to those listed under &#147;Risk Factors&#148; and included elsewhere in
this Annual Report on Form 10-K.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DSW is a leading U.S. specialty branded footwear retailer operating 199 DSW stores in 32
states as of January&nbsp;28, 2006, with net sales of approximately $1.14&nbsp;billion in fiscal 2005. We
offer in our DSW stores a combination of selection, convenience and value that we believe
differentiates us from our competitors such as mall-based department stores, national chains and
independent shoe retailers and appeals to consumers from a broad range of socioeconomic and
demographic backgrounds. In addition to operating DSW stores, as of January&nbsp;28, 2006, we operated a
total of 213 leased shoe departments for three non-affiliated retailers, including 157 leased shoe
departments for Stein Mart, Inc., or Stein Mart; 55 for Gordman&#146;s, Inc., or Gordmans; and one for
Frugal Fannie&#146;s Fashion Warehouse, or Frugal Fannie&#146;s. As of January&nbsp;28, 2006, we also operated 25
leased shoe departments for Filene&#146;s Basement, a wholly-owned subsidiary of Retail Ventures. We
plan to further strengthen our position as a leading specialty branded footwear retailer by
pursuing three primary strategies for growth &#151; expanding our store base, driving sales through
enhanced merchandising and continuing to improve profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
first DSW store was opened in July&nbsp;1991. From 1998 until
the completion of our initial public offering in July&nbsp;2005, we
operated as a subsidiary of Retail
Ventures and its predecessors, and our assets, liabilities and operating results were included in the financial
statements of Value City Department Stores, Inc. or Retail Ventures since the time of our
acquisition by Value City and the formation of Retail Ventures, respectively. Upon completion of
our initial public offering, DSW became a publicly-traded company and operates its business as a
stand-alone entity. As of January&nbsp;28, 2006, Retail Ventures owned approximately 27.7&nbsp;million of our
Common Shares, or in excess of 63.1% of our outstanding shares, representing approximately 93.2% of
the aggregate voting power of our outstanding Common Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also operate leased shoe departments for three non-affiliated retailers and one affiliated
retailer in our leased department segment. We entered into supply agreements to merchandise the non-affiliated
shoe departments in Stein Mart, Gordmans and Frugal Fannie&#146;s stores as of July&nbsp;2002, June&nbsp;2004 and
September&nbsp;2003, respectively. We have operated leased shoe departments for Filene&#146;s Basement, a
wholly-owned subsidiary of Retail Ventures, since its acquisition by Retail Ventures in March&nbsp;2000.
Effective as of January&nbsp;30, 2005, we updated and reaffirmed our contractual arrangement with
Filene&#146;s Basement. We own the merchandise, record sales of merchandise net of returns and sales
tax, own the fixtures (except for Filene&#146;s Basement) and provide supervisory assistance in these covered
locations. Stein Mart, Gordmans, Frugal Fannie&#146;s and Filene&#146;s Basement provide the sales
associates. We pay a percentage of net sales as rent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our consolidated financial statements, which are discussed below, reflect the historical
position, results of operations and cash flows of the DSW business, which has been transferred to
us from Retail Ventures or other affiliates pursuant to the reorganization. They assume that DSW,
for the periods presented, had existed as a separate legal entity. Our consolidated financial
statements reflect the accounting policies adopted by Retail Ventures in the preparation of its
financial statements. Some costs have been reflected in the consolidated financial statements that
are not necessarily indicative of the costs that DSW would have incurred had it operated as an
independent, stand-alone entity for all periods presented. These costs include allocated portions
of Retail Ventures&#146; corporate overhead, interest expense and income taxes.
</DIV>

<P align="center" style="font-size: 10pt">25
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Sources of Revenue</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DSW generates revenues by purchasing primarily in-season shoes and accessories directly from
vendors for sale to customers in DSW stores and leased shoe departments. We have operated leased
shoe departments in Filene&#146;s Basement stores since April&nbsp;2000, in Stein Mart stores since July&nbsp;2002
and in Gordmans stores since June&nbsp;2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Expansion Strategy</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The main growth strategy for our business is to increase total net sales through DSW store
expansion while maintaining positive comparable store sales growth for DSW stores. We intend to
open approximately 30 stores per year in each fiscal year from fiscal 2006 through fiscal 2010. As
of January&nbsp;28, 2006, we have signed leases for an additional 16 stores. For fiscal 2006, we expect
to spend $13.4&nbsp;million and $20.0&nbsp;million, respectively, for capital expenditures and inventory in
connection with new DSW store openings. We expect to receive
approximately $7.5&nbsp;million in tenant
allowances in connection with these store openings. We plan to finance investment in new DSW stores
with cash flows from operating activities and may draw from our $150&nbsp;million secured revolving
credit facility if necessary. However, we may be unable to open new stores contemplated by our
growth plan on a timely basis. For a further discussion of the risks associated with our growth
strategy, see &#147;Risk Factors &#151; Risks Relating to Our Business.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect our expenses to increase as we operate the additional stores and support the
increasing size of the business. However, we will strive to limit the growth rate of our expenses
to a rate that is less than the growth rate of net sales. We expect the increase in net sales to
come primarily from an increase in our market share, as we do not expect a significant increase in
the total footwear market.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We utilize economic and demographic information to select new DSW store locations that we
believe will generate additional incremental sales with minimal negative effects on existing
stores. The selection of stores is based on evaluating total sales expectations for the location,
as well as the appropriateness of the size and rent. In the past, we have closed stores which have
not been profitable, and we may do so again in the future. In addition, we have also moved stores
to other locations in the same market. In fiscal years 2002, 2003, and 2004, we opened DSW stores
that were approximately 6% larger than the average store size of a typical DSW store in prior
fiscal years. In fiscal 2005, the average size of our new stores equaled the average size of our
stores existing at the beginning of the year. However, to date, the sales volumes of these newer
stores have been less than our average store sales, and, as a result, we have experienced a
decrease in net sales per average gross square foot. As the newer stores increase their net sales
and we open new stores sized to fit market potential, we expect to improve our net sales per gross
square foot performance in the future. Beginning is fiscal 2006, we
believe the average square footage of our new stores will be less
than the current chain average.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate that cash from operations, together with our existing cash, will be adequate to
fund operating expenses, working capital, capital expenditures and our planned retail expansion. We
may also draw from our $150&nbsp;million secured revolving credit facility, if necessary. However,
there can be no assurance as to the future availability of external financing or internally
generated funds required to execute our DSW store expansion strategy as planned. For more
information regarding our plans for funding our operations and expansion, see &#147;&#151; Liquidity and
Capital Resources&#148; below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Key Financial Measures</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In evaluating DSW&#146;s results of operations, our management refers to a number of key financial
and non-financial measures relating to the performance of our business. Among our key financial
results are net sales, operating profit and net income. Non-financial measures that we use in
evaluating our performance include number of DSW stores and leased shoe departments, net sales per
average gross square foot for DSW stores, and change in comparable stores sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following describes certain line items set forth in our consolidated statement of income:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Sales. </I>We record net sales exclusive of sales tax and net of returns. For comparison
purposes, we define stores or leased shoe departments as comparable or non-comparable. A store&#146;s or
leased shoe department&#146;s sales are included in comparable sales if the store or leased shoe
department has been in operation at least 14&nbsp;months at the beginning of the fiscal year. Stores and
leased shoe departments are excluded from the comparison in the month that they close. Stores that
are remodeled or relocated are excluded from the comparison if there is a material change in the
size of the store or are relocated out of their area.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cost of Sales. </I>Our cost of sales includes the cost of merchandise, distribution and
warehousing (including depreciation), store occupancy (excluding depreciation), permanent and point
of sale reductions, markdowns and shrinkage. Our fiscal 2005 cost of sales also reflects the impact
of shared services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Expenses. </I>Operating expenses include expenses related to store selling, store
management and store payroll costs, advertising, leased shoe department operations, store
depreciation and amortization, pre-opening advertising and other pre-opening costs (which are
expensed as incurred), corporate expenses for buying services, information services, depreciation
expense for corporate cost centers, marketing, legal, finance, outside professional services,
allocable costs from Retail Ventures and other corporate related departments and benefits for
associates and related payroll taxes. Our fiscal 2005 operating expenses also reflect the cost of
shared services and the cost of operating as a public company. Corporate level expenses are
primarily attributable to operations at our corporate offices in Columbus, Ohio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Fiscal Year; Seasonality</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We follow a 52/53-week fiscal year that ends on the Saturday nearest to January&nbsp;31 in each
year. Fiscal 2005, 2004 and 2003 each consisted of 52&nbsp;weeks. Our next fiscal year will consist of
53&nbsp;weeks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is subject to seasonal trends. Our net sales, measured on a comparable stores
basis, have typically been higher in spring and early fall, when our customers&#146; interest in new
seasonal styles increases. Unlike many other retailers, we have not historically experienced a
large increase in net sales during our fourth quarter associated with the winter holiday season.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Separation Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the completion of our initial public offering in July&nbsp;2005, we entered into
several agreements with Retail Ventures in connection with the separation of the DSW business from
the Retail Ventures group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Master Separation Agreement. </I>The master separation agreement contains key provisions relating
to the separation of our business from Retail Ventures. The master separation agreement requires us
to exchange information with Retail Ventures, follow certain accounting practices and resolve
disputes with Retail Ventures in a particular manner. We also have agreed to maintain the
confidentiality of certain information and preserve available legal privileges. The separation
agreement also contains provisions relating to the allocation of the costs of our initial public
offering, indemnification, non-solicitation of employees and employee benefit matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the master separation agreement, we agreed to effect up to one demand registration per
calendar year of our Common Shares, whether Class&nbsp;A or Class&nbsp;B, held by Retail Ventures, if
requested by Retail Ventures. We have also granted Retail Ventures the right to include its Common
Shares of DSW in an unlimited number of other registrations of such shares initiated by us or on
behalf of our other shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Shared Services Agreement. </I>Many aspects of our business, which were fully managed and
controlled by us without Retail Ventures&#146; involvement, continue to operate as they did prior to our
initial public offering. We continue to manage operations for critical functions such as
merchandise buying, planning and allocation, distribution and store operations. Under the shared
services agreement, which became effective as of January&nbsp;30, 2005, we provide services to several
subsidiaries of Retail Ventures relating to planning and allocation support, distribution services
and transportation management, site research, lease negotiation, store design and construction
management. Retail Ventures provides us with services relating to import administration, risk
management, information technology, tax, logistics, legal services, financial services, shared
benefits administration and payroll and maintain insurance for us and for our directors, officers,
and employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The initial term of the shared services agreement expires at the end of fiscal 2007 and will
be extended automatically for additional one-year terms unless terminated by one of the parties.
With respect to each shared service, we cannot reasonably anticipate whether the services will be
shared for a period shorter or longer than the initial term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Separation Agreement. </I>Until the completion of our initial public offering in July&nbsp;2005, we
were historically included in Retail Ventures&#146; consolidated group, or the Consolidated Group, for
U.S. federal income tax purposes as well as in certain consolidated, combined or unitary groups
which include Retail Ventures and/or certain of its subsidiaries, or a Combined Group, for state
and local income tax purposes. We entered into a tax separation agreement with Retail Ventures that
became effective upon consummation of our initial public offering. Pursuant to the tax separation
agreement, we and Retail Ventures generally make payments to each other such that, with respect to
tax returns for any taxable period in which we or any of our subsidiaries are included in the
Consolidated Group or any Combined Group, the amount of taxes to be paid by us will be
</DIV>

<P align="center" style="font-size: 10pt">27
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">determined, subject to certain adjustments, as if we and each of our subsidiaries included in
the Consolidated Group or Combined Group filed our own consolidated, combined or unitary tax
return. Retail Ventures will prepare pro forma tax returns for us with respect to any tax return
filed with respect to the Consolidated Group or any Combined Group in order to determine the amount
of tax separation payments under the tax separation agreement. We have the right to review and
comment on such pro forma tax returns. We are responsible for any taxes with respect to tax returns
that include only us and our subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail Ventures is exclusively responsible for preparing and filing any tax return with
respect to the Consolidated Group or any Combined Group. We generally are responsible for preparing
and filing any tax returns that include only us and our subsidiaries. Retail Ventures has agreed to
undertake to provide these services with respect to our separate tax returns. For the tax services
provided to us by Retail Ventures, we pay Retail Ventures a monthly fee equal to 50% of all costs
associated with the maintenance and operation of Retail Ventures&#146; tax department (including all
overhead expenses). In addition, we reimburse Retail Ventures for 50% of any third party fees and
expenses generally incurred by Retail Ventures&#146; tax department and 100% of any third party fees and
expenses incurred by Retail Ventures&#146; tax department solely in connection with the performance of
the tax services provided to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail Ventures is primarily responsible for controlling and contesting any audit or other tax
proceeding with respect to the Consolidated Group or any Combined Group; provided, however, that,
except in cases involving taxes relating to a spin-off, we have the right to control decisions to
resolve, settle or otherwise agree to any deficiency, claim or adjustment with respect to any item
for which we are solely liable under the tax separation agreement. Pursuant to the tax separation
agreement, we have the right to control and contest any audit or tax proceeding that relates to any
tax returns that include only us and our subsidiaries. We and Retail Ventures have joint control
over decisions to resolve, settle or otherwise agree to any deficiency, claim or adjustment for
which we and Retail Ventures could be jointly liable, except in cases involving taxes relating to a
spin-off. Disputes arising between the parties relating to matters covered by the tax separation
agreement are subject to resolution through specific dispute resolution provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been included in the Consolidated Group for periods in which Retail Ventures owned at
least 80% of the total voting power and value of the our outstanding stock. Following completion of
our initial public offering in July&nbsp;2005, we are no longer included in the Consolidated Group. Each
member of a consolidated group for U.S. federal income tax purposes is jointly and severally liable
for the U.S. federal income tax liability of each other member of the consolidated group.
Similarly, in some jurisdictions, each member of a consolidated, combined or unitary group for
state, local or foreign income tax purposes is jointly and severally liable for the state, local or
foreign income tax liability of each other member of the consolidated, combined or unitary group.
Accordingly, although the tax separation agreement allocates tax liabilities between us and Retail
Ventures, for any period in which we were included in the Consolidated Group or a Combined Group,
we could be liable in the event that any income tax liability was incurred, but not discharged, by
any other member of the Consolidated Group or a Combined Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retail Ventures has informed us that it does not currently intend or plan to undertake a
spin-off of our stock to Retail Ventures shareholders, it
continues to evaluate financing options in light of market conditions
and other factors. Nevertheless, we and Retail Ventures agreed
to set forth our respective rights, responsibilities and obligations with respect to any possible
spin-off in the tax separation agreement. If Retail Ventures were to decide to pursue a possible
spin-off, we have agreed to cooperate with Retail Ventures and to take any and all actions
reasonably requested by Retail Ventures in connection with such a transaction. We have also agreed
not to knowingly take or fail to take any actions that could reasonably be expected to preclude
Retail Ventures&#146; ability to undertake a tax-free spin-off. In addition, we generally would be
responsible for any taxes resulting from the failure of a spin-off to qualify as a tax-free
transaction to the extent such taxes are attributable to, or result from, any action or failure to
act by us or certain transactions in our stock (including transactions over which we would have no
control, such as acquisitions of our stock and the exercise of warrants, options, exchange rights,
conversion rights or similar arrangements with respect to our stock) following or preceding a
spin-off. We would also be responsible for a percentage (based on the relative market
capitalizations of us and Retail Ventures at the time of such spin-off) of such taxes to the extent
such taxes are not otherwise attributable to us or Retail Ventures. Our agreements in connection
with such spin-off matters last indefinitely. In addition, present and future majority-owned
affiliates of DSW or Retail Ventures will be bound by our agreements, unless Retail Ventures or we,
as applicable, consent to grant a release of an affiliate (such consent cannot be unreasonably
withheld, conditioned or delayed), which may limit our ability to sell or otherwise dispose of such
affiliates. Additionally, a minority interest participant(s) in a future joint venture, if any,
would need to evaluate the effect of the tax separation agreement on such joint venture, and such
evaluation may negatively affect their decision whether to participate in such a joint venture.
Furthermore, the tax separation agreement may negatively affect our ability to acquire a majority
interest in a joint venture.
</DIV>


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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Critical Accounting Policies and Estimates</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As discussed in Note 1 to our consolidated financial statements included elsewhere in this
Annual Report on Form 10-K, the preparation of our consolidated financial statements in conformity
with generally accepted accounting principles, or GAAP, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
commitments and contingencies at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates
and judgments, including, but not limited to, those related to inventory valuation, depreciation,
amortization, recoverability of long-lived assets (including intangible assets), estimates for self
insurance reserves for health and welfare, workers&#146; compensation and casualty insurance, customer
loyalty program, income taxes, contingencies, litigation and revenue recognition. We base these
estimates and judgments on our historical experience and other factors we believe to be relevant,
the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. The process of determining
significant estimates is fact-specific and takes into account factors such as historical
experience, current and expected economic conditions, product mix, and in some cases, actuarial and
appraisal techniques. We constantly re-evaluate these significant factors and make adjustments
where facts and circumstances dictate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While we believe that our historical experience and other factors considered provide a
meaningful basis for the accounting policies applied in the preparation of the consolidated
financial statements, we cannot guarantee that our estimates and assumptions will be accurate. As the
determination of these estimates requires the exercise of judgment, actual results inevitably will
differ from those estimates, and such differences may be material to our financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe the following represent the most significant accounting policies, critical
estimates and assumptions, among others, used in the preparation of our consolidated financial
statements:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Revenue Recognition. </I>Revenues from merchandise sales are recognized at the point of sale
and are net of returns and exclude sales tax. Revenue from gift cards is deferred and the
revenue is recognized upon redemption of the gift cards.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Cost of Sales and Merchandise Inventories. </I>Merchandise inventories are stated at the
lower of cost, determined using the first-in, first-out basis, or market, using the retail
inventory method. The retail inventory method is widely used in the retail industry due to
its practicality. Under the retail inventory method, the valuation of inventories at cost
and the resulting gross profit are calculated by applying a calculated cost to retail ratio
to the retail value of inventories. The cost of the inventory reflected on our consolidated
balance sheet is decreased by charges to cost of sales at the time the retail value of the
inventory is lowered through the use of markdowns. Hence, earnings are negatively impacted
as merchandise is marked down prior to sale. Reserves to value inventory at the lower of
cost or market were $19.2&nbsp;million and $14.2&nbsp;million at the end of fiscal 2005 and 2004,
respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Inherent in the calculation of inventories are certain significant management judgments and
estimates, including setting the original merchandise retail value or mark-on, markups of
initial prices established, reductions in prices due to customers&#146; perception of value
(known as markdowns), and estimates of losses between physical inventory counts, or
shrinkage, which, combined with the averaging process within the retail inventory method,
can significantly impact the ending inventory valuation at cost and the resulting gross
profit.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We include in the cost of sales expenses associated with warehousing, distribution and store
occupancy. Warehousing costs are comprised of labor, benefits and other labor-related costs
associated with the operations of the warehouse, which are primarily payroll-related taxes
and benefits. The non-labor costs associated with warehousing include rent, depreciation,
insurance, utilities and maintenance and other operating costs that are passed to us from
the landlord. Distribution costs include the transportation of merchandise to the warehouse
and from the warehouse to our stores. Store occupancy costs include rent, utilities,
repairs, maintenance, insurance, and janitorial costs and other costs associated with
licenses and occupancy-related taxes, which are primarily real estate taxes passed to us by
our landlords.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Asset Impairment and Long-lived Assets. </I>We must periodically evaluate the carrying
amount of our long-lived assets, primarily property and equipment, and finite life
intangible assets when events and circumstances warrant such a review to ascertain if any
assets have been impaired. The carrying amount of a long-lived asset is considered impaired
when the carrying value of the asset exceeds the expected future cash flows from the asset.
Our reviews are conducted at the lowest identifiable level, which includes a store. The
impairment loss recognized is the excess of the carrying amount of
the asset over its fair value, estimated on discounted cash flow. Should an impairment loss be realized, it
will be included in cost of sales. The amount of impairment losses recorded during fiscal
2005 and fiscal 2004 were $0.2 and $0.8&nbsp;million, respectively, while in fiscal 2003 the
amount of the impairment loss was immaterial to the financial statements. We believe at
this time that the long-lived assets&#146; carrying amounts and useful lives continue to</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>be appropriate. To the extent these future projections or our strategies change, the
conclusion regarding impairment may differ from our current estimates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Self-insurance Reserves. </I>We record estimates for certain health and welfare, workers
compensation and casualty insurance costs that are self-insured programs. These estimates
are based on actuarial assumptions and are subject to change based on actual results.
Should the total cost of claims for health and welfare, workers compensation and casualty
insurance exceed those anticipated, reserves recorded may not be sufficient, and, to the
extent actual results vary from assumptions, earnings would be impacted.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Customer Loyalty Program. </I>We maintain a customer loyalty program for our DSW stores in
which customers receive a future discount on qualifying purchases. The &#147;Reward Your Style&#148;
program is designed to promote customer awareness and loyalty and provide us with the
ability to communicate with our customers and enhance our understanding of their spending
trends. Upon reaching the target spending level, customers may redeem these discounts on a
future purchase. Generally, these future discounts must be redeemed within six months. We
accrue the estimated costs of the anticipated redemptions of the discount earned at the
time of the initial purchase and charge such costs to operating expense based on historical
experience. The estimates of the costs associated with the loyalty program require us to
make assumptions related to customer purchase levels and redemption rates. The accrued
liability as of January&nbsp;28, 2006 and January&nbsp;29, 2005 was $8.3&nbsp;million and $4.5&nbsp;million,
respectively. To the extent assumptions of purchases and redemption rates vary from actual
results, earnings would be impacted.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Income Taxes. </I>We are required to determine the aggregate amount of income tax expense to
accrue and the amount which will be currently payable based upon tax statutes of each
jurisdiction we do business in. In making these estimates, we adjust income based on a
determination of generally accepted accounting principles for items that are treated
differently by the applicable taxing authorities. Deferred tax assets and liabilities, as a
result of these differences, are reflected on our balance sheet for temporary differences
that will reverse in subsequent years. A valuation allowance is established against
deferred tax assets when it is more likely than not that some or all of the deferred tax
assets will not be realized. If our management had made these determinations on a different
basis, our tax expense, assets and liabilities could be different.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Results of Operations</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January&nbsp;28, 2006, we operated 199 DSW stores and leased shoe departments in 157 Stein
Mart stores, 55 Gordmans stores, 25 Filene&#146;s Basement stores and one Frugal Fannie&#146;s store. We
manage our operations in two segments, defined as DSW stores and leased departments. The leased
departments are comprised of leased shoe departments in Stein Mart, Gordmans, Frugal Fannie and
Filene&#146;s Basement. The following table represents selected components of our historical
consolidated results of operations, expressed as percentages of net sales:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>For the Fiscal Year Ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 28,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(52 Weeks)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(52 Weeks)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(52 Weeks)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales, including
sales from leased
departments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(74.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(72.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">30
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Fiscal Year Ended January&nbsp;28, 2006 (Fiscal 2005) Compared to Fiscal Year Ended January&nbsp;29,
2005 (Fiscal 2004)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Sales. </I>Net sales for the fifty-two weeks ended January&nbsp;28, 2006 increased by 19.0%, or
$183.0&nbsp;million, to $1.14&nbsp;billion from $961.1&nbsp;million in the fifty-two week period ended January&nbsp;29,
2005. Our comparable store sales in fiscal 2005 improved 5.4% compared to the previous fiscal year.
The increase includes an increase of 29 new DSW stores, 11 non-affiliated leased shoe departments
and one Filene&#146;s Basement leased shoe department, during fiscal 2005. The new DSW locations added
$59.8&nbsp;million in sales compared to fiscal 2004, while the new leased shoe departments added $3.7
million. Leased shoe department sales comprised 10.5% of total net sales in fiscal 2005, compared
to 9.4% in fiscal 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compared with fiscal 2004, DSW comparable store sales for fiscal 2005 increased in women&#146;s
6.8%, athletic 6.4%, men&#146;s 3.8% and decreased in accessories 6.4%. Sales increases in women&#146;s were
across all categories; dress, casual and seasonal. The seasonal performance of boots drove the
women&#146;s increase with a 19.7% increase for the year. The increase in athletic was driven by
women&#146;s, and specifically women&#146;s fashion athletic. The increase in men&#146;s was driven by an expanded
assortment offering in casual and fashion. The decrease in accessories was due to a narrowing of
the offering in gift products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Gross Profit. </I>Gross profit increased $45.5&nbsp;million to $315.7&nbsp;million in fiscal 2005 from
$270.2&nbsp;million in fiscal 2004, and decreased as a percentage of net sales from 28.1% in fiscal 2004
to 27.6% in fiscal 2005. The decrease is primarily attributable to increased markdowns in all
categories as we executed all of our planned clearance rotations. In
fiscal 2004, we did not undertake one of our planned clearance
rotations in the third quarter. The
decrease was partially offset by an increase in initial markup. The increase in initial markups is
the result of increased average unit retail prices and the ability to buy at lower costs, which is
due to the fact that we placed larger orders. We are not expecting to continue increasing our
initial mark up at the same pace as prior years. Warehouse expense as a percentage of net sales
decreased from 2.2% in fiscal 2004 to 1.4% in fiscal 2005. The decrease in warehouse expense is the
result of improved operational efficiencies achieved through the use of electronic shipping
information, increased unit volumes and the application of the shared service agreement
for the full year. This decrease in warehouse expense was partially offset by increases in store
occupancy, from 12.9% of net sales in fiscal 2004 to 13.4% of net sales in fiscal 2005. The
increase in the store occupancy was the result of an increase in the penetration of the leased
business compared to the total.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Expenses. </I>For fiscal 2005, operating expenses increased $31.5&nbsp;million from $214.1
million in fiscal 2004 to $245.6&nbsp;million in fiscal 2005. Operating expenses represented 22.3% of
net sales in fiscal 2004 and 21.5% of net sales in fiscal 2005. Operating expenses for fiscal 2005
include $7.7&nbsp;million in pre-opening costs compared to $10.8&nbsp;million in the prior fiscal year.
Pre-opening costs are expensed as incurred and therefore do not necessarily reflect expenses for
the stores opened in a given fiscal year. Included in operating expenses is the related operating
cost associated with operating the leased shoe departments, excluding occupancy. The new DSW stores
and leased shoe departments added $9.9&nbsp;million in expenses compared to fiscal 2004, excluding
pre-opening expenses. Fiscal 2005 operating expenses also included a $6.5&nbsp;million charge related
to the theft of credit card and other purchase information discussed below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the first quarter of fiscal 2005, we accrued an estimated liability related to the
theft of credit card and other purchase information. Potential exposures for losses related to
stolen information were estimated to fall within a range of approximately $6.5&nbsp;million to
approximately $9.5&nbsp;million. Because of many factors, including the early development of
information regarding the theft and recoverability under insurance policies, there is no amount in
the estimated range that represents a better estimate than any other amount in the range.
Therefore, in accordance with Financial Accounting Standard No.&nbsp;5, Accounting for Contingencies, we
have accrued a charge to operations equal to the low end of the range set forth above, or $6.5
million. At January&nbsp;28, 2006 the balance of the reserve was approximately $4.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Profit. </I>Operating profit was $70.1&nbsp;million in fiscal 2005 compared to $56.1&nbsp;million
in fiscal 2004, and increased as a percentage of net sales from 5.8% in fiscal 2004 to 6.1% in
fiscal 2005. Operating profit was positively affected by the full year of operations for our DSW
stores and leased shoe departments opened in fiscal 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest Expenses. </I>Interest expense, net of interest income, was $7.5&nbsp;million in fiscal 2005
compared to $2.7&nbsp;million in fiscal 2004. Interest expense increased in fiscal 2005 as a result of
interest paid to Retail Ventures related to dividends paid via a note prior to our initial public
offering. Interest expense includes the amortization of debt issuance costs of $0.6&nbsp;million and
$0.5&nbsp;million in fiscal 2005 and fiscal 2004, respectively. As of
January 28, 2006, we had no debt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Income Taxes. </I>Our effective tax rate for fiscal 2005 was 40.6%, compared to 34.5% for fiscal
2004. The favorable
rate experienced in fiscal 2004, primarily in the fourth quarter, was driven by several factors
which included the deductibility of certain expenses associated with the termination benefits of
the former Chief Executive Officer of Retail Ventures, among others.
</DIV>

<P align="center" style="font-size: 10pt">31
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Fiscal Year Ended January&nbsp;29, 2005 (Fiscal 2004) Compared to Fiscal Year Ended January&nbsp;31, 2004
(Fiscal 2003)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Sales. </I>Net sales for the fifty-two weeks ended January&nbsp;29, 2005 increased by 21.4%, or
$169.8&nbsp;million, to $961.1&nbsp;million from $791.3&nbsp;million in the fifty-two week period ended January
31, 2004. Our comparable store sales in fiscal 2004 improved 5.0% compared to the previous fiscal
year. The increase includes a net increase of 30 new DSW stores, 51 non-affiliated leased shoe
departments and five Filene&#146;s Basement leased shoe departments in fiscal 2004. The new DSW
locations added $82.0&nbsp;million in sales compared to fiscal 2003, while the new leased shoe
departments added $12.7&nbsp;million. Leased shoe department sales comprised 9.4% of total net sales in
fiscal 2004, compared to 8.9% in fiscal 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compared with fiscal 2003, DSW comparable store sales increased in women&#146;s 4.3%, athletic
11.6% and accessories 9.6%, and decreased in the men&#146;s category by 0.3%. Sales increases in women&#146;s
were driven by increases in dress, better and sandals in the spring and women&#146;s casual in the fall.
The increase in athletic was the result of sales increases in fashion athletic in both the men&#146;s
and women&#146;s categories. The increase in accessories was the result of additional new merchandise
being offered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Gross Profit. </I>Gross profit increased $67.3&nbsp;million to $270.2&nbsp;million in fiscal 2004 from
$202.9&nbsp;million in fiscal 2003, and increased as a percentage of net sales from 25.6% in fiscal 2003
to 28.1% in fiscal 2004. This increase is primarily attributable to increased initial markups and a
decrease in markdowns when compared to the prior fiscal year. The initial markup increase is the
result of increased average unit retail prices and the ability to buy at lower costs, which is due
to the fact that we placed larger orders. The decreased markdowns relate to the fact that we did
not execute a planned rotation of clearance due to our favorable clearance position in September.
Warehouse expense as a percentage of net sales decreased from 2.5% in fiscal 2003 to 2.2% in fiscal
2004. The decrease in warehouse expense is the result of improved operational efficiencies achieved
through the use of electronic shipping information and increased unit volumes. This decrease in
warehouse expense was partially offset by increases in store occupancy, from 12.8% of net sales in
fiscal 2003 to 12.9% of net sales in fiscal 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Expenses. </I>For fiscal 2004, operating expenses increased $39.2&nbsp;million from $174.9
million in fiscal 2003 to $214.1&nbsp;million in fiscal 2004. Operating expenses represented 22.1% of
net sales in fiscal 2003 and 22.3% of net sales in fiscal 2004. Operating expenses for fiscal 2004
include $10.8&nbsp;million in pre-opening costs compared to $5.1&nbsp;million in the prior fiscal year.
Pre-opening costs are expensed as incurred and therefore do not necessarily reflect expenses for
the stores opened in a given fiscal year. Included in operating expenses is the related operating
cost associated with operating the leased shoe departments, excluding occupancy. The new DSW stores
and leased shoe departments added $14.8&nbsp;million in expenses compared to fiscal 2003, excluding
pre-opening expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Profit. </I>Operating profit was $56.1&nbsp;million in fiscal 2004 compared to $28.1&nbsp;million
in fiscal 2003, and increased as a percentage of net sales from 3.5% in fiscal 2003 to 5.8% in
fiscal 2004. Operating profit was positively affected by the full year of operations for our DSW
stores and leased shoe departments opened in fiscal 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest Expense. </I>Interest expense, net of interest income, was $2.7&nbsp;million in each of fiscal
2004 and fiscal 2003. Interest expense in fiscal 2004 was the result of an increase in the average
weighted borrowing rate, offset in part by a decrease in average weighted borrowings. Interest
expense includes the amortization of debt issuance costs of $0.5&nbsp;million in each of fiscal 2004 and
fiscal 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Income Taxes. </I>Our effective tax rate for fiscal 2004 was 34.5%, compared to 41.5% for fiscal
2003. The favorable rate experienced in fiscal 2004, primarily in the fourth quarter, was driven by
several factors which included the deductibility of certain expenses associated with the
termination benefits of the former Chief Executive Officer of Retail Ventures, among others. The
favorable effective tax rate is not expected to continue into the future as DSW anticipates its
effective tax rate will approximate its statutory rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Liquidity and Capital Resources</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Overview</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary ongoing cash requirements are for seasonal and new store inventory purchases,
capital expenditures in connection with our expansion, the remodeling of existing stores and
infrastructure growth. We have historically funded our expenditures with cash flows from operations
and borrowings under the credit facilities to which we have been a party. Our working capital and
inventory levels typically build seasonally. We believe that we will be able to continue to fund
our operating requirements and the expansion of our business pursuant to our growth strategy in the
future with existing cash, cash flows from operations and borrowings under the DSW secured
revolving credit facility, if necessary.
</DIV>

<P align="center" style="font-size: 10pt">32
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>$150 Million Secured Revolving Credit Facility. </I>Simultaneously with the amendment and
restatement of the Value City revolving credit facility described below, DSW entered into a new
$150&nbsp;million secured revolving credit facility with a term of five years. Under this facility, we
and our subsidiary, DSWSW, are named as co-borrowers. The DSW facility has borrowing base
restrictions and provides for borrowings at variable interest rates based on LIBOR, the prime rate
and the Federal Funds effective rate, plus a margin. Our obligations under the secured revolving
credit facility are secured by a lien on substantially all of our and our subsidiary&#146;s personal
property and a pledge of our shares of DSWSW. In addition, our secured revolving credit facility
contains usual and customary restrictive covenants relating to our management and the operation of
our business. These covenants will, among other things, restrict our ability to grant liens on our
assets, incur additional indebtedness, open or close stores, pay cash dividends and redeem our
stock, enter into transactions with affiliates and merge or consolidate with another entity. In
addition, if at any time we utilize over 90% of our borrowing capacity under this facility, we must
comply with a fixed charge coverage ratio test set forth in the facility documents. At January&nbsp;28,
2006, $136.4&nbsp;million was available under the $150&nbsp;million secured revolving credit facility and no
direct borrowings were outstanding. At January&nbsp;28, 2006, $13.6&nbsp;million in letters of credit were
issued and outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Transactions with Retail Ventures</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Union Square Store Guaranty by Retail Ventures. </I>In January&nbsp;2004, we entered into a lease
agreement with 40 East 14 Realty Associates, L.L.C., an unrelated third party, for our Union Square
store in Manhattan, New York. In connection with the lease, Retail Ventures has agreed to guarantee
payment of our rent and other expenses and charges and the performance of our other obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Intercompany Accounts. </I>Prior to the completion of our initial public offering in July&nbsp;2005,
DSW and Retail Ventures used intercompany transactions in the conduct of their operations. Under
this arrangement, Retail Ventures acted as a central processing location for payments for the
acquisition of merchandise, payroll, outside services, capital additions and expenses by
controlling the payroll and accounts payable activities for all Retail Ventures&#146; subsidiaries,
including DSW. DSW transferred cash received from sales of merchandise to cash accounts controlled
by Retail Ventures. The concentration of cash and the offsetting payments for merchandise,
expenses, capital assets and accruals for future payments were accumulated on our balance sheet in
advances to affiliates. The balance of advances to affiliates fluctuated based on DSW&#146;s activities
with Retail Ventures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following completion of our initial public offering, DSW&#146;s intercompany activities are limited
to those arrangements set forth in the shared services agreement and the other agreements between
DSW and Retail Ventures. DSW no longer concentrates its cash from the sale of merchandise into
Retail Ventures&#146; accounts but into its own DSW accounts. DSW pays for its own merchandise, expenses
and capital additions from newly established disbursement accounts. Any intercompany payments are
made pursuant to the terms of the shared services agreement and other agreements between DSW and
Retail Ventures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The DSW Separation from Retail Ventures</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon completion of our initial public offering in July&nbsp;2005, Retail Ventures amended or
terminated the existing credit facilities and other debt obligations of Value City and its other
affiliates, including certain facilities under which DSW had rights and obligations as a
co-borrower and co-guarantor. DSW is no longer a party to any of these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The Value City Revolving Credit Facility. </I>Prior to completion of our initial public offering
in July&nbsp;2005, we were party to a Loan and Security Agreement, as amended, entered into with
National City, as administrative agent, and the other parties named therein, originally entered
into in June&nbsp;2002. Upon the completion of our initial public offering, this revolving credit
agreement was amended and restated and we were released from our obligations as a party thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The Value City Term Loan Facility. </I>Prior to completion of our initial public offering in July
2005, we were party to a Financing Agreement, as amended, among Cerberus, as agent and lender, and
SSC as lender, and the other parties named as co-borrowers therein, originally entered into in June
2002. Upon the completion of our initial public offering, this term loan agreement was amended and
restated and we were released from our obligations as a party thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms of this term loan agreement, SSC and Cerberus each provided us, Value City and
the other Retail Ventures affiliates named as co-borrowers with a separate $50&nbsp;million term loan
comprised of two tranches with initial three-year terms. In July&nbsp;2004, the maturity dates of these
loans were extended until June&nbsp;11, 2006. In connection with the second tranche of these term loans,
Retail Ventures issued to each of Cerberus and SSC warrants to purchase 1,477,396 common shares of
Retail Ventures at a purchase price of $4.50 per share, subject to adjustment. In September&nbsp;2002,
Back Bay bought from each of Cerberus and SSC a $1.5&nbsp;million interest in each of the tranches of
their term loans for an aggregate $6.0&nbsp;million interest, and Back Bay received from each of
Cerberus and SSC a corresponding portion of the warrants to purchase Retail
</DIV>

<P align="center" style="font-size: 10pt">33
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ventures common shares originally issued in connection with the second tranche of their term
loans. Effective November&nbsp;23, 2005, Millennium Partners, L.P. purchased from Back Bay Capital
Funding LLC term loan warrants to purchase an aggregate of 177,288 of
Retail Ventures common shares, subject to adjustment. The term loans&#146; stated rate of interest
per annum through June&nbsp;11, 2004 was 14% if paid in cash and 15% if the co-borrowers elected a
paid-in-kind, or PIK, option. During the first two years of the term loans, the co-borrowers could
elect to pay all interest in PIK. During the final two years of the term loans, the stated rate of
interest is 15.0% if paid in cash or 15.5% if by PIK, and the PIK option is limited to 50% of the
interest due. For fiscal 2002 and fiscal 2003, the co-borrowers elected to pay interest in cash.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the amendment of this term loan agreement, Retail Ventures amended the
outstanding warrants to provide SSC, Cerberus and Millennium the right, from time to time, in whole
or in part, to (i)&nbsp;acquire Retail Ventures common shares at the then current conversion price
(subject to the existing anti-dilution) provisions, (ii)&nbsp;acquire from Retail Ventures Class&nbsp;A
Common Shares of DSW at an exercise price of $19.00 per share (subject to anti-dilution provisions
similar to those in the existing warrants) or (iii)&nbsp;acquire a combination thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assuming an exercise price per share of $19.00, SSC and Cerberus would each receive 328,915
Class&nbsp;A Common Shares, and Millennium would receive 41,989 Class&nbsp;A Common Shares, if they exercised
these warrants in full exclusively for DSW Common Shares. The warrants expire in June&nbsp;2012.
Although Retail Ventures has informed us that it does not currently intend or plan to undertake a spin-off of Common Shares to Retail
Ventures&#146; shareholders (it continues to evaluate financing options in light of market conditions and other factors), in the event that Retail Ventures effects a spin-off of its DSW Common
Shares to its shareholders in the future, the holders of outstanding unexercised warrants will
receive the same number of DSW Common Shares that they would have received had they exercised their
warrants in full for Retail Ventures common shares immediately prior to the record date of the
spin-off, without regard to any limitations on exercise in the warrants. Following the completion
of any such spin-off, the warrants will be exercisable solely for Retail Ventures common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into an exchange agreement with Retail Ventures whereby, upon the request of
Retail Ventures, we will be required to exchange some or all of the Class&nbsp;B Common Shares of DSW
held by Retail Ventures for Class&nbsp;A Common Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The Value City Senior Subordinated Convertible Loan Facility. </I>Prior to completion of our
initial public offering in July&nbsp;2005, we were a co-guarantor under the Amended and Restated Senior
Subordinated Convertible Loan Agreement, entered into by Value City, as borrower, Cerberus, as
agent and lender, SSC, as lender, and DSW and the other parties named as guarantors, originally
entered into in June&nbsp;2002. Upon the completion of our initial public offering, this convertible
loan agreement was amended and restated and we are no longer a party thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the amendment and restatement of this convertible loan agreement, the $75
million convertible loan was converted into a $50&nbsp;million non-convertible loan. In addition, Retail
Ventures agreed to issue to SSC and Cerberus convertible warrants which will be exercisable from
time to time until the later of June&nbsp;11, 2007 and the repayment in full of Value City&#146;s obligations
under the amended and restated loan agreement. Under the convertible warrants, SSC and Cerberus
will have the right, from time to time, in whole or in part, to (i)&nbsp;acquire Retail Ventures common
shares at the conversion price referred to in the convertible loan (subject to existing
antidilution provisions), (ii)&nbsp;acquire from Retail Ventures Class&nbsp;A Common Shares of DSW at an
exercise price of $19.00 per share (subject to antidilution provisions similar to those in the
existing warrants) or (iii)&nbsp;acquire a combination thereof.
Although Retail Ventures has informed us that it does not currently intend
or plan to undertake a spin-off of Common Shares to Retail
Ventures&#146; shareholders (it continues to evaluate
financing options in light of market conditions and other factors), in the event that
Retail Ventures effects a spin-off of its DSW Common Shares to its shareholders in the future, the
holders of outstanding unexercised warrants will receive the same number of DSW Common Shares that
they would have received had they exercised their warrants in full for Retail Ventures common
shares immediately prior to the record date of the spin-off, without regard to any limitation on
exercise contained in the warrants. Following the completion of any such spin-off, the warrants
will be exercisable solely for Retail Ventures common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SSC and Cerberus may acquire upon exercise of the warrants in full an aggregate number of
Class&nbsp;A Common Shares of DSW from Retail Ventures which have a value equal to $75&nbsp;million. Assuming
an exercise price per share of $19.00, SSC and Cerberus would each receive 1,973,684 Class&nbsp;A Common
Shares without giving effect to anti-dilution adjustments, if any, if they exercised these
warrants exclusively for DSW Common Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Value City Intercompany Note. </I>The capital stock of DSW held by Retail Ventures secures a $240
million Value City intercompany note made payable by Retail Ventures to Value City, which was
executed and delivered on January&nbsp;1, 2005 in connection with the transfer of all the capital stock
of DSW and Filene&#146;s Basement by Value City to Retail Ventures on that date. The lien granted to
Value City on the DSW capital stock held by Retail Ventures will be released upon written notice
that warrants held by Cerberus, SSC and Millennium are to be exercised in exchange for DSW capital
stock held by Retail Ventures and to be delivered by Retail Ventures upon the exercise of such
warrants. The lien will also be released upon repayment of the note in full.
</DIV>

<P align="center" style="font-size: 10pt">34
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The $165.0 Million Intercompany Note. </I>In March&nbsp;2005, we incurred intercompany indebtedness to
fund a $165.0&nbsp;million dividend to Retail Ventures. We repaid this note in full in July&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The $25.0 Million Intercompany Note. </I>In May&nbsp;2005, we incurred intercompany indebtedness to
fund a $25.0&nbsp;million dividend to Retail Ventures. We repaid this note in full in July&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cross-Corporate Guarantees. </I>We previously entered into cross-corporate guarantees with various
financing institutions pursuant to which we, Retail Ventures, Filene&#146;s Basement and Value City,
jointly and severally, guaranteed payment obligations owed to these entities under factoring
arrangements they have entered into with vendors who may provide merchandise to some or all of
Retail Ventures&#146; subsidiaries. In July&nbsp;2005, we terminated these cross-corporate guarantees and no
amounts remain guaranteed by us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Operating Activities</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash provided by operations in fiscal 2005 was $109.3&nbsp;million, compared to $15.3&nbsp;million
for fiscal 2004. Net working capital increased $99.6&nbsp;million to $238.5&nbsp;million at January&nbsp;28, 2006
from $138.9&nbsp;million at January&nbsp;29, 2005. Current assets divided by current liabilities at those
dates were 2.7 and 2.3, respectively. The $109.3&nbsp;million net cash provided by operations during
fiscal 2005 is primarily due to net income, an increase in accrued
expenses of $17.3&nbsp;million and a
reduction in the amount of advances to affiliates of $23.7&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash provided by operating activities totaled $15.3&nbsp;million in
fiscal 2004 and $44.9
million in fiscal 2003. The $15.3&nbsp;million net cash provided by operations during fiscal 2004
reflects several causes. Net cash was used to increase inventory by $58.0&nbsp;million, and increase advances to affiliates by $22.2&nbsp;million. Net
cash was provided by operations, an increase in accrued expenses of $15.0&nbsp;million and an increase
in accounts payable of $19.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate all our stores, warehouses and corporate office space from leased facilities. Lease
obligations are accounted for either as operating leases or as capital leases. We disclose in the
notes to the financial statements included elsewhere in this Annual Report on Form 10-K the minimum
payments due under operating or capital leases.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Investing Activities</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
fiscal 2005, our cash used in investing activities amounted to $25.3&nbsp;million compared to
$33.9&nbsp;million for fiscal 2004. For each fiscal year from fiscal 2003 through fiscal 2005, our cash
used in investing activities consisted of capital expenditures. Cash used for capital expenditures
was $25.3&nbsp;million, $33.9&nbsp;million, and $22.1&nbsp;million for fiscal 2005, fiscal 2004, and fiscal 2003,
respectively. Capital expenditures were related primarily to new stores.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future capital expenditures will depend primarily on the number of new stores we open, the
number of existing stores we remodel and the timing of these expenditures. In fiscal 2005, we
opened 29 new DSW stores. . We plan to open approximately 30 stores per year in each fiscal year
from fiscal 2006 through fiscal 2010. During fiscal 2005, the average investment required to open a
typical new DSW store was approximately $1.4&nbsp;million. Of this amount, gross inventory typically
accounted for $680,000, fixtures and leasehold improvements typically accounted for $460,000 (prior
to tenant allowances) and pre-opening advertising and other pre-opening expenses typically
accounted for $280,000. We plan to finance investment in new stores with existing cash and cash
flows from operating activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Financing Activities</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
fiscal 2005, our net cash provided by financing activities was $32.4&nbsp;million, compared to
$19.9&nbsp;million for fiscal 2004, and net cash used by financing activities of $19.2&nbsp;million in fiscal
2003. The cash provided of $32.4&nbsp;million in fiscal 2005 was primarily the result of the proceeds
from the sale of stock from our IPO, offset by the amounts we paid to Retail Ventures for our
intercompany indebtedness arising from our dividends to Retail Ventures and the repayment of our
obligations under our prior credit facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Contractual and Obligations</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have the following minimum commitments under contractual obligations, as defined by the
SEC. A &#147;purchase obligation&#148; is defined as an agreement to purchase goods or services that is
enforceable and legally binding on us and that specifies all significant terms, including: fixed or
minimum quantities to be purchased, fixed, minimum or variable price provisions; and the
approximate timing of the transaction. Other long-term liabilities are defined as long-term
liabilities that are
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">reflected on our balance sheet in accordance with GAAP. Based on this definition, the table
below includes only those contracts which include fixed or minimum obligations. It does not include
normal purchases, which are made in the ordinary course of business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides aggregated information about contractual obligations and other
long-term liabilities as of January&nbsp;28, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Payments due by Period</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">No</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Less Than</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">1 - 3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">3 -5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">More Than</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Expiration</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Contractual Obligations</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">1 Year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">5 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Date</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease and operating lease
obligations <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">804,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">354,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction commitments<SUP style="font-size: 85%; vertical-align: text-top"> (2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase obligations <SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">805,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">92,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">184,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">173,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">354,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Our operating leases require us to pay for common area maintenance costs and real
estate taxes. In fiscal 2005, these common area maintenance costs and real estate taxes
represented 30.1% of our required lease payments. These costs and taxes vary year by year
and are based almost entirely on actual costs incurred and taxes paid incurred by the
landlord. As such, they are not included in the lease obligations presented above.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Construction commitments include capital items to be purchased for projects that were
under construction, or for which a lease had been signed, as of January&nbsp;28, 2006.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Many of our purchase obligations are cancelable by us without payment or penalty, and
we have excluded such obligations, along with all associate employment and intercompany
obligations.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had outstanding letters of credit that totaled approximately $13.6&nbsp;million at January&nbsp;28,
2006 and $14.9&nbsp;million at January&nbsp;29, 2005. If certain conditions are met under these arrangements,
we would be required to satisfy the obligations in cash. Due to the nature of these arrangements
and based on historical experience, we do not expect to make any significant payment outside of
terms set forth in these arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January&nbsp;28, 2006, we have entered into various construction commitments, including
capital items to be purchased for projects that were under construction, or for which a lease has
been signed. Our obligations under these commitments aggregated to approximately $0.3&nbsp;million as of
January&nbsp;28, 2006. In addition, as of January 28, 2006, we have signed 16 lease agreements for new store locations with
annual rent of approximately $6.3&nbsp;million. In connection with the new lease agreements, we will
receive approximately $4.8&nbsp;million of tenant allowances, which will reimburse us for expenditures
at these locations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2005, we incurred intercompany indebtedness to fund a $165.0&nbsp;million dividend to
Retail Ventures. In July&nbsp;2005, we repaid the note in full from the net proceeds of our initial
public offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2005, we incurred intercompany indebtedness to fund a $25.0&nbsp;million dividend to Retail
Ventures. In July&nbsp;2005, we repaid the note in full from the net proceeds of our initial public
offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recent Accounting Pronouncements</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued SFAS No.&nbsp;123 (revised 2004) (&#147;SFAS No.&nbsp;123R&#148;), <I>Share-Based
Payment</I>. This statement revised SFAS No.&nbsp;123, <I>Accounting for Stock-Based Compensation</I>, and requires
companies to expense the value of employee stock options and similar awards. The effective date of
this standard is interim and annual periods beginning after June&nbsp;15, 2005. No stock options or
similar awards have been granted by DSW as of fiscal years 2004 and 2003. In April&nbsp;2005, the SEC
delayed the compliance date for SFAS 123R until the beginning of our fiscal year 2006. We will
utilize the modified prospective method of adoption. We expect that
the impact of adoption of SFAS 123R to our results of operations will
be similar, on an annualized basis, to the pro forma disclosures
presented in Note 3 of the Notes to our Consolidated Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt">36
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November, 2005, the FASB issued FIN 47, Accounting for Conditional Asset Retirement
Obligations, (&#147;FIN 47&#148;) which clarified the term &#147;conditional asset retirement obligation&#148; as used
in FASB Statement No.&nbsp;143, Accounting for Asset Retirement Obligations. Conditional asset
retirement obligation refers to a legal obligation to perform an asset retirement activity in which
the timing and/or method of settlement are dependent on a future event that may or may not be
within the control of the entity. While the timing and/or method of settlement is unknown, the
obligation to perform the asset retirement obligation is unconditional. FIN 47 requires that the
fair value of the asset retirement activity be recorded when it can be reasonably estimated. The
adoption of FIN 47 during the fourth quarter of fiscal 2005 did not have a material impact on our
financial position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Off-Balance Sheet Arrangements</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is not our intention to participate in transactions that generate relationships with
unconsolidated entities or financial partnerships, such as special purpose entities or variable
interest entities, which would facilitate off-balance sheet arrangements or other limited purposes.
We have not entered into any &#147;off-balance sheet&#148; arrangements, as that term is described by the
SEC, as of January&nbsp;28, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Inflation</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our results of our operations and financial condition are presented based upon historical
cost. While it is difficult to accurately measure the impact of inflation because of the nature of
the estimates required, management believes that the effect of inflation, if any, on our results of
operations and financial condition has been minor; however, there can be no assurance that the
business will not be affected by inflation in the future.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cash and cash equivalents are maintained only with maturities of 90&nbsp;days or less. Our
short-term investments have interest reset periods of 35&nbsp;days or less. These financial instruments
may be subject to interest rate risk through lost income should interest rates increase during
their limited term to maturity or resetting of interest rates. As of January&nbsp;28, 2006, there was no
long-term debt outstanding. Future borrowings, if any, would bear interest at negotiated rates and
would be subject to interest rate risk. Because we have no outstanding debt, we do not believe that
a hypothetical adverse change of 10% in interest rates would have a material effect on our
financial position.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial statements and financial statement schedule and the Report of Independent
Registered Public Accounting Firm thereon are filed pursuant to this Item&nbsp;8 and are included in
this report beginning on page F-1.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 9.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 9A. CONTROLS AND PROCEDURES.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Evaluation of Disclosure Controls and Procedures</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, under the supervision and with the participation of our management, including the Chief
Executive Officer and Chief Financial Officer, performed an evaluation of our disclosure controls
and procedures, as contemplated by Securities Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e). Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer concluded, as of the end
of the period covered by this report, that such disclosure controls and procedures were effective.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Changes in Internal Control over Financial Reporting</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No change was made in our internal control over financial reporting during our most recent
fiscal quarter that has materially affected, or is reasonable likely to affect, our internal
control over financial reporting.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 9B. OTHER INFORMATION.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<P align="center" style="font-size: 10pt">37
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Executive Officers</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following persons are our executive officers. Our officers are elected annually by our
Board and serve at the pleasure of the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Jay L. Schottenstein</B>, age 51, serves as our Chief Executive Officer and Chairman of the Board
of Directors. He was appointed as our Chief Executive Officer in March&nbsp;2005. Mr.&nbsp;Schottenstein
became a director of DSW in March&nbsp;2005. He has been Chairman of the Board of Directors of Retail
Ventures, American Eagle Outfitters, Inc. and SSC since March&nbsp;1992 and was Chief Executive Officer
of Retail Ventures from April&nbsp;1991 to July&nbsp;1997 and from July&nbsp;1999 to December&nbsp;2000. Mr.
Schottenstein served as Vice Chairman of SSC from 1986 until March&nbsp;1992 and as a director of SSC
since 1982. He served in various executive capacities at SSC since 1976. Mr.&nbsp;Schottenstein is also
a director of American Eagle Outfitters, Inc., which is a company with a class of securities
registered pursuant to Section&nbsp;12 of the Securities Exchange Act of 1934, or the Exchange Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Deborah L. Ferr&#233;e</B>, age 52, has served as our Vice Chairman and Chief Merchandising Officer
since January&nbsp;2006. Ms.&nbsp;Ferr&#233;e joined us in November&nbsp;1997. She served as our President and Chief
Merchandising Officer from November&nbsp;2004 until January&nbsp;2006. From March&nbsp;2002 until November&nbsp;2004,
she served as Executive Vice President and Chief Merchandising Officer. Prior to that, she served
as Senior Vice President of Merchandising beginning in September&nbsp;2000, and Vice President of
Merchandising beginning in October&nbsp;1997. Prior to joining us, Ms.&nbsp;Ferr&#233;e worked in the retail
industry for more than 30&nbsp;years in various positions, including serving as Divisional Merchandising
Manager of Shoes, Accessories and Intimate Apparel for Harris Department Store, women&#146;s buyer for
Ross Stores and Divisional Merchandise Manager of the May Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Peter Z. Horvath</B>, age 48, has served as our President since January&nbsp;2006. From January&nbsp;2005
until January&nbsp;2006, Mr.&nbsp;Horvath served as our Executive Vice President and Chief Operating Officer.
He has extensive retail experience, having spent nineteen years with the Limited Brands business.
He has held numerous finance function roles within various divisions of Limited Brands, most
recently serving as Senior Vice President of Merchandise Planning and Allocation for the entire
Limited Brands enterprise from April&nbsp;2002 to August&nbsp;2004. From February&nbsp;1997 to April&nbsp;2002, he
served as Chief Financial Officer for multiple apparel divisions of Limited Brands. From 1985 to
February&nbsp;1997, Mr.&nbsp;Horvath held various positions with Limited Brands, including Vice President
Controller of Express, Inc. and Director of Financial Reporting for Limited Stores.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Kevin M. Lonergan</B>, age 57, serves as our Executive Vice President and Chief Operating Officer.
Prior to joining us in January&nbsp;2006, Mr.&nbsp;Lonergan served as Vice President of the West Zone for
American Eagle Outfitters, beginning in January&nbsp;2004, where he was responsible for 397 stores in 30
states. Prior to that time, Mr.&nbsp;Lonergan served as Executive Vice President and Chief Operating
Officer of Old Navy, a division of Gap, Inc., where he oversaw all store operations and helped
build the newly formed Old Navy division from its inception in 1993. Prior to serving in that
capacity, Mr.&nbsp;Lonergan held executive positions at various divisions of Gap, Inc., Target and
Carson Pirie Scott. Mr.&nbsp;Lonergan has over 35&nbsp;years of business experience in all phases of retail,
including department stores, specialty and mass merchandising, and has been responsible for many
areas of business, including stores, operations, finance, real estate, human resources, systems,
and customer service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Douglas J. Probst</B>, age 41, serves as our Executive Vice President, Chief Financial Officer and
Treasurer. Mr.&nbsp;Probst joined DSW in March&nbsp;2005. From April&nbsp;1990 to February&nbsp;2005, he held various
positions with Too Inc., a company spun-off from The Limited, Inc., including Vice President of
Finance and Controller from May&nbsp;2004 to February&nbsp;2005, Vice President Finance from October&nbsp;2003 to
May&nbsp;2004 and Vice President Financial Analysis and Store Control from December&nbsp;1999 to October
2003. From August&nbsp;1986 to March&nbsp;1990, he was in the practice of public accounting with KPMG. Mr.
Probst is a certified public accountant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Derek Ungless</B>, age 57, serves as our Executive Vice President and Chief Marketing Officer, a
position he has held since June&nbsp;2005. From April&nbsp;2002 to May&nbsp;2005, he was Executive Vice President
of Marketing for Express, part of Limited Brands. Mr.&nbsp;Ungless was Senior Vice President and Head of
Global Brand Design of the Estee Lauder brand, part of Estee Lauder Companies Inc. from September
2000 until November&nbsp;2001 and was Executive Vice President and Creative Director of Brooks Brothers
from October&nbsp;1997 until September&nbsp;2000. Mr.&nbsp;Ungless has over twelve years of experience working in
the retail industry.
</DIV>



<P align="center" style="font-size: 10pt">38
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit Committee</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The members of our Audit Committee are Messrs.&nbsp;James D. Robbins (Chair), Philip B. Miller and
Allan J. Tanenbaum. The Board of Directors has affirmatively determined that each of Messrs.
Robbins, Miller, and Tanenbaum is an independent member of the Audit Committee in accordance with
the listing standards of the New York Stock Exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has determined that James D. Robbins is an audit committee financial
expert as such term is defined by the SEC under Item 401(h) of Regulation&nbsp;S-K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Code of Ethics and Corporate Governance Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have adopted a code of ethics that applies to all of our directors, officers and employees,
including our principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, and an additional code of ethics
that applies to senior financial officers. These codes of ethics, designated as the &#147;Code of
Conduct&#148; and the &#147;Code of Ethics for Senior Financial Officers,&#148; respectively by us, can be found
on our investor website at <U>www.dswshoe.com</U>. We intend to disclose any amendment to, or
waiver from, any applicable provision of the Code of Conduct or Code of Ethics for Senior Financial
Officers (if such amendment or waiver relates to elements listed under Item 406(b) of Regulation
S-K and applies to our directors, principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions) by posting
such information on our website at <U>www.dswshoe.com</U>. The reference to our investor website
address does not constitute incorporation by reference of the information contained on the website
and should not be considered part of this document.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has adopted and approved Corporate Governance Principles and written
charters for its Nominating and Corporate Governance, Audit and Compensation Committees. In
addition, the Audit Committee has adopted a written Audit Committee Pre-Approval Policy with
respect to audit and non-audit services to be performed by our independent public accountants. All
of the forgoing documents are available on our investor website at <U>www.dswshoe.com</U> and a
copy of the foregoing will be made available (without charge) to any shareholder upon request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with General Instruction G(3), the information contained under the captions
<B>&#147;ELECTION OF DIRECTORS&#148;, &#147;OTHER DIRECTOR INFORMATION, COMMITTEES OF DIRECTORS AND CORPORATE
GOVERNANCE INFORMATION&#148;</B>, in our definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on June 14, 2006, to be filed with the SEC pursuant to Regulation&nbsp;14A promulgated under
the Exchange Act (the &#147;Proxy Statement&#148;), is incorporated herein by reference to satisfy the
remaining information required by this Item.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.
Schottenstien, our Chairman and Chief Executive Officer, and Mr.
Probst, our Executive Vice President, Chief Financial Officer and
Treasurer, have issued certifications required by Sections 302 and
906 of the Sarbanes-Oxley Act of 2002 and applicable Securities and
Exchange Commission regulations with respect to this Annual Report on
Form 10-K. The full text of the certifications are set forth in
Exhibit 31 and 32 to this Annual Report on Form 10-K.
</div>

<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;11. EXECUTIVE COMPENSATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with General Instruction G(3), the information contained under the captions
<B>&#147;COMPENSATION OF MANAGEMENT&#148; </B>and <B>&#147;OTHER DIRECTOR INFORMATION COMMITTEES OF DIRECTORS AND CORPORATE
GOVERNANCE INFORMATION &#150; GENERAL&#148; </B>in the Proxy Statement is incorporated herein by reference.
Neither the report of the Compensation Committee of our Board of Directors on executive
compensation nor the share price performance graph included in the Proxy Statement shall be deemed
to be incorporated herein by reference.
</DIV>
<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with General Instruction G(3), the information contained under the captions
<B>&#147;SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT&#148;, and &#147;COMPENSATION OF MANAGEMENT -
EQUITY COMPENSATION PLAN TABLE&#148; </B>in the Proxy Statement is incorporated herein by reference.
</DIV>
<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with General Instruction G(3), the information contained under the caption
<B>&#147;CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS&#148; </B>in the Proxy Statement is incorporated herein by
reference.
</DIV>
<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. PRINCIPAL ACCOUNTANT FEES AND SERVICES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with General Instruction G(3), the information contained under the caption
<B>&#147;AUDIT AND OTHER SERVICE FEES&#148; </B>in the definitive Proxy Statement is incorporated herein by
reference.
</DIV>

<P align="center" style="font-size: 10pt">39
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART IV</B>
</DIV>

<DIV align="left">
<A name="124"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>15(a)(1) Financial Statements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The documents listed below are filed as part of this Form 10-K:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Page in</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Form 10-K</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Report of Independent Registered Public Accounting Firm</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Balance Sheets at January&nbsp;28, 2006 and January&nbsp;29, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statements of Operations for the years ended
January&nbsp;28, 2006, January&nbsp;29, 2005 and January&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statements of Shareholders&#146; Equity for the years ended
January&nbsp;28, 2006, January&nbsp;29, 2005 and January&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Statements of Cash Flows for the years ended
January&nbsp;28, 2006, January&nbsp;29, 2005 and January&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes to Consolidated Financial Statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-6</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>15(a)(2) Consolidated Financial Statement Schedules:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The schedule listed below is filed as part of this Form 10-K:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Schedule&nbsp;II. Valuation and Qualifying Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">S-1</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Schedules not listed above are omitted because of the absence of the conditions under which they
are required or because the required information is included in the financial statements or the
notes thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>15(a)(3) and (b)&nbsp;Exhibits:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See Index to Exhibits which begins on page E-1.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>15(c) Additional Financial Statement Schedules:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None.
</DIV>



<P align="center" style="font-size: 10pt">40
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>DSW INC.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">April 12, 2006&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Douglas J. Probst
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Douglas J. Probst, Executive
Vice President, Chief Financial Officer, and Treasurer</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by
the following persons in the capacities and on the dates indicated.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Signature</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Title</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Date</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" nowrap valign="top"><DIV style="margin-left:15px; text-indent:-15px">*</DIV>
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
<DIV align="left">Jay L. Schottenstein</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Chairman and Chief Executive Officer<br>
(Principal Executive Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April 12, 2006</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">*
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
<DIV align="left">Douglas J. Probst</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Executive Vice President, Chief Financial<BR>
Officer, and Treasurer<br>
(Principal Financial and Accounting Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April 12, 2006</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">*
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
<DIV align="left">Carolee Friedlander</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April 12, 2006</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">*
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
<DIV align="left">Philip B. Miller</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April 12, 2006</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">*
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
<DIV align="left">James D. Robbins</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April 12, 2006</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">*
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
<DIV align="left">Harvey L. Sonnenberg</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April 12, 2006</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">*
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
<DIV align="left">Allan J. Tanenbaum</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April 12, 2006</TD>
</TR>
<TR valign="bottom" style="padding-top: 1em">
    <TD align="center" nowrap valign="top">*
<DIV style="font-size: 1pt; border-bottom: 1px solid #000000">&nbsp;</DIV>
<DIV align="left">Heywood Wilansky</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April 12, 2006</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="35%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">*By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Douglas J. Probst</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Douglas J. Probst, (Attorney-in-fact)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">41
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="300"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Board of Directors and Shareholders<BR>
DSW Inc.<BR>
Columbus, Ohio 43219

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets of DSW Inc. and its wholly owned
subsidiary (the &#147;Company&#148;) as of January&nbsp;28, 2006 and January&nbsp;29, 2005, and the related
consolidated statements of income, shareholders&#146; equity, and cash flows for each of the three
years ended January&nbsp;28, 2006, January&nbsp;29, 2005, and January&nbsp;31, 2004. Our audits also included the
financial statement schedule listed in the Index at Item&nbsp;15. These consolidated financial statements and
financial statement schedule are the responsibility of the Company&#146;s management. Our responsibility
is to express an opinion on the financial statements and financial statement schedule based on our
audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have,
 nor were we engaged to perform, an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances but not for the purpose of expressing an
opinion on the effectiveness of the Company&#146;s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of DSW Inc. and its wholly owned subsidiary as of January&nbsp;28, 2006, and
January&nbsp;29, 2005, and the results of their operations and their cash flows for each of the three
years ended January&nbsp;28, 2006, January&nbsp;29, 2005, and January&nbsp;31, 2004, in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion, such financial
statement schedule, when considered in relation to the consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth therein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>/s/ DELOITTE &#038; TOUCHE LLP</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Columbus, Ohio<BR>
April 12, 2006

</DIV>

<P align="center" style="font-size: 10pt">F-1
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>DSW INC.</B>
</DIV>

<DIV align="left">
<A name="301"></A>
</DIV>

<DIV align="left" style="font-size: 10pt"><B>CONSOLIDATED BALANCE SHEETS<BR>
(in thousands, except share amounts)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 28,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 29,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">124,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,339</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,291</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Receivables from related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208,015</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,940</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">378,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247,846</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,676</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment &#150; at cost:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Furniture, fixtures and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,605</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,936</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Less accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(79,403</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,485</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Property and equipment &#150; net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,056</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,899</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tradenames and other intangibles, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,079</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">881</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">507,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">395,437</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">78,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">72,073</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable to related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,804</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,560</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued
advertising</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,958</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,485</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,927</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term obligations, net of current maturities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other noncurrent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,684</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shareholders&#146; equity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Class&nbsp;A Common Shares, no par
value; 170,000,000 authorized; 16,190,088
and none issued and outstanding, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Class&nbsp;B Common Shares, no par
value; 100,000,000 authorized; 27,702,667
and 27,702,667 issued and outstanding, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,442</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred Shares, no par value; 100,000,000
authorized; no shares issued or outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,384</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,410</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">304,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,826</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">507,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">395,437</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The accompanying Notes are an integral part of the Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt">F-2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>DSW INC.</B>
</DIV>

<DIV align="left">
<A name="302"></A>
</DIV>

<DIV align="left" style="font-size: 10pt"><B>CONSOLIDATED STATEMENTS OF INCOME<BR>
YEARS ENDED JANUARY 28, 2006, JANUARY 29, 2005 AND JANUARY 31, 2004<BR>
(in thousands, except per share amounts)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 28,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 29,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,144,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">961,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">791,348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(828,342</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(690,878</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(588,421</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,927</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(245,607</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(214,102</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(174,874</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,053</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(914</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,734</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,739</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,591</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,314</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,426</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,420</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,507</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares used in per share calculations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The accompanying Notes are an integral part of the Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt">F-3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>DSW INC.</B>
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>

<DIV align="left" style="font-size: 10pt"><B>CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#146; EQUITY<BR>
(in thousands)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Class A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Class B</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Class A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Class B</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Deferred</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Common</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Common</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Common</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Common</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Retained</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Earnings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Expense</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, February&nbsp;1, 2003</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">101,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">129,064</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, January&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">101,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">42,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">143,871</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,955</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, January&nbsp;29, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">101,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">77,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">178,826</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">277,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">277,963</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,181</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend to parent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101,442</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(88,558</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(190,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted stock units granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,686</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of deferred
compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock units granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">447</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, January&nbsp;28, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">281,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">26,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,410</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">304,716</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="29" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The accompanying Notes are an integral part of the Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt">F-4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>DSW INC.</B>
</DIV>

<DIV align="left">
<A name="304"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
YEARS ENDED JANUARY 28, 2006, JANUARY 29, 2005 AND JANUARY 31, 2004<BR>
(in thousands)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 28,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 29,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net income
to net cash provided by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,478</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of debt issuance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of deferred compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,813</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disposal of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment Charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="RIGHT">833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Grants of director stock units</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in working capital, assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,748</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,965</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable from related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,683</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(57,996</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,907</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,815</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(338</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(641</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances to/from affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,236</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,574</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,209</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from lease incentives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,394</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other noncurrent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(419</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">386</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,973</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,910</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid
for property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,344</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33,949</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,110</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from sale of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,253</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33,912</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,110</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payments on capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(138</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from sale of stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">277,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payment of note to parent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(190,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (decrease)&nbsp;increase in revolving credit facility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(55,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Debt issuance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(570</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided (used in) by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase in cash and equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,595</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and equivalents, beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,481</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and equivalents, end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">124,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,076</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The accompanying Notes are an integral part of the Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt">F-5
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>DSW INC.</B>
</DIV>

<DIV align="left">
<A name="305"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
YEARS ENDED JANUARY 28, 2006, JANUARY 29, 2005 AND JANUARY 31, 2004</B></DIV>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SIGNIFICANT ACCOUNTING POLICIES</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Business Operations</I></B>&#151; DSW Inc. (&#147;DSW&#148;) and its wholly-owned subsidiary, DSW Shoe Warehouse, Inc.
(&#147;DSWSW&#148;), are herein referred to collectively as DSW or the Company. Prior to December&nbsp;2004,
DSW was a wholly-owned subsidiary of Value City Department Stores, Inc., a wholly-owned
subsidiary of Retail Ventures, Inc. (&#147;RVI&#148;). In December&nbsp;2004, RVI completed a corporate
reorganization whereby Value City Department Stores, Inc. merged with and into Value City
Department Stores, LLC (&#147;Value City&#148;), another wholly-owned subsidiary of RVI. In turn, Value
City transferred all of the issued and outstanding shares of DSW to RVI in exchange for a
promissory note. On June&nbsp;29, 2005, DSW commenced an initial public offering (&#147;IPO&#148;) that closed
on July&nbsp;5, 2005. DSW is listed on the New York Stock Exchange trading under the symbol &#147;DSW&#148;.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DSW operates in two segments and sells better-branded footwear in both. DSW stores also sell
accessories. As of January&nbsp;28, 2006, DSW operated a total of 199 stores located throughout the
United States as one segment. These DSW stores offer a wide selection of brand name and
designer dress, casual and athletic footwear for men and women. During the years ended January
28, 2006, January&nbsp;29, 2005, and January&nbsp;31, 2004, DSW opened 29, 31, and 16 new DSW stores,
respectively, and, during the year ended January&nbsp;28, 2006, we re-categorized two DSW/Filene&#146;s
Basement combination locations from the DSW segment to the leased segment.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DSW also operates leased shoe departments for three non-affiliated retailers and one affiliated
retailer in our leased department segment. We entered into supply agreements to merchandise the
non-affiliated shoe departments in Stein Mart, Gordmans and Frugal Fannie&#146;s stores as of July
2002, June&nbsp;2004 and September&nbsp;2003, respectively. We have operated leased shoe departments for
Filene&#146;s Basement, a wholly-owned subsidiary of Retail Ventures, since its acquisition by
Retail Ventures in March&nbsp;2000. Effective as of January&nbsp;30, 2005, we updated and reaffirmed our
contractual arrangement with Filene&#146;s Basement. We own the merchandise, record sales of
merchandise net of returns and sales tax, own the fixtures (except
for Filene&#146;s Basement) and provide
supervisory assistance in these covered locations. Stein Mart, Gordmans, Frugal Fannie&#146;s and
Filene&#146;s Basement provide the sales associates. We pay a percentage of net sales as rent. As of
January&nbsp;28, 2006, we supplied merchandise to 157 Stein Mart stores, 55 Gordmans stores, one
Frugal Fannie&#146;s, and 25 Filene&#146;s Basement stores.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Fiscal Year</I></B>&#151;The Company&#146;s fiscal year ends on the Saturday nearest January&nbsp;31. Fiscal years
2005, 2004 and 2003 consist of 52&nbsp;weeks. Unless otherwise stated, references to years in this
report relate to fiscal years rather than calendar years.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Use of Estimates</I></B>&#151;The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Significant estimates
are required as a part of inventory valuation, depreciation, amortization, recoverability of
long-lived assets and establishing reserves for self- insurance. Although these estimates are
based on management&#146;s knowledge of current events and actions it may undertake in the future,
actual results could differ from these estimates.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-6
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Financial Instruments</I></B>&#151;The following assumptions were used to estimate the fair value of each
class of financial instruments:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><I>&nbsp;</I></TD>
    <TD width="1%"><I>&nbsp;</I></TD>
    <TD><I>Cash and Equivalents</I>&#151; Cash and equivalents represent cash, highly liquid investments with
original maturities of three months or less at the date of purchase and credit card
receivables, which generally settle within three days. The carrying
amounts approximate fair value.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><I>&nbsp;</I></TD>
    <TD width="1%"><I>&nbsp;</I></TD>
    <TD><I>Accounts Receivable</I>&#151;Accounts receivable are classified as current assets because the average
collection period is generally less than one year. The carrying amount approximates fair
value because of the relatively short average maturity of the instruments and no significant
change in interest rates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><I>&nbsp;</I></TD>
    <TD width="1%"><I>&nbsp;</I></TD>
    <TD><I>Long-Term Debt</I>&#151;The carrying amount approximates fair value as a result of the variable
rate-based borrowings.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Concentration of Credit Risk</I></B>&#151;Financial instruments, which principally subject the Company to
concentration of credit risk, consist of cash and cash equivalents. The Company invests excess
cash when available through financial institutions in overnight investments. At times, such
amounts may be in excess of FDIC insurance limits.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Concentration of Vendor Risk &#151; </I></B>During fiscal 2005, taking into account industry consolidation,
merchandise supplied to the Company by three key vendors accounted for approximately 22% of net
sales.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Inventories</I></B>&#151;Merchandise inventories are stated at the lower of cost, determined using the
first-in, first-out basis, or market, using the retail inventory method. The retail method is
widely used in the retail industry due to its practicality. Under the retail inventory method,
the valuation of inventories at cost and the resulting gross profits are calculated by applying
a calculated cost to retail ratio to the retail value of inventories. The cost of the inventory
reflected on the balance sheet is decreased by charges to cost of sales at the time the retail
value of the inventory is lowered through the use of markdowns. Hence, earnings are negatively
impacted as the merchandise is marked down prior to sale. Reserves to value inventory at the
lower of cost or market were $19.2&nbsp;million and $14.2&nbsp;million at the end of fiscal years 2005
and 2004, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Inherent in the calculation of inventories are certain significant management judgments and
estimates, including setting the original merchandise retail value or mark-on, markups of
initial prices established, reductions in prices due to customers&#146; perception of value (known
as markdowns), and estimates of losses between physical inventory counts, or shrinkage, which
combined with the averaging process within the retail method, can significantly impact the
ending inventory valuation at cost and the resulting gross profit.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Vendor Allowances</I></B>&#151;Vendor allowances include allowances, rebates and cooperative advertising
funds received from vendors. The amount of these funds is determined for each fiscal year and
the majority is based on various quantitative contract terms. Amounts expected to be received
from vendors relating to the purchase of merchandise inventories are recognized as a reduction
of cost of goods sold as the merchandise is sold. Amounts that represent a reimbursement of
costs incurred, such as advertising, are recorded as a reduction to the related expense in the
period that the related expense is incurred. On an annual basis, the Company confirms earned
allowances with vendors to determine the amounts are recorded in accordance with the terms of
the contract. At January&nbsp;28, 2006 and January&nbsp;29, 2005, the Company had a vendor allowance
balance of less than $100,000.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-7
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Property and Equipment</I></B>&#151;Property and
equipment are stated at cost less accumulated depreciation
determined by the straight-line method over the expected useful lives of the assets. Assets
held under capital leases and related obligations are recorded initially at the lower of fair
market value or the present value of the minimum lease payments. The straight-line method is
used to amortize such capitalized costs over the lesser of the expected useful life of the
asset or the life of the lease. Leasehold improvements are amortized under the straight-line
method over the lesser of the initial lease term or the expected useful life (10&nbsp;years). The
estimated useful lives of furniture, fixtures and equipment are 3 to 10&nbsp;years.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Asset Impairment and Long-Lived Assets</I></B>&#151;The Company periodically evaluates the carrying amount
of its long-lived assets, primarily property and equipment, and finite life intangible assets
when events and circumstances warrant such a review to ascertain if any assets have been
impaired. The carrying amount of a long-lived asset is considered impaired when the carrying
value of the asset exceeds the expected future cash flows from the asset. The Company reviews
are conducted down at the lowest identifiable level, which include a store. The impairment loss
recognized is the excess of the carrying value of the
asset over its fair value, estimated on discounted cash flow. Should an impairment loss be realized, it will be included in cost
of sales. The Company expensed $0.2&nbsp;million and $0.8&nbsp;million in fiscal 2005 and 2004,
respectively, of identified store assets where the recorded value could not be supported by
future cash flows. The impairment charge was recorded within the DSW stores segment. The amount
of impairment losses recorded during fiscal 2003 was immaterial to the financial statements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Goodwill</I></B>&#151;Goodwill represents the excess cost over the estimated fair values of net assets
including identifiable intangible assets of businesses acquired. Goodwill is tested for
impairment at least annually. The Company, as a result of adoption of Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;142, <I>Goodwill and Other Intangible Assets</I>, no longer records
goodwill amortization. All of the Company&#146;s goodwill relates to
the DSW stores segment.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Tradenames and Other Intangible Assets</I></B>&#151;Tradenames and other intangible assets are comprised of
values assigned to names the Company acquired and leases acquired. The accumulated amortization
for these assets is $6.7&nbsp;million and $5.8&nbsp;million at January&nbsp;28, 2006 and January&nbsp;29, 2005,
respectively. The asset value and accumulated amortization of intangible assets is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 28,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>(In thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tradenames:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross Asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,587</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,738</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,012</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Useful life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Favorable leases:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross Asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(73</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Useful life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tradenames and other intangible assets&#151;net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,079</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Aggregate amortization expense for the current and each of the five succeeding years is as
follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Fiscal Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(In thousands)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">864</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">861</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">854</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">854</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">854</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">854</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Income Taxes&#151;</I></B>Income taxes are accounted for using the asset and liability method. Under this
method, deferred income taxes arise from temporary differences between the tax bases of assets
and liabilities and their reported amounts in the financial statements. A valuation allowance
is established against deferred tax assets when it is more likely than not that some portion or
all of the deferred tax assets will not be realized. As of January&nbsp;28, 2006, and January&nbsp;29,
2005, the Company did not have any income tax valuation allowances.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Deferred Rent&#151;</I></B>Many of the Company&#146;s operating leases contain predetermined fixed increases of
the minimum rental rate during the initial lease term. For these leases the Company recognizes
the related rental expense on a straight-line basis and records the difference between the
amount charged to expense and the rent paid as deferred rent and begins amortizing such
deferred rent upon the delivery of the lease location by the lessor. The amounts included in
the other noncurrent liabilities caption were $22.6&nbsp;million and $16.7&nbsp;million, at January&nbsp;28,
2006 and January&nbsp;29, 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Tenant Allowances&#151;</I></B>The Company receives cash allowances from landlords, which are deferred and
amortized on a straight-line basis over the life of the lease as a reduction of rent expense.
These allowances are included in the caption other noncurrent
liabilities and were $40.5
million and $35.0&nbsp;million, at January&nbsp;28, 2006 and January&nbsp;29, 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Sales and Revenue Recognition</I></B>&#151;Sales of merchandise are net of returns and exclude sales tax.
Revenues from our retail operations are recognized at the later of point of sale or delivery of
goods to the customer. Revenue from gift cards is deferred and the revenue is recognized upon
redemption of the gift card.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of January&nbsp;28, 2006, the Company supplies footwear, under supply arrangements, to 25
Filene&#146;s Basement stores and 213 locations for other non-related retailers in the United States
of America. Sales for these leased supply locations are net of returns and sales tax, as
tracked by the lessor, and are included in net sales and represent 10.5%, 9.4% and 8.9% of
total net sales for fiscal 2005, 2004, and 2003, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Cost of Sales</I></B>&#151;Cost of sales includes the cost of merchandise, distribution and warehousing
(including depreciation), store occupancy (excluding depreciation), permanent and point of sale
reductions, markdowns and shrinkage provision.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Warehousing costs are comprised of labor, benefits and other labor-related costs associated
with the operations of the warehouse, which are primarily payroll-related taxes and benefits.
The non-labor costs associated with the warehouse include rent, depreciation, insurance,
utilities and maintenance and other
operating costs that are passed to the Company from the landlord. Distribution costs include
the transportation of merchandise to the warehouse and from the warehouse to the stores. Store
occupancy costs include rent, utilities, repairs, maintenance, insurance and janitorial costs
and other costs associated</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>with licenses and occupancy-related taxes, which are primarily real
estate taxes passed to the Company by the landlords.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Operating Expenses </I>&#150; Operating expenses include expenses related to store selling, store
management and store payroll costs, advertising, leased shoe department operations, store
depreciation and amortization, pre-opening advertising and other pre-opening costs (which are
expensed as incurred), corporate expenses for buying services, information services,
depreciation expense for corporate cost centers, marketing, insurance, legal, finance, outside
professional services, allocable costs from our parent and other corporate related departments,
and benefits for associates and related payroll taxes. Corporate level expenses are primarily
attributable to operations at our corporate offices in Columbus, Ohio.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Customer Loyalty Program</I></B>&#151;The Company maintains a customer loyalty program for its DSW
operations in which customers receive a future discount on qualifying purchases in exchange for
marketing information. The &#147;Reward Your Style&#148; is designed to promote customer
awareness and loyalty and provide the Company with the ability to communicate with its
customers. Upon reaching the spending levels, customers may redeem these discounts on a future
purchase. Generally these future discounts must be redeemed within six months. The Company
accrues the estimated costs of the anticipated redemptions of the discount earned at the time
of the initial purchase and charges such costs to operating expenses based on historical
experience. The estimates of the costs associated with the loyalty program require the Company
to make assumptions related to customer purchase levels and redemption rates. The accrued
liability as of January&nbsp;28, 2006 and January&nbsp;29, 2005 was $8.3&nbsp;million and $4.5&nbsp;million,
respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Pre-Opening Costs</I></B>&#151;Pre-opening costs associated with opening or remodeling of stores are
expensed as incurred. Pre-opening costs expensed were $7.7&nbsp;million, $10.8&nbsp;million and $5.1
million for fiscal 2005, 2004, and 2003, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Advertising Expense</I></B>&#151;The cost of advertising is expensed as incurred or when the advertising
first takes place. Advertising costs were $38.0&nbsp;million, $39.3&nbsp;million and $36.4&nbsp;million in
fiscal 2005, 2004, and 2003, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Earnings Per Share (&#147;EPS&#148;)</I></B>&#151;Basic earnings per share are based on net income and a simple
weighted average of Class&nbsp;A and Class&nbsp;B common shares and directors stock units outstanding,
calculated using the treasury stock method. Diluted earnings per share reflect the potential
dilution of Class&nbsp;A common shares related to outstanding stock options and restricted stock
units. The numerator for the diluted earnings per share calculation is net income. The
denominator is the weighted average diluted shares outstanding.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Years ended</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 28,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 29,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(in thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumed exercise of dilutive stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted stock units</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Number of shares for computation of
dilutive earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,703</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-10
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For the fiscal year ended January&nbsp;28, 2006, all potentially issuable shares from the
exercise of stock options were dilutive. For the fiscal years ended January&nbsp;29, 2005 and
January&nbsp;31, 2004, there were no potentially dilutive instruments outstanding.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Recent Accounting Pronouncements</I></B>&#151;The Financial Accounting Standards Board (&#147;FASB&#148;) periodically
issues SFAS, some of which require implementation by a date falling within or after the close
of the fiscal year.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;2004, the FASB issued SFAS No.&nbsp;123 (revised 2004) (&#147;SFAS No.&nbsp;123R&#148;), <I>Share-Based
Payment</I>. This statement revised SFAS No.&nbsp;123, <I>Accounting for Stock-Based Compensation</I>, and
requires companies to expense the value of employee stock options and similar awards. The
effective date of this standard is interim and annual periods beginning after June&nbsp;15, 2005. In
April&nbsp;2005, the SEC delayed the compliance date for SFAS 123R until the beginning of the
Company&#146;s fiscal year 2006. No stock options or similar awards were granted by the Company
during fiscal 2004 and prior. The Company will utilize the modified prospective method of
adoption. The Company expects that the impact of adoption of SFAS
123R to the Company&#146;s results of operations will be similiar, on
an annualized basis, to the pro forma disclosures presented in Note&nbsp;3 below.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November, 2005, the FASB issued FIN 47, <I>Accounting for Conditional Asset Retirement
Obligations</I>, (&#147;FIN 47&#148;) which clarified the term &#147;conditional asset retirement obligation&#148; as
used in FASB Statement No.&nbsp;143, <I>Accounting for Asset Retirement Obligations</I>. Conditional asset
retirement obligation refers to a legal obligation to perform an asset retirement activity in
which the timing and/or method of settlement are dependent on a future event that may or may
not be within the control of the entity. While the timing and/or method of settlement is
unknown, the obligation to perform the asset retirement obligation is unconditional. FIN 47
requires that the fair value of the asset retirement activity be recorded when it can be
reasonably estimated. The adoption of FIN 47 during the fourth quarter of fiscal 2005 did not
have a material impact on our financial position or results of operations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INITIAL PUBLIC OFFERING</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On July&nbsp;5, 2005, DSW completed its IPO of 14,062,500 Class&nbsp;A common shares. In connection with
this offering, DSW granted an option to the underwriters to purchase up to an additional
2,109,375 Class&nbsp;A common shares to cover over-allotments, which option was exercised in full by
the underwriters and also closed on July&nbsp;5, 2005. DSW sold 16,171,875 Class&nbsp;A common shares
raising net proceeds of $285.8&nbsp;million, net of the underwriters&#146; commission and before
expenses of approximately $7.8&nbsp;million. DSW used the net proceeds of the offering to
repay $196.6&nbsp;million of intercompany indebtedness, including interest, owed to RVI and for
working capital and general corporate purposes, including the paying down of $20&nbsp;million
outstanding on Value City&#146;s old secured revolving credit facility and $10&nbsp;million intercompany
advance. The 410.09 common shares of DSW held by RVI outstanding at January&nbsp;29, 2005 were
changed to 27,702,667 Class&nbsp;B common shares. It is the 27,702,667 Class&nbsp;B common shares which
are being used in the prior period&#146;s calculation of earnings per share. Subsequent to the IPO,
the transactions between DSW and RVI and its other subsidiaries are settled in accordance with
a shared services agreement and resulted in the advances from affiliates being classified as a
current payable. At January&nbsp;28, 2006, Retail Ventures owned approximately 63.1% of DSW&#146;s
outstanding Common Shares, representing approximately 93.2% of the combined voting power of
DSW&#146;s outstanding Common Shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>STOCK BASED COMPENSATION</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DSW has various stock-based employee compensation plans. DSW accounts for those plans in
accordance with Accounting Principles Board Opinion (&#147;APB&#148;) No.&nbsp;25, &#147;Accounting for Stock
Issued</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-11
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to Employees,&#148; and related interpretations. Accordingly, no stock-based employee
compensation cost has been recognized for the fixed stock option
plans, as the exercise price of the options equals the market price
of the stock on the grant date. The following table
illustrates the effect on net income and income per share if DSW had applied the fair value
recognition of Statement of Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;123, &#147;Accounting for
Stock-Based Compensation.&#148;</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Year ended</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 28,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 29,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(in thousands, except per share amounts)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: Stock-based employee
compensation expense included
in reported net income, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: Total stock-based employee
compensation expense determined
under the fair value based method
for all awards, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,212</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To determine the pro forma amounts, the fair value of each stock option
has been estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants in the fiscal
year 2005: expected volatility of 42.3%; dividend yield of 0.0%; risk-free interest rate
of 4.1%; and expected lives of 5.0 years. The weighted average fair value of options
granted in the fiscal year 2005 was $8.43. There were no options granted prior to fiscal 2005.
Pro forma disclosures may not be representative of the actual results to be
expected in future years.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10 pt; margin-top: 6pt">
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>RELATED PARTY TRANSACTIONS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company purchases merchandise from Value City and other affiliates of Schottenstein Stores
Corporation (&#147;SSC&#148;). Purchases from affiliates were immaterial in fiscal 2005, fiscal 2004 and
fiscal 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company also leases certain store and warehouse locations owned by SSC as described in Note
5.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Accounts receivable from and payable to affiliates principally result from commercial
transactions with entities owned or controlled by SSC or intercompany transactions with SSC.
Settlement of affiliate receivables and payables are in the form of cash. These transactions
settle normally in 30 to 60&nbsp;days. Amounts receivable or payable to SSC or its affiliates at
January&nbsp;28, 2006 and January&nbsp;29, 2005 were immaterial.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company shares certain personnel, administrative and service costs with SSC and its
affiliates. The costs of providing these services are allocated among the Company, SSC and its
affiliates without a premium. The allocated amounts are not significant. SSC does not charge
the Company for general
corporate management services. In the opinion of the Company and SSC management, the
aforementioned charges are reasonable.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company participated in SSC&#146;s self-insurance program for general liability, casualty loss
and certain state workers&#146; compensation programs, which participation ended in fiscal 2003.
While the</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Company no longer participates in the program, it continues to remain responsible for
liabilities it incurred under the program. The Company expensed an immaterial amount in fiscal
2005 and 2004 and $0.2&nbsp;million in fiscal 2003, respectively, for such program. Estimates for
self-insured programs are determined by independent actuaries based on actuarial assumptions,
which incorporate historical incurred claims and incurred but not reported (&#147;IBNR&#148;) claims.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Through the shared services agreement with RVI and in the ordinary course of business, the
Company has received various services provided by RVI or its subsidiaries, including import
administration, risk management, human resources, information technology, tax, financial
services and payroll, as well as other corporate services. RVI has also provided the Company
with the services of a number of its executives and employees. The financial statements include
allocations by RVI of its costs related to these services. These costs allocations have been
determined on a basis that the Company and RVI consider to be reasonable reflections of the use
of services provided or the benefit received to the Company. These allocations totaled $17.3
million, $29.5&nbsp;million and $24.4&nbsp;million in fiscal 2005, fiscal 2004 and fiscal 2003,
respectively. In addition, the Company has entered into agreements with various subsidiaries of
RVI to supply all of their shoe inventories. The net balance of these transactions is reflected
within the balance sheets as advances to affiliates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>See Notes 5, 6, and 8 for additional related party disclosures.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>LEASES</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company leases stores and warehouses under various arrangements with related and unrelated
parties. Such leases expire through 2024 and in most cases provide for renewal options.
Generally, the Company is required to pay base rent, real estate taxes, maintenance, insurance
and contingent rentals based on sales in excess of specified levels.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of January&nbsp;28, 2006, the Company leased or had other agreements with 15 store locations
owned by SSC or affiliates of SSC, and one warehouse facility for an annual minimum rent of
$7.7&nbsp;million and additional contingent rents based on aggregate sales in excess of specified
sales for the store locations. Under supply agreements to Filene&#146;s Basement stores and other
non-related retailers, the Company pays contingent rents based on sales.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Future minimum lease payments required under the aforementioned leases, exclusive of real
estate taxes, insurance and maintenance costs, at January&nbsp;28, 2006 are as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Operating Leases</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Fiscal</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unrelated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Related</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #ffffff"><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>Party</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>Party</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>(In thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">91,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">83,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,646</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,884</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,812</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,367</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Future years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">354,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">302,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,738</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total minimum lease payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">804,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">708,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">95,855</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The composition of rental expense is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 28,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>(In thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minimum rentals:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrelated parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">73,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">63,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">52,326</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,011</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contingent rentals:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrelated parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,785</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,796</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">108,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">89,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">74,918</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At January&nbsp;28, 2006 and January&nbsp;29, 2005, the Company had no capital leases.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>LONG-TERM OBLIGATIONS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Long-term obligations consist of the following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 28,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>(In thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revolving credit facility (long-term)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">55,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Letters of credit outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,854</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Availability under revolving credit facility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">136,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">108,544</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>DSW $150 Million Credit Facility</I></B>&#151;Simultaneously with the amendment and restatement of the
revolving credit facility described below and the Company&#146;s
initial public offering, the Company entered
into a new $150&nbsp;million secured revolving credit facility with a term of five years. Under
this facility, the Company and its subsidiary, DSWSW, are named as co-borrowers. The facility
has borrowing base
restrictions and provides for borrowings at variable interest rates based on LIBOR, the prime
rate and the Federal Funds effective rate, plus a margin. The Company&#146;s obligations under the
secured revolving credit facility are secured by a lien on substantially all of its and its
subsidiary&#146;s personal property and a pledge of its shares of DSWSW. In addition, the secured
revolving credit facility contains usual and customary restrictive covenants relating to the
management and the operation of the business. These covenants will, among other things,
restrict the Company&#146;s ability to grant liens on its assets, incur additional indebtedness,
open or close stores, pay cash dividends and redeem its stock, enter into transactions with
affiliates and merge or consolidate with another entity. In addition, if at any time the
Company utilizes over 90% of its borrowing capacity under the facility, the Company must comply
with a fixed charge coverage ratio test set forth in the facility documents.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-14
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B><I>Credit Facilities Which DSW Is No Longer Obligated</I></B>&#151;At January&nbsp;29, 2005, the Company&#146;s direct
parent, RVI and its subsidiaries, had an aggregate $525.0&nbsp;million of financing that consisted
of three separate credit facilities (collectively, the &#147;Credit Facilities&#148;): (i)&nbsp;a $350.0
million revolving credit facility (subsequently increased to
$425&nbsp;million) (the &#147;Revolving Loan&#148;), (ii)&nbsp;two $50.0&nbsp;million term loan
facilities provided equally by Cerberus Partners, L.P. and SSC (the &#147;Term Loans&#148;), and (iii)&nbsp;an
amended and restated $75.0&nbsp;million senior subordinated convertible term loan facility,
initially entered into by RVI and its subsidiaries on March&nbsp;15, 2000, which is held equally by
Cerberus Partners, L.P. and SSC (the &#147;Convertible Loan&#148;). The Company was a co-borrower under
the Revolving Loan and the Term Loans, and was a guarantor under the Convertible Loan. The
Company, the other co-borrowers and the guarantors were jointly and severally liable under the
Revolving Loan and the Term Loans. All of the Credit Facilities were guaranteed by RVI. The
Company is no longer a party to these Credit Facilities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has reflected in the historical financial statements its direct obligations under
the Revolving Loan as it relates to the borrowings thereunder. The Term Loans and Convertible
Loan are not reflected on the Company&#146;s financial statements as they are recorded on
consolidated financial statements of RVI. These Credit Facilities are also subject to an
Intercreditor Agreement which provides for an established order of payment of obligations from
the proceeds of collateral upon default (the &#147;Intercreditor Agreement&#148;).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under the Revolving Loan, the borrowing base formula applicable to the Company was based on the
value of the Company&#146;s inventory and accounts receivable. Primary security for the Revolving
Loan was provided in part by a first priority lien on all of the inventory and accounts
receivable of the Company and other borrowers thereunder, as well as certain notes and payment
intangibles. Subject to the Intercreditor Agreement, the Revolving Loan also had the
substantial equivalent of a second priority-perfected security interest in all of the first
priority collateral securing the Term Loans. Interest on borrowings under the Revolving Loan
was calculated at the bank&#146;s base rate plus 0% to 0.5%, or at the Eurodollar offer rate plus
2.00% to 2.75%, depending upon the level of average excess availability that the Company and
the other borrowers maintain. The interest rate on borrowings under the Revolving Loan was 4.7%
and 3.2% at January&nbsp;29, 2005 and January&nbsp;31, 2004, respectively. DSW is no longer a party to
this credit facility. At January&nbsp;29, 2005, the outstanding borrowings for the Company and RVI
and their affiliates under the Credit Facilities were: Revolving Loan, $140.0&nbsp;million; Term
Loans, $100.0&nbsp;million; and Convertible Loan, $75.0&nbsp;million.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The weighted average interest rate on borrowings under the
Company&#146;s Credit Facilities during
fiscal years 2005, 2004 and 2003, and the dividend notes issued and repaid
during fiscal 2005 to RVI was 8.5%, 3.6% and 3.3% respectively. The total interest
expense was $8.9&nbsp;million, $2.7&nbsp;million and $2.7&nbsp;million and included fees, such as commitment
and line of credit fees, of $0.2&nbsp;million, $0.5&nbsp;million and $0.6&nbsp;million for fiscal 2005, 2004
and 2003, respectively.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>7.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INCOME TAX PROVISION</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The provision for income taxes consists of the following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 28,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>(In thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,711</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State and local</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,770</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,481</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,110</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,843</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State and local</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(978</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,084</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,821</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,507</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A reconciliation of the expected income taxes based upon the statutory rate is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 28,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>(In thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense at federal statutory rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State and local taxes&#151;net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,188</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-deductible amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work opportunity tax credit&#151;net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(292</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(119</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(131</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State tax
deferred tax asset write-off of commercial activity tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Officer compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Meals and entertainment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-deductible expenses and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(568</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,881</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">25,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,507</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-16
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The components of the net deferred tax asset are as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 28,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>(In thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basis differences in inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,418</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basis differences in property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">859</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tenant allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,406</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State and local tax NOLs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,043</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Alternative Minimum Tax credit carryforward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,634</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued rent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,042</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Workers compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,443</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,708</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,193</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,785</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,662</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,569</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued bonus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,336</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basis differences in property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,080</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State and local taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,192</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,742</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,882</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total&#151;net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,311</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The net deferred tax asset is recorded in the Company&#146;s balance sheet as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 28,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>January 29,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>(In thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current deferred tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current deferred tax (liability)&nbsp;asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(364</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total &#151; net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,311</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Prior to the completion of its initial public offering, the Company filed a consolidated
federal income tax return with RVI and its other subsidiaries. The allocation of the RVI
current consolidated federal income tax to its subsidiaries historically was in accordance with
SFAS No.&nbsp;109, <I>Accounting for Income Taxes</I>. RVI used the &#147;parent company down&#148; approach in
allocating the consolidated amount of current and deferred tax expense to its subsidiaries.
For the current fiscal year the Company will file its own tax return for the stub period
subsequent to the initial public offering.</TD>
</TR>
<TR>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The net operating loss deferred tax assets consist of a
state and local component. These net operating losses are available to
reduce state and local taxable income for the fiscal years 2006 to
2023.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>8.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>OTHER BENEFIT PLANS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company participates in a 401(k) Plan (the &#147;Plan&#148;) through the shared services agreement
with RVI. Employees who attain age twenty-one are eligible to defer compensation as of the
first day of the month following 60&nbsp;days of employment and may contribute up to thirty percent
of their compensation to the Plan, on a pre-tax basis, subject to Internal Revenue Service
limitations. As of the first day of the month following an employee&#146;s completion of one year of
service as defined under the terms of the
Plan, the Company matches employee deferrals into the Plan, 100% on the first 3% of eligible</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>compensation deferred and 50% on the next 2% of eligible compensation deferred.
Additionally, the Company may contribute a discretionary profit sharing amount to the Plan each
year. The Company incurred costs associated with the 401(k) Plan of $1.1&nbsp;million, $0.7&nbsp;million,
and $0.9&nbsp;million for fiscal years 2005, 2004 and 2003, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>9.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>STOCK OPTION PLANS</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has a 2005 Equity Incentive Plan that provides for the issuance of equity awards to
purchase up to 4,600,000 common shares, including stock options and restricted stock units to
management, key employees of the Company and affiliates, consultants as defined, and directors
of the Company. Options generally vest 20% per year on a cumulative basis. Options granted
under the 2005 Equity Incentive Plan generally remain exercisable for a period of ten years
from the date of grant. Prior to fiscal 2005, the Company did not have a stock option plan or
any equity units outstanding.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In 2005, the Company issued 17,000 stock units to directors who are not
employees of the Company or RVI. Stock units will be automatically granted to each director who
is not an employee of the Company or Retail Ventures on the date of each annual meeting of the
shareholders for the purpose of electing directors. The number of stock units granted to each
non-employee director is calculated by dividing one-half of their annual retainer (excluding
any amount paid for service as the chair of a board committee) by the fair market value of a
share of DSW stock on the date of the meeting. In addition, each director eligible to receive
compensation for board service may elect to have the cash portion of their compensation paid in
the form of restricted stock units. Stock units granted to non-employee directors vest and are
settled upon the director terminating service from the board. Stock units granted to directors
which are not subject to forfeiture are considered to be outstanding for the purposes of
computing basic earnings per share.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In addition, the Company granted 131,000 restricted stock units to employees during fiscal
2005. Restricted stock units generally cliff vest at the end of four years. Restricted stock
units granted to employees that are subject to the risk of forfeiture are not included in the
computation of basic earnings per share.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following table summarizes the Company&#146;s stock option plan and related per share Weighted
Average Exercise Prices (&#147;WAEP&#148;) (shares in thousands):</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">January 28, 2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">WAEP</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canceled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19.54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercisable end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shares available for additional grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&nbsp;</TD>


    <TD>The following table summarizes information about stock options outstanding as of January
28, 2006 (shares in thousands):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Options Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Options Exercisable</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">Average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">Remaining</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">Contract</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Range of Exercise Prices</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Life</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">WAEP</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">WAEP</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">$19.00  &#151;  $20.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">9 years</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">$20.01  &#151;  $25.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">10 years</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="center">24.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">$25.01  &#151;  $30.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">10 years</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>10.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>COMMITMENTS AND CONTINGENCIES</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As previously reported, on March 8, 2005 RVI announced that it had learned of the theft of
credit card and other purchase information from a portion of the
Company&#146;s customers.  On April 18,
2005, RVI issued the findings from its investigation into the theft.  The theft covered transaction
information involving approximately 1.4 million credit cards and data from transactions involving
approximately 96,000 checks.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>DSW and RVI contacted and continue to cooperate with law enforcement and other authorities with
regard to this matter.  The Company is involved in several legal proceedings arising out of this
incident, which seek unspecified monetary damages, credit monitoring and other relief.  After
consultation with counsel, the Company believes that the damages arising out of these legal proceedings
will not exceed the reserves the Company currently has recorded.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In connection with this matter, the Company entered into a consent order with the
Federal Trade Commission (&#147;FTC&#148;), which has jurisdiction over consumer protection matters.
The FTC published the final order on March 14, 2006, and copies of the complaint and consent
order are available from the FTC&#146;s Web site at
<U>http://www.ftc.gov</U> and also from the FTC&#146;s Consumer
Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has not admitted any wrongdoing or that the facts
alleged in the FTC&#146;s
proposed unfairness complaint are true.  Under the consent order, the Company will pay no fine
or damages.  The Company has agreed, however, to maintain a comprehensive information security
program and to undergo a biannual assessment of such program by an independent third party.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>There can be no assurance that there will not be additional proceedings or
claims brought against the Company in the future.  The Company has contested and will
continue to vigorously contest the claims made against it and will continue to explore
its defenses and possible claims against others.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company estimates that the potential exposure for losses related to this theft
including exposure under currently pending proceedings, ranges from approximately $6.5 million
to approximately $9.5 million.  Because of many factors, including the early development of
information regarding the theft and recoverability under insurance policies, there is no amount
in the estimated range that represents a better estimate than any other amount in the range.
Therefore, in accordance with Financial Accounting Standard No. 5, <I>Accounting for Contingencies</I>,
the Company has accrued a charge to operations in the first quarter of fiscal 2005 equal to the
low end of the range set forth above.  As the situation develops and more information becomes
available, the amount of the reserve may increase or decrease accordingly.  The amount of any
such change may be material.  At January 28, 2006, the balance of the reserve was $4.8 million.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Although difficult to quantify, since the announcement of the theft, the Company
has not discerned any material negative effect on sales trends it believes is attributable
to the theft.  However, this may not be indicative of the long-term developments regarding
this matter.</TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is involved in various legal proceedings that are incidental to the conduct
of its business.  The Company estimates the range of liability related to pending litigation where
the amount and range of loss can be estimated.  The Company records its best estimate of a loss when
the loss is considered probable. Where a liability is probable and there is a range of estimated loss,
the Company records the most likely estimated liability related to the claim.  In the opinion of management,
the amount of any liability with respect to these proceedings will not be material.  As additional information
becomes available, the Company will assess the potential liability related to its pending litigation and revises
the estimates. Revisions in our estimates and potential liability
could materially impact the Company&#146;s results of
operations.

</TD>
</TR>



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>11.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SEGMENT REPORTING</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is managed in two operating segments: DSW owned stores and leased
departments. All of the operations are located in the United States. The Company has
identified such segments based on internal management reporting and management
responsibilities and measures segment profit as gross profit, which is defined as net
sales less cost of sales. The tables below present segment information (in thousands):</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">DSW</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Leased</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Stores</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Departments</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>As of January&nbsp;28, 2006</I>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">
Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,023,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">120,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,144,061</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,719</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,537</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">507,715</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>As of January&nbsp;29, 2005</I>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">
Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">870,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">90,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">961,089</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,211</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,975</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">376,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">395,437</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>As of January&nbsp;31, 2004</I>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">
Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">720,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">70,713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">791,348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,927</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,324</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>12.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>QUARTERLY FINANCIAL DATA (UNAUDITED)</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Thirteen weeks ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">April 30,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">July 30,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">October 29,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 28,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">(in thousands except per share data)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">281,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">276,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">302,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">283,804</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(199,008</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(199,848</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(219,221</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(210,265</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(55,675</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(65,292</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56,895</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,644</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest (expense)&nbsp;income, net:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-related</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(849</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,092</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">879</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,672</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,920</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,523</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,552</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,425</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,965</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,484</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,039</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Thirteen weeks ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">May 1,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">July 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">October 30,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">January 29,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">(in thousands except per share data)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">232,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">234,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">262,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">231,683</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(164,972</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(167,464</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(184,991</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(173,451</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,939</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,232</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(53,782</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,305</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(60,664</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48,351</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,881</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense, net:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-related</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(726</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(989</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(274</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,607</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,263</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,992</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,358</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(807</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted earnings per share<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The earnings per share calculations for each quarter are based upon the applicable
weighted average shares outstanding for each period and may not necessarily be equal to the
full year share amount.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">F-21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>13.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">January 28,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">January 29,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3">January 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">(in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid during the period for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">898</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noncash investing and operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in accounts payable due to asset purchases
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">******
</DIV>


<P align="center" style="font-size: 10pt">F-22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="306"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUPPLEMENTAL SCHEDULE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>DSW INC.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SCHEDULE II&#151;VALUATION AND QUALIFYING ACCOUNTS<BR>
(Dollars in thousands)</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Column A</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Column B</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Column C</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Column D</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Column E</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Balance at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Charge to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Charges to</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Balance at</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Beginning</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Costs and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>End</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Description</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Expenses</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accounts</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deductions</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of Period</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance deduction from</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">asset to which it applies:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Inventory Reserve:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year Ended:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1/31/2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1/29/2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,202</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1/28/2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,217</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Allowance for Sales Returns:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year Ended:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1/31/2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,405</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1/29/2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,472</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1/28/2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,572</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Store Closing Reserve:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Year Ended:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1/31/2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">803</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1/29/2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1/28/2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">282</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">S-1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt">INDEX TO EXHIBITS

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>No.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended Articles of Incorporation of the registrant.*</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Code of Regulations of the registrant.*</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen Class&nbsp;A Common Shares certificate.*</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amended and Restated Registration Rights Agreement, dated as of July&nbsp;5,
2005, by and among Retail Ventures, Inc., Cerberus Partners, L.P., Schottenstein
Stores Corporation and Back Bay Funding LLC. Incorporated by reference to Exhibit
4.2 to Retail Ventures&#146; Form&nbsp;8-K (file no. 1-10767) filed July&nbsp;11, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exchange Agreement, dated July&nbsp;5, 2005, by and between Retail Ventures, Inc. and
DSW Inc. Incorporated by reference to Exhibit&nbsp;10.4 to Retail Ventures&#146; Form&nbsp;8-K
(file no. 1-10767) filed July&nbsp;11, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">4.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended Common Stock Purchase Warrant issued by Retail Ventures, Inc. to Cerberus
Partners, L.P. Incorporated by reference to Exhibit&nbsp;4.1 to Retail Ventures&#146; Form
8-K (file no. 1-10767) filed October&nbsp;19, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">4.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended Common Stock Purchase Warrant issued by Retail Ventures, Inc. to
Schottenstein Stores Corporation. Incorporated by reference to Exhibit&nbsp;4.2 to
Retail Ventures&#146; Form&nbsp;8-K (file no. 1-10767) filed October&nbsp;19, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">4.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Conversion Warrant issued by Retail Ventures, Inc. to Cerberus Partners,
L.P. and Schottenstein Stores Corporation. Incorporated by reference to Exhibit&nbsp;4.1
to Form&nbsp;8-K (file no. 1-10767) filed July&nbsp;11, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">4.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Term Loan Warrant issued by Retail Ventures, Inc. to Millennium Partners,
L.P. Incorporated by reference to Exhibit&nbsp;4.1 to Retail Ventures&#146; Form&nbsp;10-Q (file
no. 1-10767) filed December&nbsp;8, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Corporate Services Agreement, dated June&nbsp;12, 2002, between Retail Ventures and
Schottenstein Stores Corporation. Incorporated by reference to Exhibit&nbsp;10.6 to
Retail Ventures&#146; Form&nbsp;10-Q (file no. 1-10767) filed June&nbsp;18, 2002.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.1.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Corporate Services Agreement, dated July&nbsp;5, 2005, among Retail
Ventures, Schottenstein Stores Corporation and Schottenstein Management Company,
together with Side Letter Agreement, dated July&nbsp;5, 2005, among Schottenstein Stores
Corporation, Retail Ventures, Inc., Schottenstein Management Company and DSW Inc.
related thereto. Incorporated by reference to Exhibit&nbsp;5 to Retail Ventures&#146; Form
8-K (file no. 1-10767) filed July&nbsp;11, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated March&nbsp;4, 2005, between Deborah L. Ferr&#233;e and DSW Inc.**#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated June&nbsp;1, 2005, between Peter Z. Horvath and DSW Inc.**#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated June&nbsp;1, 2005, between Douglas J. Probst and DSW Inc.**#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated December&nbsp;1, 2005, between Kevin Lonergan and DSW Inc.
Incorporated by reference to Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K filed January
24, 2006.#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated June&nbsp;26, 2005, between Derek Ungless and DSW Inc.*#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Summary of Director Compensation.*#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loan and Security Agreement, between DSW Inc. and DSW Shoe Warehouse, Inc., as the
Borrowers, and National City Business Credit, Inc., as Administrative Agent and
Collateral Agent for the Revolving Credit Lenders.*</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated March&nbsp;22, 2000, by and between East Fifth Avenue, LLC, an
affiliate of Schottenstein Stores Corporation, as landlord, and Shonac, as
tenant, re: warehouse facility and corporate headquarters. Incorporated by
reference to Exhibit&nbsp;10.60 to Retail Ventures&#146; Form&nbsp;10-K (file no. 1-10767)
filed April&nbsp;28, 2000.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Common Stock Purchase Warrants (with respect to the stock of Retail
Ventures) issued to Cerberus Partners, L.P. and Schottenstein Stores
Corporation. Incorporated by reference to Exhibit&nbsp;10.5 to Retail Ventures&#146;
Form&nbsp;10-Q (file no. 1-10767) filed June&nbsp;18, 2002.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Conversion Warrant to be issued by Retail Ventures to Schottenstein
Stores Corporation and Cerberus Partners, L.P.**</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.23
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">DSW Inc. 2005 Equity Incentive Plan.*#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Restricted Stock Units Award Agreement for Employees.**#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stock Units for automatic grants to non-employee directors.**#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.23.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stock Units for conversion of non-employee directors&#146; cash retainer.**#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.23.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Non-Employee Directors&#146; Cash Retainer Deferral Election Form.**#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.23.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Nonqualified Stock Option Award Agreement for Consultants.**#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.23.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Nonqualified Stock Option Award Agreement for Employees.**#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">DSW Inc. 2005 Cash Incentive Compensation Plan.*#</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.25
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Master Separation Agreement, dated July&nbsp;5, 2005, between Retail Ventures, Inc.
and DSW. Incorporated by reference to Exhibit&nbsp;10.1 to Retail Ventures&#146; Form
8-K (file no. 1-10767) filed July&nbsp;11, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.26
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shared Services Agreement, dated as of January&nbsp;30, 2005, between Retail
Ventures, Inc. and DSW. Incorporated by reference to Exhibit&nbsp;10.2 to Retail
Ventures&#146; Form&nbsp;8-K (file no. 1-10767) filed July&nbsp;11, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.27
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Separation Agreement, dated July&nbsp;5, 2005, among Retail Ventures, Inc. and
its affiliates and DSW Inc. and its affiliates. Incorporated by reference to
Exhibit&nbsp;10.3 to Retail Ventures&#146; Form&nbsp;8-K (file no. 1-10767) filed July&nbsp;11,
2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.28
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supply Agreement, effective as of January&nbsp;30, 2005, between Filene&#146;s Basement
and DSW. Incorporated by reference to Exhibit&nbsp;10.6 to Retail Ventures&#146; Form
8-K (file no. 1-10767) filed July&nbsp;11, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.29
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated August&nbsp;30, 2002, by and between Jubilee Limited Partnership, an
affiliate of Schottenstein Stores Corporation, and Shonac
Corporation, re: Troy, MI DSW store. Incorporated by reference to Exhibit&nbsp;10.44 to Retail
Ventures&#146; Form&nbsp;10-K (file no. 1-10767) filed April&nbsp;29, 2004.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">E-1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>No.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.29.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated October&nbsp;23, 2002,
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee re: Troy, MI DSW store. Incorporated by
reference to Exhibit&nbsp;10.29.1 to Retail Ventures&#146; Form&nbsp;10-K/A (file
no. 1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.30
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated October&nbsp;8, 2003, by and between Jubilee Limited
Partnership, an affiliate of Schottenstein Stores Corporation, and
Shonac Corporation, re: Denton, TX DSW store. Incorporated by
reference to Exhibit&nbsp;10.46 to Retail Ventures&#146; Form&nbsp;10-K (file no.
1-10767) filed April&nbsp;29, 2004.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.30.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated December&nbsp;18, 2003
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee re: Denton, TX DSW store. Incorporated by
reference to Exhibit&nbsp;10.30.1 to Retail Ventures&#146; Form&nbsp;10-K/A (file
no. 1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.31
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated October&nbsp;28, 2003, by and between JLP-RICHMOND LLC, an
affiliate of Schottenstein Stores Corporation, and Shonac
Corporation, re: Richmond, VA DSW store. Incorporated by reference
to Exhibit&nbsp;10.47 to Retail Ventures&#146; Form&nbsp;10-K (file no. 1-10767)
filed April&nbsp;29, 2004.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated December&nbsp;18, 2003
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee re: Richmond, VA DSW store. Incorporated by
reference to Exhibit&nbsp;10.31.1 to Retail Ventures&#146; Form&nbsp;10-K/A (file
no. 1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.32
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated May&nbsp;2000, by and between Jubilee-Richmond LLC, an
affiliate of Schottenstein Stores Corporation, and DSW Shoe
Warehouse, Inc. (as assignee of Shonac Corporation), re: Glen
Allen, VA DSW store. Incorporated by reference to Exhibit&nbsp;10.49 to
Retail Ventures&#146; Form&nbsp;10-K (file no. 1-10767) filed April&nbsp;14,
2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.33
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated February&nbsp;28, 2001, by and between Jubilee-Springdale,
LLC, an affiliate of Schottenstein Stores Corporation, and Shonac
Corporation d/b/a DSW Shoe Warehouse, re: Springdale, OH DSW
store. Incorporated by reference to Exhibit&nbsp;10.50 to Retail
Ventures&#146; Form&nbsp;10-K (file no. 1-10767) filed April&nbsp;14, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.33.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated May&nbsp;11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee re: Springdale, OH DSW store. Incorporated by reference
to Exhibit&nbsp;10.50.1, to Retail Ventures&#146; Form&nbsp;10-K/A (file no.
1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.34
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement of Lease, dated 1997, between Shoppes of Beavercreek
Ltd., an affiliate of Schottenstein Stores Corporation, and Shonac
corporation (assignee of Schottenstein Stores Corporation d/b/a
Value City Furniture through Assignment of Tenant&#146;s Leasehold
Interest and Amendment No.&nbsp;1 to Agreement of Lease, dated February
28, 2001), re: Beavercreek, OH DSW store. Incorporated by
reference to Exhibit&nbsp;10.51 to Retail Ventures&#146; Form&nbsp;10-K (file no.
1-10767) filed April&nbsp;14, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.34.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated May&nbsp;11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee re: Beavercreek, OH DSW store. Incorporated by reference
to Exhibit&nbsp;10.51.1 to Retail Ventures&#146; Form&nbsp;10-K/A (file no.
1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.35
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated February&nbsp;28, 2001, by and between JLP-Chesapeake,
LLC, an affiliate of Schottenstein Stores Corporation, and Shonac
Corporation, re: Chesapeake, VA DSW store. Incorporated by
reference to Exhibit&nbsp;10.52 to Retail Ventures&#146; Form&nbsp;10-K (file no.
1-10767) filed April&nbsp;14, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.35.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated May&nbsp;11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee re: Chesapeake, VA DSW store. Incorporated by reference
to Exhibit&nbsp;10.52.1 to Retail Ventures&#146; Form&nbsp;10-K/A (file no.
1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.36
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ground Lease Agreement, dated April&nbsp;30, 2002, by and between
Polaris Mall, LLC, a Delaware limited liability company, and
Schottenstein Stores Corporation-Polaris LLC, an affiliate of
Schottenstein Stores Corporation, as modified by Sublease
Agreement, dated April&nbsp;30, 2002, by and between Schottenstein
Stores Corporation-Polaris LLC, as sublessor, and DSW Shoe
Warehouse, Inc., as sublessee (assignee of Shonac Corporation),
re: Columbus, OH (Polaris) DSW store. Incorporated by reference to
Exhibit&nbsp;10.53 to Retail Ventures&#146; Form&nbsp;10-K (file no. 1-10767)
filed April&nbsp;14, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.36.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated August&nbsp;6, 2002, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Columbus, OH (Polaris) DSW store. Incorporated by
reference to Exhibit&nbsp;10.53.1 to Retail Ventures&#146; Form&nbsp;10-K/A (file
no. 1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.37
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated August&nbsp;30, 2002, by and between JLP-Cary, LLC, an
affiliate of Schottenstein Stores Corporation, and Shonac
Corporation, re: Cary, NC DSW store. Incorporated by reference to
Exhibit&nbsp;10.54 to Retail Ventures&#146; Form&nbsp;10-K (file no. 1-10767)
filed April&nbsp;14, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.37.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated October&nbsp;23, 2002,
between Shonac Corporation, as assignor, and DSW Shoe Warehouse,
Inc., as assignee, re: Cary, NC DSW store. Incorporated by
reference to Exhibit&nbsp;10.54.1 to Retail Ventures&#146; Form&nbsp;10-K/A (file
No.&nbsp;1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">E-2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>No.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.38
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated August&nbsp;30, 2002, by and between JLP-Madison, LLC, an affiliate of
Schottenstein Stores Corporation, and Shonac Corporation, re: Madison, TN DSW
store. Incorporated by reference to Exhibit&nbsp;10.55 to Retail Ventures&#146; Form&nbsp;10-K
(file no. 1-10767) filed April&nbsp;14, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.38.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated October&nbsp;23, 2002, between Shonac
Corporation, as assignor, and DSW Shoe Warehouse, Inc., as assignee, re: Madison,
TN DSW store. Incorporated by reference to Exhibit&nbsp;10.55.1 to Retail Ventures&#146; Form
10-K/A (file no. 1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.39
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sublease, dated May&nbsp;2000, by and between Schottenstein Stores Corporation, as
sublessor, and Shonac Corporation d/b/a DSW Shoe Warehouse, Inc., as sublessee, re: Pittsburgh, PA DSW store. Incorporated by reference to Exhibit&nbsp;10.48 to Retail
Ventures&#146; Form&nbsp;10-K (file no. 1-10767) filed April&nbsp;14, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.39.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated January&nbsp;8, 2001, between Shonac
Corporation, as assignor, and DSW Shoe Warehouse, Inc. as assignee, re: Pittsburgh,
PA DSW store. Incorporated by reference to Exhibit&nbsp;10.48.1 to Retail Ventures&#146; Form
10-K/A (file no. 1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.40
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated September&nbsp;24, 2004, by and between K&#038;S Maple Hill Mall, L.P., an
affiliate of Schottenstein Stores Corporation, and Shonac Corporation, re: Kalamazoo, MI DSW store. Incorporated by reference to Exhibit&nbsp;10.58 to Retail
Ventures&#146; Form&nbsp;10-K (file no. 1-10767) filed April&nbsp;14, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.40.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated February&nbsp;28, 2005, between Shonac
Corporation, as assignor, and DSW Shoe Warehouse, Inc., as assignee, re: Kalamazoo,
MI DSW store. Incorporated by reference to Exhibit&nbsp;10.58.1 to Retail Ventures&#146; Form
10-K/A (file no. 1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.41
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated November&nbsp;2004, by and between KSK Scottsdale Mall, L.P., an affiliate
of Schottenstein Stores Corporation, and Shonac Corporation, re: South Bend, IN DSW
store. Incorporated by reference to Exhibit&nbsp;10.59 to Retail Ventures&#146; Form&nbsp;10-K
(file no. 1-10767) filed April&nbsp;14, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.41.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated March&nbsp;18, 2005, between Shonac
Corporation, as assignor, and DSW Shoe Warehouse, Inc., as assignee, re: South
Bend, IN DSW store. Incorporated by reference to Exhibit&nbsp;10.59.1 to Retail
Ventures&#146; Form&nbsp;10-K/A (file no. 1-10767) filed May&nbsp;12, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.42
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sublease Agreement, dated June&nbsp;12, 2000, by and between Jubilee Limited
Partnership, an affiliate of Schottenstein Stores Corporation, and Shonac
Corporation, re: Fairfax, VA DSW store.**</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.42.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assignment and Assumption Agreement, dated January&nbsp;8, 2001, between Shonac
Corporation, as assignor, and DSW Shoe Warehouse, Inc., as assignee, re: Fairfax,
VA DSW store.**</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.43
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease, dated March&nbsp;1, 1994, between Jubilee Limited Partnership, an affiliate of
Schottenstein Stores Corporation, and Value City Department Stores, Inc., as
modified by First Lease Modification, dated November&nbsp;1, 1994, re: Merrilville, IN
DSW store. Incorporated by reference to Exhibit&nbsp;10.44 to Retail Ventures&#146; Form&nbsp;10-K
(file no. 1-10767) filed April&nbsp;14, 2005.**</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.43.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">License Agreement, dated August&nbsp;30, 2002, by and between Value City Department
Stores, Inc. and Shonac Corporation, re: Merrillville, IN DSW store.**</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.44
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Indemnification Agreement between DSW Inc. and its officers and directors.**</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">10.45
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement of Lease, dated April&nbsp;7, 2006, by and between JLP-Harvard Park, LLC, an
affiliate of Schottenstein Stores Corporation, and DSW Inc., re: Chagrin Highlands,
Warrendale, Ohio DSW store.*</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">21.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of Subsidiaries.*</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Deloitte &#038; Touche LLP.*</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">24.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Powers of Attorney.*</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rule&nbsp;13a-14(a)/15d-14(a) Certification &#150; Principal Executive Officer.*</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rule&nbsp;13a-14(a)/15d-14(a) Certification &#150; Principal Financial Officer.*</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;1350 Certification &#150; Principal Executive Officer.*</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;1350 Certification &#150; Principal Financial Officer.*</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Previously filed as the same Exhibit&nbsp;Number to the Company&#146;s Form S-1 filed with the
Securities and Exchange Commission on March&nbsp;14, 2005 and amended on May&nbsp;9, 2005, June&nbsp;7, 2005,
June&nbsp;15, 2005 and June&nbsp;29, 2005, and incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">#</TD>
    <TD>&nbsp;</TD>
    <TD>Management contract or compensatory plan or arrangement.</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt">E-3
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>2
<FILENAME>l19155aexv3w1.txt
<DESCRIPTION>EXHIBIT 3.1
<TEXT>
<PAGE>

                                                                     EXHIBIT 3.1

(SEAL LOGO)                                   EXPEDITE THIS FORM: (SELECT ONE)
                                              ----------------------------------
                                              MAIL FORM TO ONE OF THE FOLLOWING:
                                              ----------------------------------
                                                         PO Box 1390
                                              [X]  Yes   Columbus, OH 43216
                                               *** REQUIRES AN ADDITIONAL FEE
                                                          OF $100 ***
                                              ----------------------------------
                                                          PO Box 1028
                                              [ ]  No     Columbus, OH 43216
                                              ----------------------------------

                       PRESCRIBED BY J. KENNETH BLACKWELL
                            Ohio Secretary of State
                          Central Ohio: (614) 466-3910
                   Toll Free: 1-877-SOS-FILE (1-877-767-3453)


www.state.oh.us/sos
e-mail: busserv@sos.state.oh.us

                           CERTIFICATE OF AMENDMENT BY
                            SHAREHOLDERS OR MEMBERS
                                   (Domestic)
                                Filing Fee $50.00

(CHECK ONLY ONE (1) BOX)
--------------------------------------------------------------------------------
(1) Domestic for Profit PLEASE READ INSTRUCTIONS (2) Domestic Non-Profit
    [X] Amended         [ ] Amendment                [ ] Amended   [ ] Amendment
        (122-AMAP)          (125-AMDS)                  (126-AMAN)     (128-AMD)
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
COMPLETE THE GENERAL INFORMATION IN THIS SECTION FOR THE BOX CHECKED ABOVE.

Name of Corporation             DSW Inc.
                                ------------------------------------------------
Charter Number                  379756
                                ------------------------------------------------
Name of Officer                 Julia A. Davis
                                ------------------------------------------------
Title                           Secretary
                                ------------------------------------------------

[X] Please check if additional provisions attached.

The above named Ohio corporation, does hereby certify that:

[ ] A meeting of the  [ ] shareholders  [ ] directors (NON-PROFIT AMENDED
                                                      ARTICLES ONLY)

[ ] members was duly called and held on         __________________________
                                                         (Date)

at which meeting a quorum was present in person or by proxy, based upon the
quorum present, an affirmative vote was cast which entitled them to exercise
_________% as the voting power of the corporation.

[X] In a writing signed by all of the  [X] shareholders  [ ] directors
                                                             (NON-PROFIT AMENDED
                                                             ARTICLES ONLY)

[ ] members who would be entitled to the notice of a meeting or such other
    proportion not less than a majority as the articles of regulations or bylaws
    permit.
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
CLAUSE APPLIES IF AMENDED BOX IS CHECKED.

Resolved, that the following amended articles of incorporations be and the same
are hereby adopted to supercede and take the place of the existing articles of
incorporation and all amendments thereto.
--------------------------------------------------------------------------------

                                  Page 1 of 2
<PAGE>
--------------------------------------------------------------------------------
ALL OF THE FOLLOWING INFORMATION MUST BE COMPLETED IF AN AMENDED BOX IS CHECKED.
IF AN AMENDMENT BOX IS CHECKED, COMPLETE THE AREAS THAT APPLY.

FIRST:  The name of the corporation is:   DSW Inc.
                                          --------------------------------------

SECOND: The place in the State of Ohio where its principal office is located is
        in the City of:

        Columbus                                               Franklin
        ----------------------------------------------         -----------------
        (city, village or township)                            (county)

THIRD: The purposes of the corporation are as follows:


The purposes for which the Corporation is formed is to engage in any lawful act
or activity for which corporations may be formed under Chapter 1701 of the Ohio
Revised Code.


FOURTH: The number of shares which the corporation is authorized to have
        outstanding is: 370,000,000(see attached)

                           (DOES NOT APPLY TO BOX (2))
--------------------------------------------------------------------------------

       REQUIRED                /s/ Julia A. Davis
Must be authenticated          -----------------------------      _________,2005
    (SIGNED) by an               Authorized Representative           Date
authorized representative
  (SEE INSTRUCTIONS)           Julia A. Davis
                               -----------------------------
                               (Print Name)

                               -----------------------------

                               -----------------------------

                               ______________________________    _______________
                               Authorized Representative             Date

                               -----------------------------
                               (Print Name)

                               -----------------------------

                               -----------------------------

                                  Page 2 of 2
<PAGE>

                          ADDITIONAL PROVISIONS TO THE
                        AMENDED ARTICLES OF INCORPORATION
                                       OF
                                    DSW INC.

          FOURTH (Cont'd): The number of shares which the corporation is
authorized to have outstanding is the authorized number of shares of the
corporation. One Hundred Seventy Million (170,000,000) of the authorized number
of shares of the corporation shall be Class A Common Shares, without par value
(the "Class A Common Shares"), One Hundred Million (100,000,000) shall be Class
B Common Shares, without par value (the "Class B Common Shares"; and together
with the Class A Common Shares, the "Common Shares"), and One Hundred Million
(100,000,000) shall be preferred shares, without par value (the "Preferred
Shares").

          Effective upon the filing of a Certificate of Amendment with the
Office of the Secretary of State of Ohio certifying adoption of these Amended
Articles of Incorporation by the sole shareholder, the issued and outstanding
common shares of the corporation shall be changed into 27,702,667 Class B
Common Shares.

          The designations, preferences, privileges and voting powers of shares
of each class and the restrictions or qualifications thereof are as follows:

          Section 1. Common Shares. Except as specifically otherwise provided
herein, the Class A and Class B Common Shares shall be identical and shall
entitle the holders thereof to the same rights and privileges.

          (a) Voting Rights. The voting rights of the Common Shares shall be as
follows:

          i.   each outstanding Class A Common Share shall entitle the holder
               thereof to one (1) vote on each matter properly submitted to the
               shareholders, or to the holders of the Class A Common Shares, for
               their vote, consent, waiver, release or other action;


          ii.  each outstanding Class B Common Share shall entitle the holder
               thereof to eight (8) votes on each matter properly submitted to
               the shareholders, or to the holders of the Class B Common Shares,
               for their vote, consent, waiver, release or other action; and


         iii.  the holders of Class A Common Shares and Class B Common Shares
               shall vote as a single class upon all matters submitted to the
               shareholders of the corporation except as otherwise provided by
               law.

          (b) Dividend and Other Rights of Common Shares. Holders of Class A
Common Shares and Class B Common Shares will share in any dividend declared by
the Board of Directors, subject to any preferential rights of any outstanding
Preferred Shares. The corporation shall not subdivide or combine any of the
Common Shares, or pay any dividend or other distribution on any of the Common
Shares, or accord any other payment, benefit or preference to any of the Common
Shares, except by extending such subdivision, combination, distribution,
payment, benefit or preference equally to all Common Shares. If dividends are
<PAGE>
declared that are payable in Common Shares, such dividends shall be payable in
Class A Common Shares to holders of Class A Common Shares and in Class B Common
Share to holders of Class B Common Shares.

          Section 2. Preferred Shares

          (a) The directors of the corporation are authorized to adopt
amendments to the Articles of Incorporation in respect of any unissued Preferred
Shares and thereby to fix or change, to the full extent now or hereafter
permitted by Ohio law, the express terms of the Preferred Shares, or of any one
or more series of the Preferred Shares, including without limitation, the
division of such shares into series and the designation and authorized number of
shares of each series; dividend or distribution rights; redemption rights and
price; liquidation rights, preferences and price; sinking fund requirements;
voting rights; conversion rights; and restrictions on the issuance of shares of
the same series or of any other class or series.

          (b) All shares of each series of the Preferred Shares shall be
identical with each other in all respects.

          FIFTH: No shareholder of the corporation shall have, as a matter of
right, the pre-emptive right to purchase, subscribe for or otherwise acquire any
shares of any class, now or hereafter authorized, or to purchase, subscribe or
otherwise acquire for securities or other obligations convertible into or
exchangeable for any such shares or which by warrants or otherwise entitle the
holders thereof to purchase, subscribe for or otherwise acquire any such shares.

          SIXTH:

          Section 1. Authority of the Corporation to Deal in its Securities. The
directors of the corporation shall have the power to cause the corporation from
time to time and at any time to purchase, hold, sell, transfer or otherwise deal
with (i) any shares issued by it, (ii) any security or other obligation of the
corporation that confers upon the holder thereof the right to convert the same
into shares authorized by the articles of the corporation, and (iii) any
security or other obligation that confers upon the holder thereof the right to
purchase shares authorized by the articles of the corporation. The corporation
shall have the right to repurchase, if and when any shareholder desires to sell,
or on the happening of any event is required to sell, any shares issued by the
corporation.

          Section 2. Limitation on Authority to Issue Class B Common Shares. The
authority granted in this Article SIXTH shall not limit the plenary authority
of the directors to purchase, hold, sell, transfer or otherwise deal with any
shares or other securities issued by the corporation or authorized by its
Articles. Notwithstanding the foregoing, to the extent that any of the Class B
Common Shares are hereafter surrendered in exchange for Class A Common
Shares, the Class B Common Shares so surrendered shall be retired. Except in
connection with a subdivision of, or dividend or other distribution on, the
Class B Common Shares, the directors of the corporation shall not have the
power to cause the corporation to reissue, sell, transfer or otherwise deal
with such Class B Common Shares.


          SEVENTH:

          Section 1. Definitions. For purposes of this Article SEVENTH:
<PAGE>
          (a) The "corporation" shall include all subsidiary corporations and
all partnerships, joint ventures, associations and other entities in which the
corporation owns (directly or indirectly) fifty percent or more of the
outstanding voting shares, voting power, partnership interests or similar
ownership interests.

          (b) "RVI" means Retail Ventures, Inc., an Ohio corporation and, at the
time this Certificate of Amendment is filed with the Secretary of State of Ohio,
the sole shareholder of the corporation, and all successors to RVI by merger,
consolidation or otherwise, and all subsidiary corporations and all
partnerships, joint ventures, associations and other entities in which RVI owns
(directly or indirectly) fifty percent or more of the outstanding voting shares,
voting power, partnership interests or similar ownership interests, but shall
not include the corporation and its subsidiaries.

          (c) "SSC" means Schottenstein Stores Corporation, a Delaware
corporation and, at the time this Certificate of Amendment is filed with the
Secretary of State of Ohio, the controlling shareholder of RVI, and all
successors to SSC by merger, consolidation or otherwise, and all subsidiary
corporations and all partnerships, joint ventures, associations and other
entities in which SSC owns (directly or indirectly) fifty percent or more of the
outstanding voting shares, voting power, partnership interests or similar
ownership interests, but shall not include the RVI and its subsidiaries or
corporation and its subsidiaries.

          (c) "Family Trust" means one or more trusts established for the
benefit of any of Jay L. Schottenstein, Susan S. Diamond, Ann S. Deshe, Lori
Schottenstein, Geraldine Schottenstein, any of their respective spouses,
children or lineal descendants, or any person controlled by any such trust or
trusts.

          (d) "Related Entities" means SSC and its subsidiaries and RVI and its
subsidiaries.

          (e) "Related Persons" means directors of the corporation and directors
of one or more of the Related Entities and corporations, partnerships,
associations or other organizations in which one or more of such directors has a
financial interest.

          Section 2. Corporate Opportunity

          (a) In anticipation that RVI will remain a substantial shareholder of
the corporation, SSC will remain a substantial shareholder of RVI and the
Related Entities may engage in the same or similar activities or lines of
business and have interests in the same areas of corporate opportunities, and in
recognition of the benefits to be derived by the corporation through its
continued contractual, corporate and business relations with RVI and SSC
(including services of officers and directors of RVI and SSC as officers and
directors of the corporation), the provisions of this Section 2 are set forth to
regulate and define the conduct of certain affairs of the corporation as they
may involve the Related Entities and their respective officers and directors,
and the powers, rights, duties and liabilities of the corporation and its
officers, directors and shareholders in connection therewith.

          (b) The Related Entities shall have the right to, and shall have no
duty not to, (i) engage in the same or similar activities or lines of business
as the corporation, (ii) do business with any supplier or customer of the
corporation, and (iii) unless restricted by contract, employ or otherwise engage
any officer or employee of the corporation, and the Related Entities nor any of
their respective officers or directors (except as provided in Paragraph (c) of
this Section 2) shall
<PAGE>
be liable to the corporation or its shareholders for breach of any fiduciary
duty by reason of any such activities of the Related Entities or of such
person's participation therein. In the event that a Related Entity acquires
knowledge of a potential transaction or matter which may be a corporate
opportunity for both the corporation and such Related Entity, the Related Entity
shall have no duty to communicate or offer such corporate opportunity to the
corporation and shall not be liable to the corporation or its shareholders for
breach of any fiduciary duty as a shareholder of the corporation by reason of
the fact that it pursues or acquires such corporate opportunity for itself,
directs such corporate opportunity to another person or entity, or does not
communicate information regarding such corporate opportunity to the corporation.

          (c) In the event that a director or officer of the corporation who is
also a director or officer of a Related Entity acquires knowledge of a potential
transaction or matter which may be corporate opportunity for both the
corporation and such Related Entity, such director or officer of the corporation
shall not be liable to the corporation or its shareholders by reason of the fact
that the Related Entity pursues or acquires such corporate opportunity for
itself or directs such corporate opportunity to another person or does not
communicate information regarding such corporate opportunity to the corporation,
if such director or officer acts in a manner consistent with the following
policy:

          i.   a corporate opportunity offered to any person who is an officer
               of the corporation, and who is also a director but not an officer
               of a Related Entity, shall belong to the corporation, unless such
               opportunity is expressly offered to such person in writing solely
               in his capacity as a director of the a Related Entity, in which
               case such opportunity shall belong to such Related Entity;

          ii.  a corporate opportunity offered to any person who is a director
               but not an officer of the corporation, and who is also a director
               or officer of a Related Entity, shall belong to the corporation
               only if such opportunity is expressly offered to such person in
               writing solely in his or her capacity as a director of the
               corporation, and otherwise shall belong to the Related Entity;
               and;

          iii. a corporate opportunity offered to any person who is an officer,
               whether or not such person is also a director, of both the
               corporation and a Related Entity shall belong to the corporation
               only if such opportunity is expressly offered to such person in
               writing solely in his or her capacity as an officer or director
               of the corporation, and otherwise shall belong to the Related
               Entity.

          (d) For the purposes of this Section 2, a "corporate opportunity"
shall include, but not be limited to, any business opportunity which the
corporation is financially able to undertake, is, from its nature, in the line
of the corporation's business and is of practical advantage to it, and is one in
which the corporation has an interest or a reasonable expectancy, where the
circumstances are such that the self-interest of the Related Entity or the
officer or directors, as the case may be, would be brought into conflict with
that of the corporation if the Related Entity should embrace the opportunity.

          (e) If any contract, agreement, arrangement or transaction between the
corporation and a Related Entity involves a corporate opportunity and is
approved in accordance with the procedures set forth in Section 3 of this
Article SEVENTH, the Related Entity and its officers and directors shall be
deemed to have fulfilled their fiduciary duties to the corporation and its
shareholders with respect thereto under this Section 2. Any such contract,
agreement, arrangement or transaction involving a corporate opportunity not so
approved shall not by reason
<PAGE>
thereof result in any breach of any fiduciary duty, but shall be governed by the
other provisions of this Section 2, these Articles and the code of regulations
of the corporation (the "Regulations") and Chapter 1701 of the Ohio Revised
Code.

          Section 3. Contract, Action or Transaction Not Voidable

          (a) In anticipation that (i) the corporation will have continued
contractual, corporate and business relations with the Related Entities, and in
anticipation that the corporation may enter into contracts or otherwise transact
business with the Related Entities and that the corporation may derive benefits
therefrom and (ii) the corporation may from time to time enter into contractual,
corporate or business relations with one or more of the Related Persons have a
financial interest, the provisions of this Section 3 are set forth to regulate
and define certain contractual relations and other business relations of the
corporation as they may involve Related Entities and Related Persons, and the
powers, rights, duties and liabilities of the corporation and its officers,
directors and shareholders in connection therewith. The provisions of this
Section 3 are in addition to, and not in limitation of, the provisions of
Chapter 1701 of the Ohio Revised Code and the other provisions of these Articles
of Incorporation. Any contract or business relation which does not comply with
the procedures set forth in this Section 3 shall not by reason thereof be deemed
void or voidable or result in any breach of any fiduciary duty, but shall be
governed by the provisions of these Articles, the Regulations and Chapter 1701
of the Ohio Revised Code.

          (b) No contract, action or transaction (or any amendment, modification
or termination thereof) between the corporation and one or more of the Related
Entities or between the corporation and one or more of the Related Persons shall
be void or voidable solely for the reason that any Related Entity or any Related
Person are parties thereto, or solely because any Related Person is present at
or participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because such Related
Person's votes are counted for such purpose, and the Related Entity or Related
Person shall not be liable to the corporation or its shareholders by reason of
entering into, performance or consummation of any such contraction, action, or
transaction if:

          i.   The material fact as to his or their relationship or interest and
               as to the contract, action or transaction are disclosed or are
               known to the Board of Directors or the committee thereof and the
               Board of Directors or committee thereof, in good faith reasonably
               justified by such facts, authorizes the contract, action, or
               transaction by the affirmative vote of a majority of the
               disinterested directors, even though the disinterested directors
               constitute less than a quorum of the directors or committee;

          ii.  The material facts as to his or their relationship or interest
               and as to the contract, action or transaction are disclosed or
               are known to the shareholders entitled to vote thereon and the
               contract, action or transaction is specifically approved at a
               meeting of the shareholders held for such purpose by the
               affirmative vote of the holders of shares entitling them to
               exercise a majority of the voting power of the corporation held
               by persons not interested in the contract, action or transaction;
               or

          iii. The contract, action or transaction is fair as to the corporation
               as of the time it is authorized or approved by the Board of
               Directors, a committee of the Board of Directors, or the
               shareholders; provided, however, that nothing
<PAGE>
               contained in this Section 2 shall limit or otherwise affect the
               liability of directors under Section 1701.95 of the Ohio Revised
               Code.

          (c) Directors of the corporation who are also directors or officers of
any Related Entity or Related Person may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract, agreement, arrangement or transaction.

          Section 4. The directors, by the affirmative vote of a majority of
those in office, and irrespective of any financial or personal interest in any
of them, shall have the authority to establish reasonable compensation, which
may include pension, disability, and death benefits, for services to the
corporation by directors and officers, or to delegate such authority to one or
more officers or directors.

          Section 5. Any person or entity purchasing or otherwise acquiring any
interest in shares of the corporation shall be deemed to have notice of and to
have consented to the provisions of this Article SEVENTH.

          Section 6. This Article SEVENTH shall remain in effect so long as RVI,
SSC and the Family Trusts (or any of them) shall hold (as a group) shares of the
corporation entitled to ten percent (10%) or more of the combined voting power
of all shares of the corporation regularly entitled to vote for the election of
directors

          Section 7. Neither the alteration, amendment or repeal of this Article
SEVENTH, nor the adoption of any provision inconsistent with this Article
SEVENTH, shall eliminate or reduce the effect of this Article SEVENTH in respect
of any matter occurring, or any cause of action, suit or claim that, but for
this Article SEVENTH would accrue or arise, prior to such alteration, amendment,
repeal or adoption.

          EIGHTH: None of the provisions of Section 1701.831 of the Ohio Revised
Code relating to control share acquisitions, shall be applicable to this
corporation.

          NINTH: None of the provisions of Chapter 1704 of the Ohio Revised Code
relating to transactions affecting control shall be applicable to this
corporation.

          TENTH: Notwithstanding any provision of the Ohio Revised Code
requiring for any purpose the vote, consent, waiver or release of the holders of
shares of the corporation entitling them to exercise two-thirds, or any other
proportion (but less than all), of the voting power of the corporation or of any
class or classes of shares thereof, for such purpose the vote, consent, waiver
or release of the holders of shares entitling them to exercise not less than a
majority of the voting power of the corporation, or of such class or classes
shall be required.

          ELEVENTH: Notwithstanding any provision of the Ohio Revised Code now
or hereafter in effect, no shareholder shall have the right to vote cumulatively
in the election of directors.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>3
<FILENAME>l19155aexv3w2.htm
<DESCRIPTION>EXHIBIT 3.2
<TEXT>
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<TITLE>Exhibit 3.2</TITLE>
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<P align="right" style="font-size: 10pt"><B>Exhibit&nbsp;3.2</B>






<P align="center" style="font-size: 10pt"><B>AMENDED AND RESTATED<BR>
CODE OF REGULATIONS<BR>
OF<BR>
DSW INC.</B>



<P align="center" style="font-size: 10pt"><B>ARTICLE ONE</B>



<P align="center" style="font-size: 10pt"><B>MEETINGS OF SHAREHOLDERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1.01. Annual Meetings</U>. An annual meeting of shareholders for the election of
directors, for the consideration of reports to be laid before such meeting, and for the transaction
of such other business as may properly come before such meeting shall be held on such date as may
be fixed from time to time by the directors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1.02. Calling of Meetings</U>. Meetings of the shareholders may be called only
by:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;the chairman of the board, the president, or, in case of the president&#146;s absence, death,
or disability, the vice president authorized to exercise the authority of the president;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;the directors by action at a meeting, or a majority of the incumbent directors acting
without a meeting; or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;the holders of at least fifty percent of all shares outstanding and entitled to vote
thereat.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1.03. Place of Meetings</U>. Each meeting of shareholders shall be held at the
principal office of the corporation, unless otherwise provided by action of the directors.
Meetings of shareholders may be held at any place either within or without the State of Ohio. If
authorized by the directors, a meeting of shareholders may be held solely by means of communication
equipment as authorized by law.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1.04. Notice of Meetings</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;Written notice stating the time, place, if any, and purposes of a meeting of the
shareholders, and the means, if any, by which shareholders can be present and vote at the meeting
through the use of communications equipment, shall be given either by personal delivery or by mail,
or overnight delivery service, or any other means of communication authorized by the shareholder to
whom the notice is given, not less than seven nor more than ninety days before the date of the
meeting (i)&nbsp;to every shareholder of record entitled to notice of the meeting (ii)&nbsp;by or at the
direction of the president, the secretary, or another officer expressly authorized by action of the
directors to give such notice. If mailed or sent by overnight delivery


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P align="left" style="font-size: 10pt">service, such notice shall be addressed to the shareholder at such shareholder&#146;s address as it
appears on the records of the corporation. If sent by another means of communication authorized by
the shareholder, the notice shall be sent to the address furnished by the shareholder for those
transmissions. Notice of adjournment of a meeting need not be given if the time and place, if any,
to which it is adjourned and the means, if any, by which shareholders can be present and vote at
the adjourned meeting through the use of communications equipment are fixed and announced at such
meeting. In the event of a transfer of shares after the record date for determining the
shareholders who are entitled to receive notice of a meeting of shareholders, it shall not be
necessary to give notice to the transferee.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;Upon request in writing delivered either in person or by registered mail to the president
or the secretary, specifying the purpose or the purposes for which the persons properly making such
request have called a meeting of shareholders, that officer shall forthwith cause to be given to
the shareholders entitled thereto notice of a meeting to be held on a date not less than ten nor
more than sixty days after the receipt of such request, as the officer may fix. If the notice is
not given within thirty days after the receipt of such request by the president or the secretary,
then the persons properly calling the meeting may fix the time of the meeting and give notice
thereof in accordance with Section&nbsp;1.04(A), or cause the notice to be so given by any designated
representative.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1.05. Waiver of Notice</U>. Notice of the time, place, if any, and purposes of
any meeting of shareholders may be waived in writing, either before or after the holding of such
meeting, by any shareholder, which writing shall be filed with or entered upon the records of such
meeting. The attendance of any shareholder at any such meeting without protesting, prior to or at
the commencement of the meeting, the lack of proper notice shall be deemed to be a waiver by such
shareholder of notice of such meeting. A telegram, cablegram, electronic mail, or an electronic or
other transmission capable of authentication that appears to have been sent by a shareholder and
that contains a waiver by such shareholder is a writing for purposes of this Section&nbsp;1.05.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1.06. Quorum</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;At any meeting of shareholders, the presence, in person, by proxy, or by the use of
communications equipment, of the holders, of record on the record date for such meeting, of at
least fifty percent of all shares outstanding and entitled to vote thereat shall be necessary to
constitute a quorum for such meeting or at any adjournment thereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;Except as otherwise provided in Section&nbsp;1.07(B)(2) in respect of adjournment, no action
may be taken at any meeting of shareholders, or at any adjournment thereof, unless a quorum is
present.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;If a quorum is present at a meeting of shareholders, it cannot be broken by the subsequent
withdrawal of one or more shareholders or their proxies or by any decrease in the number of shares
represented at the meeting.


<P align="center" style="font-size: 10pt">2
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1.07. Votes Required</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;At all elections of directors, the candidates receiving the greatest number of votes shall
be elected; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;Any other proposal submitted to the shareholders at a meeting can be authorized or
approved only by the affirmative vote of the holders of the greater of (i)&nbsp;a majority of the shares
required to constitute a quorum for such meeting and (ii)&nbsp;a majority of the shares voted on such
proposal; provided, however, that:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;no action required by law, the articles, or the regulations to be authorized or taken by
the holders of a designated proportion of the shares may be authorized or taken by a lesser
proportion; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;the holders of a majority of the voting shares represented at a meeting, whether or not a
quorum is present, or the officer of the corporation acting as chairman of the meeting, may adjourn
such meeting from time to time; and at such adjourned meeting, any business may be transacted as if
the meeting had been held as originally noticed.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1.08. Conduct of the Meeting</U>. At any meeting of shareholders, unless
otherwise determined at such meeting by the holders of a majority of the voting shares represented
and entitled to vote at such meeting, the officer of the corporation acting as chairman of such
meeting shall have plenary authority to conduct the meeting and may, among other things, set the
order of business, prescribe reasonable rules to preserve order, impose limits on the shareholders&#146;
right to speak and, except as otherwise provided in the regulations, determine the manner of
voting.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1.09. Record Date.</U> The directors may fix a record date for the determination
of the shareholders who are entitled to receive notice of and to vote at a meeting of shareholders,
which record date shall not be a date earlier than the date on which the record date is fixed and
which record date may be a maximum of sixty days preceding the date of the meeting of shareholders.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1.10. Proxies</U>. At meetings of the shareholders, any shareholder entitled to
vote thereat may be represented and may vote by a proxy or proxies appointed by a writing signed,
or a verifiable communication authorized, by such shareholder, but such writing or verifiable
communication must be filed with the secretary of the meeting before such proxy shall be allowed to
vote thereunder.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1.11. Inspectors of Election</U>. In advance of any meeting of shareholders, the
directors may appoint one or more inspectors of election to act at such meeting or any adjournment
thereof; if inspectors are not so appointed, the officer of the corporation acting as chairman of
any such meeting may make such appointment. In case any person appointed as inspector fails to
appear or act, the vacancy may be filled only by appointment made by the directors in advance of
such meeting or, if not so filled, at the meeting by the officer of the


<P align="center" style="font-size: 10pt">3
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<P align="left" style="font-size: 10pt">corporation acting as chairman of such meeting. No other person or persons may appoint or
require the appointment of inspectors of election.


<P align="center" style="font-size: 10pt"><B>ARTICLE TWO</B>



<P align="center" style="font-size: 10pt"><B>DIRECTORS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.01. Authority and Qualifications</U>. Except where the law, the articles or the
regulations otherwise provide, all authority of the corporation shall be vested in and exercised by
or under the direction of its directors. Directors need not be shareholders of the corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.02 Number of Directors and Term of Office</U>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;Until changed in accordance with the provisions of the regulations, the authorized number
of directors of the corporation shall be seven (7).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;The authorized number of directors may be fixed or changed at a meeting of the
shareholders called for the purpose of electing directors at which a quorum is present by the
holders of a majority of the voting shares represented and entitled to vote at the meeting.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;The directors may fix or change the authorized number of directors and may fill any
director&#146;s office that is created by an increase in the authorized number of directors; provided,
however, that the directors may not increase the authorized number of directors to more than
fifteen (15)&nbsp;nor reduce the authorized number of directors to fewer than five (5).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)&nbsp;When the authorized number of directors is less than six, each director shall be elected
for a term of one year.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)&nbsp;When the authorized number of directors is six or more, but less than nine, the directors
shall be divided into two classes, designated Class&nbsp;I and Class&nbsp;II. Each class shall consist, as
nearly as possible, of one-half of the total authorized number of directors. Except as may be
necessary to initially establish the classes of directors, each director shall be elected for a two
year term.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F)&nbsp;When the authorized number of directors is nine or more, the directors shall be divided
into three classes, designated Class&nbsp;I, Class&nbsp;II and Class&nbsp;III. Each class shall consist, as
nearly as possible, of one-third of the total authorized number of directors. Except as may be
necessary to initially establish the classes of directors or to fill a vacancy in an unexpired
term, each director shall be elected for a three year term.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(G)&nbsp;If the authorized number of directors is increased, the directors elected to fill the
directors&#146; offices resulting from such increase shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible; provided, however, if
the increase would permit the creation an additional class of directors, the new


<P align="center" style="font-size: 10pt">4
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<P align="left" style="font-size: 10pt">directors shall be assigned to the new class as necessary to maintain the number of directors
in each class as nearly equal as possible. When new directors are apportioned among existing
classes, any director elected to fill a director&#146;s office created by an increase in the authorized
number of directors shall hold office for a term that coincides with the remaining term of that
class.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(H)&nbsp;If the authorized number of directors is decreased, such reduction shall not shorten the
term of any incumbent director, but, as their terms expire, the directors shall be reapportioned
among the classes so as to maintain the number of directors in each class as nearly equal as
possible. When directors are reapportioned among the classes, any director assigned to a different
class shall thereafter hold office for a term that coincides with the remaining term of that class.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(I)&nbsp;At each annual meeting of shareholders, successors to the directors whose terms expire at
that annual meeting shall be elected for (i)&nbsp;one year if the authorized number of directors is less
than six, (ii)&nbsp;two years if there are two classes of directors, or (iii)&nbsp;three years if there are
three classes of directors. Each director shall be elected to serve until the election, at an
annual meeting of shareholders for the election of directors for the year in which the director&#146;s
term expires or at a special meeting called for that purpose, of the director&#146;s successor.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.03. Election</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;Directors may be elected at an annual meeting of shareholders or at a special meeting
called for the purpose of electing directors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;The election of directors shall be by ballot (i)&nbsp;whenever the number of candidates exceeds
the number of directors to be elected or (ii)&nbsp;if requested by the officer of the corporation acting
as chairman of the meeting or by the holders of a majority of the voting shares represented and
entitled to vote at such meeting, but the election shall otherwise be by voice vote.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.04. Removal by Shareholders. </U> All the directors, all the directors of a
particular class (if the directors of the Corporation are divided into classes), or any individual
director may be removed from office by the shareholders, without assigning any cause, only by the
vote of the holders of not less than three-fourths of the voting power of the corporation entitling
them to elect directors in place of those to be removed. In case of any removal pursuant to this
Section&nbsp;2.04, a new director may be elected at the same meeting for the unexpired term of each
director removed. Failure to elect a director to fill the unexpired term of any director removed
shall be deemed to create a vacancy in the board.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.05. Vacancies</U>. The remaining directors, though less than a majority of the
whole authorized number of directors, may, by the vote of a majority of their number, fill any
vacancy in the board for the unexpired term.


<P align="center" style="font-size: 10pt">5
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.06. Meetings</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;A meeting of the directors shall be held immediately following the adjournment of each
annual meeting of shareholders at which directors are elected, and notice of such meeting need not
be given. The directors shall hold such other meetings as may from time to time be called, and
such other meetings of directors may be called only by the chairman of the board, the president,
another officer expressly authorized by action of the directors to give notice of meetings of
directors, or any two directors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;All meetings of directors shall be held at the principal office of the corporation unless
the directors from time to time otherwise determine.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;Meetings of the directors may be held through any communications equipment if all persons
participating can hear each other, and participation in a meeting pursuant to this provision shall
constitute presence at such meeting.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.07. Notice of Meetings</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;Notice of the place, if any, and time of each meeting of the directors, other than a
meeting held immediately following the adjournment of an annual meeting of shareholders at which
directors are elected, shall be given to each of the directors:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;by personal delivery or by mail, telegram, cablegram, overnight delivery service, or any
other means of communication authorized by the director, if such notice is given at least two days
before the meeting; or


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;orally, either in person or by telephone, not later than the day before the meeting.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;Notice of any meeting of the directors may be given only by the chairman of the board, the
president, the secretary of the corporation, or another officer expressly authorized by action of
the directors to give such notice. The method of giving notice to all directors need not be
uniform. Any such notice need not specify the purpose or purposes of the meeting. Notice of
adjournment of a meeting of directors need not be given if the time and place to which it is
adjourned are fixed and announced at such meeting.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.08. Waiver of Notice</U>. Notice of the place, if any, and time of any meeting
of the directors may be waived in writing, either before or after the holding of such meeting, by
any director, which writing shall be filed with or entered upon the records of the meeting. The
attendance of any director at any meeting of the directors without protesting, prior to or at the
commencement of such meeting, the lack of proper notice shall be deemed to be a waiver by the
director of such notice. A telegram, cablegram, electronic mail, or an electronic or other
transmission capable of authentication that appears to have been sent by a director and that
contains a waiver by such director is a writing for the purposes of this Section&nbsp;2.08.


<P align="center" style="font-size: 10pt">6
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.09. Quorum; Vote Required</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;A majority of the whole authorized number of directors shall be necessary to constitute a
quorum for a meeting of the directors, except that a majority of the directors in office shall
constitute a quorum for filling a vacancy in the board. If a quorum is present at a meeting of the
directors, it cannot be broken by the subsequent withdrawal of one or more directors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;The affirmative vote of a majority of the directors present at a meeting at which a quorum
is present is the act of the board, unless the vote of a greater number of the directors is
required by law, the articles, the regulations or the bylaws.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.10. Committees</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;The directors may create an executive committee or any other committee of directors, to
consist of one or more of the directors, and may delegate to any such committee any of the
authority of the directors, however conferred, other than the authority to fill vacancies among the
directors or in any committee of the directors. Any act or authorization of any act by the
executive committee or any other committee within the authority delegated to it shall be as
effective for all purposes as the act or authorization of the directors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;The executive committee or any other committee of directors shall serve at the pleasure of
the directors, shall act only in the intervals between meetings of the directors, and shall be
subject to the control and direction of the directors.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;No notice of a meeting of the executive committee or of any other committee of directors
shall be required. A meeting of the executive committee or of any other committee of directors may
be called only by the president, another officer expressly authorized by action of the directors to
give notice of a meeting of such committee, or a member of such executive or other committee of
directors. Meetings of the executive committee or of any other committee of directors may be held
through any communications equipment if all persons participating can hear each other, and
participation in such a meeting shall constitute presence thereat.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.11. Bylaws</U>. The directors may adopt, and amend from time to time, bylaws for
their own government, which bylaws shall not be inconsistent with the law, the articles or the
regulations.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2.12. Nominations</U>. Nominations for the election of directors may be made by
the directors or a committee appointed by the directors or by any shareholder entitled to vote in
the election of directors generally; however, any shareholder entitled to vote in the election of
directors generally may nominate one or more persons for election as directors at a meeting only if
written notice of such shareholder&#146;s intent to make such nomination or nominations has been given
to the Secretary of the corporation. Such notice shall be personally delivered to, or mailed by
United States mail, postage prepaid, and received at, the principal executive offices of the
corporation not less than sixty (60)&nbsp;days, nor more than ninety (90)&nbsp;days,


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<P align="left" style="font-size: 10pt">prior to the first anniversary of the date of the preceding year &#145;s annual meeting (or, if the
date of the annual meeting is changed by more than thirty (30)&nbsp;days from the anniversary date of
the preceding year&#146;s annual meeting or in the case of a special meeting, within seven (7)&nbsp;days
after the corporation mails or otherwise gives public notice of the meeting). Each such notice
shall set forth: (A)&nbsp;the name and address of the shareholder who intends to make the nomination and
of the person or persons to be nominated; (B)&nbsp;a representation that the shareholder is a holder of
record of shares of the corporation entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in the notice; (C)&nbsp;a
description of all arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (D)&nbsp;such other information regarding each nominee
proposed by such shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, by the directors; and (E)&nbsp;the consent of each nominee to
serve as a director of the corporation if so elected. The chairman of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the foregoing procedure.


<P align="center" style="font-size: 10pt"><B>ARTICLE THREE</B>



<P align="center" style="font-size: 10pt"><B>OFFICERS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;3.01. Officers</U>. The officers of the corporation to be elected by the
directors shall be a chief executive officer, president, a secretary, a treasurer, and, if desired,
one or more executive vice presidents and such other officers and assistant officers as the
directors may from time to time elect. The directors may elect a chairman of the board, who must
be a director. Officers need not be shareholders of the corporation. Any two or more offices may
be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in
more than one capacity if such instrument is required by law, the articles or the regulations to be
executed, acknowledged, or verified by two or more officers.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;3.02. Tenure of Office</U>. The officers of the corporation shall hold office at
the pleasure of the directors and need not be elected annually. Any officer of the corporation may
be removed, either with or without cause, at any time, by the affirmative vote of a majority of all
the directors then in office; such removal, however, shall be without prejudice to the contract
rights, if any, of the person so removed.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;3.03. Duties of Officers.</U> All officers shall, respectively, have such powers
and perform such duties as the law, the articles, the regulations or the directors may from time to
time provide. Unless otherwise provided by the directors:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;The chairman of the board, if any, shall preside at all meetings of the directors.


<P align="center" style="font-size: 10pt">8
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;The chief executive officer shall be the active executive officer of the corporation and
shall exercise supervision over the other officers, subject, however, to the control of the board
of directors. The chief executive officer shall be entitled to exercise the powers of the
president, however conferred. The chief executive officer shall have such other powers and duties
as the directors shall from time to time assign to him. The chief executive officer of the
corporation shall preside at all meetings of shareholders.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;The president shall be the chief administrative officer of the corporation and shall,
subject to the control of the board of directors and, if there be one, the chief executive officer,
exercise supervision over the business of the corporation and shall have, among such additional
powers and duties as the directors or, if there be one, the chief executive officer may from time
to time assign to him, including the power and authority to sign all certificates evidencing shares
of the corporation and all deeds, mortgages, bonds, contracts, notes and other instruments
requiring the signature of the president of the corporation. In the absence of the chairman of the
board and if there be one, the chief executive officer, it shall be the duty of the president to
preside at all meetings of shareholders.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)&nbsp;In the absence of the president or in the event of the president&#146;s inability or refusal to
act, the vice president, if any (or in the event there be more than one vice president, the vice
presidents in the order designated, or in the absence of any designation, then in the order of
their election), shall perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all restrictions upon the president. The vice presidents shall perform
such other duties and have such other powers as the president may from time to time prescribe.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)&nbsp;The secretary, or an assistant secretary, if any, in case of the absence or inability to
act of the secretary, shall keep minutes of all the proceedings of the shareholders and the
directors and make a proper record of the same and shall perform such other duties and have such
other powers as the president may from time to time prescribe.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F)&nbsp;The treasurer, or an assistant treasurer, if any, in case of the absence or inability to
act of the treasurer, shall be the chief financial officer of the corporation, shall exercise
supervision over the finances of the corporation and shall perform such other duties and have such
other powers as the president may from time to time prescribe.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;3.04. Executives.</U> Notwithstanding the foregoing, the chief executive officer
and president of the corporation may appoint the executives of the corporation, who shall not be
officers of the corporation for purposes of Ohio law but who may have titles below the title of
executive vice president, and may fix their salaries. Such executives shall serve at the pleasure
of the chief executive officer and president of the corporation and shall have such powers and
perform such duties as may be assigned by the chief executive officer or president of the
corporation.


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<P align="center" style="font-size: 10pt"><B>ARTICLE FOUR</B>



<P align="center" style="font-size: 10pt"><B>SHARES</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;4.01. Certificates</U>. Certificates evidencing ownership of shares of the
corporation shall be issued to those entitled to them. Each certificate evidencing shares of the
corporation:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;shall bear (i)&nbsp;the signatures of the chairman of the board, the president, or a vice
president, and of the secretary, an assistant secretary, the treasurer, or an assistant treasurer
(except that when any such certificate is countersigned by an incorporated transfer agent or
registrar, such signatures may be facsimile, engraved, stamped or printed) and (ii)&nbsp;such recitals
as may be required by law; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;may bear such other recitals as are permitted by law.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;4.02. Lost, Wrongfully Taken or Destroyed Certificates</U>. Except as otherwise
provided by law, where the owner of a certificate evidencing shares of the corporation claims that
such certificate has been lost, destroyed or wrongfully taken, the directors must cause the
corporation to issue a new certificate in place of the original certificate if the owner:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;so requests before the corporation has notice that such original certificate has been
acquired by a protected purchaser;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;files with the corporation, unless waived by the directors, an indemnity bond, with surety
or sureties satisfactory to the corporation, in such sums as the directors may, in their
discretion, deem reasonably sufficient as indemnity against any loss or liability that the
corporation may incur by reason of the issuance of each such new certificate; and


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;satisfies any other reasonable requirements which may be imposed by the directors, in
their discretion.


<P align="center" style="font-size: 10pt"><B>ARTICLE FIVE</B>



<P align="center" style="font-size: 10pt"><B>INDEMNIFICATION AND INSURANCE</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;5.01. Indemnification</U>. The corporation shall indemnify each person who was or
is a party or is threatened to be made a party to, or is or was involved or is threatened to be
involved (as a deponent, witness or otherwise) in, any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, arbitrative, administrative or investigative
(including, without limitation, any threatened, pending or completed action, suit or proceeding by
or in the right of the corporation)(hereinafter a &#147;Proceeding&#148;), by reason of the fact that such
person is or was a director or officer of the corporation or is or was serving at the request of
the corporation as a director, trustee, officer, partner, member or manager, of another
corporation,


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<P align="left" style="font-size: 10pt">limited liability company, partnership, joint venture, trust, employee benefit plan or other
enterprise (hereinafter an &#147;Indemnitee&#148;), against all expenses (including, without limitation,
attorneys&#146; fees, filing fees, court reporters&#146; fees, expert witnesses&#146; fees and transcript
costs)(hereinafter &#147;Expenses&#148;), judgments, fines, excise taxes assessed with respect to an employee
benefit plan, penalties and amounts paid in settlement (such judgments, fines, excise taxes,
penalties and amounts paid in settlement are hereinafter referred to as &#147;Liabilities&#148;) actually
and reasonably incurred by the Indemnitee in connection with any Proceeding, unless and only to the
extent that it is determined, as provided in Section&nbsp;5.04, that any such indemnification should be
denied or limited. Notwithstanding the foregoing, except as to claims to enforce rights conferred
on an Indemnitee by this Article&nbsp;Five that may be brought, initiated or otherwise asserted by the
Indemnitee pursuant to Section&nbsp;5.07, the corporation shall not be required by this Section&nbsp;5.01 to
indemnify an Indemnitee in connection with any claim (including, without limitation, any original
claim, counterclaim, cross-claim or third-party claim) in a Proceeding, which claim is brought,
initiated or otherwise asserted by the Indemnitee, unless the bringing, initiation or assertion of
the claim in the Proceeding by the Indemnitee was authorized or ratified by the Board of Directors
of the corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;5.02. Court-Approved Indemnification</U>. Anything contained in Section&nbsp;5.01 to
the contrary notwithstanding, the corporation shall not indemnify an Indemnitee (A)&nbsp;in such
Indemnitee&#146;s capacity as a director of the corporation in respect of any claim, issue or matter
asserted in a Proceeding by or in the right of the corporation as to which the Indemnitee shall
have been adjudged to be liable to the corporation for an act or omission undertaken by such
Indemnitee in such capacity with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interests of the corporation, (B)&nbsp;in such Indemnitee&#146;s capacity
other than that of director of the corporation in respect of any claim, issue or matter asserted in
a Proceeding by or in the right of the corporation as to which the Indemnitee shall have been
adjudged to be liable to the corporation for negligence or misconduct or (C)&nbsp;in any Proceeding by
or in the right of the corporation in which the only liability is asserted pursuant to Section
1701.95 of the Ohio Revised Code against the Indemnitee, unless and only to the extent that the
court of common pleas in the county in Ohio in which the principal office of the corporation is
located or the court in which a Proceeding is brought (each, a &#147;Designated Court&#148;) shall determine,
upon application of either the Indemnitee or the corporation, that, despite the adjudication or
assertion of such liability, and in view of all the circumstances of the case, the Indemnitee is
fairly and reasonably entitled to such indemnity as the Designated Court shall deem proper. In the
event of any such determination by the Designated Court, the corporation shall timely pay any
indemnification determined by the Designated Court to be proper as contemplated by this Section
5.02.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;5.03. Indemnification for Expenses When Successful on the Merits or
Otherwise</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;Anything contained in this Article&nbsp;Five to the contrary notwithstanding, to the extent
that an Indemnitee has been successful on the merits or otherwise in defense of any Proceeding or
in defense of any claim, issue or matter asserted therein, the Indemnitee shall be promptly
indemnified by the corporation against all Expenses actually and reasonably incurred by Indemnitee
in connection therewith.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;Without limiting the generality of the foregoing, an Indemnitee claiming indemnification
under Section&nbsp;5.03 shall be deemed to have been successful on the merits or otherwise in defense of
any Proceeding or in defense of any claim, issue or matter asserted therein, if such Proceeding
shall be terminated as to such Indemnitee, with or without prejudice, without the entry of a
judgment or order against the Indemnitee, without a conviction of the Indemnitee, without the
imposition of a fine or penalty upon the Indemnitee, and without the Indemnitee&#146;s payment or
agreement to pay any other Liability (whether or not any such termination is based upon a judicial
or other determination of lack of merit of the claims made against the Indemnitee or otherwise
results in a vindication of the Indemnitee).


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;5.04. Determination</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;Any indemnification covered by Section&nbsp;5.01 and that is not precluded by Section&nbsp;5.02
shall be timely paid by the corporation unless and only to the extent that a determination is made
that such indemnification shall be denied or limited because (i)&nbsp;the Indemnitee did not act in good
faith and in a manner which the Indemnitee reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal Proceeding, the Indemnitee had
reasonable cause to believe that such Indemnitee&#146;s conduct was unlawful, or (ii)&nbsp;the Indemnitee did
not actually or reasonably incur an Expense or Liability to be indemnified.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;Any indemnification covered by Section&nbsp;5.03 shall be timely paid by the corporation unless
and only to the extent that a determination is made that such indemnification shall be denied or
limited because the Indemnitee did not actually or reasonably incur the Expense to be indemnified.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;Each determination required or permitted by this Section&nbsp;5.04 may be made only by a
Designated Court.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;5.05. Presumptions</U>. Upon making any request for indemnification under this
Article&nbsp;Five, the Indemnitee shall be presumed to be entitled to indemnification under this Article
Five, and the corporation shall have the burden of proof in the making of any determination
contrary to such presumption by clear and convincing evidence. Without limiting the generality of
the foregoing, for purposes of this Article&nbsp;Five, it shall be presumed that (A)&nbsp;the Indemnitee
acted in good faith and in a manner which the Indemnitee reasonably believed to be in or not
opposed to the best interests of the corporation, (B)&nbsp;with respect to any criminal Proceeding, the
Indemnitee had no reasonable cause to believe that such Indemnitee&#146;s conduct was unlawful and (C)
each Liability and Expense for which indemnification is claimed was actually and reasonably
incurred by the Indemnitee. The termination of any Proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, rebut any
such presumption.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;5.06. Advances for Expenses</U>. The Expenses incurred by an Indemnitee in
defending a Proceeding shall be paid by the corporation in advance of the final disposition of such
Proceeding at the request of the Indemnitee within thirty days after the receipt by the


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<P align="left" style="font-size: 10pt">corporation of a written statement or statements from the Indemnitee requesting such advance
or advances from time to time. Such statement or statements shall reasonably evidence the Expenses
incurred by the Indemnitee in connection with the defense of the Proceeding and shall include or be
accompanied by a written undertaking by or on behalf of such Indemnitee to repay such amount if it
shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the
corporation in respect of such Expense.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;5.07. Right of Indemnitee to Bring Suit</U>. If (A)&nbsp;a claim for indemnification
under this Article&nbsp;Five is not paid in full by the corporation within sixty days after a written
claim has been received by the corporation or (B)&nbsp;a claim for advancement of Expenses under Section
5.06 is not paid in full by the corporation within thirty days after a written claim has been
received by the corporation, the Indemnitee may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the
Indemnitee shall be entitled to be indemnified for all the Expenses actually and reasonably
incurred by the Indemnitee in prosecuting such claim in enforcing the Indemnitee&#146;s rights under
this Article&nbsp;Five.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;5.08. Article&nbsp;Five Not Exclusive</U>. The indemnification provided by this
Article&nbsp;Five shall not be exclusive of, and shall be in addition to, any other rights to which any
person seeking indemnification may be entitled under the articles, the regulations, any agreement,
a vote of shareholders or disinterested directors, or otherwise, both as to action in such person&#146;s
official capacity and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, trustee, partner, member or
manager and shall inure to the benefit of the heirs, executors and administrators of such a person.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;5.09. Insurance</U>. The corporation may purchase and maintain insurance, or
furnish similar protection, including but not limited to trust funds, letters of credit, or
self-insurance, for or on behalf of any person who is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the corporation as a director,
trustee, officer, employee, partner, member, manager or agent of another corporation, limited
liability company, partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person&#146;s status as such, whether or not the corporation would have
the obligation or the power to indemnify such person against such liability under the provisions of
this Article&nbsp;Five. Insurance may be purchased from or maintained with a person in which the
corporation has a financial interest.


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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;5.10. Venue; Jurisdiction</U>.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;Any action, suit or proceeding to determine a right to indemnification under this Article
Five may be maintained by an Indemnitee claiming such indemnification or by the corporation only in
a Designated Court. Each of the corporation and, by claiming or accepting such indemnification,
any such Indemnitee consents to the exercise of jurisdiction by a Designated Court in any such
action, suit or proceeding.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;Any action, suit or proceeding to determine (i)&nbsp;the obligation of an Indemnitee under this
Article&nbsp;Five to repay any Expenses previously advanced by the corporation or (ii)&nbsp;the obligation of
the corporation under this Article&nbsp;Five to advance any Expenses may be maintained by the
corporation or by such Indemnitee only in a Designated Court. Each of the corporation and, by
claiming or accepting such advancements, any such Indemnitee consents to the exercise of
jurisdiction by a Designated Court in any such action, suit or proceeding.


<P align="center" style="font-size: 10pt"><B>ARTICLE SIX</B>



<P align="center" style="font-size: 10pt"><B>MISCELLANEOUS</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;6.01. Amendments</U>. The regulations may be amended, or new regulations may be
adopted, at a meeting of shareholders held for such purpose, only by the affirmative vote of the
holders of shares entitling them to exercise not less than a majority of the voting power of the
corporation on such proposal, or without a meeting by the written consent of the holders of shares
entitling them to exercise not less than a majority of the voting power of the corporation on such
proposal.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;6.02. Actions Without a Meeting</U>. Anything contained in the regulations to the
contrary notwithstanding, except as provided in Section&nbsp;6.01, any action which may be authorized or
taken at a meeting of the shareholders or of the directors or of a committee of the directors, as
the case may be, may be authorized or taken without a meeting with the affirmative vote or approval
of, and in a writing or writings signed by, all the shareholders who would be entitled to notice of
a meeting of the shareholders held for such purpose, or all the directors, or all the members of
such committee of the directors, respectively, which writings shall be filed with or entered upon
the records of the corporation.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;6.03. Seal</U>. If the corporation adopts a seal, it shall be circular,
about two inches in diameter, with the name of the corporation engraved around the margin and the
word &#147;SEAL&#148; engraved across the center; provided, however, that nothing contained in this Section
6.03 shall be construed to require the corporation to obtain a seal or to use a seal for any
purpose.



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<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>4
<FILENAME>l19155aexv4w1.txt
<DESCRIPTION>EXHIBIT 4.1
<TEXT>
<PAGE>

                                                                     EXHIBIT 4.1

                    WITHOUT PAR VALUE

NUMBER             THIS CERTIFICATE IS        [DSW INC. LOGO]    CLASS A
[DSW GRAPHIC LOGO] TRANSFERABLE IN CLEVELAND,                  COMMON SHARES
                            OHIO

                    INCORPORATED UNDER THE                        SHARES
                   LAWS OF THE STATE OF OHIO

                                                              CUSIP 23334L 10 2

                                                              SEE REVERSE FOR
                                                                   CERTAIN
                                                                 DEFINITIONS

              THIS CERTIFIES THAT

              IS THE OWNER OF

                    FULLY PAID AND NON-ASSESSABLE SHARES OF THE CLASS A
              COMMON SHARES, WITHOUT PAR VALUE PER SHARE, OF DSW INC.
              transferable on the books of the Corporation by the holder
              hereof in person or by duly authorized attorney upon surrender
              of this certificate properly endorsed.

                    This certificate is not valid until countersigned and
              registered by the Transfer Agent and Registrar.

                    Witness the facsimile signatures of the Corporation's
              duly authorized officers.

              Dated:

<TABLE>
<S>                           <C>                  <C>             <C>             <C>
                                                                   /s/ [ILLEGIBLE]
COUNTERSIGNED AND REGISTERED:                                      ---------------
     NATIONAL CITY BANK                                                CHAIRMAN
       (Cleveland, Ohio)      TRANSFER AGENT
                              AND REGISTRAR

 BY                                                /s/ [ILLEGIBLE]                 /s/ [ILLEGIBLE]
                                                   ---------------                 ---------------
                              AUTHORIZED SIGNATURE VICE CHAIRMAN                    TREASURER
</TABLE>

<PAGE>

      The Corporation will furnish without charge within five days after receipt
of written request therefor to each shareholder who so requests a statement of
the powers, designations, preferences and relative, participating, optional or
other special rights of each class of shares or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.

      The following abbreviations, when used in the inscription on the face of
this certificate, 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_____
TEN ENT -- as tenants by the entireties                       (Cust)     (Minor)
JT TEN  -- as joint tenants with right of          under Uniform Gifts to Minors
           survivorship and not as tenants          Act_________________________
           in common                                             (State)

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

      For value received, ____________________________ hereby sell, assign and
transfer unto

     PLEASE INSERT SOCIAL SECURITY OR OTHER
        IDENTIFYING NUMBER OF ASSIGNEE
                    [ ]

________________________________________________________________________________
  (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
shares of the Class A Common Shares represented by the within Certificate, and
do hereby irrevocably constitute and appoint

________________________________________________________________________Attorney
to transfer the said Certificate on the books of the within named Corporation
with full power of substitution in the premises.
Dated__________________________________

                                 _______________________________________________
                         NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
                                 CORRESPOND WITH THE NAME AS WRITTEN UPON THE
                                 FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
                                 WITHOUT ALTERATION OR ENLARGEMENT OR ANY
                                 CHANGE WHATEVER.

SIGNATURE(S) GUARANTEED:

___________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN  ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

<TABLE>
<S>                                          <C>
   AMERICAN BANK NOTE COMPANY                PRODUCTION COORDINATOR: MIKE PETERS: 931-490-1714
          711 ARMSTRONG LANE                              PROOF OF JUNE 20, 2005
        COLUMBIA, TENNESSEE 38401                               DSW INC.
             (931) 388-3003                                TSB 20238 BACK
     SALES: R. JOHNS 212-269-0339 X 13       OPERATOR:                   TERESA
/ ETHER 7 / LIVE JOBS / D / DSW/ 20238 BACK                    NEW
</TABLE>

PLEASE INITIAL THE APPROPRIATE SELECTION FOR THIS PROOF: __________ OK AS IS
__________ OK WITH CHANGES __________ MAKE CHANGES AND SEND ANOTHER PROOF
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>5
<FILENAME>l19155aexv10w6.txt
<DESCRIPTION>EXHIBIT 10.6
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.6

                     STANDARD EXECUTIVE EMPLOYMENT AGREEMENT

                                     BETWEEN

                                    DSW INC.

                                       AND

                                  DEREK UNGLESS

This Standard Executive Employment Agreement ("Agreement") by and between DSW
Inc. ("Company") and Derek Ungless ("Executive"), collectively, the "Parties,"
is effective as of the date signed ("Effective Date") and supercedes and
replaces any other oral or written employment-related agreement between the
Executive and the Company.

                                  1.00 DURATION

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

                      2.00 EXECUTIVE'S EMPLOYMENT FUNCTION

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

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

                                3.00 COMPENSATION

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

3.01 BASE SALARY. The Company will pay to the Executive an annualized base
salary of $350,000 which may be adjusted at the Company's discretion ("Base
Salary"). The Executive's Base Salary will be paid in installments that
correspond with the Company's normal payroll practices.

<PAGE>

3.02 CASH INCENTIVE BONUS.

      [1] The Executive will be eligible to receive a Cash Incentive Bonus under
      the terms of the Retail Ventures, Inc. Incentive Compensation Plan
      ("Incentive Plan"), as modified by the Company. The Company intends to
      provide the Executive with a cash bonus of 50 percent of Base Salary based
      on the Executive's achievement of the incentive goals established by the
      Company. Subsequent annual cash bonuses will be based, in the Company's
      discretion, on Incentive Goals and percentages of Base Salary determined
      under the Incentive Plan that is then in effect.

      [2] PAYMENT OF CASH BONUS. Any Cash Incentive Bonus will be payable, in
      cash, consistent with the Company's normal bonus payment policy.

3.03 EQUITY INCENTIVE. The Company shall negotiate in good faith with Executive
concerning Executive's equity incentive compensation to provide equity incentive
compensation to a level that is commensurate with Executive's new position. It
is agreed that these enhancements may include grants of stock appreciation
rights and/or restricted stock units and other equity or equity-based
compensation awards. Any award provided will subtract from the agreed-upon
vesting schedule the time the Executive has already served in his position.

      [1] STANDARD STOCK OPTIONS. Subject to the terms of the DSW Inc. 2005
      Equity Incentive Plan and any applicable stock option agreement, the
      Company will grant to the Executive options to purchase shares of the
      Company's common stock at a per share exercise price as approved by the
      Board of Directors. These options would typically become exercisable
      pursuant to the terms set forth in the Company's standard 5-year schedule.

      [2] RESTRICTED STOCK OPTIONS. Subject to the terms of the DSW Inc. 2005
      Equity Incentive Plan and any applicable Restricted Stock grant agreement,
      Executive is eligible to receive Restricted Stock equity grants as
      approved by the Board of Directors.

      [3] ADDITIONAL EQUITY INCENTIVE. Subject to the Company's discretion, the
      Executive will be eligible for additional discretionary grants of stock
      options.

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

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

3.06 EXPENSES. The Executive is entitled to receive prompt reimbursement for all
normal and reasonable expenses incurred while performing services under this
Agreement, including all

                                                     Initials ______ Date ______

                                        2
<PAGE>

reasonable travel expenses. Reimbursement for these expenses will be made as
soon as administratively feasible after the date the Executive submits
appropriate evidence of the expenditure and otherwise complies with the
Company's business expense reimbursement policy.

3.07 CAR. The Company will provide Executive with the applicable car allowance
under the Company's executive car allowance program, and with a fuel card. The
allowance will be grossed-up for taxes at the 45 percent tax rate. (The term
"grossed up" as used in this Agreement refers to a payment to Executive that,
after reduction for any income or excise taxes due, is equal to the net amount
payable.)

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

                          4.00 EXECUTIVE'S OBLIGATIONS

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

4.01 SCOPE OF DUTIES. The Executive will:

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

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

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

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

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

4.02 CONFIDENTIAL INFORMATION.

      [1] OBLIGATION TO PROTECT CONFIDENTIAL INFORMATION. The Executive
      acknowledges that the Company and its subsidiaries, parent corporation and
      affiliated entities (collectively, "Group" and separately, "Group Member")
      have a legitimate and continuing proprietary interest in the protection of
      Confidential Information (as defined

                                                     Initials ______ Date ______

                                        3
<PAGE>

      in Section 4.02[2]) and have invested, and will continue to invest,
      substantial sums of money to develop, maintain and protect Confidential
      Information. The Executive agrees [A] during and after employment with all
      Group Members [I] that any Confidential Information will be held in
      confidence and treated as proprietary to the Group, [II] not to use or
      disclose any Confidential Information except to promote and advance the
      Group's business interests and [B] immediately upon separation from
      employment with all Group Members, to return to the Company any
      Confidential Information.

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

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

                                                     Initials ______ Date ______

                                        4
<PAGE>

      any Group Member may alter or modify the Intellectual Property at the
      Group Member's sole discretion, and the Executive waives all right to
      claim or disclaim authorship.

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

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

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

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

      [1] COOPERATION WITH THE COMPANY. The Executive agrees [A] to be
      reasonably available to answer questions for the Group's (and any Group
      Member's) officers regarding any matter, project, initiative or effort for
      which the Executive was responsible while employed by any Group Member and
      [B] to cooperate with the Group (and with each Group Member) during the
      course of all third-party proceedings arising out of the Group's (and any
      Group Member's) business about which the Executive has knowledge or
      information. For purposes of this Agreement, [C] "proceedings" includes
      internal

                                                     Initials ______ Date ______

                                        5
<PAGE>

      investigations, administrative investigations or proceedings and lawsuits
      (including pre-trial discovery and trial testimony) and [D] "cooperation"
      includes [I] the Executive's being reasonably available for interviews,
      meetings, depositions, hearings and/or trials without the need for
      subpoena or assurances by the Group (or any Group Member), [II] providing
      any and all documents in the Executive's possession that relate to the
      proceeding, and [III] providing assistance in locating any and all
      relevant notes and/or documents.

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

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

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

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

                                                     Initials ______ Date ______

                                        6
<PAGE>

      [5] DEFINITION OF CAUSE. For these purposes, Cause means the Executive's
      [A] failure to substantially perform the duties associated with employment
      under this Agreement; [B] willful, illegal or grossly negligent conduct
      that is materially injurious to the Company or any Group Member monetarily
      or otherwise; [C] violation of laws or regulations governing the Company
      or to any Group Member; [D] breach of any fiduciary duty owed to the
      Company or any Group Member; [E] misrepresentation or dishonesty which the
      Company determines has had or is likely to have a material adverse effect
      upon the Company's or any Group Member's operations or financial
      condition; [F] breach of Section 4.00 of this Agreement; [G] involvement
      in any act of moral turpitude that has an injurious effect on the Company
      (or any Group Member) or its reputation; or [H] breach of the terms of any
      non-solicitation or confidentiality clauses contained in an employment
      agreement(s) with a former employer. The Company's dissatisfaction with
      the Executive's performance, or the business results achieved, shall not
      constitute Cause under this Section.

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

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

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

                      5.00 TERMINATION AND RELATED BENEFITS

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

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

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

      [2] APPLICATION OF PRO RATA. Any pro rata share required to be paid under
      Section 5.00 will be based on the number of days between the first day of
      the fiscal year

                                                     Initials ______ Date ______

                                        7
<PAGE>

      during which the Executive terminates employment and the date that the
      Executive terminates employment divided by the number of days in the
      fiscal year during which the Executive terminates employment.

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

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

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

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

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

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

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

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

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

                                                     Initials ______ Date ______

                                        8
<PAGE>

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

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

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

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

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

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

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

      [5] DEFINITION OF CAUSE. For these purposes, Cause means the Executive's
      [A] failure to substantially perform the duties associated with employment
      under this Agreement; [B] willful, illegal or grossly negligent conduct
      that is materially injurious to the Company or any Group Member monetarily
      or otherwise; [C] violation of laws or regulations governing the Company
      or to any Group Member; [D] breach of any fiduciary duty owed to the
      Company or any Group Member; [E] misrepresentation or dishonesty which the
      Company determines has had or is likely to have a material adverse effect
      upon the Company's or any Group Member's operations or financial
      condition; [F] breach of Section 4.00 of this Agreement; [G] involvement
      in any act of moral turpitude that has an injurious effect on the Company
      (or any Group Member) or its reputation; or [H] breach of the terms of any
      non-solicitation or confidentiality clauses contained in an Standard
      Executive Employment Agreement(s) with a former employer. The Company's
      dissatisfaction with the Executive's performance, or the business results
      achieved, shall not constitute Cause under this Section.

                                                     Initials ______ Date ______

                                        9
<PAGE>

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

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

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

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

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

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

5.06 INVOLUNTARY TERMINATION WITHOUT CAUSE. The Company may terminate the
Executive's employment at any time Without Cause (as defined below) by
delivering to the Executive a written notice specifying the date termination is
to be effective. Subject to Section 5.04[6], if this notice is given and if all
requirements of this Agreement are met (including those imposed under Section
7.00), the Company will make the following payments to the Executive as of the
effective date of termination Without Cause:

      [1] BASE SALARY. For 12 months beginning on the date of termination
          Without Cause, the Company will continue to pay the Executive's Base
          Salary at the rate in effect on the date of termination Without
          Cause. As a condition of this salary continuation, the Executive is
          expected to promptly and reasonably pursue new employment. If during
          the 12 months of salary continuation the Executive becomes employed
          either as an employee or a consultant, the Executive's Base Salary
          paid by the Company will be reduced by the amount of Base Salary or
          consultant compensation paid by the new employer or entity for the
          remainder of the 12 month salary continuation period. The Executive
            agrees to immediately

                                                     Initials ______ Date ______

                                        10
<PAGE>

            notify the Company of any subsequent employment or consulting work
            during the period of salary continuation.

      [2] HEALTH CARE. The Company will reimburse the Executive for the cost of
      maintaining continuing health coverage under COBRA for a period of no more
      than 12 months following the date of termination, less the amount the
      Executive is expected to pay as a regular employee premium for such
      coverage. Such reimbursements will cease if the Executive becomes eligible
      for similar coverage under another benefit plan.

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

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

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

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

                                   6.00 NOTICE

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

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

                                  7.00 RELEASE

In exchange for the payments and benefits described in this Agreement, as well
as any and all other mutual promises made in this Agreement, the Executive and
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, legatees

                                                     Initials ______ Date ______

                                        11
<PAGE>

and assigns agree to release and forever discharge the Company, the Group and
each Group Member and their executives, officers, directors, agents, attorneys,
successors and assigns, from any and all claims, suits and/or causes of action
that grow out of or are in any way related to the Executive's recruitment to or
employment with the Company and all Group Members, other than any claim that the
Company has breached this Agreement. This release includes, but is not limited
to, any claims that the Company, the Group or any Group Member violated the
Employee Retirement and Income Security Act of 1974; the Age Discrimination in
Employment Act; the Older Worker's Benefit Protection Act; the Americans with
Disabilities Act; Title VII of the Civil Rights Act of 1964 (as amended); the
Family and Medical Leave Act; any law prohibiting discrimination, harassment or
retaliation in employment; any claim of promissory estoppel or detrimental
reliance, defamation, intentional infliction of emotional distress; or the
public policy of any state, or any federal, state or local law. The Executive
agrees, upon termination of employment with all Group Members, to reaffirm and
execute this release in writing. If the Executive fails to reaffirm and execute
this release, the Executive agrees to forego any payment from the Company as if
the Executive had terminated employment voluntarily under Section 5.05.
Specifically, the Executive agrees that a necessary condition for the payment of
any of the amounts described in Section 5.00 in the event of termination (except
termination under Section 5.02) is the Executive's reaffirmation of this release
upon termination of employment. The Executive acknowledges that the Executive is
an experienced senior executive knowledgeable about the claims that might arise
in the course of employment with the Company and knowingly agrees that the
payments upon termination (except those payable upon the Executive's death)
provided for in this Agreement are satisfactory consideration for the release of
all possible claims. The Executive is advised to consult with an attorney prior
to executing this Agreement. The Executive acknowledges that 21 days have been
given to consider this release. The Executive may revoke consent to this
Agreement by delivering a written notice of such revocation to the Company
within seven days of signing this Agreement. If the Executive revokes this
consent, this Agreement will become null and void and the Executive must return
any compensation received under it, except salary earned for actual work.

                                 8.00 INSURANCE

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

                                9.00 ARBITRATION

9.01 ACKNOWLEDGEMENT OF ARBITRATION. Unless stated otherwise in this Agreement,
the Parties agree that arbitration is the sole and exclusive remedy for each of
them to resolve and redress any dispute, claim or controversy involving the
interpretation of this Agreement or the terms, conditions or termination of this
Agreement or the terms, conditions or termination of Executive's employment with
the Group and with each Group Member, including any claims for

                                                     Initials ______ Date ______

                                       12
<PAGE>

any tort, breach of contract, violation of public policy or discrimination,
whether such claim arises under federal or state law.

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

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

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

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

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

                                                     Initials ______ Date ______

                                       13
<PAGE>

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

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

                            10.00 GENERAL PROVISIONS

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

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

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

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

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

                                                     Initials ______ Date ______

                                       14
<PAGE>

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

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

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

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

10.07 MISCELLANEOUS.

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

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

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

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

                                                     Initials ______ Date ______

                                       15
<PAGE>

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

                                       EXECUTIVE

                                       /s/ Derek Ungless
                                       -----------------------------------------

                                       Signed:  June 26, 2005

                                       DSW INC.

                                       By: /s/ Kathleen Maurer
                                           -------------------------------------

                                       Signed:  June 28, 2005

                                                     Initials ______ Date ______

                                       16
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>6
<FILENAME>l19155aexv10w7.txt
<DESCRIPTION>EXHIBIT 10.7
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.7

                    DSW Inc. SUMMARY OF DIRECTOR COMPENSATION

1.    Pursuant to the terms of the DSW Inc. 2005 Equity Incentive Plan (the
      "Equity Incentive Plan"), each of Messrs. Miller, Robbins, Sonnenberg and
      Tanenbaum and Ms. Friedlander receives:

      o     an annual cash retainer of $50,000, payable in quarterly
            installments of $12,500 beginning on the last day of each fiscal
            quarter; and

      o     on the date of each annual meeting of the shareholders for the
            purpose of electing directors, an automatic grant of a number of
            Stock Units to each director serving after such annual meeting
            determined by dividing $50,000 by the "Fair Market Value" of a share
            of "Stock" on the "Grant Date" pursuant to Section 7.01[3] of the
            Equity Incentive Plan;

2.    Mr. Tanenbaum receives an additional annual cash retainer of $5,000,
      payable in quarterly installments of $1,250 on the last business day of
      each fiscal quarter, for service as the Chair of the Nominating and
      Corporate Governance Committee;

3.    Mr. Miller receives an additional annual cash retainer of $7,500, payable
      in quarterly installments of $1,850 on the last business day of each
      fiscal quarter, for service as the Chair of the Compensation Committee;
      and

4.    Mr. Robbins receives an additional annual cash retainer of $10,000,
      payable in quarterly installments of $2,500 on the last business day of
      each fiscal quarter, for service as the Chair of the Audit Committee.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.11
<SEQUENCE>7
<FILENAME>l19155aexv10w11.txt
<DESCRIPTION>EXHIBIT 10.11
<TEXT>
<PAGE>

                                                                   Exhibit 10.11

                          LOAN AND SECURITY AGREEMENT
                                    DSW INC.
                               THE LEAD BORROWER

                                      FOR:
                                    DSW INC.
                            DSW SHOE WAREHOUSE, INC.

                                 THE BORROWERS

                      NATIONAL CITY BUSINESS CREDIT, INC.
                 ADMINISTRATIVE AGENT AND COLLATERAL AGENT FOR
                 THE REVOLVING CREDIT LENDERS REFERENCED HEREIN

                               NATIONAL CITY BANK
                           AS LETTER OF CREDIT ISSUER

                       THE CIT GROUP/BUSINESS CREDIT, INC.
                              BANK OF AMERICA, N.A.
                            AS CO-SYNDICATION AGENTS

                      GENERAL ELECTRIC CAPITAL CORPORATION
                         WELLS FARGO RETAIL FINANCE, LLC
                           AS CO-DOCUMENTATION AGENTS

                               NATIONAL CITY BANK
                                AS LEAD ARRANGER

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                           <C>
LOAN AND SECURITY AGREEMENT...............................................     i

Article 1 - Definitions...................................................     1

Article 2 - The Revolving Credit:.........................................    39
   2.1.   Establishment of  Revolving Credit..............................    39
   2.2.   Advances in Excess of Borrowing Base (OverLoans)................    39
   2.3.   Risks of Value of Collateral....................................    40
   2.4.   Commitment to Make Revolving Credit Loans and Support Letters
          of Credit.......................................................    40
   2.5.   Revolving Credit Loan Requests..................................    40
   2.6.   Suspension of Revolving Credit..................................    42
   2.7.   Making of Revolving Credit Loans................................    42
   2.8.   SwingLine Loans.................................................    43
   2.9.   The Loan Account................................................    44
   2.10.  The Revolving Credit Notes......................................    45
   2.11.  Payment of The Loan Account.....................................    45
   2.12.  Interest on Revolving Credit Loans..............................    47
   2.13.  Underwriting Fee; Collateral Monitoring Fee.....................    47
   2.14.  Unused Line Fee.................................................    48
   2.15.  Concerning Fees.................................................    48
   2.16.  Agent's and Revolving Credit Lenders' Discretion................    48
   2.17.  Procedures For Issuance of L/Cs and Banker's Acceptances........    48
   2.18.  Fees For L/Cs and Banker's Acceptances..........................    50
   2.19.  Concerning L/C's and Banker's Acceptances.......................    52
   2.20.  Changed Circumstances...........................................    53
   2.21.  Designation of Lead Borrower as Borrowers' Agent................    54
   2.22.  Revolving Credit Lenders' Commitments...........................    55
   2.23.  Payments........................................................    56

Article 3 - Conditions Precedent:.........................................    57
   3.1.   Corporate Due Diligence.........................................    57
   3.2.   Opinions........................................................    57
   3.3.   Additional Documents............................................    58
   3.4.   Officers' Certificates..........................................    58
   3.5.   Representations and Warranties..................................    58
   3.6.   Minimum Day One Availability....................................    58
   3.7.   Senior Non-convertible facility.................................    58
   3.8.   DSW Initial public offering.....................................    58
   3.9.   Repayment of Existing Indebtedness..............................    58
   3.10.  Consents........................................................    58
   3.11.  Appraisals and Commercial Finance Examinations..................    58
</TABLE>


                                       ii

<PAGE>

<TABLE>
<S>                                                                           <C>
   3.12.  Financial Information...........................................    58
   3.13.  Material Agreements.............................................    59
   3.14.  Litigation......................................................    59
   3.15.  Perfection of Encumbrances......................................    59
   3.16.  All Fees and Expenses Paid......................................    59
   3.17.  Cash Management.................................................    59
   3.18.  Insurance.......................................................    59
   3.19.  Separation and Service Agreements...............................    60
   3.20.  No Loan Party in Default........................................    60
   3.21.  No Adverse Change...............................................    60
   3.22.  Certain Changes.................................................    60
   3.23.  Benefit of Conditions Precedent.................................    60

Article 4 - General Representations and Warranties........................    60
   4.1.   Due Organization. Authorization. No Conflicts...................    60
   4.2.   Trade Names.....................................................    61
   4.3.   Intellectual Property...........................................    62
   4.4.   Locations.......................................................    62
   4.5.   Encumbrances....................................................    62
   4.6.   Indebtedness....................................................    62
   4.7.   Insurance.......................................................    63
   4.8.   Licenses........................................................    63
   4.9.   Leases..........................................................    63
   4.10.  Requirements of Law.............................................    63
   4.11.  Labor Relations.................................................    63
   4.12.  Taxes...........................................................    64
   4.13.  No Margin Stock.................................................    65
   4.14.  Investment and Holding Company Status...........................    65
   4.15.  ERISA...........................................................    66
   4.16.  Hazardous Materials.............................................    66
   4.17.  Litigation......................................................    67
   4.18.  Adequacy of Disclosure..........................................    67
   4.19.  Unrestricted Subsidiaries.......................................    68
   4.20.  No Bankruptcy Filing............................................    68
   4.21.  Patriot Act.....................................................    68
   4.22.  Foreign Asset Control Regulations...............................    68

Article 5 - GENERAL COVENANTS.............................................    68
   5.1.   Payment and Performance of Liabilities..........................    68
   5.2.   Maintenance of existence........................................    68
   5.3.   Trade Names.....................................................    69
   5.4.   Locations.......................................................    69
   5.5.   Encumbrances....................................................    70
   5.6.   Indebtedness....................................................    70
   5.7.   Insurance.......................................................    70
</TABLE>


                                       iii

<PAGE>

<TABLE>
<S>                                                                           <C>
   5.8.   Licenses........................................................    71
   5.9.   Requirements of Law.............................................    71
   5.10.  Labor Relations.................................................    71
   5.11.  Maintain Properties.............................................    71
   5.12.  Taxes...........................................................    72
   5.13.  No Margin Stock.................................................    73
   5.14.  ERISA...........................................................    73
   5.15.  Hazardous Materials.............................................    73
   5.16.  Dividends. Investments. Corporate Action........................    74
   5.17.  Loans...........................................................    75
   5.18.  Protection of Assets............................................    76
   5.19.  Line of Business; Conduct of Business...........................    76
   5.20.  Affiliate Transactions..........................................    77
   5.21.  Additional Subsidiaries.........................................    77
   5.22.  Further Assurances..............................................    78
   5.23.  Adequacy of Disclosure..........................................    78
   5.24.  No Restrictions on Liabilities..................................    78
   5.25.  Unrestricted Subsidiaries.......................................    79

Article 6 - Financial Reporting and Performance Covenants:................    79
   6.1.   Maintain Records................................................    79
   6.2.   Access to Records...............................................    79
   6.3.   Prompt Notice to Administrative Agent...........................    80
   6.4.   Weekly Reports..................................................    82
   6.5.   Monthly Reports.................................................    82
   6.6.   Quarterly Reports...............................................    82
   6.7.   Annual Reports..................................................    82
   6.8.   Officers' Certificates..........................................    83
   6.9.   Inventories, Appraisals, and Audits.............................    84
   6.10.  Additional Financial Information................................    85
   6.11.  Information Delivered Pursuant to Article 6.....................    85
   6.12.  Financial Covenant..............................................    86

Article 7 - USE OF COLLATERAL:............................................    86
   7.1.   Use of Inventory Collateral.....................................    86
   7.2.   Inventory Quality...............................................    86
   7.3.   Adjustments and Allowances......................................    86
   7.4.   Validity of Accounts............................................    87
   7.5.   Notification to Account Debtors.................................    87

Article 8 - CASH MANAGEMENT. PAYMENT OF LIABILITIES:......................    87
   8.1.   Depository Accounts.............................................    87
   8.2.   Credit Card Receipts............................................    88
   8.3.   The Administrative agent's, Collection, and Operating Accounts..    88
   8.4.   Proceeds and Collections........................................    89
</TABLE>


                                       iv

<PAGE>

<TABLE>
<S>                                                                          <C>
   8.5.   Payment of Liabilities..........................................    90
   8.6.   The Operating Account...........................................    91

Article 9 - GRANT OF SECURITY INTEREST:...................................    91
   9.1.   Grant of Security Interest......................................    91
   9.2.   Extent and Duration of Security Interest........................    92

Article 10 - COLLATERAL AGENT AS BORROWERS' ATTORNEY-IN-FACT:.............    93
   10.1.  Appointment as Attorney-In-Fact.................................    93
   10.2.  No Obligation to Act............................................    94

Article 11 - Events of Default:...........................................    94
   11.1.  Failure to Pay the Revolving Credit.............................    94
   11.2.  Failure To Make Other Payments..................................    94
   11.3.  Failure to Perform Covenant or Liability (No Grace Period)......    95
   11.4.  Financial Reporting Requirements................................    95
   11.5.  Failure to Perform Covenant or Liability (Grace Period).........    95
   11.6.  Misrepresentation...............................................    95
   11.7.  Acceleration of Other Debt. Breach of Lease.....................    96
   11.8.  Default Under Other Agreements..................................    96
   11.9.  Uninsured Casualty Loss.........................................    96
   11.10. Attachment. Judgment. Restraint of Business.....................    96
   11.11. Business Failure................................................    96
   11.12. Bankruptcy......................................................    97
   11.13. Termination of Guaranty.........................................    97
   11.14. Challenge to Loan Documents.....................................    97
   11.15. Change in Control...............................................    97

Article 12 - RIGHTS AND REMEDIES UPON DEFAULT:............................    97
   12.1.  Acceleration....................................................    97
   12.2.  Rights of Enforcement...........................................    98
   12.3.  Sale of Collateral..............................................    98
   12.4.  Occupation of Business Location.................................    99
   12.5.  Grant of Nonexclusive License...................................    99
   12.6.  Assembly of Collateral..........................................    99
   12.7.  Rights and Remedies.............................................   100

Article 13 - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:.................   100
   13.1.  Revolving Credit Funding Procedures.............................   100
   13.2.  SwingLine Loans.................................................   100
   13.3.  Administrative Agent's Covering of Fundings:....................   101
   13.4.  Ordinary Course Distributions...................................   103

Article 14 - ACCELERATION AND LIQUIDATION:................................   104
   14.1.  Acceleration Notices............................................   104
   14.2.  Acceleration....................................................   104
</TABLE>


                                        v

<PAGE>

<TABLE>
<S>                                                                          <C>
   14.3.  Initiation of Liquidation.......................................   105
   14.4.  Actions At and Following Initiation of Liquidation..............   105
   14.5.  Collateral Agent' Conduct of Liquidation........................   105
   14.6.  Distribution of Liquidation Proceeds:...........................   106
   14.7.  Relative Priorities To Proceeds of Liquidation..................   106

Article 15 - THE AGENT:...................................................   107
   15.1.  Appointment of The Agent........................................   107
   15.2.  Responsibilities of Agent.......................................   107
   15.3.  Concerning Distributions By the Agent...........................   108
   15.4.  Dispute Resolution..............................................   109
   15.5.  Distributions of Notices and of Documents.......................   109
   15.6.  Confidential Information........................................   110
   15.7.  Reliance by Agent...............................................   110
   15.8.  Non-Reliance on Agent and Other Revolving Credit Lenders........   110
   15.9.  Indemnification.................................................   111
   15.10. Resignation of Agent............................................   111
   15.11. Lead Arranger, Co-Syndication Agents and Co-Documentation
          Agents..........................................................   112

Article 16 - ACTION BY AGENT - CONSENTS - AMENDMENTS - WAIVERS:...........   112
   16.1.  Administration of Credit Facilities.............................   112
   16.2.  Actions Requiring or On Direction of Majority Lenders...........   113
   16.3.  Actions Requiring or On Direction of SuperMajority Lenders......   113
   16.4.  Action Requiring Certain Consent................................   114
   16.5.  Actions Requiring or Directed By Unanimous Consent..............   114
   16.6.  Actions Requiring SwingLine Lender Consent......................   116
   16.7.  Actions Requiring Agent's Consent...............................   116
   16.8.  Miscellaneous Actions...........................................   116
   16.9.  Actions Requiring Lead Borrower's Consent.......................   116
   16.10. NonConsenting Revolving Credit Lender...........................   117

Article 17 - ASSIGNMENTS BY REVOLVING CREDIT LENDERS:.....................   119
   17.1.  Assignments and Assumptions:....................................   119
   17.2.  Assignment Procedures...........................................   119
   17.3.  Effect of Assignment............................................   120

Article 18 - NOTICES:.....................................................   121
   18.1.  Notice Addresses................................................   121
   18.2.  Notice Given....................................................   122
   18.3.  Wire Instructions. Notice Given.................................   122

Article 19 - TERM:........................................................   122
   19.1.     Termination of Revolving Credit..............................   122
   19.2.     Actions On Termination.......................................   123

Article 20 - GENERAL:.....................................................   123
</TABLE>


                                       vi

<PAGE>

<TABLE>
<S>                                                                          <C>
   20.1.  Protection of Collateral........................................   123
   20.2.  Publicity.......................................................   123
   20.3.  Confidentiality.................................................   124
   20.4.  Successors and Assigns..........................................   124
   20.5.  Severability....................................................   125
   20.6.  Amendments.  Course of Dealing..................................   125
   20.7.  Power of Attorney...............................................   125
   20.8.  Application of Proceeds.........................................   126
   20.9.  Increased Costs.................................................   126
   20.10. Replacement of Revolving Credit Lender..........................   127
   20.11. Costs and Expenses of the Agent and Issuer......................   127
   20.12. Copies and Facsimiles...........................................   128
   20.13. Ohio Law........................................................   128
   20.14. Consent to Jurisdiction.........................................   128
   20.15. Indemnification.................................................   129
   20.16. Rules of Construction...........................................   129
   20.17. Agent's Consent.................................................   131
   20.18. Participations..................................................   131
   20.19. Right of Set-Off................................................   131
   20.20. Pledges To Federal Reserve Banks................................   131
   20.21. Maximum Interest Rate...........................................   132
   20.22. Waivers.........................................................   132
   20.23. Additional Waivers..............................................   133
   20.24. Patriot Act Notices.............................................   134
</TABLE>


                                       vii
<PAGE>

                                    EXHIBITS

1.1       Existing L/Cs
1.3     : Intercompany Notes
1.4     : Exempt DDAs
1.5     : Unrestricted Subsidiaries
1.6     : Existing Investments
1.7     : Permitted Dispositions
2.5     : Form of Loan Request
2.8(c)  : SwingLine Note
2.10    : Revolving Credit Note
2.22    : Revolving Credit Lenders' Commitments
3.3     : Additional Documents
4.1     : Corporate Information
4.2     : Trade Names
4.4     : Locations, Leases, and Landlords
4.5(a)  : Encumbrances
4.5(b)  : Consigned Property
4.6     : Indebtedness
4.7     : Insurance Policies
4.8     : Licenses
4.9     : Capital Leases
4.11    : Labor Contracts
4.12    : Taxes
4.16(a) : Hazardous Materials
4.17    : Litigation
5.17(e) : Existing Loans
5.17(f) : Intercompany Loans
6.4     : Borrowing Base Certificate
6.5     : Monthly Financial Reporting Requirements
8.1     : DDA's.
8.2     : Credit Card Arrangements
8.3     : Administrative Agent's Accounts; Collection Account Banks; Operating
          Accounts
17.2    : Assignment / Assumption


                                      viii

<PAGE>

LOAN AND SECURITY AGREEMENT

                                                   As of 12:01 a.m. July 5, 2005

     THIS AGREEMENT is made between

          National City Business Credit, Inc., an Ohio corporation with offices
     at 1965 E. Sixth Street, Cleveland, Ohio 44114, as administrative agent (in
     such capacity, herein the "ADMINISTRATIVE AGENT"), for the ratable benefit
     of the "REVOLVING CREDIT LENDERS", who are, at present, those financial
     institutions identified on the signature pages of this Agreement and who in
     the future are those Persons (if any) who become "Revolving Credit Lenders"
     in accordance with the provisions hereof;

          National City Business Credit, Inc., as Collateral Agent (in such
     capacity, herein the "COLLATERAL AGENT"), for the ratable benefit of the
     Revolving Credit Lenders,

          and

          The Revolving Credit Lenders;

          and

          DSW Inc. (in such capacity, the "LEAD BORROWER"), an Ohio corporation
     with its principal executive offices at 4150 East Fifth Avenue, Columbus,
     Ohio 43219, as agent for the following (individually, a "BORROWER" and
     collectively, the "BORROWERS"):

          Said DSW Inc. ("DSW"); and

          DSW Shoe Warehouse, Inc. ("DSW SHOE"), a Missouri corporation with its
          principal executive offices at 4150 East Fifth Avenue, Columbus, Ohio
          43219

in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,

                                   WITNESSETH:

ARTICLE 1 - DEFINITIONS

     As used herein, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:

     "ACCELERATION": The making of demand or declaration that any Indebtedness,
     not otherwise due and payable, is due and payable. Derivations of the word
     "Acceleration" (such as "Accelerate") are used with like meaning in this
     Agreement.


                                       1

<PAGE>

     "ACCELERATION NOTICE": Written notice as follows:

               (a) From the Administrative Agent to the Revolving Credit
          Lenders, as provided in Section 14.1(a).

               (b) From the SuperMajority Lenders to the Administrative Agent,
          as provided in Section 14.1(b).

     "ACCOUNT DEBTOR": Has the meaning given that term in the UCC.

     "ACCOUNTS" include, without limitation, "accounts" as defined in the UCC,
     and also all: accounts, accounts receivable, receivables, and rights to
     payment (whether or not earned by performance) for: property that has been
     or is to be sold, leased, licensed, assigned, or otherwise disposed of;
     services rendered or to be rendered; a policy of insurance issued or to be
     issued; a secondary obligation incurred or to be incurred; arising out of
     the use of a credit or charge card or information contained on or used with
     that card; winnings in a lottery or other game of chance; and also all
     Inventory which gave rise thereto, and all rights associated with such
     Inventory, including the right of stoppage in transit; all reclaimed,
     returned, rejected or repossessed Inventory (if any) the sale of which gave
     rise to any Account.

     "ACH": Automated clearing house.

     "ACQUISITION ": The purchase or acquisition of all or substantially all of
     the assets of any Person, the purchase of a controlling equity interest in
     any Person, or the merger or consolidation of any Person with any other
     Person, in any transaction or group of transactions which are part of a
     common plan.

     "ADMINISTRATIVE AGENT": NCBC, or its successors or assigns, in its capacity
     as administrative agent for the Revolving Credit Lenders hereunder.

     "ADMINISTRATIVE AGENT'S ACCOUNT": Is defined in Section 8.3.

     "ADMINISTRATIVE AGENT'S COVER": Defined in Section 13.3(c)(i).

     "AFFILIATE": The following:

               (a) With respect to any Person, any other Person that directly
          or, alone or with a group of related Persons whose interests taken as
          a whole, indirectly through one of more intermediaries, Controls, is
          Controlled by, or is under common Control with, such Person.
          Notwithstanding anything to the contrary herein contained, in no event
          shall the Agent, the Issuer, or any Revolving Credit Lender be
          considered an "Affiliate" of a Loan Party.

               (b) Any Person: which is a parent, brother-sister or subsidiary,
          of a Borrower; whose enterprise's tax returns or financial statements
          are consolidated


                                       2

<PAGE>

          with those of a Borrower; which is a member of the same controlled
          group of corporations (within the meaning of Section 1563(a)(1), (2)
          and (3) of the Internal Revenue Code of 1986, as amended from time to
          time) of which any Borrower is a member; or Controls or is Controlled
          by any Borrower.

               (c) With respect to the Loan Parties, without limiting the
          provisions of clauses (a) and (b) hereof, "Affiliate" includes
          Schottenstein Stores Corporation.

     "AGENT": Collectively, the Administrative Agent and the Collateral Agent.

     "AGENTS' RIGHTS AND REMEDIES": Is defined in Section 12.7.

     "APPLICABLE LAW": As to any Person: (i) All statutes, rules, regulations,
     orders, or other requirements having the force of law and (ii) all court
     orders and injunctions, arbitrator's decisions, and/or similar rulings, in
     each instance ((i) and (ii)) of or by any federal, state, municipal, and
     other governmental authority, or court, tribunal, panel, or other body
     which has or claims jurisdiction over such Person, or any property of such
     Person, or of any other Person for whose conduct such Person would be
     responsible.

     "APPLICABLE MARGIN": The following percentages for Base Margin Loans and
     LIBOR Loans based upon the following criteria:

<TABLE>
<CAPTION>
                                     APPLICABLE
                                     MARGIN FOR
                                    BASE MARGIN   APPLICABLE MARGIN
LEVEL      EXCESS AVAILABILITY         LOANS       FOR LIBOR LOANS
-----   -------------------------   -----------   -----------------
<S>     <C>                         <C>           <C>
1       Greater than $120,000,000        0%             1.25%
2       Greater than $75,000,000,        0%             1.50%
        but less than or equal to
        $120,000,000
3       Greater than $35,000,000,        0%             1.75%
        but less than or equal to
        $75,000,000
</TABLE>


                                       3

<PAGE>

<TABLE>
<S>     <C>                         <C>           <C>
4       Less than or equal to            0%             2.00%
        $35,000,000
</TABLE>

     The Applicable Margin shall initially be established at Level 2.
     Thereafter, the Applicable Margin shall be adjusted quarterly on the first
     day of each calendar quarter, commencing January 1, 2006, based upon the
     Average Excess Availability during the prior quarter, provided that in no
     event shall the Applicable Margin be established at Level 1 during the
     first six (6) months subsequent to the Effective Date. Upon the occurrence
     and during the continuance of a Specified Event of Default, the Applicable
     Margin may, at the option of the Agent, be immediately increased to the
     percentages set forth in Level 4 (even if the Excess Availability
     requirements for another Level have been met) and interest shall be
     determined in the manner set forth in Section 2.12(g).

     "APPRAISED INVENTORY LIQUIDATION VALUE": The product of (a) the Cost of
     Eligible Inventory (net of Inventory Reserves) multiplied by (b) that
     percentage, determined from the then most recent appraisal of each
     Borrower's Inventory undertaken initially at the Lead Borrower's request,
     and subsequently at the request of the Collateral Agent, to reflect the
     appraiser's estimate of the net recovery on such Borrower's Inventory in
     the event of an in-store liquidation of that Inventory.

     "APPRAISED INVENTORY PERCENTAGE": 87.5%.

     "ASSIGNING REVOLVING CREDIT LENDER": Defined in Section 17.1(a).

     "ASSIGNMENT AND ACCEPTANCE": Defined in Section 17.2.

     "AUTHORIZED OFFICER": Is defined in Section 6.8.

     "AVAILABILITY RESERVES": Without duplication, such reserves as the
     Collateral Agent from time to time determines in the Collateral Agent's
     reasonable, good faith discretion as being appropriate to reflect the
     impediments to the Collateral Agent's ability to realize upon the
     Collateral. The Collateral Agent shall furnish the Lead Borrower with
     written notice two (2) Business Days prior to imposing or changing any
     Availability Reserve (unless a Specified Event of Default then exists and
     is continuing, in which event no prior notice shall be required). Without
     limiting the generality of the foregoing, Availability Reserves may include
     (but are not limited to) reserves based on the following:

          (i)  rent (but only if a landlord's waiver, acceptable to the
               Collateral Agent, has not been received by the Collateral Agent).

          (ii) Customer Credit Liabilities.


                                       4

<PAGE>

          (iii) taxes and other governmental charges, including, ad valorem,
               personal property, and such other taxes which are reasonably
               likely to have priority over the Collateral Interests of the
               Collateral Agent in the Collateral.

          (iv) L/C Landing Costs.

          (v)  Hedge Agreements.

     Without limiting the rights of the Collateral Agent to establish or modify
     Availability Reserves, the initial Availability Reserves on the Effective
     Date shall be the following:

          (a)  gift certificates and Merchandise Credits (in an amount equal to
               fifty percent (50%) of the outstanding gift certificates and
               merchandise credits reflected in the Borrowers' financial
               statements (which amount shall be updated no less frequently than
               every thirty (30) days and which financial statements will be
               maintained consistently with past practices)).

          (b)  landlord lien reserve equal to two months' rent for all stores
               located in Pennsylvania and Virginia.

          (c)  layaway deposits (in an amount equal to one hundred percent
               (100%) of the outstanding layaway deposits reflected in the
               Borrowers' financial statements (which amount shall be updated no
               less frequently than every thirty (30) days and which financial
               statements will be maintained consistently with past practices)).

          (d)  Hedge Agreements.

     "AVERAGE EXCESS AVAILABILITY ": For any period, the sum of Excess
     Availability for each day comprising such period divided by the number of
     days in such period.

     "BANKER'S ACCEPTANCE": A time draft or bill of exchange relating to a
     Documentary Letter of Credit which has been accepted by the Issuer. Without
     limitation, Existing Banker's Acceptances shall be deemed to be Banker's
     Acceptances issued under this Agreement and shall be entitled to all of the
     benefits hereof.

     "BANKER'S ACCEPTANCE FEES": The fees payable in respect of Banker's
     Acceptances pursuant to Section 2.18.

     "BANKRUPTCY CODE": Title 11, U.S.C., as amended from time to time.

     "BASE": For any day, a rate per annum equal to the higher of (a) the rate
     of interest which is established from time to time by NCB at its principal
     office in Cleveland, Ohio as its "prime rate" in effect, such rate to be
     adjusted automatically, without notice, as of the opening of business on
     the effective date


                                       5

<PAGE>

     of any change in such rate (it being agreed that (i) such rate is not
     necessarily the lowest rate of interest then available from NCB on
     fluctuating rate loans, and (ii) such rate may be established by NCB by
     public announcement or otherwise), and (b) the Federal Funds Effective Rate
     in effect on such day plus one-half of one percent (0.50%) per annum.

     "BASE MARGIN LOAN": Each Revolving Credit Loan while bearing interest at
     the Base Margin Rate.

     "BASE MARGIN RATE": That per annum rate which is the aggregate of the Base
     plus the Applicable Margin for Base Margin Loans.

     "BORROWER" and "BORROWERS": Is defined in the Preamble.

     "BORROWING BASE CERTIFICATE": Is defined in Section 6.4.

     "BUSINESS DAY": Any day other than (a) a Saturday or Sunday; (b) any day on
     which banks in Cleveland, Ohio, generally are not open to the general
     public for the purpose of conducting commercial banking business; (c) a day
     on which the principal office of the Administrative Agent is not open to
     the general public to conduct business; or (d) when used in connection with
     a LIBOR Loan, any day on which banks are not open for dealings in dollar
     deposits in the London interbank market.

     "BUSINESS PLAN": The business plan for the Loan Parties fiscal years 2005
     through and including 2010 dated April 19, 2005, as set forth in that
     certain confidential side letter from the Lead Borrower to the
     Administrative Agent.

     "CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of
     liabilities which may be capitalized in accordance with GAAP.

     "CAPITAL LEASE": Any lease which may be capitalized in accordance with
     GAAP.

     "CASH CONTROL EVENT": Either (i) an Event of Default has occurred and is
     continuing, or (ii) the Average Excess Availability for any five (5)
     consecutive Business Days is less than Thirty Million Dollars
     ($30,000,000). For purposes hereof, the occurrence of a Cash Control Event
     shall be deemed continuing notwithstanding that Average Excess Availability
     may thereafter exceed the amount set forth in the preceding sentence unless
     and until Average Excess Availability exceeds such amounts for ninety (90)
     consecutive Business Days, in which case a Cash Control Event shall no
     longer be deemed to be continuing for purposes hereof; provided that a Cash
     Control Event shall be deemed continuing (even if Average Excess
     Availability exceeds the required amounts for ninety (90) consecutive
     Business Days) if a Cash Control Event has occurred and been discontinued
     on one (1) occasion during the preceding twelve month period.


                                       6

<PAGE>

     "CCM": Cerberus Partners, L.P., a Delaware limited partnership with its
     principal office at 450 Park Avenue, New York, New York 10022.

     "CCM TERM LOAN FACILITIES": The term loan facilities entered into between,
     among others, the Borrowers and CCM, as agent, pursuant to a Financing
     Agreement dated June 11, 2002, in the aggregate principal amount of
     $100,000,000.00, as amended and in effect.

     "CHANGE IN CONTROL": The occurrence of any of the following:

               (a) The acquisition, by any group of Persons (within the meaning
          of the Securities Exchange Act of 1934, as amended) or by any Person
          (other than by (x) a Person Controlled by Schottenstein Stores
          Corporation, or (y) one or more Family Trusts) of beneficial ownership
          (within the meaning of Rule 13d-3 of the Securities and Exchange
          Commission) of 25% or more of the issued and outstanding capital stock
          of the Parent having the right, under ordinary circumstances, to vote
          for the election of directors of the Parent, excluding from the
          foregoing any acquisition pursuant to warrants issued under the
          exercise of conversion rights under the Senior Non-Convertible
          Facility.

               (b) Other than as a result of the exercise by CCM of board
          representation rights under the Senior Non-Convertible Facility, more
          than thirty percent (30%) of the Persons who were directors of the
          Parent on the first day of any period consisting of twelve (12)
          consecutive calendar months (the first of which twelve (12) month
          periods commencing with the first day of May, 2005), cease to be
          directors of the Parent for any reason, other than death, disability,
          or replacement (in the ordinary course of business and not as a result
          of any change in the equity ownership of the Parent) by other Persons
          nominated by the nominating committee of the board of directors of the
          Parent.

               (c) The failure of the Parent to own, directly or indirectly, 35%
          of the capital stock of each of the other Loan Parties and any group
          of Persons (within the meaning of the Securities Exchange Act of 1934,
          as amended) or any Person (other than by (x) a Person Controlled by
          Schottenstein Stores Corporation, or (y) one or more Family Trusts)
          owns beneficial ownership (within the meaning of Rule 13d-3 of the
          Securities and Exchange Commission) of the capital stock of the Loan
          Parties in an amount greater than the number of shares of such capital
          stock beneficially owned by (x) a Person Controlled by Schottenstein
          Stores Corporation, or (y) one or more Family Trusts.

               (d) The failure of Schottenstein Stores Corporation or one or
          more Family Trusts to possess, directly or indirectly, the power to
          cause the direction of the management and policies of the Parent and
          the Borrowers.

     "CHATTEL PAPER": Has the meaning given that term in the UCC.


                                       7

<PAGE>

     "COLLATERAL": Is defined in Section 9.1.

     "COLLATERAL AGENT": NCBC, in its capacity as Collateral Agent for the
     Revolving Credit Lenders hereunder.

     "COLLATERAL INTEREST": Any interest in property to secure an obligation,
     including, without limitation, a security interest, mortgage, and deed of
     trust.

     "COLLATERAL MONITORING FEE": Is defined in Section 2.13.

     "COLLECTION ACCOUNT": Any DDA into which the proceeds of Collateral are
     transferred and concentrated, including, without limitation, transfers from
     other DDAs, credit card processors, checks, and accounts receivables. The
     Collection Accounts as of the Effective Date are set forth on EXHIBIT 8.3
     hereto.

     "COLLECTION ACCOUNT AGREEMENT": An agreement, in form satisfactory to the
     Collateral Agent, which agreement recognizes the Collateral Agent'
     Collateral Interest in the contents of the DDA which is the subject of such
     agreement and agrees that, after and during the continuance of a Cash
     Control Event, such contents shall be transferred only to the
     Administrative Agent's Account or as otherwise instructed by the
     Administrative Agent.

     "COMMERCIAL TORT CLAIM": Has the meaning given that term in the UCC.

     "COMPETITIVE BUSINESS": Any business or enterprise consisting of any of the
     following:

          (a)  operation of off-price discount department stores.

          (b)  operation of retail furniture stores and related accessories.

          (c)  operation of designer and name brand shoe stores.

          (d)  operation of licensed shoe departments.

          (e)  furniture manufacturing.

          (f)  bedding manufacturing.

     "CONSENT": Actual consent given by the Revolving Credit Lender from whom
     such consent is sought; or the passage of seven (7) Business Days from
     receipt of written notice to a Revolving Credit Lender from any Agent of a
     proposed course of action to be followed by such Agent without such
     Revolving Credit Lender's giving such Agent written notice of that
     Revolving Credit Lender's objection to such course of action, provided that
     the Agent may rely on such passage of time as consent by a Revolving Credit
     Lender only if such written notice states that


                                       8

<PAGE>

     consent will be deemed effective if no objection is received within such
     time period.

     "CONSOLIDATED": When used to modify a financial term, test, statement, or
     report, refers to the application or preparation of such term, test,
     statement or report (as applicable) based upon the consolidation, in
     accordance with GAAP, of the financial condition or operating results of
     the DSW and its Subsidiaries.

     "CONTROL": The possession, direct or indirect, of the power to cause the
     direction of the management and policies of a Person whether through the
     ownership of voting securities, by contract or otherwise. A Person shall be
     deemed to have control of another Person if it is a "beneficial owner" (as
     such term is defined in Rule 13d-3 and Rule 13d-5 of the Securities
     Exchange Act of 1934, as amended) or a member of a "group" that is the
     beneficial owner, directly or indirectly, of 20% or more of the voting
     stock or equity interest in such Person. The terms "Controlled" and
     "Controlling" as used herein are intended to have the same meaning as
     "Control."

     "COST": The lower of cost or market, determined in each case in accordance
     with GAAP.

     "COSTS OF COLLECTION": Includes, without limitation, all reasonable
     attorneys' fees and reasonable out-of-pocket expenses incurred by the
     Agents' and Issuer's attorneys, and all reasonable out-of-pocket costs
     incurred by the Agents and the Issuer in the administration of the
     Liabilities and/or the Loan Documents, including, without limitation,
     reasonable costs and expenses associated with travel on behalf of the
     Agents and Issuer, where such costs and expenses are related to or in
     respect of the Agents' and Issuer's: administration and management of the
     Liabilities; negotiation, documentation, and amendment of any Loan
     Document; or efforts to preserve, protect, collect, or enforce the
     Collateral, the Liabilities, and/or the Agents' Rights and Remedies and/or
     any of the rights and remedies of the Agents and Issuer against or in
     respect of any guarantor or other Person liable in respect of the
     Liabilities (whether or not suit is instituted in connection with such
     efforts). "Costs of Collection" also includes the reasonable fees and
     expenses of Lenders' Special Counsel. The Costs of Collection are
     Liabilities, and at the Administrative Agent's option may bear interest at
     the then effective Base Margin Rate after such time as they have been added
     to the Loan Account.

     "CREDIT CARD ADVANCE RATE": 85%

     "CUSTOMER CREDIT LIABILITY": Gift certificates, customer deposits,
     merchandise credits, layaway obligations, frequent shopping programs, and
     similar liabilities of any Borrower to its retail customers and prospective
     customers.

     "DDA": Any checking or other demand daily depository account maintained by
     any Borrower other than any Exempt DDA.


                                       9

<PAGE>

     "DEFAULT": Any occurrence, circumstance, or state of facts with respect to
     a Borrower which (a) is an Event of Default; or (b) would become an Event
     of Default if any requisite notice were given and/or any requisite period
     of time were to run and such occurrence, circumstance, or state of facts
     were not cured within any applicable grace period.

     "DELINQUENT REVOLVING CREDIT LENDER": Defined in Section 13.3(c).

     "DEPOSIT ACCOUNT": Has the meaning given that term in the UCC and also
     includes all demand, time, savings, passbook, or similar accounts
     maintained with a bank.

     "DOCUMENTS": Has the meaning given that term in the UCC.

     "DOCUMENTS OF TITLE": Has the meaning given that term in the UCC.

     "DSW": Has the meaning given that term in the Preamble hereto.

     "DSW SHOE" Has the meaning given that term in the Preamble hereto.

     "DSW

     "AVAILABILITY": The result of the following:

                    (i)  The lesser of

                         (A) The Revolving Credit Ceiling

                              or

                         (B) The DSW Borrowing Base

                    Minus

                    (ii) The aggregate unpaid balance of the Loan Account
                         attributable to Revolving Credit Loans made to DSW or
                         DSW Shoe.

                    Minus

                    (iii) The aggregate undrawn Stated Amount of all then
                         outstanding L/Cs and Banker's Acceptances issued for
                         the account of DSW or DSW Shoe.

                    Minus

                    (iv) The aggregate of the Availability Reserves.


                                       10
<PAGE>

     "DSW BORROWING BASE": The aggregate of the following:

               (a) The face amount of Eligible Credit Card Receivables of DSW
          and DSW Shoe multiplied by the Credit Card Advance Rate.

                    Plus

               (b) The lesser of (a) the Cost of Eligible Inventory (net of
          Inventory Reserves) of DSW and DSW Shoe multiplied by the Inventory
          Advance Rate or (b) the Appraised Inventory Percentage of the
          Appraised Inventory Liquidation Value of the Inventory of DSW and DSW
          Shoe.

     "EBITDA": For the Borrowers, on a consolidated basis, in any period of
     determination, the sum, without duplication, of the following: Net Income
     determined in accordance with GAAP, plus, (a) Interest Expense, (b) taxes
     on income, (c) depreciation expense, (d) amortization expense, (e) all
     other non-cash and/or non-recurring charges and expenses, and (f) loss from
     any sale of assets, other than sales in the ordinary course of business,
     less (x) gain from any sale of assets, other than sales in the ordinary
     course of business and (y) all non-cash and/or non-recurring income, all of
     the foregoing determined in accordance with GAAP.

     "EFFECTIVE DATE": The date upon which the conditions precedent set forth in
     Article 3 hereof have been satisfied or waived and the first Revolving
     Credit Loans are to be made and L/Cs to be issued hereunder.

     "ELIGIBLE ASSIGNEE": A bank, insurance company, or company engaged in the
     business of making commercial loans having a combined capital and surplus
     in excess of $500,000,000 or any domestic Affiliate of any Revolving Credit
     Lender, or any Person to whom a Revolving Credit Lender assigns its rights
     and obligations under this Agreement as part of a programmed assignment and
     transfer of such Revolving Credit Lender's rights in and to a material
     portion of such Revolving Credit Lender's portfolio of asset based credit
     facilities. In no event shall an "Eligible Assignee" include a Person who
     is engaged in a Competitive Business with any Loan Party, and as long as
     Schottenstein Stores Corporation remains in Control of the Borrowers, an
     "Eligible Assignee" shall in no event include a Person which is engaged in
     a Competitive Business or a Related Business with Schottenstein Stores
     Corporation.

     "ELIGIBLE CREDIT CARD RECEIVABLES": Accounts due on a non-recourse basis
     from major or private label credit card processors, which have been
     outstanding for less than five (5) Business Days.

     "ELIGIBLE INVENTORY": Such of the Borrowers' Inventory, inclusive of
     Eligible L/C Inventory, at such locations, and of such types, character,
     qualities and quantities, as the Collateral Agent in its reasonable, good
     faith discretion from time to time determines to be acceptable for
     borrowing, as to which Inventory, the Collateral


                                       11

<PAGE>

     Agent has a perfected security interest which is prior and superior to all
     security interests, claims, and Encumbrances. Without limiting the
     foregoing, Inventory acquired in a Permitted Acquisition (other than a
     Permitted Acquisition involving the merger of one or more Loan Parties)
     shall not be deemed Eligible Inventory unless the Collateral Agent
     otherwise agrees.

     "ELIGIBLE L/C INVENTORY": Without duplication of other Eligible Inventory,
     Inventory not yet delivered to the Borrowers, the purchase of which is
     supported by a documentary L/C or Banker's Acceptance then having an
     initial expiry of sixty (60) or less days, provided that

               (a) Such Inventory is of such types, character, qualities and
          quantities (net of Inventory Reserves) as the Collateral Agent in its
          reasonable, good faith discretion from time to time determines to be
          eligible for borrowing and it would otherwise constitute Eligible
          Inventory; and

               (b) The documentary L/C supporting such purchase names the
          Collateral Agent as consignee of the subject Inventory or the
          Collateral Agent has control over the documents which evidence
          ownership of the subject Inventory (such as by the providing to the
          Collateral Agent of a customs brokers agreement in form reasonably
          satisfactory to the Collateral Agent).

     "EMPLOYEE BENEFIT PLAN": An employee benefit pension benefit plan that is
     covered by Title IV of ERISA or is subject to the minimum finding standards
     under Section 412 of the Internal Revenue Code of 1986, as amended from
     time to time, and as to which a Borrower or any ERISA Affiliate may have
     any liability.

     "ENCUMBRANCE": Each of the following:

               (a) A Collateral Interest or agreement to create or grant a
          Collateral Interest; a security interest; the interest of a lessor
          under a Capital Lease; conditional sale or other title retention
          agreement; sale of accounts receivable or chattel paper; or other
          arrangement pursuant to which any Person is entitled to any preference
          or priority with respect to the property or assets of another Person
          or the income or profits of such other Person; each of the foregoing
          whether consensual or non-consensual and whether arising by way of
          agreement, operation of law, legal process or otherwise.

               (b) The filing of any financing statement under the UCC or
          comparable law of any jurisdiction unless such financing statement is
          terminated promptly upon any Loan Party's knowledge thereof.

     "END DATE": The date upon which all of the following conditions are met:
     (a) all payment Liabilities described in Section 19.2(a) have been paid in
     full (b) satisfactory arrangements with respect to L/Cs and Banker's
     Acceptances have been made in accordance with the provisions of Section
     19.2(b), and (c) all


                                       12

<PAGE>

     obligations of any Revolving Credit Lender to make loans and advances and
     to provide other financial accommodations to the Borrowers hereunder shall
     have been irrevocably terminated.

     "ENVIRONMENTAL ACTIONS": Any complaint, summons, citation, notice,
     directive, order, claim, litigation, investigation, judicial or
     administrative proceeding, judgment, letter or other communication from any
     Person or Governmental Authority involving violations of Environmental Laws
     or Releases of Hazardous Materials (i) from any assets, properties or
     businesses owned or operated by any Loan Party or any of its Subsidiaries
     or any predecessor in interest; or (ii) onto any facilities which received
     Hazardous Materials generated by any Loan Party or any of its Subsidiaries
     or any predecessor in interest.

     "ENVIRONMENTAL LAWS": The Comprehensive Environmental Response,
     Compensation and Liability Act (42 U.S.C. Section 9601, et seq.), the
     Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.),
     the Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et
     seq.), the Federal Clean Water Act (33 U.S.C. Section 1251 et seq.), the
     Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances
     Control Act (15 U.S.C. Section 2601 et seq.) and the Occupational Safety
     and Health Act (29 U.S.C. Section 651 et seq.), as such laws may be amended
     or otherwise modified from time to time, and any other present or future
     federal, state, local or foreign statute, ordinance, rule, regulation,
     order, judgment, decree, permit, license or other binding determination of
     any Governmental Authority imposing liability or establishing standards of
     conduct for protection of the environment or other government restrictions
     relating to the protection of the environment or the Release, deposit or
     migration of any Hazardous Materials into the environment.

     "ENVIRONMENTAL LIABILITIES AND COSTS": All liabilities, monetary
     obligations, remedial actions, losses, damages, punitive damages,
     consequential damages, treble damages, reasonable costs and expenses
     (including all reasonable fees, disbursements and expenses of counsel,
     experts and consultants and costs of investigations and feasibility
     studies), fines, penalties, sanctions and interest incurred as a result of
     any claim or demand by any Governmental Authority or any third party, and
     which relate to any environmental condition or a Release of Hazardous
     Materials from or onto (i) any property presently or formerly owned by any
     Loan Party or any of its Subsidiaries or (ii) any facility which received
     Hazardous Materials generated by any Loan Party or any of its Subsidiaries.

     "ENVIRONMENTAL LIEN": Any Lien in favor of any Governmental Authority for
     Environmental Liabilities and Costs.

     "EQUIPMENT": Includes, without limitation, "equipment" as defined in the
     UCC, and also all furniture, store fixtures, motor vehicles, rolling stock,
     machinery, office equipment, plant equipment, tools, dies, molds, and other
     goods, property, and assets which are used and/or were purchased for use in
     the operation or


                                       13

<PAGE>

     furtherance of a Borrowers' business, and any and all accessions or
     additions thereto, and substitutions therefor.

     "ERISA": The Employee Retirement Income Security Act of 1974, as amended.

     "ERISA AFFILIATE": Any Person which is under common control with a Borrower
     within the meaning of Section 4001 of ERISA or is part of a group which
     includes any Borrower and which would be treated as a single employer under
     Section 414 of the Internal Revenue Code of 1986, as amended from time to
     time.

     "EUROCURRENCY RESERVE PERCENTAGE": For any Interest Period with respect to
     a LIBOR Loan, as of any date of determination, the aggregate of the then
     stated maximum reserve percentages (including any marginal, special,
     emergency or supplemental reserves), expressed as a decimal, applicable to
     such Interest Period (if more than one such percentage is applicable, the
     daily average of such percentages for those days in such Interest Period
     during which any such percentages shall be so applicable) by the Board of
     Governors of the Federal Reserve System, any successor thereto, or any
     other banking authority, domestic or foreign, to which the Administrative
     Agent or any Revolving Credit Lender may be subject in respect of
     eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
     in Regulation D of the Federal Reserve Board) or in respect of any other
     category of liabilities including deposits by reference to which the rate
     of interest on LIBOR Loans is determined or any category or extension of
     credit or other assets that include LIBOR Loans. as defined in such
     regulations. For purposes hereof, such reserve requirements shall include,
     without limitation, those imposed under Regulation D of the Federal Reserve
     Board and the LIBOR Loans shall be deemed to constitute Eurocurrency
     Liabilities subject to reserve requirements without benefit of credits for
     proration, exceptions or offsets which may be available to any Revolving
     Credit Lender under Regulation D.

     "EVENTS OF DEFAULT": Is defined in Article 11. An "Event of Default" shall
     be deemed to have occurred and to be continuing unless and until that Event
     of Default has been duly waived by the Administrative Agent in writing or
     cured to the satisfaction of the Administrative Agent.

     "EXCESS AVAILABILITY": As of any date of determination, DSW Availability
     less all then held checks, accounts payable which are beyond customary
     payment terms consistent with past practice (other than accounts payable
     which are being disputed in good faith and for which the Borrowers have
     adequate reserves), and overdrafts (other than daylight overdrafts, as
     defined in the Federal Reserve Daylight Credit Policies in effect from time
     to time).

     "EXCLUDED PROPERTY": Shall mean the following:


                                       14

<PAGE>

               (a) the Equipment that is subject to a "purchase money security
          interest", as such term is now or hereafter defined in the UCC, which
          (x) constitutes a Permitted Encumbrance under this Agreement and (y)
          prohibits the creation by a Loan Party of a junior security interest
          therein, unless the holder thereof has consented to the creation of
          such a junior security interest; or

               (b) any General Intangibles, other than Payment Intangibles, if
          and only to the extent that (i) in the case of any such General
          Intangible, (x) any contract evidencing such General Intangible
          contains a valid and effective contractual restriction or limitation
          which prohibits the grant or creation of a security interest therein,
          or (y) a valid and effective restriction or limitation imposed by
          applicable law, regulation, rule, order or other directive of any
          governmental body, agency or authority, or the order of any court of
          competent jurisdiction, prohibits the grant or creation of a security
          interest in such General Intangible, or (ii) in the case of any such
          General Intangible, such General Intangible would be subject to loss
          or forfeiture upon the grant or creation of a security interest
          therein by reason of (x) a valid and effective contractual restriction
          or limitation contained in any contract evidencing such General
          Intangible, or (y) a valid and effective restriction or limitation
          imposed by applicable law, regulation, rule, order or other directive
          of any governmental body, agency or authority, or the order of any
          court of competent jurisdiction; or

               (c) Inventory or other property held pursuant to consignment
          arrangements (other than between the Loan Parties) in which a Borrower
          is the consignee to the extent that the consignor has properly
          perfected its interest therein; or

               (d) all motor vehicles owned by any Loan Party; or

               (e) any Exempt DDA.

     provided that the Proceeds realized from any of the foregoing shall not be
     deemed Excluded Property but shall constitute Collateral.

     "EXEMPT DDA": Those depository accounts described on EXHIBIT 1.4 hereto,
     and, in addition, any depository account maintained by any Borrower, the
     only contents of which may be transfers from the Operating Account and
     actually used solely (i) for petty cash purposes; (ii) for payroll; (iii)
     for charitable contributions; or (iv) for medical, pension, benefits, VEBA,
     employees, taxes, stock options and like special purpose accounts.

     "EXISTING L/CS": Those letters of credit described on EXHIBIT 1.1 hereto
     which have been issued by NCB under the Borrowers' existing credit facility
     with, among others, NCB.


                                       15

<PAGE>

     "FACILITY GUARANTEE": A guaranty executed by the Facility Guarantors in
     favor of the Agent, the Issuer and the Revolving Credit Lenders.

     "FACILITY GUARANTORS": Each Borrower and all other Subsidiaries of the
     Borrowers now existing or hereafter created, other than the Unrestricted
     Subsidiaries.

     "FACILITY GUARANTORS COLLATERAL DOCUMENTS": All security agreements,
     mortgages, pledge agreements, deeds of trust, and other instruments,
     documents or agreements executed and delivered by any Facility Guarantor to
     secure the Facility Guarantee.

     "FAMILY TRUST": One or more trusts established for the benefit of any of
     Jay L. Schottenstein, Susan S. Diamond, Ann S. Deshe, Lori Schottenstein,
     Geraldine Schottenstein, any of their respective spouses, children or
     lineal descendants, or any Person Controlled by any such trust or trusts.

     "FARM PRODUCTS": Has the meaning given that term in the UCC.

     "FEDERAL FUNDS EFFECTIVE RATE": For any day, the rate per annum (rounded
     upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted
     average of the rates on overnight federal funds transactions with members
     of the Federal Reserve System arranged by federal funds brokers on such
     day, as published by the Federal Reserve Bank of New York on the Business
     Day next succeeding such day, provided that (i) if the day for which such
     rate is to be determined is not a Business Day, the Federal Funds Effective
     Rate for such day shall be such rate on such transactions on the
     immediately preceding Business Day as so published on the next succeeding
     Business Day, and (ii) if such rate is not so published for any Business
     Day, the Federal Funds Effective Rate for such day shall be the average of
     quotations for such day on such transactions received by the Administrative
     Agent from three federal funds brokers of recognized standing selected by
     the Administrative Agent.

     "FEE LETTER": That letter dated on or about the Effective Date and styled
     "Fee Letter" between the Lead Borrower and the Administrative Agent, as
     such letter may from time to time be amended.

     "FISCAL": When followed by "month", "quarter" or "year", the relevant
     fiscal period based on the Borrowers' fiscal year and accounting
     conventions.

     "FIXED CHARGES": The sum of the following for the Borrowers on a
     consolidated basis: (a) Interest Expense, plus (b) scheduled payments of
     principal on Indebtedness (including Capital Leases).

     "FIXED CHARGE COVERAGE RATIO": For the Borrowers on a consolidated basis,
     at any date of determination, the ratio of (a) EBITDA, minus Capital
     Expenditures, minus income taxes paid in cash, minus dividends and other
     distributions on account of


                                       16

<PAGE>

     DSW's capital stock, for the applicable period then ending taken as one
     accounting period, to (b) Fixed Charges, for the applicable period then
     ending taken as one accounting period.

     "FIXTURES": Has the meaning given that term in the UCC.

     "GAAP": Generally accepted accounting principles in effect from time to
     time in the United States, applied on a consistent basis, provided that
     "GAAP" shall mean generally accepted accounting principles consistent with
     those used in the preparation of the financial statements described herein.

     "GENERAL INTANGIBLES": Includes, without limitation, "general intangibles"
     as defined in the UCC; and also all: rights to payment for credit extended;
     deposits (other than DDAs); amounts due to any Borrower; credit memoranda
     in favor of any Borrower; warranty claims; tax refunds and abatements;
     insurance refunds and premium rebates; all means and vehicles of investment
     or hedging, including, without limitation, options, warrants, and futures
     contracts; records; customer lists; telephone numbers; goodwill; causes of
     action; judgments; payments under any settlement or other agreement;
     literary rights; rights to performance; royalties; license and/or franchise
     fees; rights of admission; licenses; franchises; license agreements,
     including all rights of any Borrower to enforce same; permits, certificates
     of convenience and necessity, and similar rights granted by any
     governmental authority; patents, patent applications, patents pending, and
     other intellectual property; internet addresses and domain names;
     developmental ideas and concepts; proprietary processes; blueprints,
     drawings, designs, diagrams, plans, reports, and charts; catalogs; manuals;
     technical data; computer software programs (including the source and object
     codes therefor), computer records, computer software, rights of access to
     computer record service bureaus, service bureau computer contracts, and
     computer data; tapes, disks, semi-conductors chips and printouts; trade
     secrets rights, copyrights, mask work rights and interests, and derivative
     works and interests; user, technical reference, and other manuals and
     materials; trade names, trademarks, service marks, and all goodwill
     relating thereto; applications for registration of the foregoing; and all
     other general intangible property of any Borrower in the nature of
     intellectual property; proposals; cost estimates, and reproductions on
     paper, or otherwise, of any and all concepts or ideas, and any matter
     related to, or connected with, the design, development, manufacture, sale,
     marketing, leasing, or use of any or all property produced, sold, or
     leased, by any Borrower or credit extended or services performed, by any
     Borrower, whether intended for an individual customer or the general
     business of any Borrower, or used or useful in connection with research by
     any Borrower.

     "GOODS": Has the meaning given that term in the UCC, and also includes all
     things movable when a security interest therein attaches and also all
     computer programs embedded in goods and any supporting information provided
     in connection with a transaction relating to the program if (i) the program
     is associated with the goods


                                       17

<PAGE>

     in such manner that it customarily is considered part of the goods or (ii)
     by becoming the owner of the goods, a Person acquires a right to use the
     program in connection with the goods.

     "GOVERNMENTAL AUTHORITY": Any nation or government, any federal, state,
     city, town, municipality, county, local or other political subdivision
     thereof or thereto and any department, commission, board, bureau,
     instrumentality, agency or other entity exercising executive, legislative,
     judicial, taxing, regulatory or administrative powers or functions of or
     pertaining to government.

     "HAZARDOUS MATERIALS": (a) Any element, compound or chemical that is
     defined, listed or otherwise classified as a contaminant, pollutant, toxic
     pollutant, toxic or hazardous substance, extremely hazardous substance or
     chemical, hazardous waste, special waste, or solid waste under
     Environmental Laws or that is reasonably likely to cause immediately, or at
     some reasonably foreseeable future time, harm to or have an adverse effect
     on, the environment or risk to human health or safety, including, without
     limitation, any pollutant, contaminant, waste, hazardous waste, toxic
     substance or dangerous good which is defined or identified in any
     Environmental Law and which is present in the environment in such quantity
     or state that it contravenes any Environmental Law; (b) petroleum and its
     refined products; (c) polychlorinated biphenyls; (d) any substance
     exhibiting a hazardous waste characteristic, including, without limitation,
     corrosivity, ignitability, toxicity or reactivity as well as any
     radioactive or explosive materials; and (e) any raw materials, building
     components (including, without limitation, asbestos-containing materials)
     and manufactured products containing hazardous substances listed or
     classified as such under Environmental Laws.

     "HEDGE AGREEMENTS": All obligations of any Person in respect of interest
     rate swap agreements, currency swap agreements and other similar agreements
     designed to hedge against fluctuations in interest rates or foreign
     exchange rates.

     "INDEBTEDNESS": Without duplication, all obligations, contingent and
     otherwise, that in accordance with GAAP should be classified upon the
     balance sheet of any Borrower and/or the consolidated balance sheet of the
     Borrowers as liabilities, other than trade payables, deferred rent, or
     accrued expenses incurred in the ordinary course of business or to which
     reference should be made by footnotes thereto, including in any event and
     whether or not so classified:

               (a) All obligations in respect of money borrowed (including any
          indebtedness which is non-recourse to the credit of such Person but
          which is secured by an Encumbrance on any asset of such Person)
          whether or not evidenced by a promissory note, bond, debenture or
          other written obligation to pay money.

               (b) All obligations evidenced by bonds, notes, debentures or
          other similar instruments.


                                       18

<PAGE>

               (c) All obligations in connection with Hedge Agreements.

               (d) All obligations in connection with any letter of credit or
          acceptance transaction (including, without limitation, the face amount
          of all letters of credit and acceptances issued for the account of
          such Person or reimbursement on account of which such Person would be
          obligated).

               (e) All obligations in connection with the sale or discount of
          accounts receivable or chattel paper of such Person.

               (f) All obligations on account of deposits or advances other than
          deferred rent incurred in the ordinary course of business.

               (g) All obligations as lessee under Capital Leases; and

               (h) All obligations in connection with any sale and leaseback
          transaction.

                    "Indebtedness" also includes:

                    (x) Indebtedness of others secured by an Encumbrance on any
               asset of such Person, whether or not such Indebtedness is assumed
               by such Person.

                    (y) Any guaranty, endorsement, suretyship or other
               undertaking pursuant to which that Person may be liable in
               respect of Indebtedness of any third party; and

                    (z) The Indebtedness of a partnership or joint venture for
               which such Person is liable as a general partner or joint
               venturer.

     "INDEMNIFIED PERSON": Is defined in Section 20.15.

     "INFORMATION": Is defined in Section 20.3.

     "INSTRUMENTS": Has the meaning given that term in the UCC.

     "INTERCOMPANY NOTES": The promissory notes and other evidences of
     Indebtedness amongst the Loan Parties outstanding from time to time. The
     Intercompany Notes outstanding as of the Effective Date are set forth on
     EXHIBIT 1.3 hereto.

     "INTEREST EXPENSE": Total interest expense generated during the period in
     question (including attributable to conditional sales contracts, Capital
     Leases and other title retention agreements in accordance with GAAP) of the
     Borrowers on a consolidated basis with respect to all outstanding
     Indebtedness including accrued interest and interest paid in kind and
     capitalized interest, fees, commissions,


                                       19

<PAGE>

     discounts and other fees owed with respect to letters of credit and
     bankers' acceptance financing, and net costs under Hedge Agreements.

     "INTEREST PAYMENT DATE": With reference to:

               Each LIBOR Loan: The last day of the Interest Period relating
          thereto (and on the last day of the third month for any such loan
          which has a six month Interest Period); the Termination Date; and the
          End Date.

               Each Base Margin Loan: The first day of each [August, November,
          February and May]; the Termination Date; and the End Date.

     "INTEREST PERIOD": The following:

               (a) With respect to each LIBOR Loan: Subject to Subsection (c),
          below, the period commencing on the date of the making or continuation
          of, or conversion to, the subject LIBOR Loan and ending one, two,
          three, or six months thereafter, as the Lead Borrower may elect by
          notice (pursuant to Section 2.5) to the Administrative Agent

               (b) With respect to each Base Margin Loan: Subject to Subsection
          (c), below, the period commencing on the date of the making or
          continuation of or conversion to such Base Margin Loan and ending on
          that date (i) as of which the subject Base Margin Loan is converted to
          a LIBOR Loan, as the Lead Borrower may elect by notice (pursuant to
          Section 2.5) to the Administrative Agent, or (ii) on which the subject
          Base Margin Loan is paid by the Borrowers.

               (c) The setting of Interest Periods is in all instances subject
          to the following:

                    (i)  Any Interest Period for a Base Margin Loan which would
                         otherwise end on a day which is not a Business Day
                         shall be extended to the next succeeding Business Day.

                    (ii) Any Interest Period for a LIBOR Loan which would
                         otherwise end on a day that is not a Business Day shall
                         be extended to the next succeeding Business Day, unless
                         that succeeding Business Day is in the next calendar
                         month, in which event such Interest Period shall end on
                         the last Business Day of the month during which the
                         Interest Period ends.

                    (iii) Subject to Subsection (iv), below, any Interest Period
                         applicable to a LIBOR Loan, which Interest Period
                         begins on a day for which there is no numerically
                         corresponding day in the calendar month during which
                         such Interest


                                       20

<PAGE>

                         Period ends, shall end on the last Business Day of the
                         month during which that Interest Period ends.

                    (iv) Any Interest Period which would otherwise end after the
                         Termination Date shall end on the Termination Date.

                    (v)  The number of Interest Periods in effect at any one
                         time is subject to Section 2.12 hereof.

     "INVENTORY": Includes, without limitation, "inventory" as defined in the
     UCC and also all: (a) Goods which are leased by a Person as lessor; are
     held by a Person for sale or lease or to be furnished under a contract of
     service; are furnished by a Person under a contract of service; or consist
     of raw materials, work in process, or materials used or consumed in a
     business; (b) Goods of said description in transit; (c) Goods of said
     description which are returned, repossessed and rejected; (d) packaging,
     advertising, and shipping materials related to any of the foregoing; (e)
     all names, marks, and General Intangibles affixed or to be affixed or
     associated thereto; and (f) Documents and Documents of Title which
     represent any of the foregoing.

     "INVENTORY ADVANCE RATE": The following percentages of the Cost of Eligible
     Inventory of the Borrowers specified below for the periods indicated:

<TABLE>
<CAPTION>
Period                               Inventory Advance Rate
------                               ----------------------
<S>                                  <C>
January 1 through March 31 of each            79%
year
April 1 through October 14 of each            83%
year
October 15 through                            79%
December 31 of each year
</TABLE>

     Any Inventory Advance Rate may be increased by the Collateral Agent from
     time to time in its sole discretion by an amount not to exceed two percent
     (2%) from the rates set forth above. Without limiting the generality of the
     Collateral Agent's discretion, the increase of an Inventory Advance Rate by
     the Collateral Agent shall not obligate the Collateral Agent to maintain
     such increased Inventory Advance Rate for any specific period of time and
     the Collateral Agent may reduce the Inventory Advance Rate (but not below
     the levels set forth in the above table) at any time in their sole
     discretion. The increase of the Inventory Advance Rate by the Collateral
     Agent on any one occasion shall not obligate them to increase the Inventory
     Advance Rate on any other occasion.

     "INVENTORY RESERVES": Without duplication, such Reserves as may be
     established from time to time by the Collateral Agent in the Collateral
     Agent's reasonable,


                                       21

<PAGE>

     good faith discretion with respect to the determination of the saleability,
     at retail, of the Eligible Inventory or which reflect such other factors as
     affect the market value of the Eligible Inventory. The Collateral Agent
     shall furnish the Lead Borrower with notice two (2) Business Days prior to
     imposing or changing any Inventory Reserve (unless a Specified Event of
     Default then exists and is continuing, in which event no prior notice shall
     be required). Without limiting the rights of the Collateral Agent to
     establish or modify Inventory Reserves, the initial Inventory Reserves on
     the Effective Date shall be the following:

          (a) Shrinkage.

          (b) Consigned Inventory.

          (c) Damaged Goods.

     "INVESTMENT PROPERTY": Has the meaning given that term in the UCC.

     "ISSUER": The issuer of any L/C or Banker's Acceptance. The Issuer shall be
     NCB or such other Revolving Credit Lender (or Affiliate of a Revolving
     Credit Lender) as the Lead Borrower (with the consent of the Administrative
     Agent, which consent shall not be unreasonably withheld) may select.

     "L/C": Any letter of credit issued pursuant to this Agreement. Without
     limitation, Existing L/Cs shall be deemed to be L/Cs issued under this
     Agreement and shall be entitled to all of the benefits hereof.

     "L/C LANDING COSTS": To the extent not included in the Stated Amount of an
     L/C or a Banker's Acceptance, customs, duty, freight, and other
     out-of-pocket costs and expenses which will be expended to "land" the
     Inventory, the purchase of which is supported by such L/C or Banker's
     Acceptance.

     "L/C FEES": The fees payable in respect of L/Cs pursuant to Section 2.18.

     "LEAD ARRANGER": NCB.

     "LEAD BORROWER": Defined in the Preamble.

     "LEASE": Any lease or other agreement, no matter how styled or structured,
     pursuant to which a Borrower is entitled to the use or occupancy of any
     space.

     "LEASEHOLD INTEREST": Any interest of a Borrower as lessee under any Lease.

     "LENDERS' SPECIAL COUNSEL": A single counsel, selected by the Majority
     Lenders following the occurrence of an Event of Default, to represent the
     interests of the Revolving Credit Lenders in connection with the
     enforcement, attempted enforcement, or preservation of any rights and
     remedies under this, or any other


                                       22

<PAGE>

     Loan Document, as well as in connection with any "workout", forbearance, or
     restructuring of the credit facility contemplated hereby.

     "LETTER-OF-CREDIT RIGHT": Has the meaning given that term in UCC and also
     refers to any right to payment or performance under an L/C, whether or not
     the beneficiary has demanded or is at the time entitled to demand payment
     or performance.

     "LIABILITIES": Includes, without limitation, the following:

               (a) All and each of the following, arising under this Agreement
          or under any of the other Loan Documents, whether now existing or
          hereafter arising:

                    (i)  Any and all direct and indirect liabilities, debts, and
                         obligations of each Borrower to any Agent or any
                         Revolving Credit Lender, each of every kind, nature,
                         and description.

                    (ii) Each obligation to repay any loan, advance,
                         indebtedness, note, obligation, overdraft, or amount
                         now or hereafter owing by any Borrower to each Agent or
                         any Revolving Credit Lender (including all future
                         advances whether or not made pursuant to a commitment
                         by the Agent or any Revolving Credit Lender), whether
                         or not any of such are liquidated, unliquidated,
                         primary, secondary, secured, unsecured, direct,
                         indirect, absolute, contingent, or of any other type,
                         nature, or description, or by reason of any cause of
                         action which any Agent or any Revolving Credit Lender
                         may hold against any Borrower.

                    (iii) All notes and other obligations of each Borrower now
                         or hereafter assigned to or held by any Agent or any
                         Revolving Credit Lender, each of every kind, nature,
                         and description.

                    (iv) All interest, fees, and charges and other amounts which
                         may be charged by any Agent or any Revolving Credit
                         Lender to any Borrower and/or which may be due from any
                         Borrower to any Agent or any Revolving Credit Lender
                         from time to time.

                    (v)  All reasonable costs and expenses incurred or paid by
                         any Agent or any Revolving Credit Lender in respect of
                         any agreement between any Borrower and any Agent or any
                         Revolving Credit Lender or instrument furnished by any
                         Borrower to any Agent or any Revolving Credit Lender


                                       23

<PAGE>

                         (including, without limitation, Costs of Collection,
                         reasonable attorneys' fees, and all court and
                         litigation costs and expenses).

                    (vi) Any and all covenants of each Borrower to or with any
                         Agent or any Revolving Credit Lender and any and all
                         obligations of each Borrower to act or to refrain from
                         acting in accordance with any agreement between that
                         Borrower and any Agent or any Revolving Credit Lender
                         or instrument furnished by that Borrower to any Agent
                         or any Revolving Credit Lender.

                    (vii) Each of the foregoing as if each reference to the "any
                         Agent or any Revolving Credit Lender" were to each
                         Affiliate of each Agent.

               (b) Any and all direct or indirect liabilities, debts, and
          obligations of each Borrower to any Agent or any Affiliate of any
          Agent, each of every kind, nature, and description owing on account of
          any service or accommodation provided to, or for the account of any
          Borrower pursuant to this or any other Loan Document, including cash
          management services, Hedge Agreements, and the issuances of L/C's and
          Banker's Acceptances.

     "LIBOR BUSINESS DAY": Any day which is both a Business Day and a day on
     which the London interbank market in which NCB participates is open for
     dealings in United States Dollar deposits.

     "LIBOR LOAN": Any Revolving Credit Loan which bears interest at a LIBOR
     Rate.

     "LIBOR MARGIN": The Applicable Margin for LIBOR Loans.

     "LIBOR OFFER RATE": For any Interest Period for LIBOR Loans, the quotient
     (rounded upwards, if necessary, to the next 1/100 of 1%) of: (x) the per
     annum rate of interest determined by the Administrative Agent in accordance
     with its usual procedures (which determination shall be conclusive absent
     manifest error) as of approximately 11:00 a.m. (London time) two LIBOR
     Business Days prior to the beginning of such Interest Period pertaining to
     such LIBOR Loan, as provided by Bloomberg's or Reuters (or any similar
     company or service that provides rate quotations comparable to those
     currently provided by such companies as the rate in the London interbank
     market) as the rate in the London interbank market for deposits in U.S.
     Dollars in immediately available funds with a maturity comparable to such
     Interest Period divided by (y) a number equal to 1.00 minus the
     Eurocurrency Reserve Percentage. In the event that such rate quotation is
     not available for any reason, then the rate (for purposes of clause (x)
     hereof) shall be the rate, determined by the Administrative Agent as of
     approximately 11:00 a.m. (London time) two LIBOR Business Days prior to the
     beginning of such Interest


                                       24

<PAGE>

     Period pertaining to such LIBOR Loan, to be the average (rounded upwards,
     if necessary, to the next 1/100 of 1%) of the per annum rates at which
     deposits in U.S. Dollars in immediately available funds in an amount
     comparable to NCBC's Revolving Credit Commitment Percentage of such LIBOR
     Loan and with a maturity comparable to such Interest Period are offered to
     the prime banks by leading banks in the London interbank market. The LIBOR
     Offer Rate shall be adjusted automatically on and as of the effective date
     of any change in the Eurocurrency Reserve Percentage.

     "LIBOR RATE": That per annum rate which is the aggregate of the LIBOR Offer
     Rate plus the LIBOR Margin.

     "LIQUIDATION": The exercise, by the Collateral Agent, of those rights
     accorded to the Collateral Agent under the Loan Documents as a creditor of
     the Borrowers following and on account of the occurrence and continuance of
     an Event of Default looking towards the realization on the Collateral.
     Derivations of the word "Liquidation" (such as "Liquidate") are used with
     like meaning in this Agreement.

     "LOAN ACCOUNT": Is defined in Section 2.9.

     "LOAN COMMITMENT": With respect to each Revolving Credit Lender, that
     respective Revolving Credit Lender's Revolving Credit Dollar Commitment.

     "LOAN DOCUMENTS": This Agreement, the Facility Guarantee, the Facility
     Guarantors Collateral Documents, and each other instrument or document from
     time to time executed and/or delivered in connection with the arrangements
     contemplated hereby or in connection with any transaction with any Agent or
     any Affiliate of any Agent related to this Agreement, including, without
     limitation, any transaction which arises out of any cash management,
     depository, investment, banker's acceptance, letter of credit, interest
     rate protection, Hedge Agreement, or other services provided by any Agent
     or any Affiliate of any Agent, as each may be amended from time to time.

     "LOAN PARTY OR LOAN PARTIES": Collectively, the Borrowers and the Facility
     Guarantors.

     "MAJORITY LENDERS": (a) If there are two or fewer Revolving Credit Lenders
     who are not Delinquent Revolving Credit Lenders: All Revolving Credit
     Lenders who are not Delinquent Revolving Credit Lenders.

               (b) If there are three or more Revolving Credit Lenders who are
          not Delinquent Revolving Credit Lenders: Revolving Credit Lenders
          (other than Delinquent Revolving Credit Lenders) holding at least 51%
          of the Revolving Credit Commitment Percentages of the Revolving Credit
          Dollar Commitments of Revolving Credit Lenders who are not Delinquent
          Revolving Credit Lenders.


                                       25
<PAGE>

     "MATERIAL ACCOUNTING CHANGE": Any change in GAAP applicable to accounting
     periods subsequent to the Borrowers' fiscal year most recently completed
     prior to the execution of this Agreement, which change has a material
     effect on the Borrowers' Consolidated financial condition or operating
     results, as reflected on financial statements and reports prepared by or
     for the Borrowers and their Subsidiaries, when compared with such condition
     or results as if such change had not taken place.

     "MATERIAL ADVERSE EFFECT": A material adverse effect on (a) the business,
     operations, property, assets, or financial condition of the Loan Parties
     taken as a whole, or (b) the validity or enforceability of this Agreement
     or any of the other Loan Documents or any of the material rights or
     remedies of the Agent or the Revolving Credit Lenders hereunder or
     thereunder.

     "MATURITY DATE": July 5, 2010.

     "NCB": National City Bank, a national banking association.

     "NCBC": National City Business Credit, Inc., an Ohio corporation.

     "NET INCOME": The net income (or loss) of the Borrowers on a consolidated
     basis for such period taken as a single accounting period determined in
     conformity with GAAP; provided, that there shall be excluded (i) the income
     (or loss) of any Person in which any other Person (other than the
     Borrowers) has a joint interest, except to the extent of the amount of
     dividends or other distributions actually paid to the Borrowers by such
     Person during such period, (ii) the income (or loss) of any Person accrued
     prior to the date it becomes a Borrower or is merged into or consolidated
     with a Borrower or that Person's assets are acquired by a Borrower, and
     (iii) the income of any Subsidiary of the Borrowers to the extent that the
     declaration or payment of dividends or similar distributions of that income
     by that Subsidiary is not at the time permitted by operation of the terms
     of the charter or any agreement, instrument, judgment, decree, order,
     statute, rule or governmental regulation applicable to that Subsidiary.

     "NOMINEE": A business entity (such as a corporation or limited partnership)
     formed by the Collateral Agent to own or manage any Post Foreclosure Asset.

     "OPERATING ACCOUNT": Is defined in Section 8.3.

     "OVERLOAN": A loan, advance, or providing of credit support (such as the
     issuance of any L/C) to the extent that, immediately after its having been
     made, DSW Availability is less than zero.

     "PARENT": Retail Ventures, Inc., an Ohio corporation.

     "PARTICIPANT": Is defined in Section 20.18, hereof.


                                       26

<PAGE>

     "PAYMENT INTANGIBLE": As defined in the UCC and also any general intangible
     under which the Account Debtor's primary obligation is a monetary
     obligation.

     "PERMITTED ACQUISITION": (i) Any Acquisition the cash consideration for
     which is less than $3,000,000 in the aggregate in any fiscal year of the
     Borrowers and their Subsidiaries and which satisfies the conditions set
     forth in clauses (f), (g), (h), and (i) below, and (ii) any other
     Acquisition in which each of the following conditions are satisfied:

               (a) No Default or Event of Default then exists or would arise
          from the consummation of such Acquisition.

               (b) Such Acquisition shall have been approved by the Board of
          Directors of the Person (or similar governing body if such Person is
          not a corporation) which is the subject of such Acquisition and such
          Person shall not have announced that it will oppose such Acquisition
          or shall not have commenced any action which alleges that such
          Acquisition will violate applicable law.

               (c) The Lead Borrower shall have furnished the Collateral Agent
          with ten (10) days prior notice of such intended Acquisition and shall
          have furnished the Collateral Agent with a current draft of the
          acquisition agreement and other acquisition documents, a summary of
          any due diligence undertaken by the Borrowers in connection with such
          Acquisition, appropriate financial statements of the Person which is
          the subject of such Acquisition, pro forma projected financial
          statements for the twelve month period following such Acquisition
          after giving effect to such Acquisition (including balance sheets,
          cash flows and income statements by month for the acquired Person,
          individually, and on a consolidated basis with all Loan Parties), and
          such other information as the Collateral Agent may reasonably require,
          each of which shall be reasonably satisfactory to the Collateral
          Agent.

               (d) The structure of the Acquisition shall be acceptable to the
          Collateral Agent in its reasonable judgment. If an Acquisition of
          capital stock or other equity interests, after consummation of such
          Acquisition, a Borrower shall own directly or indirectly a majority of
          the equity interests in the Person being acquired and shall control a
          majority of any voting interests, and/or shall otherwise Control the
          Person being acquired.

               (e) The Collateral Agent shall have received (i) the results of
          appraisals of the assets (or the assets of the Person) to be acquired
          in such Acquisition and of a commercial finance examination of the
          Person which is (or whose assets are) being acquired, and (ii) such
          other due diligence as the Collateral Agent may reasonably require,
          all of the results of the foregoing to be reasonably satisfactory to
          the Collateral Agent.


                                       27

<PAGE>

               (f) Any assets acquired shall be utilized in, and if the
          Acquisition involves a merger, consolidation or stock acquisition, the
          Person which is the subject of such Acquisition shall be engaged in,
          only those businesses permitted under Section 5.19, below.

               (g) If the Person which is the subject of such Acquisition is a
          Subsidiary of a Borrower, such Subsidiary shall have executed such
          documents as may be necessary to be joined as a "Borrower" or
          "Facility Guarantor" hereunder, as determined by the Collateral Agent,
          and the Collateral Agent shall have received a first priority security
          and mortgage interest (subject to Permitted Encumbrances) in such
          Subsidiary's capital stock, inventory, accounts, equipment, real
          estate, leaseholds, and other property of the same nature as
          constitutes Collateral under this Agreement in order to secure the
          Liabilities.

               (h) The total consideration paid for all Acquisitions (whether in
          cash, tangible property, notes or other property (other than capital
          stock of the Parent)) after the Effective Date, shall not exceed in
          the aggregate the sum of $30,000,000.

               (i) Excess Availability immediately prior to such Acquisition,
          immediately after giving effect thereto, and projected Excess
          Availability on a pro forma projected basis for the twelve months
          immediately following such Acquisition, shall not be less than
          $40,000,000.

     "PERMITTED DISPOSITION": Shall mean any of the following:

               (a) Licenses of intellectual property or licensed or leased
          departments of a Loan Party or any of its Subsidiaries in the ordinary
          course of business or to another Loan Party;

               (b) Leases or subleases of Leases, to the extent at any point in
          time such Lease or subleases have anticipated minimum fixed annual
          rental payments of not more than $3,000,000 in the aggregate;

               (c) Sales, assignments, transfers, conveyances or other
          dispositions of any or all of the property specified in EXHIBIT 1.7
          hereof; provided that in connection with a sale or similar disposition
          of any such property, if a Loan Party receives a note or similar
          obligations as all or part of the consideration therefor, such Loan
          Party shall secure such note or obligation with a mortgage or similar
          Lien on such property and pledge such note or other obligation to the
          Collateral Agent as security for the Liabilities pursuant to the terms
          of the Loan Documents;

               (d) Sales of Inventory and Equipment in connection with store
          closures permitted in accordance with the provisions of Section 5.4(c)
          hereof, provided that all sales of Inventory in connection with store
          closings (1) after the occurrence and during the continuance of an
          Event of Default, or (2) consisting of more than fifteen (15) retail
          stores at the same time, shall be in accordance with


                                       28

<PAGE>

          liquidation agreements and with liquidators reasonably acceptable to
          the Collateral Agent;

               (e) the sale, lease or transfer of any property to any Loan
          Party; and

               (f) (i) the sale of any property, land or building (including any
          related receivables or other intangible assets) to any Person which is
          not a Subsidiary of the Borrowers, or (ii) the sale of the entire
          capital stock (or other equity interests) and Indebtedness of any
          Subsidiary owned by a Loan Party to any Person which is not a
          Subsidiary of a Borrower, or (iii) the consummation of any other asset
          sale with a Person who is not a Subsidiary of a Borrower, provided
          that, in each case ((i)-(iii)):

               A.   the consideration for such transaction represents fair
                    value, and at least 90% of such consideration consists of
                    cash, provided that in connection with a sale or similar
                    disposition of any such Property, if a Loan Party receives a
                    note or similar obligations as all or part of the
                    consideration therefor, such Loan Party shall secure such
                    note or obligation with a mortgage or similar Lien on such
                    Property and pledge such note or other obligation to the
                    Collateral Agent as security for the Liabilities pursuant to
                    the terms of the Loan Documents;

               B.   the aggregate consideration for all such transactions
                    completed in any fiscal year does not exceed $500,000,

               C.   the aggregate consideration for all such transactions
                    completed after the Effective Date does not exceed
                    $1,500,000, and

               D.   other than in connection with a transaction, the aggregate
                    consideration for which is equal to an amount less than
                    $500,000, at least five (5) Business Days prior to the date
                    of completion of such transaction such Loan Party shall have
                    delivered to the Agent an officer's certificate executed on
                    behalf of such Loan Party by an Authorized Officer of such
                    Loan Party, which certificate shall contain a description of
                    the proposed transaction, the date such transaction is
                    scheduled to be consummated, the estimated purchase price or
                    other consideration for such transaction, financial
                    information pertaining to compliance with the preceding
                    clause (A), and which shall (if requested by the Agent)
                    include a certified copy of the draft or definitive
                    documentation pertaining thereto.

     "PERMITTED ENCUMBRANCES": Shall mean any of the following:

               (a) Encumbrances for taxes not yet delinquent or which are being
          contested in good faith by appropriate proceedings, provided that
          adequate


                                       29

<PAGE>

          reserves with respect thereto are maintained on the books of the
          Borrowers in accordance with GAAP, and provided further that, no
          notice of tax lien has been filed with respect thereto;

               (b) Encumbrances in respect of property or assets imposed by law
          in the ordinary course of business, such as carrier's, warehousemen's,
          mechanics', materialmen's, repairmen's, landlord's or similar
          Encumbrances arising in the ordinary course of business which (i) are
          not overdue in accordance with customary business practices and
          consistent with the applicable Loan Party's prior practices, and do
          not in the aggregate materially detract from the value of such
          property or assets or materially impair the use thereof in the
          operation of the business of the Loan Parties, or (ii) are being
          contested in good faith by a Loan Party, by appropriate proceedings
          diligently instituted and conducted and without danger of any material
          risk to the Collateral and adequate reserves or other appropriate
          provision, if any, as shall be required in conformity with GAAP shall
          have been made therefor;

               (c) Encumbrances, pledges or deposits in connection with workers'
          compensation, unemployment insurance and other types of social
          security;

               (d) Deposits to secure the performance of tenders, bids, sales,
          trade and government contracts, leases, statutory obligations, surety,
          appeal, and supersedeas bonds, warranty, advance payment, customs,
          performance and return-of-money bonds and other obligations of a like
          nature in the ordinary course of business (exclusive of obligations in
          respect of the payment of borrowed money) whether pursuant to
          statutory requirements, common law or consensual arrangements;

               (e) Easements, rights of way, leases, zoning or deed
          restrictions, licenses, covenants, building, restrictions, minor
          defects or irregularities in title and other similar real estate
          encumbrances incurred in the ordinary course of business that in the
          aggregate do not materially interfere with the conduct of the business
          of the Loan Parties; defects and irregularities in titles, survey
          exceptions, encumbrances, easements or reservations of others for
          rights-of-way, roads, pipelines, railroad crossings, services,
          utilities or other similar purposes; outstanding mineral rights or
          reservations (including rights with respect to the removal of material
          resource) which do not materially diminish the value of the surface
          estate, assuming usage of such surface estate similar to that being
          carried on by any Loan Party as of the effective date;

               (f) Any interest or title of a lessor under any lease entered
          into by any Loan Party in the ordinary course of business not in
          violation of the Loan Documents;

               (g) Any interest or title of any lessee under any leases or
          subleases of real property of a Loan Party not in violation of the
          requirements of the Loan


                                       30

<PAGE>

          Documents, provided that all such Encumbrances do not in the aggregate
          materially detract from the value of such Loan Party's property or
          materially impair the use thereof in the operation of such Loan
          Party's business;

               (h) Encumbrances arising from financing statements regarding
          property subject to Capital Leases not in violation of the
          requirements of the Loan Documents, provided that such Encumbrances
          are only in respect of the property subject to, and secure only, the
          respective lease;

               (i) Rights of consignors of goods to a Loan Party as consignee;

               (j) Encumbrances arising from judgments, decrees or attachments
          in existence less than 30 days after the entry thereof, with respect
          to which execution has been stayed and with respect to which payment
          in full above any applicable deductible is covered by insurance or a
          bond, or in circumstances not constituting an Event of Default under
          section 11.10(a);

               (k) Encumbrances created by this Agreement or the other Loan
          Documents;

               (l) Encumbrances (i) listed on EXHIBIT 4.5(A), annexed hereto, or
          (ii) arising out of the refinancing, extension, renewal or refunding
          of any Indebtedness secured by any such Encumbrances, provided that
          the principal amount of such Indebtedness is not increased and such
          Indebtedness is not secured by any additional assets;

               (m) Encumbrances which are placed upon Equipment or improvements
          to real property (including the associated real property) used in the
          ordinary course of business of a Loan Party or any Subsidiary (i) at
          the time of (or within 90 days after) the acquisition of such
          Equipment or the completion of such improvements by such Loan Party or
          any such Subsidiary to secure Indebtedness incurred to pay or finance
          all or a portion of the purchase price or other cost thereof, provided
          that the Encumbrance on the Equipment so acquired or the real property
          so improved does not encumber any other asset of such Loan Party or
          any such Subsidiary; or (ii) are existing on Equipment or real
          property at the time acquired by a Loan Party or any Subsidiary or on
          assets of a Person at the time such Person first becomes a Subsidiary
          of the Borrower; provided that (A) any such Encumbrances were not
          created at the time of or in contemplation of the acquisition of such
          assets or Person by a Loan Party or any Subsidiaries; (B) in the case
          of any such acquisition of a Person, any such Encumbrance attaches
          only to the Equipment or real estate, as applicable, of such Person;
          and (C) in the case of any such acquisition of Equipment or real
          estate by a Loan Party or any Subsidiary, any such Encumbrance
          attaches only to the property and assets so acquired and not to any
          other property or assets of such Loan Party or any such Subsidiary;
          provided that the Encumbrances outstanding from time to time under


                                       31

<PAGE>

          this clause (m) shall not secure any Indebtedness other than Permitted
          Indebtedness described in clause (c) of such definition; and

               (n) Encumbrances securing Indebtedness assumed in connection
          with, or continuing to exist after, but not incurred in connection
          with, or contemplation of, a Permitted Acquisition, which Encumbrances
          were in effect prior to the consummation of the Permitted Acquisition,
          provided that such Encumbrances may not extend to any Accounts,
          Inventory, or General Intangibles of the Loan Parties or of the Person
          so acquired.

     The inclusion of the foregoing as "Permitted Encumbrances" shall not limit
     or impair the right of the Collateral Agent to impose Reserves on account
     thereof in accordance with the provisions of this Agreement.

     "PERMITTED INDEBTEDNESS": Shall mean any of the following:

               (a) Indebtedness incurred under this Agreement and the other Loan
          Documents including any Indebtedness on account of the Revolving
          Credit.

               (b) Indebtedness on account of Equipment or improvements to real
          property acquired in compliance with the requirements of subparagraph
          (m) of the definition of Permitted Encumbrances, the incurrence of
          which would not otherwise be prohibited by this Agreement; provided
          that such Indebtedness shall not exceed $10,000,000 in the aggregate
          at any time outstanding for all Loan Parties and, with respect to the
          Parent only, shall not exceed $5,000,000 in the aggregate outstanding
          at any time;

               (c) (i) Indebtedness consisting of all obligations of a Loan
          Party or any Subsidiary as lessee under Capital Leases, and

                    (ii) Indebtedness consisting of all obligations of a Loan
          Party or any Subsidiary under any lease (i) which is accounted for by
          the lessee as an operating lease and (ii) under which the lessee is
          intended to be the "owner" of the leased property for Federal income
          tax purposes;

          provided that (A) at the time of any incurrence thereof after the date
          hereof, and after giving effect thereto, no Event of Default shall
          have occurred and be continuing or would result therefrom; and (B) the
          aggregate outstanding principal amount (using the obligations in lieu
          of principal amount, in the case of any Capital Lease, or present
          value, based on the implicit interest rate, in lieu of principal
          amount, in the case of any lease described above in part (ii)) of
          Indebtedness permitted by this clause (d) shall not exceed $10,000,000
          in the aggregate principal amount outstanding at any time for all Loan
          Parties and, with respect to the Parent only, shall not exceed
          $5,000,000 in the aggregate principal amount outstanding at any time.


                                       32

<PAGE>

               (d) Indebtedness of the Loan Parties and any Subsidiary under
          Hedge Agreements other than for speculative purposes with any
          Revolving Credit Lender or an Affiliate of a Revolving Credit Lender.

               (e) The Indebtedness listed on EXHIBIT 4.6, annexed hereto;

               (f) Indebtedness to sellers in connection with Permitted
          Acquisitions;

               (g) Intercompany indebtedness between and among the Loan Parties
          (other than the Parent) pursuant to loans and advances permitted in
          accordance with Subsection 5.17(f), below, and intercompany
          Indebtedness due to the Parent by any other Loan Party to the extent
          permitted hereunder;

               (h) Indebtedness with respect to indemnities, warranties,
          statutory obligations, and surety, appeal and supersedeas bonds
          incurred in the ordinary course of business;

               (i) Indebtedness in respect of overdraft protections and
          otherwise in connection with deposit accounts;

               (j) Indebtedness arising out of the refinancing, extension,
          renewal or refunding of any Indebtedness permitted under this
          Agreement, provided that the principal amount of such Indebtedness is
          not increased from the amount outstanding at the time of such
          refinancing;

               (k) Indebtedness owed by the Parent to any of the other Loan
          Parties in an amount not to exceed $5,000,000 (less amounts paid under
          Section 5.16(a) hereof) in the aggregate at any time outstanding; and

               (l) Intercompany Indebtedness between and among the Loan Parties
          as evidenced by the Intercompany Notes.

     "PERMITTED INVESTMENTS": Shall mean each of the following:

               (a) direct obligations of, or obligations the principal of and
          interest on which are unconditionally guaranteed by, the United States
          of America (or by any agency thereof to the extent such obligations
          are backed by the full faith and credit of the United States of
          America), in each case maturing not more than one year from the date
          of acquisition thereof;

               (b) investments in commercial paper maturing not more than one
          year from the date of acquisition thereof and having, at such date of
          acquisition, the highest credit rating obtainable from Standard &
          Poors or from Moody's Investment Services, Inc.;

               (c) investments in certificates of deposit, banker's acceptances
          and time deposits maturing not more than one year from the date of
          acquisition


                                       33

<PAGE>

          thereof issued or guaranteed by or placed with, and money market
          deposit accounts issued or offered by, any domestic office of any
          financial institution organized under the laws of the United States of
          America or any State thereof that has a combined capital and surplus
          and undivided profits of not less than $500,000,000;

               (d) fully collateralized repurchase agreements with a term of not
          more than 30 days for securities described in clause (a) above
          (without regard to the limitation on maturity contained in such
          clause) and entered into with a financial institution satisfying the
          criteria described in clause (c) above;

               (e) marketable direct obligations issued by any state of the
          United States of America or any political subdivision of any such
          state or any public instrumentality thereof maturing within one year
          from the date of acquisition thereof and, at the time of acquisition,
          having one of the two highest ratings obtainable from either Standard
          & Poors or from Moody's Investment Services, Inc.;

               (f) investments in money market funds, substantially all the
          assets of which are comprised of securities of the types described in
          clauses (a) through (e) above;

               (g) investments acquired by a Loan Party or any of its
          Subsidiaries (i) in exchange for any other investment held by such
          Loan Party or any such Subsidiary in connection with or as a result of
          a bankruptcy, workout, reorganization or recapitalization of the
          issuer of such other investment, or (ii) as a result of a foreclosure
          by such Loan Party or any of its Subsidiaries with respect to any
          secured investment or other transfer of title with respect to any
          secured investment in default;

               (h) investments by a Loan Party in the capital of any
          wholly-owned subsidiary of such Loan Party, including without
          limitation, any Permitted Acquisitions, provided that such Loan Party
          has complied with the provisions of Section 5.21 hereof with respect
          to such Subsidiary;

               (i) to the extent not permitted by the foregoing clauses,
          existing investments in any Subsidiaries (and any increases thereof
          attributable to increases in retained earnings);

               (j) to the extent not permitted by the foregoing clauses, the
          existing investments described on EXHIBIT 1.6 hereto;

               (k) investments of a Loan Party and any Subsidiary in Hedge
          Agreements other than for speculative purposes;


                                       34

<PAGE>

               (l) investments of any Person which are outstanding at the time
          such Person becomes a Subsidiary of a Loan Party as a result of a
          Permitted Acquisition, but not any increase in the amount thereof
          unless otherwise permitted by this Agreement; and

               (m) any other investments (whether in the form of cash or
          contribution of property, and if in the form of a contribution of
          property, such property shall be valued for purposes of this clause at
          the fair value thereof) in any corporation, partnership, limited
          liability company, joint venture or other business entity, which is
          not itself a Subsidiary of a Borrower or owned or Controlled by any
          director, officer or employee of a Borrower or any of its
          Subsidiaries, not otherwise permitted by the foregoing clauses, made
          after the Effective Date, shall be permitted to be incurred if (i) no
          Event of Default shall have occurred and be continuing, or would
          result therefrom, and (ii) the aggregate cumulative amount of such
          investments (together with any loans and advances permitted under
          Sections 5.6 and 5.17) does not exceed $6,000,000;

          provided that, except for Excluded Property and loans to officers and
          directors, all such Permitted Investments are subject to a perfected
          Encumbrance in favor of the Collateral Agent.

     "PERSON": Any natural person, and any corporation, limited liability
     company, trust, partnership, joint venture, or other enterprise or entity.

     "POST FORECLOSURE ASSET": All or any part of the Collateral, ownership of
     which is acquired by the Collateral Agent or a Nominee on account of the
     "bidding in" at a disposition as part of a Liquidation or by reason of a
     "deed in lieu" type of transaction.

     "PROTECTIVE OVERADVANCES": Revolving Credit Loans which are OverLoans, but
     as to which each of the following conditions is satisfied: (a) when
     aggregated with all other Revolving Credit Loans, SwingLine Loans,
     Protective OverAdvances and the Stated Amount of L/Cs and Banker's
     Acceptances, the Revolving Credit Ceiling is not exceeded; and (b) when
     aggregated with all other Protective OverAdvances, such Revolving Credit
     Loans do not aggregate more than $7,500,000; (c) such Protective
     OverAdvances shall not remain outstanding for more than forty-five (45)
     days in any period of one hundred eighty (180) consecutive days, and (d)
     such Revolving Credit Loans are made or undertaken in the Administrative
     Agent's reasonable, good faith discretion (or as directed by the Collateral
     Agent) to protect and preserve the interests of the Revolving Credit
     Lenders. Overadvances on account of circumstances beyond the control of the
     Agent (such as a drop in collateral value) shall not be deemed "Protective
     Overadvances" and shall not be subject to the limitations contained herein.

     "PROCEEDS": Includes, without limitation, "Proceeds" as defined in the UCC.


                                       35

<PAGE>

     "RECEIPTS": All cash, cash equivalents, money, checks, credit card slips,
     receipts and other Proceeds from any sale of the Collateral.

     "RECEIVABLES COLLATERAL": That portion of the Collateral which consists of
     Accounts, Payment Intangibles, Chattel Paper, Instruments, Documents of
     Title, Documents, Investment Property, Payment Intangibles,
     Letter-of-Credit Rights, bankers' acceptances, and all other rights to
     payment.

     "RELATED BUSINESS": Any business or enterprise consisting of any of the
     following:

               (a) asset maximization services.

               (b) asset valuation services.

     "RELEASE": Any spilling, leaking, pumping, pouring, emitting, emptying,
     discharging, injecting, escaping, leaching, seeping, migrating, dumping or
     disposing of any Hazardous Material (including the abandonment or
     discarding of barrels, containers and other closed receptacles containing
     any Hazardous Material) into the indoor or outdoor environment, including,
     without limitation, the movement of Hazardous Materials through or in the
     ambient air, soil, surface or ground water, or property, which is in
     violation of Environmental Laws.

     "REGISTER": Is defined in Section 17.2(c).

     "REQUIREMENTS OF LAW": As to any Person:

               (a) Applicable Law.

               (b) That Person's organizational documents.

               (c) That Person's by-laws and/or other instruments which deal
          with corporate or similar governance, as applicable.

     "RESERVES": The following: Availability Reserves and Inventory Reserves.

     "REVOLVING CREDIT": Is defined in Section 2.1.

     "REVOLVING CREDIT CEILING": $150,000,000.00.

     "REVOLVING CREDIT DOLLAR COMMITMENT": As set forth on EXHIBIT 2.22, annexed
     hereto (as such amounts may change in accordance with the provisions of
     this Agreement).

     "REVOLVING CREDIT LENDERS": Each Revolving Credit Lender to which reference
     is made in the Preamble of this Agreement and any other Person who becomes
     a "Revolving Credit Lender" in accordance with the provisions of this
     Agreement.


                                       36

<PAGE>

     "REVOLVING CREDIT LOANS": Loans made under the Revolving Credit, except
     that where the term "Revolving Credit Loan" is used with reference to
     available interest rates applicable to the loans under the Revolving
     Credit, it refers to so much of the unpaid principal balance of the Loan
     Account as bears the same rate of interest for the same Interest Period.
     (See Section 2.12(d)).

     "REVOLVING CREDIT NOTE": Is defined in Section 2.10.

     "REVOLVING CREDIT COMMITMENT PERCENTAGE": As set forth on EXHIBIT 2.22,
     annexed hereto (as such amounts may change in accordance with the
     provisions of this Agreement).

     "SEC": The Securities and Exchange Commission.

     "SENIOR NON-CONVERTIBLE FACILITY": The credit facility set forth in the
     Senior Subordinated Convertible Loan Agreement dated as of March 15, 2000,
     amended from time to time prior to the Effective Date and as amended and
     restated June 11, 2002, in the present principal amount of $75,000,000.00,
     and as most recently amended and restated on the Effective Date.

     "SPECIFIED EVENT OF DEFAULT": An Event of Default arising under any of the
     following sections of this Agreement:

               (a) Section 11.1.

               (b) Section 11.2.

               (c) Section 11.3 (with respect to Sections 5.16, 5.17, and 5.20,
          and Article 8 only).

               (d) Section 11.5 (with respect to a breach of Sections 4.5 and
          5.26 only).

               (e) Section 11.6.

               (f) Section 11.11.

               (g) Section 11.12.

               (h) Section 11.15.

     "STATED AMOUNT": The maximum amount for which an L/C or Banker's Acceptance
     may be honored.

     "SUBSIDIARY": Any corporation, association, partnership, limited liability
     company, trust, or other business entity of which the designated parent
     shall at any time own


                                       37

<PAGE>

     directly or indirectly through a Subsidiary or Subsidiaries at least a
     majority (by number of votes or Controlling interests) of the outstanding
     voting interests.

     "SUPERMAJORITY LENDERS": Revolving Credit Lenders (other than Delinquent
     Revolving Credit Lenders) holding 66-2/3% or more of the Revolving Credit
     Commitment Percentages (calculated without regard to any Revolving Credit
     Commitment Percentage of any Delinquent Revolving Credit Lender).

     "SUPPORTING OBLIGATION": Has the meaning given that term in the UCC and
     also refers to a Letter-of-Credit Right or secondary obligation which
     supports the payment or performance of an Account, Chattel Paper, a
     Document, a General Intangible, an Instrument, or Investment Property.

     "SWINGLINE": The facility pursuant to which the SwingLine Lender may
     advance Revolving Credit Loans aggregating up to the SwingLine Loan
     Ceiling.

     "SWINGLINE LENDER": NCBC.

     "SWINGLINE LOAN CEILING": $20,000,000.00 (subject to increase as provided
     in Section 16.4(e)).

     "SWINGLINE LOANS": Defined in Section 2.8.

     "TERMINATION DATE": The earliest of (a) the Maturity Date; or (b) the date
     of the occurrence of any event described in Section 11.12, below; or (c)
     the date designated as the Termination Date in the Administrative Agent's
     notice to the Lead Borrower setting the Termination Date on account of the
     occurrence of any Event of Default other than as described in Section
     11.12, below; or (d) that date designated as the Termination Date, thirty
     (30) days irrevocable written notice of which is provided by the Lead
     Borrower to the Administrative Agent.

     "TRANSFER": Wire transfer pursuant to the wire transfer system maintained
     by the Board of Governors of the Federal Reserve Board, or as otherwise may
     be agreed to from time to time by the Administrative Agent making such
     Transfer and the subject Revolving Credit Lender. Wire instructions may be
     changed in the same manner that Notice Addresses may be changed (Section
     18.1), except that no change of the wire instructions for Transfers to any
     Revolving Credit Lender shall be effective without the consent of the
     Administrative Agent.

     "UCC": The Uniform Commercial Code as in effect from time to time in the
     State of Ohio.

     "UNANIMOUS CONSENT": Consent of Revolving Credit Lenders (other than
     Delinquent Revolving Credit Lenders) holding 100% of the Loan Commitments
     (other than Loan Commitments held by a Delinquent Revolving Credit Lender).


                                       38

<PAGE>

     "UNDERWRITING FEE": Is defined in Section 2.13.

     "UNRESTRICTED SUBSIDIARY": Those Subsidiaries of the Lead Borrower
     described on EXHIBIT 1.5 hereto.

     "UNUSED LINE FEE": As defined in Section 2.14.

ARTICLE 2 - THE REVOLVING CREDIT:

     2.1. ESTABLISHMENT OF REVOLVING CREDIT

          (a) The Revolving Credit Lenders hereby establish a revolving line of
credit (the "REVOLVING CREDIT") in the Borrowers' favor pursuant to which each
Revolving Credit Lender, subject to, and in accordance with, this Agreement,
acting through the Administrative Agent, shall make loans and advances and
otherwise provide financial accommodations to and for the account of the
Borrowers as provided herein.

          (b) Loans, advances, and financial accommodations under the Revolving
Credit shall be made with reference to the DSW Borrowing Base and shall be
subject to DSW Availability. The DSW Borrowing Base and DSW Availability shall
be determined by the Administrative Agent by reference to Borrowing Base
Certificates furnished as provided in Section 6.4, below, and shall be subject
to the following:

               (i) Such determination shall take into account such Reserves as
     the Collateral Agent may determine as being applicable thereto.

               (ii) The Cost of Eligible Inventory will be determined in a
     manner consistent with current tracking practices, based on the Borrowers'
     stock ledgers inventory.

          (c) The commitment of each Revolving Credit Lender to provide such
loans, advances, and financial accommodations is subject to Section 2.22.

          (d) The proceeds of borrowings under the Revolving Credit shall be
used for the Borrowers' working capital and general corporate purposes
(including, intercompany loans), all solely to the extent permitted by this
Agreement. No proceeds of a borrowing under the Revolving Credit may be used,
nor shall any be requested, with a view towards the accumulation of any general
fund or funded reserve of the Borrowers other than in the ordinary course of the
Borrowers' business and consistent with the provisions of this Agreement.

     2.2. ADVANCES IN EXCESS OF BORROWING BASE (OVERLOANS).

          (a) Except as provided in Section 16.3(a), no Revolving Credit Lender
has any obligation to any Borrower to make any loan or advance, or otherwise to
provide any credit to or for the benefit of any Borrower where the result of
such loan, advance, or credit is an OverLoan.


                                       39

<PAGE>

          (b) The Revolving Credit Lenders' obligations, among themselves, are
subject to (among other provisions of this Agreement) Section 13.3(a) (which
relates to each Revolving Credit Lender's making amounts available to the
Administrative Agent) and 16.3(a) (which relates to Protective OverAdvances).

          (c) The Revolving Credit Lenders' providing of an OverLoan on any one
occasion does not affect the obligations of each Borrower hereunder (including
each Borrower's obligation to immediately repay any amount which otherwise
constitutes an OverLoan) nor obligate the Revolving Credit Lenders to do so on
any other occasion.

     2.3. RISKS OF VALUE OF COLLATERAL. The Agent's reference to a given asset
in connection with the making of loans, credits, and advances and the providing
of financial accommodations under the Revolving Credit and/or the monitoring of
compliance with the provisions hereof shall not be deemed a determination by any
Agent or any Revolving Credit Lender relative to the actual value of the asset
in question. All risks concerning the value of the Collateral are and remain
upon the Borrowers. All Collateral secures the prompt, punctual, and faithful
performance of the Liabilities whether or not relied upon by the Administrative
Agent in connection with the making of loans, credits, and advances and the
providing of financial accommodations under the Revolving Credit.

     2.4. COMMITMENT TO MAKE REVOLVING CREDIT LOANS AND SUPPORT LETTERS OF
CREDIT. Subject to the provisions of this Agreement, the Revolving Credit
Lenders shall make a loan or advance under the Revolving Credit and the
Administrative Agent shall endeavor to have an L/C or Banker's Acceptance issued
for the account of one or more of the Loan Parties, in each instance if duly and
timely requested by the Lead Borrower as provided herein provided that:

          (a) No OverLoan is then outstanding and none will result therefrom.

          (b) No Borrower is then in Default and none will thereby become in
Default.

     2.5. REVOLVING CREDIT LOAN REQUESTS.

          (a) Requests for loans and advances under the Revolving Credit or for
the continuance or conversion of an interest rate applicable to a Revolving
Credit Loan may be requested by the Lead Borrower by written or telephonic
notice (in the case of telephonic notice, promptly confirmed in writing if so
requested by the Administrative Agent). Such notice of borrowing shall be
substantially in the form of EXHIBIT 2.5 hereto, signed by the Lead Borrower and
transmitted to the Administrative Agent by telecopier. Each such notice shall be
irrevocable and shall specify (i) the proposed Borrower, (ii) the amount of the
proposed borrowing and the date thereof (which shall be a Business Day) and
(iii) whether the borrowing then being requested is to be a borrowing of Base
Margin Loans or LIBOR Loans and, if LIBOR Loans, the Interest Period with
respect thereto. If no election is made as to the Type of Loan or no election of
Interest Period is specified in any such notice for a borrowing of LIBOR Loans,
such notice shall be deemed a request for borrowing of Base Margin Loans. The
Administrative Agent may rely on any telephonic request for a borrowing to the
same extent that the Administrative Agent may rely on any telephonic request for
a borrowing to the same extent that the Administrative Agent


                                       40

<PAGE>

may rely on a written request. The Borrowers shall bear all risks related to
the giving of borrowing requests telephonically.

          (b) Subject to the provisions of this Agreement, the Lead Borrower
may, on behalf of any Borrower, request a Revolving Credit Loan and elect an
interest rate and Interest Period to be applicable to that Revolving Credit Loan
by giving notice to the Administrative Agent by no later than the following:

               (i) If such Revolving Credit Loan is to be or is to be converted
     to a Base Margin Loan: By 2:00 p.m. on the Business Day on which the
     subject Revolving Credit Loan is to be made or is to be so converted
     (provided that if notice is furnished after 12:00 noon on any Business Day,
     the Revolving Credit Loan so requested shall be deemed a request for a
     SwingLine Loan). Base Margin Loans requested by the Lead Borrower, other
     than those resulting from the conversion of a LIBOR Loan, shall not be less
     than $250,000 and in increments of $10,000 in excess of such minimum.

               (ii) If such Revolving Credit Loan is to be, or is to be
     continued as, or converted to, a LIBOR Loan: By 2:00 p.m. three (3) LIBOR
     Business Days before the commencement of any new Interest Period or the end
     of the then applicable Interest Period. LIBOR Loans and conversions to
     LIBOR Loans shall each be not less than $3,000,000 and in increments of
     $1,000,000 in excess of such minimum.

               (iii) Any LIBOR Loan which matures while any Borrower is in
     Default shall be converted, at the option of the Administrative Agent, to a
     Base Margin Loan notwithstanding any notice from the Lead Borrower that
     such Loan is to be continued as a LIBOR Loan.

               (iv) LIBOR Loans may not be converted or continued as LIBOR Loans
     at any time other than the end of the Interest Period applicable thereto
     unless the Borrowers shall pay, upon demand, any amounts due pursuant to
     Section 2.11(f) hereof.

          (c) Any request for a Revolving Credit Loan or for the continuance or
conversion of an interest rate applicable to a Revolving Credit Loan which is
made after the applicable deadline therefor, as set forth above, shall be deemed
to have been made at the opening of business on the then next Business Day or
LIBOR Business Day, as applicable.

          (d) The Lead Borrower may, on behalf of any Loan Party, request that
the Administrative Agent cause the issuance by the Issuer of L/Cs or Banker's
Acceptances for the account of the Borrowers as provided in Section 2.17.

          (e) The Administrative Agent may rely on any request for a loan or
advance, or other financial accommodation under the Revolving Credit which the
Administrative Agent, in good faith, believes to have been made by a Person duly
authorized to act on behalf of the Lead Borrower and may decline to make any
such requested loan or advance, or issuance, or to provide any such financial
accommodation pending the Administrative Agent's being furnished


                                       41

<PAGE>

with such documentation concerning that Person's authority to act as may be
satisfactory to the Administrative Agent.

          (f) A request by the Lead Borrower for loan or advance, or other
financial accommodation under the Revolving Credit shall be irrevocable and
shall constitute certification by each Borrower that as of the date of such
request, each of the following is true and correct:

               (i) There has been no material adverse change in the Borrowers'
     financial condition from the most recent financial information furnished
     any Agent or any Revolving Credit Lender pursuant to this Agreement.

               (ii) Each representation which is made herein or in any of the
     Loan Documents is then true and complete in all material respects as of and
     as if made on the date of such request except to the extent that any of the
     same relates expressly to a different date.

               (iii) Unless accompanied by a written Certificate of the Lead
     Borrower's President or its Chief Financial Officer describing (in
     reasonable detail) the facts and circumstances of any Default then existing
     and the steps (if any) being taken to remedy such condition, that no
     Default has occurred and is continuing.

     2.6. SUSPENSION OF REVOLVING CREDIT. If, at any time or from time to time,
any Borrower is in Default:

          (a) The Administrative Agent may, and at the direction of the
SuperMajority Lenders shall, suspend the Revolving Credit immediately, in which
event, neither the Administrative Agent nor any Revolving Credit Lender shall be
obligated, during such suspension, to make any loans or advance to any Borrower,
or to provide any financial accommodation hereunder or to seek the issuance of
any L/C or of any Banker's Acceptance for the account of any Loan Party. Nothing
contained herein shall limit the right of the Administrative Agent to make
Protective OverAdvances or the obligation of the Revolving Credit Lenders with
respect to SwingLine Loans, Protective OverAdvances, L/Cs and Banker's
Acceptances during such suspension period.

          (b) The Administrative Agent may, and at the direction of the
SuperMajority Lenders shall, suspend the right of the Lead Borrower to request
any LIBOR Loan or to convert any Base Margin Loan to a LIBOR Loan.

     2.7. MAKING OF REVOLVING CREDIT LOANS

          (a) A loan or advance under the Revolving Credit shall be made by the
transfer of the proceeds of such loan or advance to the Operating Account of the
applicable Borrower. The proceeds of any Revolving Credit Loan shall be made
available before 3:00 p.m. on the date requested in accordance with Section 2.5
hereof.


                                       42
<PAGE>

          (b) A loan or advance shall be deemed to have been made under the
Revolving Credit (and the Borrowers shall be indebted to the Administrative
Agent and the Revolving Credit Lenders for the amount thereof immediately) at
the following:

               (i) The Administrative Agent's initiation of the transfer of the
     proceeds of such loan or advance in accordance with the Lead Borrower's
     instructions (if such loan or advance is of funds requested by the Lead
     Borrower).

               (ii) The charging of the amount of such loan to the Loan Account
     (in all other circumstances).

          (c) Absent gross negligence, bad faith or willful misconduct, there
shall not be any recourse to or liability of the Administrative Agent or any
Revolving Credit Lender, on account of:

               (i) Any delay in the making of any loan or advance requested
     under the Revolving Credit.

               (ii) Any delay by any bank or other depository institution in
     treating the proceeds of any such loan or advance as collected funds.

               (iii) Any delay in the receipt, and/or any loss, of funds which
     constitute a loan or advance under the Revolving Credit, the wire transfer
     of which was properly initiated by the Administrative Agent in accordance
     with wire instructions provided to the Administrative Agent by the Lead
     Borrower.

     2.8. SWINGLINE LOANS.

          (a) For ease of administration, Base Margin Loans may be made by the
SwingLine Lender (in the aggregate, the "SWINGLINE LOANS") in accordance with
the procedures set forth in this Agreement for the making of loans and advances
under the Revolving Credit. The aggregate unpaid principal balance of the
SwingLine Loans shall not, as to all Borrowers, at any one time be in excess of
the lesser of (i) the SwingLine Loan Ceiling, or (ii) DSW Availability. The
SwingLine Lender shall not make a SwingLine Loan if the SwingLine Lender has
received notice from the Administrative Agent that the Administrative Agent has
suspended, or the Administrative Agent has received written notice from the
SuperMajority Lenders instructing the Administrative Agent to suspend, the
Revolving Credit in accordance with the terms hereof. Absent such notification,
the SwingLine Lender (x) shall not otherwise be required to determine whether
the conditions precedent to such SwingLine Loan have been satisfied or whether
the requested borrowing would cause DSW Availability to be exceeded, and (y)
shall be entitled in all cases to have each Revolving Credit Lender make
Revolving Credit Loans in settlement of such SwingLine Loans in accordance with
the provisions of Section 13.2 hereof.

          (b) The aggregate unpaid principal balance of SwingLine Loans shall
bear interest at the rate applicable to Base Margin Loans (or a money market
based rate quoted by the


                                       43

<PAGE>

Agent and accepted by the Lead Borrower) and shall be repayable as a loan under
the Revolving Credit.

          (c) The Borrowers' obligation to repay SwingLine Loans shall be
evidenced by a Note in the form of EXHIBIT 2.8(C), annexed hereto, executed by
the Borrowers, and payable to the SwingLine Lender. Neither the original nor a
copy of that Note shall be required, however, to establish or prove any
Liability. Upon receipt of an affidavit of an officer of, and a customary
indemnity from, a SwingLine Lender as to the loss, theft, destruction or
mutilation of the SwingLine Note, the Borrowers will issue in lieu thereof a
replacement SwingLine Note in the same principal amount thereof and of like
tenor.

          (d) For all purposes of this Loan Agreement, the SwingLine Loans and
the Borrowers' obligations to the SwingLine Lender constitute Revolving Credit
Loans and are secured as "Liabilities".

          (e) SwingLine Loans shall be subject to periodic settlement with the
Revolving Credit Lenders as provided in this Agreement.

     2.9. THE LOAN ACCOUNT.

          (a) An account ("LOAN ACCOUNT") shall be opened on the books of the
Administrative Agent in which a record shall be kept of all loans and advances
made under the Revolving Credit (including, without limitation, Swingline
Loans). The Loan Account shall also contain separate entries for loans and
advances made to each Borrower.

          (b) The Administrative Agent shall also keep a record (either in the
Loan Account or elsewhere, as the Administrative Agent may from time to time
elect) of all interest, fees, service charges, costs, expenses, and other debits
owed to each Agent and each Revolving Credit Lender on account of the
Liabilities from each Borrower and of all credits against such amounts so owed.

          (c) All credits against the Liabilities shall be conditional upon
final payment to the Administrative Agent for the account of the Agent or
Revolving Credit Lender entitled thereto of the items giving rise to such
credits. The amount of any item credited against the Liabilities which is
charged back against any Agent or any Revolving Credit Lender or is disgorged
for any reason or is not so paid shall be a Liability and shall be added to the
Loan Account, whether or not the item so charged back or not so paid is
returned.

          (d) Except as otherwise provided herein, all fees, service charges,
costs, and expenses for which any Borrower is obligated hereunder are payable on
demand.

          (e) The Administrative Agent, without the request of the Lead
Borrower, may advance under the Revolving Credit any interest, fee, service
charge, or other payment to which any Agent or any Revolving Credit Lender is
entitled from any Borrower pursuant hereto and may charge the same to the Loan
Account notwithstanding that an OverLoan may result thereby; provided that the
Administrative Agent shall not charge the Loan Account for any third-party


                                       44

<PAGE>

expenses incurred by the Agent (such as fees for attorneys, appraisers and
commercial finance examinations) without first having furnished the Lead
Borrower with a copy of the invoice therefor two (2) Business Days prior to the
date that the Loan Account is to be so charged.. Any such advance shall be
deemed a Base Margin Loan. Such action on the part of the Administrative Agent
shall not constitute a waiver of the Administrative Agent's rights and each
Borrower's obligations under Section 2.11(b). Any amount which is added to the
principal balance of the Loan Account as provided in this Section 2.9(e) shall
bear interest at the interest rate then and thereafter applicable to Base Margin
Loans. The Administrative Agent shall promptly furnish the Lead Borrower with a
detailed statement itemizing any amounts so charged to the Loan Account.

          (f) Any statement rendered by the Administrative Agent or any
Revolving Credit Lender to the Lead Borrower concerning the Liabilities shall be
considered correct and accepted by each Borrower and shall, absent manifest
error, be conclusively binding upon each Borrower unless the Lead Borrower
provides the Administrative Agent with written objection thereto within twenty
(20) days from the receipt by the Lead Borrower of such statement, which written
objection shall indicate, with particularity, the reason for such objection. The
Loan Account and the Administrative Agent's books and records concerning the
loan arrangement contemplated herein and the Liabilities shall be prima facie
evidence and proof of the items described therein.

     2.10. THE REVOLVING CREDIT NOTES. The Borrowers' obligation to repay loans
and advances under the Revolving Credit, with interest as provided herein, shall
be evidenced by Notes (each, a "REVOLVING CREDIT NOTE") in the form of EXHIBIT
2.10, annexed hereto, executed by each Borrower, one payable to each Revolving
Credit Lender. Neither the original nor a copy of any Revolving Credit Note
shall be required, however, to establish or prove any Liability. Upon receipt of
an affidavit of an officer of, and a customary indemnity from, a Revolving
Credit Lender as to the loss, theft, destruction or mutilation of the Revolving
Credit Note, the Borrowers will issue in lieu thereof a replacement Revolving
Credit Note in the same principal amount thereof and of like tenor.

     2.11. PAYMENT OF THE LOAN ACCOUNT.

          (a) The Borrowers may repay all or any portion of the principal
balance of the Loan Account from time to time until the Termination Date.

          (b) Each Borrower, without notice or demand from the Administrative
Agent or any Revolving Credit Lender, shall immediately pay the Administrative
Agent that amount, from time to time, which is necessary so that there is no
OverLoan outstanding.

          (c) Subject to Section 8.4, during the continuance of a Cash Control
Event, the Borrowers shall repay the Revolving Credit:

               (i) in an amount equal to the proceeds realized from the sale,
     refinancing, or other disposition of, or realization upon, any Collateral;
     and

               (ii) in accordance with the provisions of Article 8 hereof.


                                       45

<PAGE>

All amounts prepaid under this Section 2.11 may be reborrowed under the
Revolving Credit, subject to and in accordance with, the terms of this
Agreement.

          (d) The Borrowers shall repay the then entire unpaid balance of the
Loan Account and all other Liabilities on the Termination Date.

          (e) The Administrative Agent shall endeavor to cause the application
of payments (if any), pursuant to Sections 2.11(a) and 2.11(b) against LIBOR
Loans then outstanding in such manner as results in the least cost to the
Borrowers, but shall not have any affirmative obligation to do so nor liability
on account of the Administrative Agent's failure to have done so. In no event
shall action or inaction taken by the Administrative Agent excuse any Borrower
from any indemnification obligation under Section 2.11(f).

          (f) The Borrowers shall indemnify the Administrative Agent and each
Revolving Credit Lender and hold the Administrative Agent and each Revolving
Credit Lender harmless from and against any loss, cost or expense (including
loss of anticipated profits and amounts payable by the Administrative Agent or
such Revolving Credit Lender on account of "breakage fees" (so-called)) which
the Administrative Agent or such Revolving Credit Lender may sustain or incur
(including, without limitation, by virtue of acceleration after the occurrence
of any Event of Default) as a consequence of the following:

               (i) Failure by any Borrower to pay any of the principal amount of
     or any interest on any LIBOR Loan as and when due and payable, including
     any such loss or expense arising from interest or fees payable by such
     Revolving Credit Lender in order to maintain its LIBOR Loans.

               (ii) Failure by any Borrower to make a borrowing or conversion
     after the Lead Borrower has given (or is deemed to have given) a request
     for a Revolving Credit Loan or a request to convert a Revolving Credit Loan
     from one applicable interest rate to another.

               (iii) The making of any payment on a LIBOR Loan or the making of
     any conversion of any such Loan to a Base Margin Loan on a day that is not
     the last day of the applicable Interest Period with respect thereto.

          (g) Upon at least two (2) Business Days' prior written notice to the
Administrative Agent, the Borrowers may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Revolving Credit
Dollar Commitments. Each such reduction shall be in the principal amount of
$5,000,000 or any integral multiple thereof. Each such reduction or termination
shall (i) be applied ratably to the Revolving Credit Dollar Commitments of each
Revolving Credit Lender and (ii) be irrevocable when given. At the effective
time of each such termination, the Borrowers shall pay to the Administrative
Agent for application as provided herein any amount by which the unpaid balance
of the Loan Account and aggregate undrawn Stated Amount of all then outstanding
L/Cs and Banker's Acceptances outstanding on such date exceeds the amount to
which the Revolving Credit Dollar


                                       46

<PAGE>

Commitments are so reduced. Any such reduction or termination of the Revolving
Credit Dollar Commitments may not be reinstated.

     2.12. INTEREST ON REVOLVING CREDIT LOANS.

          (a) Each Revolving Credit Loan shall bear interest at the Base Margin
Rate unless timely notice is given (as provided in Section 2.5) that the subject
Revolving Credit Loan (or a portion thereof) is, or is to be converted to, a
LIBOR Loan.

          (b) Each Revolving Credit Loan which consists of a LIBOR Loan shall
bear interest at the applicable LIBOR Rate.

          (c) Subject to, and in accordance with, the provisions of this
Agreement, the Lead Borrower may cause all or a part of the unpaid principal
balance of the Loan Account to bear interest at the Base Margin Rate or the
LIBOR Rate as specified from time to time by the Lead Borrower by notice to the
Administrative Agent.

          (d) For ease of reference and administration, each part of the Loan
Account which bears interest at the same rate of interest and for the same
Interest Period is referred to herein as if it were a separate "Revolving Credit
Loan".

          (e) The Lead Borrower shall not select, renew, or convert any interest
rate for a Revolving Credit Loan such that, in addition to interest at the Base
Margin Rate, there are more than seven (7) Interest Periods for LIBOR Loans in
the aggregate for all Borrowers applicable to the Revolving Credit Loans at any
one time.

          (f) The Borrowers shall pay accrued and unpaid interest on each
Revolving Credit Loan to its Borrower in arrears as follows:

               (i) On the applicable Interest Payment Date for that Revolving
     Credit Loan.

               (ii) On the Termination Date and on the End Date.

               (iii) Following the occurrence of any Event of Default, with such
     frequency as may be determined by the Administrative Agent.

          (g) Following the occurrence of any Event of Default (and whether or
not any Agent exercises its rights on account thereof), all Revolving Credit
Loans shall bear interest, at the option of the Administrative Agent or at the
instruction of the SuperMajority Lenders, at a rate which is the aggregate of
the applicable rate (including the Applicable Margin) for Base Margin Loans
and/or LIBOR Loans, as applicable, plus two percent (2%) per annum.

     2.13. UNDERWRITING FEE; COLLATERAL MONITORING FEE. In addition to any other
fee or expense to be paid by the Borrowers on account of the Revolving Credit,
the Borrowers shall pay the Administrative Agent the "UNDERWRITING FEE", THE
"STRUCTURING FEE" and the "COLLATERAL MONITORING FEE" at the times and in the
amounts as set forth the Fee Letter.


                                       47

<PAGE>

     2.14. UNUSED LINE FEE. In addition to any other fee to be paid by the
Borrowers on account of the Revolving Credit, the Borrowers shall pay the
Administrative Agent, for the account of the Revolving Credit Lenders, the
"UNUSED LINE FEE" (so referred to herein) of 0.25% per annum of the average
difference, during the month just ended (or relevant period with respect to the
payment being made on the Termination Date) between the Revolving Credit Ceiling
and the aggregate of the unpaid principal balance of the Loan Account and the
undrawn Stated Amount of L/Cs and Banker's Acceptances outstanding during the
relevant period. The Unused Line Fee shall be paid in arrears, on the first day
of each month after the execution of this Agreement and on the Termination Date.

     2.15. CONCERNING FEES. The Borrowers shall not be entitled to any credit,
rebate or repayment of any fee earned by the Administrative Agent or any
Revolving Credit Lender pursuant to this Agreement or any Loan Document
notwithstanding any termination of this Agreement or suspension or termination
of the Administrative Agent's and any Revolving Credit Lender's respective
obligation to make loans and advances hereunder.

     2.16. AGENT'S AND REVOLVING CREDIT LENDERS' DISCRETION.

          (a) Each reference in the Loan Documents to the exercise of
reasonable, good faith discretion or the like by any Agent or any Revolving
Credit Lender shall be to such Person's exercise of its judgment, in good faith,
based upon such information of which that Person then has actual knowledge.

          (b) The burden of establishing the failure of any Agent or any
Revolving Credit Lender to have acted in a reasonable manner in such Person's
exercise of such discretion shall be the Borrowers'.

     2.17. PROCEDURES FOR ISSUANCE OF L/CS AND BANKER'S ACCEPTANCES.

          (a) The Lead Borrower may request (either directly, or as provided in
Section 2.21(a) through Retail Ventures Imports, Inc.) that an Issuer cause the
issuance of L/Cs or Banker's Acceptances for the account of any Loan Party.
Requests for L/Cs and Banker's Acceptances shall be given by the Lead Borrower
to the Administrative Agent and the Issuer not later than 2:00 p.m. three (3)
Business Days prior to the specified date for the issuance of the requested L/C
or Banker's Acceptance. Requests for L/Cs and Banker's Acceptances may be
requested by the Lead Borrower by written or telephonic notice (in the case of
telephonic notice, promptly confirmed in writing if so requested by the
Administrative Agent or the Issuer). Each such notice shall be irrevocable and
shall specify with respect to each L/C and Banker's Acceptance requested (i) the
Borrower which is to be the account party for whose benefit the L/C or Banker's
Acceptance is being issued, (ii) the face amount of the proposed L/C or Banker's
Acceptance, which shall be denominated in dollars and the intended date of
issuance thereof (which shall be a Business Day), (iii) the beneficiary, and
(iv) the terms (including the anticipated expiry date) of the L/C or Banker's
Acceptance. The Administrative Agent and the Issuer may rely on any telephonic
request for the issuance of a L/C or Banker's Acceptance to the same extent that
the Administrative Agent and the Issuer may rely on a written request. The
Borrowers shall bear all risks related to the giving of requests for the
issuance of L/Cs or


                                       48

<PAGE>

Banker's Acceptances telephonically. Notwithstanding anything to the contrary
contained in this Agreement, no L/C or Banker's Acceptance shall be issued by
any Issuer which is not also the Administrative Agent unless such Issuer shall
have received notice from the Administrative Agent that the conditions to such
issuance have been met. Any Issuer shall notify the Administrative Agent in
writing on each Business Day of all L/Cs or Bankers Acceptances issued on the
prior Business Day by such Issuer.

          (b) The Administrative Agent will endeavor to cause the issuance of
any L/C or Banker's Acceptance so requested by the Lead Borrower from and
including the Effective Date until the thirtieth (30th) Business Day prior to
the Maturity Date, provided that, at the time that the request is made, the
Revolving Credit has not been suspended as provided in Section 2.6 and if so
issued:

               (i) The aggregate Stated Amount of all L/Cs and Banker's
     Acceptances then outstanding, does not exceed $50,000,000;

               (ii) The expiry of the L/C or Banker's Acceptance is not later
     than the earlier of thirty (30) days prior to the Maturity Date or the
     following:

                    (A) As to standby L/C's, one (1) year from initial issuance
          (or in the case of renewal or extension thereof, one year after such
          renewal or extension), provided that each standby L/C may, upon the
          request of the Lead Borrower, include a provision whereby, subject to
          the approval of the Issuer, such standby L/C may be renewed for
          additional consecutive periods of twelve (12) months or less (but not
          beyond the date that is thirty Business Days prior to the Maturity
          Date) unless the Issuer notifies the beneficiary thereof at least 30
          days prior to the then applicable expiration date that such L/C will
          not be renewed.

                    (B) As to documentary L/C's, ninety (90) days from issuance.

                    (C) As to Banker's Acceptances, ninety (90) days from
          issuance.

               (iii) If, notwithstanding the foregoing, the Administrative Agent
     causes the issuance of an L/C or Banker's Acceptance, the expiry of which
     is later than the Maturity Date, it shall be 105% cash collateralized at
     its issuance; and

               (iv) An OverLoan will not result from the issuance of the subject
     L/C or Banker's Acceptance.

          (c) Concurrently with requesting the issuance of a L/C or a Banker's
Acceptance, the applicable Borrower shall execute and deliver to the Issuer in
respect of such requested L/C or Banker's Acceptance a reimbursement or similar
agreement in the Issuer's then standard form of application for and
reimbursement agreement with respect to letters of credit and banker's
acceptances; provided however that in the event of any conflict between the


                                       49

<PAGE>

provisions of such reimbursement agreement and this Agreement, the provisions of
this Agreement shall govern.

          (d) Absent gross negligence, bad faith or willful misconduct, there
shall not be any recourse to, nor liability of, the Administrative Agent or any
Revolving Credit Lender on account of

               (i) Any delay or refusal by an Issuer to issue an L/C or a
     Banker's Acceptance;

               (ii) Any action or inaction of an Issuer on account of or in
     respect to, any L/C or any Banker's Acceptance.

          (e) Immediately upon the issuance of any L/C or any Banker's
Acceptance by the Issuer (or the amendment of a L/C or Banker's Acceptance
increasing the amount thereof), and without any further action on the part of
the Issuer, the Issuer shall be deemed to have sold to each Revolving Credit
Lender, and each such Revolving Credit Lender shall be deemed unconditionally
and irrevocably to have purchased from the Issuer, without recourse or warranty,
an undivided interest and participation, to the extent of such Revolving Credit
Lender's Revolving Credit Commitment Percentage, in such L/C and Banker's
Acceptance, each drawing thereunder and the obligations of the Borrowers under
this Agreement and the other Loan Documents with respect thereto. In
consideration thereof, each Revolving Credit Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent for the account of the
Issuer its Revolving Credit Commitment Percentage of each disbursement made by
the Issuer with respect to a L/C or Banker's Acceptance which is not reimbursed
by the Borrowers. Each Revolving Credit Lender acknowledges and agrees that its
obligations hereunder are absolute and unconditional and shall not be effected
by any event or circumstance whatsoever, including the existence of a Default or
the suspension of the Revolving Credit. Any action taken or omitted by the
Issuer under or in connection with a L/C or Banker's Acceptance, if taken or
omitted in the absence of gross negligence, actual bad faith, or willful
misconduct, shall not create for the Issuer any resulting liability to any
Revolving Credit Lender.

          (f) The Borrowers shall reimburse the Issuer for the amount of any
honoring of a drawing under an L/C or Banker's Acceptance on the same day on
which such honoring takes place in immediately available funds in U.S. dollars.
The Administrative Agent, without the request of any Borrower, may advance under
the Revolving Credit (and charge to the Loan Account) the amount of any honoring
of any L/C or Banker's Acceptance and other amount for which any Borrower, the
Issuer, or the Revolving Credit Lenders become obligated on account of, or in
respect to, any L/C or Banker's Acceptance. Such advance shall be a Base Margin
Loan and shall be made whether or not any Borrower is in Default or such advance
would result in an OverLoan. Such action shall not constitute a waiver of the
Administrative Agent's rights under Section 2.11(b) hereof.

     2.18. FEES FOR L/CS AND BANKER'S ACCEPTANCES.


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<PAGE>

          (a) The applicable Borrowers shall pay the Administrative Agent, for
the account of the Revolving Credit Lenders, on the first day of each calendar
month, in arrears, a fee (each, an "L/C Fee") equal to the following per annum
percentages of the average Stated Amount of the following categories of L/Cs
outstanding during the subject month:

               (i) As to standby L/Cs, the Applicable Margin for LIBOR Loans.

               (ii) As to documentary L/Cs, fifty percent (50%) of the
     Applicable Margin for LIBOR Loans.

               (iii) After the occurrence and during the continuance of an Event
     of Default, at the option of the Administrative Agent (or at the
     instruction of the SuperMajority Lenders), the L/C Fee shall be increased
     for any L/Cs which from time to time are not cash collateralized in the
     amounts required in accordance with the provisions of this Agreement by an
     amount equal to two percent (2%) per annum.

          (b) The applicable Borrowers shall pay the Administrative Agent, for
the account of the Revolving Credit Lenders, on the first day of each month, in
arrears, a fee (each, a "Banker's Acceptance Fee") equal to fifty percent (50%)
of the Applicable Margin for LIBOR Loans of the average Stated Amount of the
Banker's Acceptances outstanding during the subject month. After the occurrence
and during the continuance of an Event of Default, at the option of the
Administrative Agent (or at the instruction of the SuperMajority Lenders), the
Banker's Acceptance Fee shall be increased for any Banker's Acceptances which
from time to time are not cash collateralized in the amounts required in
accordance with the provisions of this Agreement by an amount equal to two
percent (2%) per annum.

          (c) In addition to the fees to be paid as provided in Subsections
2.18(a) and 2.18(b), above, the Borrowers shall pay to the Administrative Agent
(or to the Issuer, if so requested by Administrative Agent), on demand, all
issuance, processing, negotiation, amendment, and administrative fees and other
amounts charged by the Issuer on account of, or in respect to, any L/C or
Banker's Acceptance issued.

          (d) If any change in Applicable Law shall either:

               (i) impose, modify or deem applicable any reserve, special
     deposit or similar requirements against letters of credit heretofore or
     hereafter issued by any Issuer or with respect to which any Revolving
     Credit Lender or any Issuer has an obligation to lend to fund drawings
     under any L/C or any Banker's Acceptance; or

               (ii) impose on any Issuer any other condition or requirements
     relating to any such letters of credit or banker's acceptance;

and the result of any event referred to in Section 2.18(d)(i) or 2.18(d)(ii),
above, shall be to increase the cost to any Revolving Credit Lender or to any
Issuer of issuing or maintaining any L/C or Banker's Acceptance (which increase
in cost shall be the result of such Issuer's reasonable allocation among that
Revolving Credit Lender's or Issuer's letter of credit customers


                                       51

<PAGE>

of the aggregate of such cost increases resulting from such events), then, upon
demand by the Administrative Agent and delivery by the Administrative Agent to
the Lead Borrower of a certificate of an officer of the subject Revolving Credit
Lender or the subject Issuer describing such change in law, executive order,
regulation, directive, or interpretation thereof, its effect on such Revolving
Credit Lender or such Issuer, and the basis for determining such increased costs
and their allocation, the Borrowers shall immediately pay to the Administrative
Agent, from time to time as specified by the Administrative Agent, such amounts
as shall be sufficient to compensate the subject Revolving Credit Lender or the
subject Issuer for such increased cost. Any Revolving Credit Lender's or any
Issuer's determination of costs incurred under Section 2.18(d)(i) or
2.18(d)(ii), above, and the allocation, if any, of such costs among the
Borrowers and other letter of credit customers of such Revolving Credit Lender
or such Issuer, if done in good faith and made on an equitable basis and in
accordance with such officer's certificate, shall, absent manifest error, be
presumed to be accurate.

     2.19. CONCERNING L/C'S AND BANKER'S ACCEPTANCES.

          (a) None of the Issuer, the Issuer's correspondents, any Revolving
Credit Lender, the Administrative Agent, or any advising, negotiating, or paying
bank with respect to any L/C or Banker's Acceptance shall be responsible in any
way for:

               (i) The performance by any beneficiary under any L/C or Banker's
     Acceptance of that beneficiary's obligations to any Borrower.

               (ii) The form, sufficiency, correctness, genuineness, authority
     of any Person signing; falsification; or the legal effect of; any documents
     called for under any L/C or Banker's Acceptance if (with respect to the
     foregoing) such documents on their face appear to be in order.

          (b) The Issuer may honor, as complying with the terms of any L/C or
any Banker's Acceptance and of any drawing thereunder, any drafts or other
documents otherwise in order, but signed or issued by an administrator,
executor, conservator, trustee in bankruptcy, debtor in possession, assignee for
the benefit of creditors, liquidator, receiver, or other legal representative of
the party authorized under such L/C or Banker's Acceptance to draw or issue such
drafts or other documents.

          (c) The Issuer may reject any drafts and documents presented under any
L/C or any Banker's Acceptance which are discrepant in any manner,
notwithstanding any prior course of dealing by the Issuer in honoring drafts
under L/Cs or Banker's Acceptances.

          (d) Unless otherwise agreed to, in the particular instance, each
Borrower hereby authorizes any Issuer to:

               (i) Select an advising bank, if any.

               (ii) Select a paying bank, if any.


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<PAGE>

               (iii) Select a negotiating bank.

          (e) All directions, correspondence, and funds transfers relating to
any L/C or any Banker's Acceptance are at the risk of the Borrowers. The Issuer
shall have discharged the Issuer's obligations under any L/C or Banker's
Acceptance which, or the drawing under which, includes payment instructions, by
the initiation of the method of payment called for in, and in accordance with,
such instructions (or by any other commercially reasonable and comparable
method). None of the Administrative Agent, any Revolving Credit Lender, or the
Issuer shall have any responsibility for any inaccuracy, interruption, error, or
delay in transmission or delivery by post, telegraph or cable, or for any
inaccuracy of translation.

          (f) The Administrative Agent's, each Revolving Credit Lender's, and
the Issuer's rights, powers, privileges and immunities specified in or arising
under this Agreement are in addition to any heretofore or at any time hereafter
otherwise created or arising, whether by statute or rule of law or contract.

          (g) Except to the extent otherwise expressly provided hereunder or
agreed to in writing by the Issuer and the Lead Borrower, documentary L/Cs will
be governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and standby L/Cs will be
governed by International Standby Practices ISP98 (adopted by the International
Chamber of Commerce on April 6, 1998) and any respective subsequent revisions
thereof.

          (h) The obligations of the Borrowers under this Agreement with respect
to L/Cs and Banker's Acceptances are absolute, unconditional, and irrevocable
and shall be performed strictly in accordance with the terms hereof under all
circumstances, whatsoever including, without limitation, the following:

               (i) Any lack of validity or enforceability or restriction,
     restraint, or stay in the enforcement of this Agreement, any L/C, any
     Banker's Acceptance, or any other agreement or instrument relating thereto.

               (ii) Any Borrower's consent to any amendment or waiver of, or
     consent to the departure from, any L/C or any Banker's Acceptance.

               (iii) The existence of any claim, set-off, defense, or other
     right which any Borrower may have at any time against the beneficiary of
     any L/C or Banker's Acceptance.

               (iv) Any good faith honoring of a drawing under any L/C or
     Banker's Acceptance, which drawing possibly could have been dishonored
     based upon a strict construction of the terms of the L/C or Banker's
     Acceptance.

     2.20. CHANGED CIRCUMSTANCES.


                                       53

<PAGE>

          (a) The Administrative Agent may advise the Lead Borrower that the
Administrative Agent has made the good faith determination (which determination
shall be final and conclusive) of any of the following:

               (i) Adequate and fair means do not exist for ascertaining the
     rate for LIBOR Loans.

               (ii) The continuation of or conversion of any Revolving Credit
     Loan to a LIBOR Loan has been made impracticable or unlawful by the
     occurrence of a contingency that materially and adversely affects the
     applicable market or the compliance by the Administrative Agent or any
     Revolving Credit Lender in good faith with any Applicable Law.

               (iii) The indices on which the interest rates for LIBOR Loans are
     based shall no longer represent the effective cost to the Administrative
     Agent or any Revolving Credit Lender for U.S. dollar deposits in the
     interbank market for deposits in which it regularly participates.

          (b) In the event that the Administrative Agent advises the Lead
Borrower of an occurrence described in Section 2.20(a), then, until the
Administrative Agent notifies the Lead Borrower that the circumstances giving
rise to such notice no longer apply:

               (i) The obligation of the Administrative Agent or each Revolving
     Credit Lender to make loans of the type affected by such changed
     circumstances or to permit the Lead Borrower to select the affected
     interest rate as otherwise applicable to any Revolving Credit Loans shall
     be suspended.

               (ii) Any notice which the Lead Borrower had given the
     Administrative Agent with respect to any LIBOR Loan, the time for action
     with respect to which has not occurred prior to the Administrative Agent's
     having given notice pursuant to Section 2.20(a), shall be deemed at the
     option of the Administrative Agent to not having been given.

     2.21. DESIGNATION OF LEAD BORROWER AS BORROWERS' AGENT.

          (a) Each Borrower hereby irrevocably designates and appoints the Lead
Borrower as that Borrower's agent to obtain loans and advances under the
Revolving Credit, the proceeds of which shall be available to each Borrower for
those uses as those set forth in Section 2.1(d) and to request the issuance of
L/Cs and Banker's Acceptances for such Borrower. The Borrowers further
irrevocably designate and appoint Retail Ventures Imports, Inc. as their agent
to request the issuance of L/Cs and Banker's Acceptances for such Borrower (to
the extent that the Lead Borrower does not make such request). As the disclosed
principal for its agent, each Borrower shall be obligated to each Agent and each
Revolving Credit Lender on account of loans and advances so made to, and L/Cs
and Banker's Acceptances so issued for it under the Revolving Credit as if made
directly by the Revolving Credit Lenders to that Borrower,


                                       54

<PAGE>

notwithstanding the manner by which such loans and advances are recorded on the
books and records of the Lead Borrower and of any Borrower.

          (b) Each Borrower recognizes that credit available to it under the
Revolving Credit is in excess of and on better terms than it otherwise could
obtain on and for its own account and that one of the reasons therefor it is
joining in the credit facility contemplated herein with all other Borrowers.
Consequently, each Borrower hereby assumes and agrees to fully, faithfully, and
punctually discharge all Liabilities of all of the Borrowers and hereby
guarantees the payment and performance of all Liabilities of all other
Borrowers. In any action or proceeding with respect to any Borrower involving
any Applicable Law, including, without limitation, state or federal bankruptcy,
insolvency, reorganization or other law affecting the rights of creditors
generally, if the obligations of such Borrower as a guarantor hereunder would
otherwise be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability hereunder, then, notwithstanding any other provision hereof to the
contrary, the amount of such liability shall, without any further action by such
Borrower, any Lender, the Agent or any other Person, be automatically limited
and reduced to the highest amount which is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding after taking into account such Borrower's right of indemnification
and contribution from each other Borrower under Section 20.23(d) hereof.

          (c) The proceeds of each loan and advance provided under the Revolving
Credit which is requested by the Lead Borrower shall be deposited into the
Operating Account of the applicable Borrower. Neither the Administrative Agent
nor any Revolving Credit Lender shall have any obligation to see to the
application of such proceeds.

     2.22. REVOLVING CREDIT LENDERS' COMMITMENTS.

          (a) Subject to Section 17.1 (which provides for assignments and
assumptions of commitments), each Revolving Credit Lender's "REVOLVING CREDIT
COMMITMENT PERCENTAGE", and "REVOLVING CREDIT DOLLAR COMMITMENT" (respectively
so referred to herein) is set forth on EXHIBIT 2.22, annexed hereto.

          (b) The obligations of each Revolving Credit Lender are several and
not joint. No Revolving Credit Lender shall have any obligation to make any loan
under the Revolving Credit in excess of either of the following:

               (i) That Revolving Credit Lender's Revolving Credit Commitment
     Percentage of the subject loan or advance or of DSW Availability.

               (ii) Any loan which, when aggregated with all other loans made by
     that Revolving Credit Lender under the Revolving Credit and then
     outstanding, exceed that Revolving Credit Lender's Revolving Credit Dollar
     Commitment.

          (c) No Revolving Credit Lender shall have any liability to the
Borrowers on account of the failure of any other Revolving Credit Lender to
provide any loan or advance under


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<PAGE>

the Revolving Credit nor any obligation to make up any shortfall which may be
created by such failure.

          (d) The Revolving Credit Dollar Commitments, Revolving Credit
Commitment Percentages, and identities of the Revolving Credit Lenders may be
changed, from time to time by the reallocation or assignment of Revolving Credit
Dollar Commitments and Revolving Credit Commitment Percentages amongst the
Revolving Credit Lenders or with other Persons who determine to become
"Revolving Credit Lenders", provided, however unless an Event of Default has
occurred and is continuing (in which event, no consent of any Borrower is
required) any assignment to a Person (other than to another Lender or to any
domestic Affiliate of any Lender) shall be subject to the prior consent of the
Lead Borrower (not to be unreasonably withheld or delayed), which consent will
be deemed given unless the Lead Borrower provides the Administrative Agent with
written objection, not more than five (5) Business Days after the Administrative
Agent shall have given the Lead Borrower written notice of a proposed
assignment), provided that the Lead Borrower's consent shall in no event be
required with respect to the following: (i) an assignment to another Revolving
Credit Lender; or (ii) an assignment to a transferee of a Revolving Credit
Lender's rights in and to a material portion of such Revolving Credit Lender's
portfolio of asset based credit facilities.

          (e) Upon written notice given the Lead Borrower from time to time by
the Administrative Agent, of any assignment or allocation referenced in Section
2.22(d):

               (i) Each Borrower shall execute one or more replacement Revolving
     Credit Notes to reflect such changed Revolving Credit Dollar Commitments,
     Revolving Credit Commitment Percentages, and identities and shall deliver
     such replacement Revolving Credit Notes to the Administrative Agent (which
     promptly thereafter shall deliver to the Lead Borrower the Revolving Credit
     Notes so replaced) provided however, in the event that a Revolving Credit
     Note is to be exchanged following its acceleration or the entry of an order
     for relief under the Bankruptcy Code with respect to any Borrower, the
     Administrative Agent, in lieu of causing the Borrowers to execute one or
     more new Revolving Credit Notes, may issue the Administrative Agent's
     certificate confirming the resulting Revolving Credit Dollar Commitments
     and Revolving Credit Commitment Percentages.

               (ii) Such change shall be effective from the effective date
     specified in such written notice and any Person added as a Revolving Credit
     Lender shall have all rights and privileges of a Revolving Credit Lender
     hereunder thereafter as if such Person had been a signatory to this
     Agreement and any other Loan Document to which a Revolving Credit Lender is
     a signatory and any Person removed as a Revolving Credit Lender shall be
     relieved of any obligations or responsibilities of a Revolving Credit
     Lender hereunder thereafter.

     2.23. PAYMENTS.

          (a) The Borrowers shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal, interest, fees
or


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<PAGE>

reimbursement of drawings under L/Cs, Banker's Acceptances, or otherwise) prior
to 2:00 p.m. on the date when due, in immediately available funds, without
setoff or counterclaim. Any amounts received after such time on any date may, in
the reasonable, good faith discretion of the Administrative Agent, be deemed to
have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the
Administrative Agent at its offices at 1965 East Sixth Street, Cleveland, Ohio
(or such other address as to which the Lead Borrower shall have been advised by
the Administrative Agent), except payments to be made directly to the Issuer as
expressly provided herein. If any payment under any Loan Document shall be due
on a day that is not a Business Day, except with respect to LIBOR Loans, the
date for payment shall be extended to the next succeeding Business Day, and, in
the case of any payment accruing interest, interest thereon shall be payable for
the period of such extension. All payments under each Loan Document shall be
made in dollars.

          (b) If and to the extent that any payment owed by the Borrowers to the
Administrative Agent, any Revolving Credit Lender or the Issuer is not made when
due, each Borrower authorizes the Administrative Agent, the Revolving Credit
Lenders and the Issuer, as the case may be, to charge from time to time against
any or all of the deposit accounts of the Borrowers any amount so due. Notice of
such charge shall be given promptly to the Lead Borrower.

ARTICLE 3 - CONDITIONS PRECEDENT:

     As a condition to the effectiveness of this Agreement, the establishment of
the Revolving Credit, and the making of the first loan under the Revolving
Credit, each of the documents respectively described in Sections 3.1 through and
including 3.4, (each in form and substance satisfactory to the Administrative
Agent) shall have been delivered to the Administrative Agent, and the conditions
respectively described in Sections 3.5 through and including 3.21, shall have
been satisfied:

     3.1. CORPORATE DUE DILIGENCE.

          (a) Certificates of corporate good standing for each Loan Party,
respectively issued by the Secretary of State for the state in which that Loan
Party is incorporated.

          (b) Certificates of due qualification, in good standing, issued by the
Secretary(ies) of State of each State for each Borrower reasonably required by
the Administrative Agent.

          (c) Certificates of each Loan Party's Secretary of the due adoption,
continued effectiveness, and setting forth the texts of, each corporate
resolution adopted in connection with the establishment of the loan arrangement
contemplated by the Loan Documents and attesting to the true signatures of each
Person authorized as a signatory to any of the Loan Documents.

     3.2. OPINIONS. Opinions of counsel to the Loan Parties in form and
substance satisfactory to the Administrative Agent.


                                       57
<PAGE>

     3.3. ADDITIONAL DOCUMENTS. Such additional instruments and documents as any
Agent or its counsel may reasonably require or request including, without
limitation, the documents described on EXHIBIT 3.3 hereto.

     3.4. OFFICERS' CERTIFICATES. Certificates executed by the Chief Executive
Officer and the Chief Financial Officer of the Lead Borrower in form and
substance satisfactory to the Administrative Agent.

     3.5. REPRESENTATIONS AND WARRANTIES. Each of the representations made by or
on behalf of each Loan Party in this Agreement or in any of the other Loan
Documents or in any other report, statement, document, or paper provided by or
on behalf of each Loan Party shall be true and complete as of the date as of
which such representation or warranty was made.

     3.6. MINIMUM DAY ONE AVAILABILITY. After giving effect to the first funding
under the Revolving Credit, any charges to the Loan Account made in connection
with the establishment of the credit facility contemplated hereby, L/Cs and
Banker's Acceptances to be issued at, or immediately subsequent to, such
establishment, Excess Availability shall not be less than $60,000,000.00.

     3.7. SENIOR NON-CONVERTIBLE FACILITY. The Loan Parties shall have been
released from all liabilities and obligations under the Senior Non-Convertible
Facility and all collateral security granted by the Loan Parties for the Senior
Non-Convertible Facility shall have been released, discharged and terminated to
the satisfaction of the Agent.

     3.8. DSW INITIAL PUBLIC OFFERING.

     The initial public offering of the capital stock of DSW shall have been
consummated and proceeds received, all of which shall be satisfactory in form
and substance to the Agent.

     3.9. REPAYMENT OF EXISTING INDEBTEDNESS. The Administrative Agent shall
have received a payoff letter from CCM as agent under the CCM Term Loan
Facilities as well as a tender of releases and discharges of all collateral
security for the CCM Term Loan Facilities, each in form and substance
satisfactory to the Administrative Agent. Such Indebtedness shall be repaid on
the Effective Date.

     3.10. CONSENTS. All necessary consents and approvals to the transactions
contemplated hereby shall have been obtained and shall be satisfactory to the
Administrative Agent.

     3.11. APPRAISALS AND COMMERCIAL FINANCE EXAMINATIONS. The Collateral Agent
shall have received (a) appraisals of the Borrowers' Inventory by a third party
appraiser acceptable to the Collateral Agent, and (b) a commercial finance
examination with respect to the Lead Borrower and its Subsidiaries, including a
review of the Borrowers' books and records, each in form and substance
satisfactory to the Collateral Agent.

     3.12. FINANCIAL INFORMATION.


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<PAGE>

     The Administrative Agent shall have received such financial information and
projections as the Agent may reasonably request, including, without limitation,
audited financial statements for each of fiscal years 2001, 2002, 2003 and 2004,
monthly and annual financial projections of the Borrowers through January, 2010.
All such financial information shall be reasonably satisfactory to the Agent and
shall reflect the Borrowers' ability to perform their obligations hereunder.

     3.13. MATERIAL AGREEMENTS. The consummation of the transactions
contemplated hereby shall not (a) violate any applicable law, statute, rule or
regulation or (b) conflict with, or result in a default or event of default
under, any material agreement of any Loan Party. There shall not have occurred
any default of any material contract or agreement of any Loan Party. The Agent
shall be satisfied with the corporate structure and organizational documents of
the Borrowers and the Parent.

     3.14. LITIGATION. There shall not be pending any litigation or other
proceeding, the result of which could reasonably be expected to have a Material
Adverse Effect.

     3.15. PERFECTION OF ENCUMBRANCES.

          (a) The Collateral Agent shall have received results of searches or
other evidence reasonably satisfactory to the Collateral Agent (in each case
dated as of a date reasonably satisfactory to the Collateral Agent) indicating
the absence of Encumbrances, except for Permitted Encumbrances, on the assets of
the Loan Parties, except for which termination statements and releases
reasonably satisfactory to the Collateral Agent are being tendered concurrently
with such extension of credit.

          (b) The Collateral Agent shall have received all documents and
instruments, including Uniform Commercial Code financing statements, required by
law or reasonably requested by the Collateral Agent to be filed, registered or
recorded to create or perfect the first priority Encumbrances intended to be
created under the Loan Documents (subject to Permitted Encumbrances having
priority over the Encumbrance of the Collateral Agent pursuant to operation of
law) and all such documents and instruments shall have been so filed (or
provision made therefor), registered or recorded to the satisfaction of the
Collateral Agent.

     3.16. ALL FEES AND EXPENSES PAID. All fees due at or immediately after the
first funding under the Revolving Credit and all costs and expenses incurred by
the Agent and the Lead Arranger in connection with the establishment of the
credit facility contemplated hereby (including the fees and expenses of counsel
to the Agent and the Lead Arranger) shall have been paid in full.

     3.17. CASH MANAGEMENT. The Loan Parties shall have established cash
management systems reasonably acceptable to the Agent, including, without
limitation, compliance with the provisions of Sections 8.1(b), 8.2(b), and
8.3(a).

     3.18. INSURANCE. The Agent shall be reasonably satisfied with the insurance
maintained by the Loan Parties and the Agent shall have received an endorsement
to such


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<PAGE>

insurance policies naming the Agent as loss payee and/or additional insured and
otherwise satisfactory in form and substance to the Agent.

     3.19. SEPARATION AND SERVICE AGREEMENTS.

     The Agent shall have received an executed copy of, and shall be reasonably
satisfied with, the separation and service agreements between the Loan Parties
and the Parent and the Parent's other Subsidiaries.

     3.20. NO LOAN PARTY IN DEFAULT. No Loan Party is in Default.

     3.21. NO ADVERSE CHANGE. Each Agent shall be reasonably satisfied that any
financial statements delivered to it fairly present the business and financial
condition of the Borrowers and their Subsidiaries, and that there has been no
material adverse change in the assets, business, financial condition, or income
of the Borrowers and their Subsidiaries since the April, 2005 financial
information delivered to the Agent.

     3.22. CERTAIN CHANGES.

          (a) No material changes in governmental regulations or policies
affecting the Loan Parties, the Agents, the Lead Arranger or any Revolving
Credit Lender involved in this transaction shall have occurred prior to the
Effective Date.

          (b) There shall not have occurred prior to the Effective Date any
disruption or material adverse change in the financial or capital markets in
general that would, in the reasonable opinion of the Administrative Agent, have
a material adverse effect on the market for loan syndications or adversely
affecting the syndication of the Revolving Credit Loans.

     3.23. BENEFIT OF CONDITIONS PRECEDENT. The conditions set forth in this
Article 3 are for the sole benefit of the Agent and each Revolving Credit Lender
and may be waived by the Administrative Agent in whole or in part without
prejudice to the Agent or any Revolving Credit Lender.

No document shall be deemed delivered to the Agents or any Revolving Credit
Lender until received and accepted by the Administrative Agent at its offices in
Cleveland, Ohio. Under no circumstances shall this Agreement take effect until
executed and accepted by the Agents.

ARTICLE 4 - GENERAL REPRESENTATIONS AND WARRANTIES

     To induce each Revolving Credit Lender to establish the credit facility
contemplated herein and to induce the Revolving Credit Lenders to provide loans
and advances under the Revolving Credit (each of which loans shall be deemed to
have been made in reliance thereupon) the Loan Parties, in addition to all other
representations and warranties made by any Loan Party in any other Loan
Document, make those representations and warranties set forth below.

     4.1. DUE ORGANIZATION. AUTHORIZATION. NO CONFLICTS


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<PAGE>

          (a) Each Loan Party presently is in good standing as a corporation or
other entity under the laws of the State in which it is organized, and, except
as described on EXHIBIT 4.1, annexed hereto, is duly qualified and in good
standing in every other State in which, by reason of the nature or location of
each Loan Parties' assets or operation of each of their respective business,
such qualification may be necessary, except where the failure to so qualify
would not have a Material Adverse Effect.

          (b) Each Loan Party's respective organizational identification number
assigned to it by the State of its incorporation and its respective federal
employer identification number, as of the Effective Date, is listed on EXHIBIT
4.1, annexed hereto.

          (c) Each Loan Party has all requisite power and authority to execute
and deliver all Loan Documents to which that Loan Party is a party and has
retain all requisite power to perform all Liabilities.

          (d) The execution and delivery by each Loan Party of each Loan
Document to which it is a party; each Loan Party's consummation of the
transactions contemplated by such Loan Documents (including, without limitation,
the creation of Collateral Interests by that Loan Party to secure the
Liabilities); and each Loan Party's performance under those of the Loan
Documents to which it is a party:

               (i) Have been duly authorized by all necessary action.

               (ii) Do not contravene in any material respect any provision of
     any Requirement of Law or obligation of that Loan Party.

               (iii) Will not result in the creation or imposition of, or the
     obligation to create or impose, any Encumbrance upon any assets of that
     Loan Party pursuant to any Requirement of Law or obligation, except
     pursuant to the Loan Documents.

          (e) The Loan Documents have been duly executed and delivered by each
Loan Party and are the legal, valid and binding obligations of each Loan Party,
enforceable against each Loan Party in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.

     4.2. TRADE NAMES.

          (a) EXHIBIT 4.2, annexed hereto, is a listing as of the Effective
Date, of:

               (i) All names under which, to the knowledge of the Lead Borrower,
     any Loan Party has conducted its business in the past five (5) years.

               (ii) All Persons with whom any Loan Party has consolidated or
     merged, or from whom any Loan Party has acquired in a single transaction or
     in a series of related transactions substantially all of such Person's
     assets in the past five (5) years.


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<PAGE>

     4.3. INTELLECTUAL PROPERTY.

          (a) Each Loan Party owns and possesses, or has the right to use all
material patents, industrial designs, trademarks, trade names, trade styles,
brand names, service marks, logos, copyrights, trade secrets, know-how,
confidential information, and other intellectual or proprietary property of any
third Person necessary for that Loan Party's conduct of that Loan Party's
business.

          (b) The conduct by each Loan Party of that Loan Party's business does
not, to the knowledge of the Loan Parties, presently infringe (nor will any Loan
Party conduct its business in the future so as to infringe) the patents,
industrial designs, trademarks, trade names, trade styles, brand names, service
marks, logos, copyrights, trade secrets, know-how, confidential information, or
other intellectual or proprietary property of any third Person, except where
such infringement is not reasonably likely to have a Material Adverse Effect.

     4.4. LOCATIONS.

          (a) The Collateral, and the books, records, and papers of the Loan
Parties pertaining thereto, are kept and maintained solely (i) at those
locations which are listed on EXHIBIT 4.4, annexed hereto (or as supplemented
pursuant to the terms of this Agreement), which Exhibit includes, with respect
to each such location, the name and address of the landlord on the Lease which
covers such location (or an indication that a Loan Party owns the subject
location) and of all service bureaus with which any such records are maintained
or (ii) at such other locations as to which the Lead Borrower has provided ten
(10) days prior written notice to the Administrative Agent of the intended
location of the Collateral, books, records, and papers thereat.

          (b) No tangible personal property of any Loan Party is in the care or
custody of any third party or stored or entrusted with a bailee or other third
party, except (i) as otherwise disclosed pursuant to, or permitted by, this
Section 4.4, or (ii) for Inventory in an amount not to exceed $1,000,000 at Cost
in the aggregate at any time in the ordinary course of business.

     4.5. ENCUMBRANCES.

          (a) The Loan Parties are the owners of the Collateral free and clear
of all Encumbrances other than any Permitted Encumbrance.

          (b) No Loan Party has possession of any property on consignment to
that Loan Party from a third party which is not a Loan Party, except (i) as of
the Effective Date, those listed on EXHIBIT 4.5(B), annexed hereto and (ii)
those as to which the Loan Parties notify the Administrative Agent in accordance
with the provisions of Section 6.3 hereof.

     4.6. INDEBTEDNESS. The Loan Parties do not have any Indebtedness other
than:

          (a) Permitted Indebtedness; and


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<PAGE>

          (b) A Loan Party's guaranty of Permitted Indebtedness of another Loan
Party.

     4.7. INSURANCE.

          (a) EXHIBIT 4.7, annexed hereto, is a schedule of all insurance
policies owned by the Loan Parties or under which any Loan Party is the named
insured as of the Effective Date. Each of such policies is in full force and
effect. To the best of such Loan Party's knowledge, neither the issuer of any
such policy nor any Loan Party is in default or violation of any such policy.

     4.8. LICENSES Each material license, distributorship, franchise, and
similar agreement issued to, or to which any Loan Party is a party is in full
force and effect. Each material license agreement to which a Loan Party is a
party as of the Effective Date is listed on EXHIBIT 4.8, annexed hereto. No
party to any such license or agreement is in default or violation thereof,
except where such default or failure is not reasonably likely to have a Material
Adverse Effect. No Loan Party has received any notice or threat of cancellation
of any such license or agreement.

     4.9. LEASES. EXHIBIT 4.9, annexed hereto, is a schedule of all presently
effective Capital Leases as of the Effective Date. (EXHIBIT 4.4 includes a list
of all other presently effective Leases). Each of such Leases and Capital Leases
is in full force and effect. No Loan Party, to the best of its knowledge, is in
default or violation of any such Lease or Capital Lease, except where such
violation is not reasonably likely to have a Material Adverse Effect. No Loan
Party has received any notice or threat of cancellation of any such Lease or
Capital Lease, which cancellation (together with all other similar
cancellations) is reasonably likely to have a Material Adverse Effect.

     4.10. REQUIREMENTS OF LAW. Each Loan Party and each of its Subsidiaries is
in compliance with all Requirements of Law except where the failure of such
compliance will not have a Material Adverse Effect. No Loan Party has received
any notice of any violation of any Requirement of Law (other than of a violation
which does not have a Material Adverse Effect), which violation has not been
cured or otherwise remedied.

     4.11. LABOR RELATIONS.

          (a) As of the Effective Date, no Loan Party is a party to any
collective bargaining or other labor contract except as listed on EXHIBIT 4.11,
annexed hereto.

          (b) There is not presently pending and, to any Loan Party's knowledge,
there is not threatened any of the following except to the extent any of the
following is not reasonably likely to have a Material Adverse Effect:

               (i) Any strike, slowdown, picketing, work stoppage, or employee
     grievance process.


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<PAGE>

               (ii) Except as described on EXHIBIT 4.17 annexed hereto, any
     proceeding against or affecting any Loan Party relating to the alleged
     violation of any Applicable Law pertaining to labor relations or before
     National Labor Relations Board, the Equal Employment Opportunity
     Commission, or any comparable governmental body, organizational activity,
     or other labor or employment dispute against or affecting any Loan Party,
     which, if determined adversely to that Loan Party is reasonably likely to
     have a Material Adverse Effect on that Loan Party.

               (iii) Any lockout of any employees by any Loan Party (and no such
     action is contemplated by any Loan Party).

               (iv) Any application for the certification of a collective
     bargaining agent.

          (c) No event has occurred or circumstance exists which could provide
the basis for any work stoppage or other labor dispute which would be reasonably
likely to have a Material Adverse Effect.

          (d) Each Loan Party:

               (i) Has complied with all Applicable Law relating to employment,
     equal employment opportunity, nondiscrimination, immigration, wages, hours,
     benefits, collective bargaining, the payment of social security and similar
     taxes, occupational safety and health, and plant closing, except where such
     non-compliance is not reasonably likely to have a Material Adverse Effect.

               (ii) Is not liable for the payment of compensation, damages,
     taxes, fines, penalties, or other amounts, however designated, for that
     Loan Party's failure to comply with any Applicable Law referenced in
     Section 4.11(d)(i) which is reasonably likely to have a Material Adverse
     Effect.

     4.12. TAXES.

          (a) With respect to the Loan Parties' federal, state, and local tax
liability and obligations:

               (i) To the best of its knowledge, the Lead Borrower, in
     compliance with all Applicable Law, has properly filed all material returns
     due to be filed up to the date of this Agreement.

               (ii) Except as described on EXHIBIT 4.12:

                    (A) Currently, no Loan Party has received from any taxing
          authority any request to perform any examination of or with respect to
          any Loan Party nor any other written or verbal notice in any way
          relating to any claimed failure by any Loan Party to comply with all
          Applicable Law concerning payment


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<PAGE>

          of any taxes or other amounts in the nature of taxes in excess of
          $500,000 in any one instance.

                    (B) No agreement exists which waives or extends any statute
          of limitations applicable to the right of any taxing authority to
          assert a deficiency or make any other claim for or in respect to
          federal income taxes.

                    (C) No issue has been raised in any tax examination of any
          Loan Party which reasonably could be expected to result in the
          assertion of a deficiency for any fiscal year open for examination,
          assessment, or claim by any taxing authority in excess of $500,000 in
          the aggregate for all Loan Parties.

          (b) The Loan Parties have paid, as they become due and payable, all
taxes and unemployment contributions and other charges of any kind or nature
levied, assessed or claimed against any Loan Party or the Collateral by any
Person whose claim could result in an Encumbrance upon any asset of any Loan
Party or by any governmental authority except for (i) taxes, contributions and
charges which are being contested in good faith by such Loan Party, by
appropriate proceedings diligently instituted and conducted, without danger to
any material risk to the Collateral, and adequate reserves or appropriate
provision, if any, as shall be required in conformity with GAAP, shall have been
made therefor, and provided that no Encumbrance has been filed on account
thereof, and (ii) taxes, contributions, and other charges which the Loan Parties
have inadvertently not paid when due as long as (A) the aggregate amount thereof
does not exceed $500,000, and (B) no Encumbrance has been filed on account
thereof, and (C) promptly upon the date an Authorized Officer obtains knowledge
or should have obtained knowledge thereof, the Borrowers make payment of such
taxes, contributions or charges; has properly exercised any trust
responsibilities imposed upon any Loan Party by reason of withholding from
employees' pay or by reason of any Loan Parties' receipt of sales tax or other
funds for the account of any third party; has timely made all contributions and
other payments as may be required pursuant to any Employee Benefit Plan now or
hereafter established by any Loan Party; and has timely filed all tax and other
returns and other reports with each Governmental Authority to whom any Loan
Party is obligated to so file, except for such returns or reports which the Loan
Parties have inadvertently not paid when due as long as (A) the aggregate amount
of taxes, assessments or charges with respect to such returns does not exceed
$500,000, and (B) no Encumbrance has been filed on account thereof, and (C)
promptly upon the date an Authorized Officer obtains knowledge or should have
obtained knowledge thereof, the Borrowers file such returns and/or reports and
make payment of any amounts required to be paid on account thereof.

     4.13. NO MARGIN STOCK. No Loan Party is engaged in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations U, T, and X of the Board of Governors of the
Federal Reserve System of the United States).

     4.14. INVESTMENT AND HOLDING COMPANY STATUS. No Loan Party is (a) an
"investment company" as defined in, or subject to regulation under, the
Investment Company


                                       65

<PAGE>

Act of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.

     4.15. ERISA.

Except to the extent that such action is not reasonably likely to have a
Material Adverse Effect, neither any Loan Party nor any ERISA Affiliate has
within the past three (3) years:

               (i) Violated or failed to be in full compliance with any Loan
     Party's Employee Benefit Plan.

               (ii) Failed timely to file all reports and filings required by
     ERISA to be filed by any Loan Party.

               (iii) Engaged in any nonexempt "prohibited transactions" or
     "reportable events" (respectively as described in ERISA).

               (iv) Engaged in, or committed, any act such that a tax or penalty
     reasonably could be imposed upon any Loan Party on account thereof pursuant
     to ERISA.

               (v) Incurred any material accumulated funding deficiency within
     the meaning of ERISA.

               (vi) Terminated any Employee Benefit Plan such that a lien could
     be asserted against any assets of any Loan Party on account thereof
     pursuant to ERISA.

               (vii) Failed to make any required contribution or payment to, or
     made a complete or partial withdrawal from, any Employee Benefit Plan which
     is a multiemployer plan within the meaning of Section 4001(a) of ERISA.

     4.16. HAZARDOUS MATERIALS.

          (a) Except as set forth on EXHIBIT 4.16(A) hereto, (i) the operations
of each Loan Party are in material compliance with all Environmental Laws; (ii)
to the best of each Loan Party's knowledge, there has been no Release at any of
the properties owned or operated by any Loan Party or a predecessor in interest,
or at any disposal or treatment facility which received Hazardous Materials
generated by any Loan Party or any predecessor in interest which is reasonably
likely to have a Material Adverse Effect; (iii) no Environmental Action has been
asserted against any Loan Party or any predecessor in interest nor does any Loan
Party have knowledge or notice of any threatened or pending Environmental Action
against any Loan Party or any predecessor in interest which is reasonably likely
to have a Material Adverse Effect; (iv) no Loan Party has knowledge of any
Environmental Actions that have been asserted against any facilities that may
have received Hazardous Materials generated by any Loan Party or any predecessor
in interest which are reasonably likely to have a Material Adverse Effect; (v)
to the best of such Loan Party's knowledge, no property now or formerly owned or
operated


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<PAGE>

by a Loan Party has been used as a treatment or disposal site for any Hazardous
Material; (vi) no Loan Party has failed to report to the proper Governmental
Authority any Release which is required to be so reported by any Environmental
Laws which is reasonably likely to have a Material Adverse Effect; (vii) each
Loan Party holds all licenses, permits and approvals required under any
Environmental Laws in connection with the operation of the business carried on
by it, except for such licenses, permits and approvals as to which a Loan
Party's failure to maintain or comply with is not reasonably likely to have a
Material Adverse Effect; and (viii) no Loan Party has received any notification
pursuant to any Environmental Laws that (A) any work, repairs, construction or
Capital Expenditures are required to be made in respect as a condition of
continued compliance with any Environmental Laws, or any license, permit or
approval issued pursuant thereto or (B) any license, permit or approval referred
to above is about to be reviewed, made, subject to limitations or conditions,
revoked, withdrawn or terminated, in each case, except as is not reasonably
likely to have a Material Adverse Effect.

     4.17. LITIGATION. Except as described in EXHIBIT 4.17, annexed hereto,
there is not presently pending or threatened by or against any Loan Party any
suit, action, proceeding, or investigation which, if determined adversely to any
Loan Party, would have a Material Adverse Effect. As of the Effective Date, no
Loan Party is the holder of any Commercial Tort Claim other than as described on
EXHIBIT 4.17.

     4.18. ADEQUACY OF DISCLOSURE.

          (a) All quarterly and annual financial statements furnished to the
Administrative Agent and to each Revolving Credit Lender by the Loan Parties on
a consolidated basis have been prepared in accordance with GAAP consistently
applied (provided however, that unaudited financial statements are subject to
normal year end adjustments and to the absence of footnotes). All financial
statements furnished to the Administrative Agent and to each Revolving Credit
Lender by the Loan Parties present fairly the condition of the Loan Parties at
the date(s) thereof and the results of operations and cash flows for the
period(s) covered (provided however, that unaudited financial statements are
subject to normal year end adjustments and to the absence of footnotes). There
has been no change in the Consolidated financial condition, results of
operations, or cash flows of the Loan Parties since the date(s) of such
financial statements, other than changes which are not reasonably likely to have
a Material Adverse Effect.

          (b) No Loan Party has any material contingent obligation or material
obligation under any Lease or Capital Lease which is not noted in the Loan
Parties' annual Consolidated financial statements furnished to the
Administrative Agent and to each Revolving Credit Lender prior to the execution
of this Agreement.

          (c) No document, instrument, agreement, or paper given to the Agents
or to any Revolving Credit Lender by or on behalf of each Loan Party or any
guarantor of the Liabilities in connection with the execution of this Agreement
by the Agents and to each Revolving Credit Lender contains any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements therein not misleading. There is no fact known to
any Loan Party which has, or which, in the foreseeable future is reasonably
likely to have a Material Adverse Effect.


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     4.19. UNRESTRICTED SUBSIDIARIES. Each of the Unrestricted Subsidiaries is
inactive or in the process of being liquidated or dissolved.

     4.20. NO BANKRUPTCY FILING. No Loan Party is contemplating, or has any
knowledge of any other Person contemplating, taking any of the actions described
in Section 11.11 or 11.12 hereof. No Loan Party is contemplating the liquidation
of all or a major portion of such Loan Party's assets.

     4.21. PATRIOT ACT. Each Borrower is in compliance, in all material
respects, with the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law
October 26, 2001)) (the "Patriot Act"). No part of the proceeds of the Loans
will be used, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

     4.22. FOREIGN ASSET CONTROL REGULATIONS. Neither of the advance of the
Loans nor the use of the proceeds of any thereof will violate the Trading With
the Enemy Act (50 U.S.C. Section 1 et seq., as amended) (the "Trading With the
Enemy Act") or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the
"Foreign Assets Control Regulations") or any enabling legislation or executive
order relating thereto (which for the avoidance of doubt shall include, but
shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the "Executive Order")
and (b) the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)).
Furthermore, none of the Borrowers or their Affiliates (a) is or will become a
"blocked person" as described in the Executive Order, the Trading With the Enemy
Act or the Foreign Assets Control Regulations or (b) engages or will engage in
any dealings or transactions, or be otherwise associated, with any such "blocked
person" or in any manner violative of any such order.

ARTICLE 5 - GENERAL COVENANTS

     5.1. PAYMENT AND PERFORMANCE OF LIABILITIES. The Loan Parties shall pay
each payment Liability when due (or when demanded, if payable on demand) and
shall promptly, punctually, and faithfully perform each other Liability.

     5.2. MAINTENANCE OF EXISTENCE

          (a) Each Loan Party shall remain in good standing as a corporation or
other entity under the laws of the state in which it is organized, and shall
hereafter remain duly qualified and in good standing in every other state in
which, by reason of the nature or location of each Loan Parties' assets or
operation of each of their respective business, such qualification may be
necessary, except where the failure to so qualify would not have a Material
Adverse Effect.


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<PAGE>

          (b) No Loan Party shall change its state of organization; any
organizational identification number assigned to that Loan Party by that state;
or that Loan Party's federal taxpayer identification number, without the prior
written consent of the Administrative Agent, which consent shall not be
unreasonably withheld.

          (c) Except where the failure to observe, maintain, or perform the
following is not reasonably likely to have a Material Adverse Effect:

               (i) All customary formalities regarding the corporate existence
     of each Loan Party will be observed.

               (ii) In accordance with its present practices, each Loan Party
     will accurately maintain its organizational documents separate from those
     of any Affiliate of such Loan Party and any other Person.

     5.3. TRADE NAMES.

     The Lead Borrower will provide the Administrative Agent with not less than
ten (10) days prior written notice (with reasonable particularity) of any change
to any Loan Party's name from that under which that Loan Party is conducting its
business at the execution of this Agreement and will not effect such change
unless each Loan Party is then in compliance with all provisions of this
Agreement.

     5.4. LOCATIONS.

          (a) The Collateral, and the books, records, and papers of the Loan
Parties pertaining thereto, will be kept and maintained solely (i) at those
locations which are listed on EXHIBIT 4.4, annexed hereto (or as supplemented
pursuant to the terms of this Agreement), which Exhibit includes, with respect
to each such location, the name and address of the landlord on the Lease which
covers such location (or an indication that a Loan Party owns the subject
location) and of all service bureaus with which any such records are maintained
or (ii) at such other locations as to which the Lead Borrower has provided ten
(10) days prior written notice to the Administrative Agent of the intended
location of the Collateral, books, records, and papers thereat.

          (b) No Loan Party shall remove any of the Collateral from those
locations described in Section 4.4(a) except for the following purposes:

               (i) To accomplish sales of Inventory in the ordinary course of
     business.

               (ii) To move Inventory or other Collateral from one such location
     to another such location.

               (iii) To utilize such of the Collateral as is removed from such
     locations in the ordinary course of business.


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          (c) No Loan Party will:

               (i) Alter, modify, or amend any Lease in a manner which is
     reasonably likely to have a Material Adverse Effect.

               (ii) Other than leased departments and similar arrangements with
     third parties, commit to open or close, or open or close, any location at
     which any Loan Party maintains, offers for sales, or stores any of the
     Collateral, in any fiscal year such that the actual number of stores of all
     Borrowers in the aggregate (A) exceeds by ten (10) the number of stores
     reflected on the Business Plan for such fiscal year, or (B) is more than
     ten (10) fewer than the number of stores reflected on the Business Plan for
     such fiscal year (without giving effect to any new stores which the
     Business Plan projected to be opened or closed, but which have not in fact
     been opened or closed)

          (d) No tangible personal property of any Loan Party shall hereafter be
placed under such care, custody, storage, or entrustment, except (i) as
otherwise disclosed pursuant to, or permitted by, this Section 5.5, or (ii) for
Inventory in an amount not to exceed $1,000,000 at Cost in the aggregate at any
time in the ordinary course of business.

     5.5. ENCUMBRANCES.

          (a) The Loan Parties shall remain, the owners of the Collateral free
and clear of all Encumbrances other than any Permitted Encumbrance.

          (b) No Loan Party shall have possession of any property on consignment
to that Loan Party from a third party that is not a Loan Party, except (i) those
listed on EXHIBIT 4.5(B), annexed hereto and (ii) those as to which the Loan
Parties notify the Administrative Agent in accordance with the provisions of
Section 6.3 hereof.

     5.6. INDEBTEDNESS. The Loan Parties shall not hereafter have any
Indebtedness other than:

          (a) Permitted Indebtedness; and

          (b) A Loan Party's guaranty of Permitted Indebtedness of another Loan
Party.

     5.7. INSURANCE.

          (a) The Lead Borrower shall provide the Administrative Agent with
prompt written notice of any change in the insurance policies owned by the Loan
Parties or under which any Loan Party is the named insured from those in effect
as of the Effective Date.

          (b) The Loan Parties shall have and maintain at all times insurance
covering such risks, in such amounts, containing such terms, in such form, for
such periods, and written by the companies presently providing such insurance,
or such other companies as may be selected by the Lead Borrower and are
satisfactory to the Agent (whose consent shall not be unreasonably withheld).


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          (c) All insurance carried by the Loan Parties shall provide for a
minimum of thirty (30) days' prior written notice of cancellation to the
Administrative Agent and all such insurance which covers the Collateral shall

               (i) Include an endorsement in favor of the Collateral Agent,
     which endorsement shall provide that the insurance, to the extent of the
     Collateral Agent' interest therein, shall not be impaired or invalidated,
     in whole or in part, by reason of any act or neglect of any Loan Party or
     by the failure of any Loan Party to comply with any warranty or condition
     of the policy.

               (ii) Not include an endorsement in favor of any other Person
     (other than those Persons intended as beneficiaries of any builder's risk
     insurance, and the holder of any Permitted Encumbrances).

          (d) The Lead Borrower shall furnish the Collateral Agent from time to
time, upon request of the Collateral Agent, with certificates or other evidence
satisfactory to the Collateral Agent regarding compliance by the Loan Parties
with the foregoing requirements.

          (e) In the event of the failure by the Loan Parties to maintain
insurance as required herein, any Agent, at its option and the Loan Parties'
expense, may obtain such insurance at the expense of the Loan Parties, provided,
however, an Agent's obtaining of such insurance shall not constitute a cure or
waiver of any Event of Default occasioned by the Loan Parties' failure to have
maintained such insurance.

     5.8. LICENSES The Loan Parties shall (a) with respect to existing licensors
and licensees, use its best efforts to, and (b) with respect to license
agreements entered into after the Effective Date, shall, cause the licensors and
licensees to enter into such tri-party or estoppel agreements as any Agent may
reasonably request.

     5.9. REQUIREMENTS OF LAW. Each Loan Party shall and shall cause its
Subsidiaries to be in compliance with, and shall hereafter comply with and use
its assets in compliance with, all Requirements of Law except where the failure
of such compliance will not have a Material Adverse Effect.

     5.10. LABOR RELATIONS.

     The Lead Borrower shall provide the Administrative Agent with prompt
written notice of any additional or amended collective bargaining or other labor
contract entered into after the Effective Date.

     5.11. MAINTAIN PROPERTIES. The Loan Parties shall:

          (a) Keep the Collateral in good order and repair (ordinary reasonable
wear and tear and insured casualty excepted).


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<PAGE>

          (b) Not suffer or cause the waste or destruction of any material part
of the Collateral.

          (c) Not use any of the Collateral in violation of any policy of
insurance thereon.

          (d) Not sell, lease, or otherwise dispose of any of the Collateral,
other than the following:

               (i) The use of Inventory in compliance with this Agreement.

               (ii) The disposal of Equipment which is obsolete, worn out, or
     damaged beyond repair, or no longer useful in the Loan Parties' businesses.

               (iii) Permitted Dispositions.

               (iv) The turning over to the Administrative Agent of all Receipts
     as provided herein.

               (v) The use of the Collateral to pay Liabilities arising in the
     ordinary course.

     5.12. TAXES.

     The Loan Parties shall: pay, as they become due and payable, all taxes and
unemployment contributions and other charges of any kind or nature levied,
assessed or claimed against any Loan Party or the Collateral by any Person whose
claim could result in an Encumbrance upon any asset of any Loan Party or by any
Governmental Authority, provided, however, that (i) no such taxes, contributions
and charges are required to be paid if being contested in good faith by such
Loan Party, by appropriate proceedings diligently instituted and conducted,
without danger to any material risk to the Collateral, and adequate reserves or
appropriate provision, if any, as shall be required in conformity with GAAP,
shall have been made therefor, and provided that no Encumbrance has been filed
on account thereof, and (ii) the inadvertent failure of a Loan Party to pay any
such taxes, contributions, and other charges when due shall not constitute an
Event of Default hereunder as long as (A) the aggregate amount thereof does not
exceed $500,000, and (B) no Encumbrance has been filed on account thereof, and
(C) promptly upon the date an Authorized Officer obtains knowledge or should
have obtained knowledge thereof, the Borrowers make payment of such taxes,
contributions or charges; properly exercise any trust responsibilities imposed
upon any Loan Party by reason of withholding from employees' pay or by reason of
any Loan Parties' receipt of sales tax or other funds for the account of any
third party; timely make all contributions and other payments as may be required
pursuant to any Employee Benefit Plan now or hereafter established by any Loan
Party; and timely file all tax and other returns and other reports with each
Governmental Authority to whom any Loan Party is obligated to so file, provided
that the inadvertent failure of a Loan Party to file any such returns or reports
when due shall not constitute an Event of Default hereunder as long as (A) the
aggregate amount of taxes, assessments or charges with respect to


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<PAGE>

such returns does not exceed $500,000, and (B) no Encumbrance has been filed on
account thereof, and (C) promptly upon the date an Authorized Officer obtains
knowledge or should have obtained knowledge thereof, the Borrowers file such
returns and/or reports and make payment of any amounts required to be paid on
account thereof.

     5.13. NO MARGIN STOCK No part of the proceeds of any borrowing hereunder
will be used at any time to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin
stock.

     5.14. ERISA.

     Neither any Loan Party nor any ERISA Affiliate shall ever engage in any
action of the type described in Section 4.15, if as a result thereof, such Loan
Party or ERISA Affiliate will, or could reasonably be expected to, incur
liability that could reasonably likely have a Material Adverse Effect.

     5.15. HAZARDOUS MATERIALS.

          (a) Each Loan Party shall, except where a violation or failure is not
reasonably likely to have a Material Adverse Effect: (i) keep any property
either owned or operated by it or any of its Subsidiaries free of any
Environmental Liens; (ii) comply, and cause each of its Subsidiaries to comply,
in all material respects with Environmental Laws and provide to the Collateral
Agent any documentation of such compliance which the Collateral Agent may
reasonably request; (iii) provide the Collateral Agent written notice within
five (5) days of any Release of a Hazardous Material in excess of any reportable
quantity from or onto property at any time owned or operated by it or any of its
Subsidiaries and take any remedial actions required to abate said Release; (iv)
provide the Collateral Agent with written notice within ten (10) days of the
receipt of any of the following: (A) notice that an Environmental Lien has been
filed against any property of any Loan Party or any of its Subsidiaries; (B)
commencement of any Environmental Action or notice that an Environmental Action
will be filed against any Loan Party or any of its Subsidiaries; and (C) notice
of a violation, citation or other administrative order which, to the extent that
any of the foregoing are reasonably likely to have a Material Adverse Effect and
(v) defend, indemnify and hold harmless the Agent and the Revolving Credit
Lenders and their transferees, and their respective employees, agents, officers
and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including, without
limitation, attorney and consultant fees, investigation and laboratory fees,
court costs and litigation expenses) arising out of (A) the generation,
presence, disposal, Release or threatened Release of any Hazardous Materials on,
under, in, originating or emanating from any property at any time owned or
operated by any Loan Party or any of its Subsidiaries (or its predecessors in
interest or title), (B) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to the presence or
Release of such Hazardous Materials, (C) any request for information,
investigation, lawsuit brought or threatened, settlement reached or order by a
Governmental Authority relating to the presence or Release of such Hazardous
Materials, (D) any violation of any Environmental Law and/or (E) any
Environmental Action filed against the Agent or any Revolving Credit Lender, to
the extent that any of the foregoing is reasonably likely to have a Material
Adverse Effect.


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<PAGE>

          (b) No Loan Party shall knowingly or negligently permit the use,
handling, generation, storage, treatment, Release or disposal of Hazardous
Materials at any property owned or leased by it or any of its Subsidiaries,
except in compliance with Environmental Laws and so long as such use, handling,
generation, storage, treatment, Release or disposal of Hazardous Materials is
not reasonably likely to result in a Material Adverse Effect.

     5.16. DIVIDENDS. INVESTMENTS. CORPORATE ACTION. No Loan Party shall:

          (a) Pay any cash dividend or make any other distribution in respect of
any class of that Loan Party's capital stock, (other than dividends payable to
another Loan Party or payable solely in the capital stock of such paying Loan
Party). Notwithstanding anything to the contrary contained herein, dividends
(other than dividends payable solely in the capital stock of another Loan Party)
shall only be payable to the Parent by any other Loan Party to the extent not
otherwise in violation of the Loan Documents and in any event in an amount not
to exceed $5,000,000 (less loans and advances to the Parent made under clause
(k) of the definition of Permitted Indebtedness) in the aggregate after the date
hereof.

          (b) Own, redeem, retire, purchase, or acquire any of any Loan Party's
capital stock; provided that the Loan Parties may make cash payments for any
such purposes if:

               (i) no Default or Event of Default shall have occurred and be
     continuing at the time of declaration or payment thereof; and

               (ii) after giving effect to the making any such cash payment, the
     aggregate amount so expended for such purposes subsequent to the Effective
     Date does not exceed $1,500,000; and

               (iii) after giving effect to the making any such cash payment,
     the aggregate amount so expended for such purposes in any fiscal year of
     the Borrowers does not exceed $500,000.

          (c) Invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any Person other than a Permitted
Investment, or a Permitted Acquisition.

          (d) Merge or consolidate or be merged or consolidated with or into any
other corporation or other entity, other than in connection with a Permitted
Acquisition (provided that a Loan Party is the surviving, continuing or
resulting corporation) or of one Loan Party into another Loan Party; provided
that, if no Default or Event of Default shall have occurred and be continuing or
would result therefrom, the following shall be permitted:

               (i) The merger, consolidation or amalgamation of any wholly-owned
     Subsidiary with or into a Borrower or with or into another wholly-owned
     Subsidiary of a Borrower, so long as in any merger, consolidation or
     amalgamation involving a Borrower, the Borrower is the surviving,
     continuing or resulting corporation;

               (ii) The liquidation or dissolution of any Unrestricted
     Subsidiary.


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<PAGE>

               (iii) Any acquisition which is a Permitted Acquisition, provided
     that all of the applicable conditions contained in the definition of the
     term Permitted Acquisition are satisfied.

               (iv) Notwithstanding the foregoing, the Parent may not merge or
     consolidate or be merged or consolidated with or into any other Person
     without the prior written consent of the Administrative Agent.

          (e) Subordinate any debts or obligations owed to that Loan Party by
any third party to any other debts owed by such third party to any other Person.

          (f) Enter into leases of property or assets not constituting Permitted
Acquisitions, unless such leases are not otherwise in violation of this
Agreement.

          (g) Organize or create any Affiliate other than in connection with a
Permitted Acquisition.

          (h) Acquire any assets other than in the ordinary course and conduct
of that Loan Party's business as conducted at the execution of this Agreement,
other than in connection with a Permitted Acquisition or as otherwise permitted
in this Agreement.

     5.17. LOANS. No Loan Party shall make any loans or advances to, nor acquire
the Indebtedness of, any Person, provided, however, the foregoing does not
prohibit any of the following:

          (a) Advance payments made to that Loan Party's suppliers in the
ordinary course;.

          (b) Advances to that Loan Party's officers, employees, and
salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of that Loan Party, which
expenses are properly substantiated by the Person seeking such advance and
properly reimbursable by that Loan Party;

          (c) Loans and advances to employees for business-related moving
expenses, costs of replacement homes, business machines or supplies, automobiles
and other similar expenses, in each case incurred in the ordinary course of
business not to exceed (together with loans and advances under Section 5.17(d)
and investments permitted under clause (m) of the definition of Permitted
Investments) $6,000,000 in the aggregate outstanding to all employees at any one
time;

          (d) Loans and advances to that Loan Party's officers, employees, and
salespersons in connection with any employment agreements or arrangements, or
any stock options or option plans not to exceed $6,000,000 (together with loans
and advances under Section 5.17(c) and investments permitted under clause (m) of
the definition of Permitted Investments) in the aggregate outstanding to all
employees at any one time;


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<PAGE>

          (e) To the extent not permitted by the foregoing clauses, the existing
loans and advances, described on EXHIBIT 5.17(E) hereto;

          (f) Intercompany loans and advances or other Intercompany Indebtedness
(i) existing on the date hereof and described on EXHIBIT 5.17(F) hereof, (ii)
hereafter made amongst any Loan Parties within the same Borrower, (iii)
hereafter made by any Borrower to any other Borrower, (iv) hereafter made by any
Loan Party to any of its wholly owned Subsidiaries which are also Loan Parties;
and (v) hereafter made to the Parent by any other Loan Party to the extent any
of the same constitutes Permitted Indebtedness under clause (k) of the
definition of Permitted Indebtedness or to any Loan Party by the Parent,
provided that such intercompany loans shall be evidenced by such documentation
as the Collateral Agent may require.

          (g) Loans and advances of a Person outstanding at the time such Person
becomes a Subsidiary as a result of a Permitted Acquisition, provided that any
such loans or advances were not made at the time of or in contemplation of the
acquisition of such Person by a Loan Party or any Subsidiaries.

          (h) Any other loans and advances to or for the benefit of any Person
which (i) is not itself a Loan Party, (ii) are not otherwise permitted by the
foregoing clauses, and (iii) are made after the Effective Date, which loans and
advances have been approved in advance by the Administrative Agent.

     5.18. PROTECTION OF ASSETS. The Administrative Agent, in the Administrative
Agent's reasonable, good faith discretion, and from time to time, may discharge
any tax or Encumbrance on any of the Collateral, or take any other action which
the Administrative Agent may deem reasonably necessary or desirable to repair,
insure, maintain, preserve, collect, or realize upon any of the Collateral. The
Administrative Agent shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken
except where there is a specific finding in a judicial proceeding (in which the
Administrative Agent has had an opportunity to be heard), from which finding no
further appeal is available, that the Administrative Agent had acted in actual
bad faith, in willful misconduct, or in a grossly negligent manner. The Loan
Parties shall pay to the Administrative Agent, on demand, or the Administrative
Agent, in its reasonable, good faith discretion, may add to the Loan Account,
all amounts paid or incurred by the Administrative Agent pursuant to this
Section 5.18.

     5.19. LINE OF BUSINESS; CONDUCT OF BUSINESS.

          (a) No Loan Party shall engage in any business other than the business
in which it is currently engaged or a business reasonably related thereto, or
any retail lease department operation.

          (b) The Loan Parties shall conduct their business substantially in
accordance with the Business Plan, or as otherwise approved by the
Administrative Agent pursuant to Section 6.10, below. The foregoing shall not
obligate the Borrowers to achieve any specific financial performance and no
financial performance covenants are intended to be imposed thereby.


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<PAGE>

     5.20. AFFILIATE TRANSACTIONS.

          (a) Except as set forth in that certain confidential side letter from
the Lead Borrower to the Administrative Agent and for loans which may be made
between Loan Parties permitted pursuant to Section 5.17, above, no Loan Party
shall make any payment, nor give any value to any Affiliate except for leases,
goods and services with such Affiliate for a price and on terms which shall be
in the ordinary course of business at prices and on terms and conditions no less
favorable to that Loan Party than those which would have been charged and
imposed in an arms length transaction from unrelated third parties, except (i)
sales of goods to an Affiliate for use or distribution outside of the United
States of America which complies with the any applicable legal requirements of
the Internal Revenue Code of 1986 and the Treasury Regulations, each as amended
from time to time, provided that such sales shall not exceed $500,000 in the
aggregate in any fiscal year of the Borrowers, (ii) loans, advances and other
payments to officers and directors as part of their compensation which are
entered into in the ordinary course of business and which are not otherwise
prohibited under the Loan Documents, (iii) other dividends and distributions to
officers, directors and shareholders otherwise permitted under this Agreement,
or (iv) transactions between or among the Loan Parties not prohibited hereunder
and not involving any other Affiliate.

          (b) The Loan Parties shall not (i) without the prior written consent
of the Administrative Agent, amend, modify or waive any of the provisions of the
instruments, documents or agreements described in the confidential side letter
referred to in clause (a) above, the effect of which is to increase the payments
or value to be furnished by a Loan Party to any Affiliate (other than for
ordinary increases under such instruments, documents and agreements in the
ordinary course of business, for which the Loan Parties are presently obligated
to make payment in such instrument, document or agreement as in effect on the
Effective Date) or which would cause such instruments, documents or agreements
to be at prices and on terms and conditions less favorable to that Loan Party
than those which would have been charged and imposed in an arms length
transaction from unrelated third parties, or (ii) make any payments under such
instruments, documents or agreements in advance of the date when due (other than
payments made to Affiliates to fund obligations or anticipated claims under
workers' compensation, medical plans, employee benefit plans or agreements, and
other similar plans, all in accordance with current practices).

          (c) The Borrowers shall use their best efforts to cause their
Affiliates to execute and deliver to the Agent and the Revolving Credit Lenders
such documentation as the Administrative Agent may reasonably require to
evidence the Affiliates' agreement with the provisions of this Section 5.20.

     5.21. ADDITIONAL SUBSIDIARIES. If any additional Subsidiary is formed or
acquired after the Effective Date, the Lead Borrower will notify the Collateral
Agent thereof and (a) the Loan Parties will cause such Subsidiary to become a
Borrower or Facility Guarantor hereunder, as determined by the Collateral Agent,
within three (3) Business Days after such Subsidiary is formed or acquired and
promptly take such actions to create and perfect Encumbrances on such
Subsidiary's assets to secure the Liabilities as the Collateral Agent or the
Majority Lenders shall reasonably request and (b) if any shares of capital stock
or Indebtedness of such Subsidiary are


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<PAGE>

owned by or on behalf of any Loan Party, the Loan Parties will cause such shares
and promissory notes evidencing such Indebtedness to be pledged within three (3)
Business Days after such Subsidiary is formed or acquired. Nothing contained
herein shall be deemed a modification of any other provisions of this Agreement
restricting the formation or acquisition of Subsidiaries by the Loan Parties.

     5.22. FURTHER ASSURANCES.

          (a) No Loan Party will hereafter acquire any asset or any interest in
property (other than real property, including Leasehold Interests therein) which
is not, immediately upon such acquisition, subject to such a perfected
Collateral Interest in favor of the Collateral Agent to secure the Liabilities
(subject only to Permitted Encumbrances).

          (b) Each Loan Party shall execute and deliver to the Collateral Agent
such instruments, documents, and papers, and shall do all such things from time
to time hereafter as the Collateral Agent may reasonably request to carry into
effect the provisions and intent of this Agreement; to protect and perfect the
Collateral Agent' Collateral Interests in the Collateral; and to comply with all
applicable statutes and laws, and facilitate the collection of the Receivables
Collateral. Each Loan Party shall execute all such instruments as may be
reasonably required by the Collateral Agent with respect to the recordation
and/or perfection of the Collateral Interests created or contemplated herein.

          (c) Each Loan Party hereby designates the Collateral Agent as and for
that Loan Party's true and lawful attorney, with full power of substitution, to
sign and file any financing statements in order to perfect or protect the
Collateral Agent' Collateral Interests in the Collateral.

          (d) This Agreement constitutes an authenticated record which
authorizes the Collateral Agent to file such financing statements as the
Collateral Agent determine as appropriate to perfect or protect the Collateral
Interests created by this Agreement.

     5.23. ADEQUACY OF DISCLOSURE.

          (a) No document, instrument, agreement, or paper hereafter given to
the Agents or to any Revolving Credit Lender by or on behalf of each Loan Party
or any guarantor of the Liabilities in connection with the execution of this
Agreement by the Agents and to each Revolving Credit Lender contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements therein not misleading.

     5.24. NO RESTRICTIONS ON LIABILITIES. No Loan Party shall enter into or
directly or indirectly become subject to any agreement which prohibits or
restricts, in any manner, any Loan Party's:

          (a) Creation of, and granting of Collateral Interests in favor of the
Collateral Agent.


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          (b) Incurrence of Liabilities.

     5.25. UNRESTRICTED SUBSIDIARIESNo Unrestricted Subsidiary shall, at any
time, have assets in excess of $500,000 in the aggregate.

ARTICLE 6 - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:

     6.1. MAINTAIN RECORDS. The Loan Parties shall:

          (a) At all times, keep proper books of account, in which full, true,
and accurate entries shall be made of all of the Loan Parties' financial
transactions, all in accordance with GAAP applied consistently with prior
periods to fairly reflect the Consolidated financial condition of the Loan
Parties at the close of, and its results of operations for, the periods in
question.

          (b) Timely provide the Administrative Agent with those financial
reports, statements, and schedules required by this Article 6 or otherwise, each
of which reports, statements and schedules shall be prepared, to the extent
applicable, in accordance with GAAP applied consistently with prior periods to
fairly reflect the Consolidated financial condition of the Loan Parties at the
close of, and the results of operations for, the period(s) covered therein.

          (c) At all times, keep accurate current records of the Collateral
including, without limitation, accurate current stock, cost, and sales records
of its Inventory for each Borrower, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.

          (d) At all times, retain (i) Deloitte and Touche, LLP, or such other
nationally recognized independent certified public accountants who are
reasonably satisfactory to Schottenstein Stores Corporation (as long as it
remains in Control of the Borrowers) or (ii) or such other independent certified
public accountants who are reasonably satisfactory to Schottenstein Stores
Corporation (as long as it remains in Control of the Borrowers) and the
Administrative Agent, and instruct such accountants, subject to the terms of
such accountants' internal policies, and subject to the confidentiality
provisions of this Agreement, to fully cooperate with, and be available to, the
Administrative Agent to discuss the Loan Parties' financial performance,
financial condition, operating results, controls, and such other matters, within
the scope of the retention of such accountants, as may be raised by the
Administrative Agent.

          (e) Not change any Loan Party's fiscal year.

     6.2. ACCESS TO RECORDS.

          (a) Each Loan Party shall accord each Agent with reasonable access
during normal business hours from time to time as each Agent may require to all
properties owned by or over which any Loan Party has control. Each Agent shall
have the right, and each Loan Party will permit each Agent from time to time as
such Agent may request, to examine, inspect, copy,


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and make extracts from any and all of the Loan Parties' books, records,
electronically stored data, papers, and files. Each Loan Party shall make that
Loan Party's copying facilities available to the Agent.

          (b) Each Loan Party hereby authorizes each Agent to:

               (i) Inspect, copy, duplicate, review, cause to be reduced to hard
     copy, run off, draw off, and otherwise use any and all computer or
     electronically stored information or data which relates to any Loan Party.
     Each Loan Party shall request full cooperation with each Agent from any
     service bureau, contractor, accountant, or other Person.

               (ii) Verify at any time the Collateral or any portion thereof,
     including verification with Account Debtors, and/or with each Loan Party's
     computer billing companies, collection agencies, and accountants.

          (c) Any Agent from time to time may designate one or more
representatives to exercise such Agent's rights under this Section 6.2 as fully
as if such Agent were doing so, provided that the Agent shall not designate a
Person which is in a Competitive Business.

     6.3. PROMPT NOTICE TO ADMINISTRATIVE AGENT.

          (a) The Lead Borrower shall provide the Administrative Agent with
written notice promptly upon the occurrence of any of the following events,
which written notice shall be with reasonable particularity as to the facts and
circumstances in respect of which such notice is being given:

               (i) Any change in any Loan Party's President, chief executive
     officer, chief operating officer, and chief financial officer (without
     regard to the title(s) actually given to the Persons discharging the duties
     customarily discharged by officers with those titles).

               (ii) Any ceasing of any Loan Party's payment of the debts of that
     Loan Party generally as they mature, in the ordinary course, to its
     creditors (other than its ceasing of making of such payments on account of
     a dispute which, if adversely determined to the Loan Parties is not
     reasonably likely to have a Material Adverse Effect).

               (iii) Any failure by any Loan Party to pay rent at any of that
     Loan Party's locations, which failure continues for more than three (3)
     days following the last day on which such rent was payable unless such
     failure is not reasonably likely to have a Material Adverse Effect.

               (iv) Any material adverse change in the business, operations, or
     financial affairs of any Borrower.


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               (v) The occurrence of any Default.

               (vi) Any intention on the part of any Loan Party to discharge
     that Loan Party's present independent accountants or any withdrawal or
     resignation by such independent accountants from their acting in such
     capacity (as to which, see Subsection 6.1(d)).

               (vii) Any litigation which, if determined adversely to any Loan
     Party, is reasonably likely to have a Material Adverse Effect.

               (viii) Any intention of a Borrower to enter into a consignment
     arrangement or licensing or other similar agreement (whether for
     intellectual property, leased departments in stores or otherwise) with any
     other Person (other than a Loan Party).

               (ix) Any Material Accounting Changes.

               (x) Any event, occurrence or circumstance not specifically
     described herein which is reasonably likely to have a Material Adverse
     Effect.

               (xi) Any Loan Party's entering into a license agreement after the
     Effective Date.

               (xii) Any Loan Party's entering into a Capital Lease after the
     Effective Date.

          (b) The Lead Borrower shall:

               (i) Provide the Administrative Agent, when so distributed, with
     copies of any materials distributed to all shareholders of the Lead
     Borrower (qua such shareholders).

               (ii) Provide the Administrative Agent:

                    (A) When filed, copies of all filings with the SEC. Such
          copies may be provided in electronic format.

                    (B) When received, copies of all correspondence from the
          SEC, other than routine general communications from the SEC.

                    (C) Should any of the information on any of the Exhibits
          hereto become misleading in any material respect, the Borrower shall
          promptly advise the Administrative Agent in writing with such
          revisions or updates as may be necessary or appropriate to update or
          correct the same; provided however that no such Exhibit shall be
          deemed to have been amended, modified or superseded by any such
          correction or update, nor shall any breach of representation or
          warranty resulting from the inaccuracy or incompleteness of such
          Exhibit be deemed to


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<PAGE>

          have been cured or waived, unless and until the Administrative Agent,
          in its discretion shall have accepted in writing such revisions.

               (iii) At the request of the Administrative Agent, from time to
     time, provide the Administrative Agent with copies of all advertising
     (including copies of all print advertising and duplicate tapes of all video
     and radio advertising).

               (iv) Provide the Administrative Agent, when received by any Loan
     Party, with a copy of any management letter or similar communications from
     any independent accountant of any Loan Party.

     6.4. WEEKLY REPORTS. Weekly, on Friday of each week (as of the then
immediately preceding Saturday) the Lead Borrower shall provide the
Administrative Agent with borrowing base certificates (each, a "BORROWING BASE
CERTIFICATE") (in the form of EXHIBIT 6.4 annexed hereto, as such form may be
revised from time to time by the Administrative Agent), and sales audit reports
and flash collateral reports (each in such form as may be specified from time to
time by the Collateral Agent). Such reports may be sent to the Administrative
Agent by facsimile transmission, provided that the original thereof is forwarded
to the Administrative Agent on the date of such transmission.

     6.5. MONTHLY REPORTS. Monthly, the Lead Borrower shall provide the
Administrative Agent with those financial statements and reports described in
EXHIBIT 6.5, annexed hereto, at the times set forth in such exhibit.

     6.6. QUARTERLY REPORTS. Quarterly, within forty-five (45) days following
the end of each of the Loan Parties' fiscal quarters, the Lead Borrower shall
provide the Administrative Agent with the following:

          (a) An original counterpart of a management prepared financial
statement (which shall be prepared in the same manner and using the same
assumptions as set forth in the forecasts furnished to, and approved by, the
Administrative Agent pursuant to the provisions of Section 6.10(c) hereof) for
the Loan Parties on a consolidated basis, for the fiscal quarter most recently
ended, and for the period from the beginning of the Loan Parties' then current
fiscal year through the end of the subject quarter, with comparative information
for the same period of the previous fiscal year, which statement shall include a
balance sheet, statement of operations, and cash flows and comparisons for the
corresponding quarter of the then immediately previous year, as well as to the
Loan Party's forecast.

          (b) The officer's compliance certificate described in Section 6.8.

     6.7. ANNUAL REPORTS.

          (a) Annually, within ninety (90) days following the end of the Loan
Parties' fiscal year, the Lead Borrower shall furnish the Administrative Agent
with the following:


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               (i) An original signed counterpart of the Loan Parties'
     Consolidated annual financial statement, which statement shall have been
     prepared by, and bear the unqualified opinion of, the Lead Borrower's
     independent certified public accountants (i.e. said statement shall be
     "certified" by such accountants) and shall include, at a minimum (with
     comparative information for the then prior fiscal year) a balance sheet,
     statement of operations, statement of changes in shareholders' equity, and
     cash flows.

               (ii) A consolidating annual financial statement for the Loan
     Parties which shall include (with comparative information for the then
     prior fiscal year) a balance sheet and statement of operations.

               (iii) The officer's compliance certificate described in Section
     6.8.

          (b) No later than fifteen (15) days prior to the end of each of the
Loan Parties' fiscal years, the Lead Borrower shall give written notice to such
independent certified accountants (with a copy of such notice, when sent, to the
Administrative Agent) that such annual financial statement will be delivered by
the Lead Borrower to the Administrative Agent (for subsequent distribution to
each Revolving Credit Lender), and that the Lead Borrower has been advised that
the Administrative Agent and each Revolving Credit Lender will rely thereon with
respect to the administration of, and transactions under, the credit facility
contemplated by this Agreement.

     6.8. OFFICERS' CERTIFICATES. The Lead Borrower shall cause either the Lead
Borrower's Chief Executive Officer, President, Executive Vice President, Chief
Financial Officer, Controller, or Treasurer (collectively, an "Authorized
Officer"), in each instance, to provide such Person's certificate with the
monthly, quarterly and annual financial statements to be provided pursuant to
this Agreement, which certificate shall:

          (a) Indicate that (i) with respect to the Consolidated financial
statement, the subject statement was prepared in accordance with GAAP
consistently applied, and (ii) with respect to all financial statements,
presents fairly the financial condition of the applicable Loan Parties at the
close of, and the results of the applicable Loan Parties' operations and cash
flows (where such cash flows are required to be provided) for, the period(s)
presented, subject, however to the following:

                    (A) Usual year end adjustments (this exception shall not be
     included in the certificate which accompanies such annual statement).

                    (B) Material Accounting Changes (in which event, such
     certificate shall include a schedule (in reasonable detail) of the effect
     of each such Material Accounting Change.

          (b) Indicate either that (i) no Default has occurred and is
continuing, or (ii) if such an event has occurred, its nature (in reasonable
detail) and the steps (if any) being taken or contemplated by the Loan Parties
to be taken on account thereof.


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<PAGE>

     6.9. INVENTORIES, APPRAISALS, AND AUDITS.

          (a) The Collateral Agent, at the reasonable expense of the Loan
Parties, may participate in and/or observe each scheduled physical count of
Inventory which is undertaken on behalf of any Loan Party.

          (b) The Loan Parties, at their own expense, shall cause not less than
one (1) physical inventory of each of Borrower to be undertaken in each twelve
(12) month period during which this Agreement is in effect conducted by such
inventory takers as are reasonably satisfactory to the Collateral Agent and
following such methodology as may be reasonably satisfactory to the Collateral
Agent.

               (i) The Lead Borrower, within forty-five (45) days following the
     completion of such inventory, shall provide the Collateral Agent with a
     reconciliation of the results of each such inventory (as well as of any
     other physical inventory undertaken by any Loan Party) and shall post such
     results to the Loan Parties' stock ledger and, as applicable to the Loan
     Parties' other financial books and records.

               (ii) The Collateral Agent, in their reasonable, good faith
     discretion, if any Event of Default has occurred and is continuing, may
     cause such additional inventories to be taken as the Collateral Agent
     determine (each, at the expense of the Loan Parties).

          (c) The Collateral Agent may obtain appraisals of the Collateral
(copies of which, subject to the approval of the appraiser, shall be provided to
the Lead Borrower promptly upon receipt thereof), from time to time (in all
events, at the Loan Parties' expense) conducted by Hilco Appraisal Services, LLC
or such appraisers as are satisfactory to the Collateral Agent. The Collateral
Agent may conduct one (1) appraisal (in each event, at the Loan Parties'
expense) of the Collateral during any twelve (12) month period during which this
Agreement is in effect, but in their reasonable, good faith discretion, during
the occurrence and continuance of an Event of Default, may undertake additional
such appraisals (likewise at the Loan Party's expense) during such period.

          (d) The Collateral Agent may conduct one (1) commercial finance field
examinations (in each event, at the Loan Parties' expense) of the Loan Parties'
books and records during any twelve (12) month period during which this
Agreement is in effect, but in their reasonable, good faith discretion during
the occurrence and continuance of an Event of Default, may undertake additional
such audits (likewise at the Loan Party's expense) during such period.

          (e) Notwithstanding anything to the contrary herein contained, upon
the occurrence of any event or circumstance which is reasonably likely to have a
material adverse effect on the business, operations, property, assets, or
financial condition of any Borrower, the limitations set forth in clauses (c)
and (d) on the number of appraisals and commercial finance examinations which
the Agent may cause to be undertaken for such Borrower only shall be
inapplicable and the Agent may undertake as many appraisals and commercial
finance examinations of such Borrower with such frequency as the Agent may deem
reasonably


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appropriate and necessary (none of which shall be included in determining the
number of appraisals and commercial finance examinations the Agent may undertake
with respect to other Borrowers).

          (f) The Collateral Agent from time to time may undertake "mystery
shopping" (so-called) visits to all or any of the Loan Parties' business
premises.

     6.10. ADDITIONAL FINANCIAL INFORMATION.

          (a) In addition to all other information required to be provided
pursuant to this Article 6, the Lead Borrower promptly shall provide the Agent
with such other and additional information concerning the Loan Parties, the
Collateral, the operation of the Loan Parties' business, and the Loan Parties'
financial condition, including original counterparts of financial reports and
statements, as any Agent may from time to time reasonably request from the Lead
Borrower.

          (b) The Lead Borrower shall, upon the Administrative Agent's request,
provide the Administrative Agent, from time to time hereafter, with updated
forecasts of the Loan Parties' anticipated performance and operating results for
the current fiscal year. Such forecasts shall be in a format consistent with the
format previously provided to the Administrative Agent.

          (c) In all events, the Lead Borrower, no sooner than ninety (90) nor
later than sixty (60) days prior to the end of each of the Loan Parties' fiscal
years, shall provide the Administrative Agent with an updated and extended
forecast which shall go out at least through the end of the then next fiscal
year and shall include a statement of operations, balance sheet, and statement
of cash flow, by month, each Consolidated and each prepared in conformity with
GAAP and consistent with the Loan Parties' then current accounting practices.

          (d) When available the "Annual Budget", as approved by the Lead
Borrowers' Board of Directors, shall be provided to the Administrative Agent.
The Annual Budget shall be subject to the approval of the Administrative Agent
(whose approval shall not be unreasonably withheld) only if the Annual Budget
varies in a material way from the Business Plan for such fiscal year.

          (e) Each Loan Party recognizes that all commercial finance
examinations, inventories, analysis, financial information, and other materials
which the Agent may obtain, develop, or receive with respect to the Loan Parties
(other than appraisals and inventories received from third parties) are
confidential to the Agent and that, except as otherwise provided herein, no Loan
Party is entitled to receipt of any of such commercial finance examinations,
inventories, analysis, financial information, and other materials, nor copies or
extracts thereof or therefrom.

     6.11. INFORMATION DELIVERED PURSUANT TO ARTICLE 6.


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     All information required to be delivered pursuant to Article 6 may be
delivered by and in electronic format.

     6.12. FINANCIAL COVENANT.

          If the aggregate outstanding Revolving Credit Loans, together with the
Stated Amount of all outstanding L/Cs at any time exceeds ninety percent (90%)
of the lesser of the Revolving Credit Ceiling or the DSW Borrowing Base, the
Loan Parties shall not permit the fixed charge coverage ratio, tested monthly as
of the last day of each month, on a trailing twelve month basis, to be less than
1.1:1.0. Such covenant shall be tested unless and until the aggregate
outstanding Revolving Credit Loans, together with the Stated Amount of all
outstanding L/Cs at any time, for ninety (90) consecutive Business Days is less
than ninety percent (90%) of the lesser of the Revolving Credit Ceiling or the
DSW Borrowing Base.

ARTICLE 7 - USE OF COLLATERAL:

     7.1. USE OF INVENTORY COLLATERAL.

          (a) No Loan Party shall engage in any of the following with respect to
its Inventory:

               (i) Any sale other than for fair consideration in the conduct of
     the Loan Parties' business in the ordinary course.

               (ii) Sales or other dispositions to creditors, except returns in
     the ordinary course of business.

               (iii) Sales or other dispositions in bulk except in the ordinary
     course of business consistent with past practices.

               (iv) Sales in breach of any provision of this Agreement.

               (v) Sales other than in connection with Permitted Dispositions.

          (b) Without the prior written consent of the Collateral Agent, no sale
of Inventory shall be on consignment (other than between Loan Parties),
approval, or under any other circumstances such that, with the exception of the
Loan Parties' customary return policy applicable to the return of inventory
purchased by the Loan Parties' retail customers in the ordinary course, such
Inventory may be returned to a Loan Party without the consent of the Collateral
Agent.

     7.2. INVENTORY QUALITY. All Inventory now owned or hereafter acquired by
each Loan Party is and will be of good and merchantable quality, consistent with
past practices.

     7.3. ADJUSTMENTS AND ALLOWANCES. Each Loan Party may grant such allowances
or other adjustments to that Loan Party's Account Debtors as that Loan Party may
reasonably deem to accord with sound business practice and which are normal and
customary extensions


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and adjustments in the ordinary course of business, provided, however, the
authority granted the Loan Parties pursuant to this Section 7.3 may be limited
or terminated by the Administrative Agent at any time in the Administrative
Agent's reasonable, good faith discretion after the occurrence and during the
continuance of an Event of Default.

     7.4. VALIDITY OF ACCOUNTS.

          (a) Except for adjustments and disputes in the ordinary course of
business, the amount of each Account shown on the books, records, and invoices
of the Loan Parties represented as owing by each Account Debtor is the correct
amount actually owing by such Account Debtor and shall have been fully earned by
performance by the Loan Parties.

          (b) No Loan Party has any knowledge of any impairment of the validity
or collectibility of any of the Accounts, other than returns, reserves,
unauthorized use of credit cards, bad checks, adjustments and disputes which
occur in the ordinary course of business. The Lead Borrower shall notify the
Administrative Agent of any such impairment immediately after any Loan Party
becomes aware of any such impairment.

          (c) No Loan Party shall post any bond to secure any Loan Party's
performance under any agreement to which any Loan Party is a party nor cause any
surety, guarantor, or other third party obligee to become liable to perform any
obligation of any Loan Party (other than to the Collateral Agent) in the event
of any Loan Party's failure so to perform, if, as a result of the surety,
guarantor or third party obligee's performance, such Person would obtain a
Encumbrance on any Collateral having priority to the Encumbrance of the
Collateral Agent.

     7.5. NOTIFICATION TO ACCOUNT DEBTORS. The Collateral Agent shall have the
right (after the occurrence of a Cash Control Event) to notify any of the Loan
Parties' Account Debtors to make payment directly to the Administrative Agent
and to collect all amounts due on account of the Collateral.

ARTICLE 8 - CASH MANAGEMENT. PAYMENT OF LIABILITIES:

     8.1. DEPOSITORY ACCOUNTS.

          (a) Annexed hereto as EXHIBIT 8.1 is a listing of all present DDA's,
which listing includes, with respect to each depository of the Loan Parties, the
following: (i) the name and address of that depository; (ii) the account
number(s) of the account(s) maintained with such depository; and (iii) a contact
person at such depository.

          (b) The Lead Borrower shall deliver the following to the
Administrative Agent, as a condition to the effectiveness of this Agreement:

               (i) Notifications, executed on behalf of each Borrower, to each
     depository institution with which any DDA is maintained (other than any
     Exempt DDA and the Collection Accounts), in form satisfactory to the
     Administrative Agent of the


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     Collateral Agent' interest in such DDA. Such Notifications shall be held in
     escrow by the Administrative Agent until the occurrence of a Cash Control
     Event at which time they may be delivered to the applicable depositary
     institutions.

               (ii) A Collection Account Agreement with any depository
     institution at which a Collection Account is maintained, including those
     listed on EXHIBIT 8.1.

          (c) No Borrower will establish any DDA hereafter (other than an Exempt
DDA) unless, contemporaneous with such establishment, the Lead Borrower delivers
the following to the Administrative Agent:

               (i) A notification for the depository at which such DDA is
     established if the same would have been required pursuant to Section
     8.1(b)(i) if the subject DDA were open at the execution of this Agreement.

               (ii) A Collection Account Agreement executed on behalf of the
     depository at which such DDA is established if the same would have been
     required pursuant to Section 8.1(b)(ii) if the subject DDA were open at the
     execution of this Agreement.

     8.2. CREDIT CARD RECEIPTS.

          (a) Annexed hereto as EXHIBIT 8.2, is a Schedule which describes all
arrangements to which any Borrower is a party with respect to the payment to
that Borrower of the proceeds of credit card charges for sales by that Borrower.

          (b) The Lead Borrower shall deliver to the Administrative Agent, as a
condition to the effectiveness of this Agreement, an agreement executed on
behalf of each Borrower with each of each Borrower's credit card clearinghouses
and processors (in form satisfactory to the Administrative Agent), which
agreement provides that, during the existence of a Cash Control Event, payment
of all credit card charges submitted by that Borrower to that clearinghouse or
other processor and any other amount payable to that Borrower by such
clearinghouse or other processor shall be directed to the Administrative Agent's
Account or as otherwise designated from time to time by the Administrative
Agent. No Borrower shall change such direction or designation except upon and
with the prior written consent of the Administrative Agent and no Borrower will
enter into any agreements with a new credit card clearinghouse or processor
hereafter unless, contemporaneous with such establishment, the Lead Borrower
delivers to the Administrative Agent an agreement with such credit card
clearinghouse or processor of like terms to those required hereunder on the
Effective Date.

     8.3. THE ADMINISTRATIVE AGENT'S, COLLECTION, AND OPERATING ACCOUNTS.

          (a) The following checking accounts have been or will be established
(and are so referred to herein):


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<PAGE>

               (i) The "ADMINISTRATIVE AGENT'S ACCOUNT(S)" (so referred to
     herein): Established by the Administrative Agent with NCB for each Borrower
     as more specifically described on EXHIBIT 8.3 hereto.

               (ii) The "COLLECTION ACCOUNTS" (so referred to herein):
     Established by the Lead Borrower with those financial institutions
     described on EXHIBIT 8.3 hereof.

               (iii) The "OPERATING ACCOUNTs" (so referred to herein):
     Established by each Borrower with NCB as more specifically described on
     EXHIBIT 8.3 hereto.

          (b) The contents of each DDA and of each Collection Account
constitutes Collateral and Proceeds of Collateral. The contents of each
Administrative Agent's Account constitutes the Administrative Agent's property.

          (c) The Borrowers shall pay all fees and charges of, and maintain such
impressed balances as may be required by the depository in which any account is
opened as required hereby (even if such account is opened by and/or is the
property of the Agent).

     8.4. PROCEEDS AND COLLECTIONS.

          (a) All Receipts constitute Collateral and proceeds of Collateral.

          (b) Absent a Cash Control Event, the Borrowers may collect all
Receipts and use such Receipts in the ordinary course of business.

          (c) During a Cash Control Event, the Borrowers shall cause all
Receipts to be deposited or transferred to the Administrative Agent's Account.

          (d) Subject to this Section 8.4, upon notice from the Administrative
Agent to the Lead Borrower that a Cash Control Event has occurred:

               (i)  All Receipts:

                    (A) Shall be held in trust by the Borrowers for the
          Collateral Agent.

                    (B) Shall not be commingled with any of any Borrower's other
          funds.

                    (C) Shall be deposited and/or transferred only to a
          Collection Account or the applicable Administrative Agent's Accounts,
          and the Borrowers shall not have any authority to withdraw any amounts
          from such accounts and the Administrative Agent shall have no
          obligation to deposit such Receipts in the applicable Operating
          Account.

               (ii) The Lead Borrower shall cause the ACH transfer or wire
     transfer to the Collection Account or the applicable Administrative Agent's
     Account (except in


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     those instances in which such transfer is not within the control of the
     Lead Borrower or any other Borrower), no less frequently than daily (and
     whether or not there is then an outstanding balance in the Loan Account) of
     the following:

                    (A) The then contents of each DDA (other than any Exempt
          DDA), each such transfer to be net of any minimum balance, not to
          exceed $2,000.00, as may be required to be maintained in the subject
          DDA by the bank at which such DDA is maintained.

                    (B) The proceeds of all credit card charges not otherwise
          provided for pursuant hereto.

               (iii) In the event that, notwithstanding the provisions of this
     Section 8.4(d), any of the Borrowers receives or otherwise has dominion and
     control of any Receipts, or any proceeds or collections of any Collateral,
     such Receipts, proceeds, and collections shall be held in trust by that
     Borrower for the Agent and shall not be commingled with any of that
     Borrower's other funds or deposited in any account of any Borrower other
     than as instructed by the Administrative Agent.

               (iv) The Borrowers shall not disburse any funds in the DDAs,
     Collection Accounts or other deposit accounts (other than Exempt DDAs and
     the Operating Accounts in the ordinary course of business consistent with
     past practices) other than in accordance with the provisions of this
     Section 8.4.

     8.5. PAYMENT OF LIABILITIES.

          (a) On each Business Day after the occurrence and during the
continuance of a Cash Control Event, the Administrative Agent shall apply the
then collected balance of each Administrative Agent's Account (net of fees
charged, and of such impressed balances as may be required by the bank at which
such Administrative Agent's Account is maintained) First, towards the SwingLine
Loans, Second, towards the unpaid balance of the Loan Account, and Third, to all
other Liabilities in such order as the Administrative Agent may determine.

          (b) The following rules shall apply to deposits and payments under and
pursuant to this Section 8.5:

               (i) Funds shall be deemed to have been deposited to an
     Administrative Agent's Account on the Business Day on which deposited,
     provided that notice of such deposit is available to the Administrative
     Agent by 1:00PM on that Business Day.

               (ii) Funds paid to the Administrative Agent, other than by
     deposit to an Administrative Agent's Account, shall be deemed to have been
     received on the Business Day when they are good and collected funds,
     provided that notice of such payment is available to the Administrative
     Agent by 1:00PM on that Business Day.


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               (iii) If notice of a deposit to an Administrative Agent's Account
     (Section 8.5(b)(i)) or payment (Section 8.5(b)(ii)) is not available to the
     Administrative Agent until after 1:00PM on a Business Day, such deposit or
     payment shall be deemed to have been made at 9:00AM on the then next
     Business Day.

               (iv) All deposits to an Administrative Agent's Account and other
     payments to the Administrative Agent are subject to clearance and
     collection.

          (c) The Administrative Agent shall transfer to the Operating Account
of the applicable Borrower any surplus in the Administrative Agent's Account
remaining after the application towards the Liabilities referred to in Section
8.5(a), above (less those amounts which are to be netted out, as provided
therein) provided, however, in the event that

               (i) any Default has occurred and is continuing; and

               (ii) one or more L/Cs and Banker's Acceptances are then
     outstanding,

then the Administrative Agent may, and at the direction of the SuperMajority
Lenders shall, establish a funded reserve of up to 105% of the aggregate Stated
Amounts of such L/C's and such Banker's Acceptances. Such funded reserve shall
either be (i) returned to the applicable Borrower provided that no Borrower is
in Default or (ii) applied towards the Liabilities in the manner set forth
herein following the occurrence of any Event of Default described in Section
11.12 or acceleration following the occurrence of any other Event of Default.

     8.6. THE OPERATING ACCOUNT.

          (a) Funds in the Operating Account of each Borrower shall be utilized
to fund disbursements made by such Borrower, including, without limitation, from
any expense accounts maintained by such Borrower.

          (b) After the occurrence and during the continuance of any Event of
Default or at any time that Average Excess Availability for any five (5)
consecutive Business Days is less than $30,000,000, NCB shall not be obligated
to permit any outgoing ACH transfers unless the amount of the proposed transfer
is fully prefunded in accordance with the requirements and practices of NCB.

ARTICLE 9 - GRANT OF SECURITY INTEREST:

     9.1. GRANT OF SECURITY INTEREST. To secure the Borrowers' prompt, punctual,
and faithful performance of all and each of the Liabilities, each Borrower
hereby grants to the Collateral Agent, for the ratable benefit of the Revolving
Credit Lenders, the Issuer, the Agents, and the Affiliates of each of them, a
continuing security interest in and to, and assigns to the Collateral Agent, for
the ratable benefit of the Revolving Credit Lenders, the following, and each
item thereof, whether now owned or now due, or in which that Borrower has an
interest, or hereafter acquired, arising, or to become due, or in which that
Borrower obtains an interest, and all products, Proceeds, substitutions, and
accessions of or to any of the following, but excluding


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the Excluded Property (all of which, together with any other property in which
the Collateral Agent may in the future be granted a security interest, is
referred to herein as the "COLLATERAL"):

          (a) All Accounts.

          (b) All Inventory.

          (c) All General Intangibles.

          (d) All Equipment.

          (e) All Goods.

          (f) All Farm Products.

          (g) All Fixtures.

          (h) All Chattel Paper.

          (i) All Letter-of-Credit Rights.

          (j) All Payment Intangibles.

          (k) All Supporting Obligations.

          (l) The Commercial Tort Claim described on EXHIBIT 4.17 hereto.

          (m) All books, records, and information relating to the Collateral
and/or to the operation of each Borrowers' business, and all rights of access to
such books, records, and information, and all property in which such books,
records, and information are stored, recorded, and maintained.

          (n) All Leasehold Interests (other than Leasehold Interests in real
property).

          (o) All Investment Property, Instruments, Documents, Deposit Accounts,
money, policies and certificates of insurance, deposits, impressed accounts,
compensating balances, cash, or other property.

          (p) All insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any of such
proceeds, refunds, and premium rebates arise out of any of the foregoing.
(9.1(a) through 9.1(p)) or otherwise.

          (q) All liens, guaranties, rights, remedies, and privileges pertaining
to any of the foregoing (9.1(a) through 9.1(p)), including the right of stoppage
in transit.

     9.2. EXTENT AND DURATION OF SECURITY INTEREST.


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<PAGE>

          (a) The security interest created and granted herein is in addition
to, and supplemental of, any security interest previously granted by any
Borrower to the Collateral Agent (including, without limitation, under any
mortgages and deeds of trust) and shall continue in full force and effect
applicable to all Liabilities until

               (i) the Termination Date has occurred; and

               (ii) all Liabilities have been paid or satisfied in full in cash
     and satisfactory arrangements with respect to L/Cs and Banker's Acceptances
     as provided in Section 19.2 hereof have been made; and

               (iii) the security interest created herein is specifically
     terminated in writing by duly authorized officers of the Collateral Agent
     as provided in Section 19.2(d) hereof.

          (b) It is intended that the Collateral Interests created herein extend
to and cover all assets of each Borrower, except for Excluded Property.

          (c) If a Borrower shall at any time acquire a Commercial Tort Claim,
the Lead Borrower shall promptly notify the Administrative Agent in writing of
the details thereof and the Borrowers shall take such actions as the Collateral
Agent shall request in order to grant to the Collateral Agent, for the ratable
benefit of the Revolving Credit Lenders, the Issuer, the Agents, and the
Affiliates of each of them, a perfected and first priority security interest
therein and in the Proceeds thereof.

ARTICLE 10 - COLLATERAL AGENT AS BORROWERS' ATTORNEY-IN-FACT:

     10.1. APPOINTMENT AS ATTORNEY-IN-FACT. Each Borrower hereby irrevocably
constitutes and appoints the Collateral Agent (acting through any officer of the
Collateral Agent) as that Borrower's true and lawful attorney, with full power
of substitution, following the occurrence of an Event of Default, to convert the
Collateral into cash at the sole risk, cost, and expense of that Borrower, but
for the sole benefit of the Agent and the Revolving Credit Lenders. The rights
and powers granted the Collateral Agent by this appointment include but are not
limited to the right and power to:

          (a) Prosecute, defend, compromise, or release any action relating to
the Collateral.

          (b) Sign change of address forms to change the address to which each
Borrowers' mail is to be sent to such address as the Collateral Agent shall
designate (after which copies of all such mail shall be promptly furnished to
the Lead Borrower); receive and open each Borrowers' mail; remove any
Receivables Collateral and Proceeds of Collateral therefrom and turn over the
balance of such mail either to the Lead Borrower or to any trustee in bankruptcy
or receiver of the Lead Borrower, or other legal representative of a Borrower
whom the Collateral Agent determine to be the appropriate Person to whom to so
turn over such mail.


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          (c) Endorse the name of the relevant Borrower in favor of the
Collateral Agent upon any and all checks, drafts, notes, acceptances, or other
items or instruments; sign and endorse the name of the relevant Borrower on, and
receive as secured party, any of the Collateral, any invoices, schedules of
Collateral, freight or express receipts, or bills of lading, storage receipts,
warehouse receipts, or other documents of title respectively relating to the
Collateral.

          (d) Sign the name of the relevant Borrower on any notice to that
Borrowers' Account Debtors or verification of the Receivables Collateral; sign
the relevant Borrowers' name on any Proof of Claim in Bankruptcy against Account
Debtors, and on notices of lien, claims of mechanic's liens, or assignments or
releases of mechanic's liens securing the Accounts.

          (e) Take all such action as may be necessary to obtain the payment of
any letter of credit and/or banker's acceptance of which any Borrower is a
beneficiary.

          (f) Repair, manufacture, assemble, complete, package, deliver, alter
or supply goods, if any, necessary to fulfill in whole or in part the purchase
order of any customer of each Borrower.

          (g) Use, license or transfer any or all General Intangibles of each
Borrower.

     10.2. NO OBLIGATION TO ACT. The Collateral Agent shall not be obligated to
do any of the acts or to exercise any of the powers authorized by Section 10.1
herein, but if the Collateral Agent elect to do any such act or to exercise any
of such powers, they shall not be accountable for more than they actually
receive as a result of such exercise of power, and shall not be responsible to
any Borrower for any act or omission to act except for any act or omission to
act as to which there is a final determination made in a judicial proceeding (in
which proceeding the Collateral Agent have had an opportunity to be heard) which
determination includes a specific finding that the subject act or omission to
act had been grossly negligent or in actual bad faith, or willful misconduct.

ARTICLE 11 - EVENTS OF DEFAULT:

     The occurrence of any event described in this Article 11 respectively shall
constitute an "EVENT OF DEFAULT" herein. The occurrence of any Event of Default
shall also constitute, without notice or demand, a default under all other
agreements between the Agent or any Revolving Credit Lender and any Loan Party
and instruments and papers heretofore, now, or hereafter given the Agent or any
Revolving Credit Lender by any Loan Party in connection with any of the Loan
Documents.

     11.1. FAILURE TO PAY THE REVOLVING CREDIT. The failure by any Loan Party to
pay when due any principal of, interest on, or fees in respect of, the Revolving
Credit.

     11.2. FAILURE TO MAKE OTHER PAYMENTS. The failure by any Loan Party to pay
when due (or upon demand, if payable on demand) any payment Liability other than
any


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payment liability on account of the principal of, or interest on, or fees in
respect of, the Revolving Credit.

     11.3. FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD). The
failure by any Loan Party to promptly, punctually, faithfully and timely
perform, discharge, or comply with any covenant or Liability included in any of
the following provisions hereof:

<TABLE>
<CAPTION>
Section _____   Relates to _____:
-------------   -----------------
<S>             <C>
5.6             Indebtedness
5.12            Pay taxes
5.16            Dividends. Investments. Other Corporate Actions
5.17            Loans and Advances
4.18            Affiliate Transactions
5.26            Parent's Line of Business
Article 6       Reporting Requirements (except as set forth in Section 11.4,
                below)
Article 8       Cash Management
</TABLE>

     11.4. FINANCIAL REPORTING REQUIREMENTS. The failure by the Borrower to
promptly, punctually, faithfully and timely perform, discharge, or comply with
the financial reporting requirements included in Section 6.5, subject, however,
to the following limited number of grace periods applicable to certain of those
requirements:

<TABLE>
<CAPTION>
                     REQUIRED BY
REPORT / STATEMENT     SECTION          GRACE PERIOD        NUMBER OF GRACE PERIODS
------------------   -----------   ---------------------   ------------------------
<S>                  <C>           <C>                     <C>
Weekly Report        6.5           Two (2) Business Days   Twice in any twelve (12)
                                                           consecutive months
</TABLE>

     11.5. FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD). The failure
by any Loan Party, within twenty (20) days following the earlier of any
Authorized Officer's knowledge of a breach of any covenant or Liability not
described in any of Sections 11.1, 11.2, 11.3, or 11.4 or of its receipt of
written notice from the Administrative Agent of the breach of any of such
covenants or Liabilities, provided that if such failure cannot be reasonably
cured within such twenty (20) day period and the Loan Parties have diligently
proceeded, and continue to diligently proceed, to effectuate a cure of such
failure, such failure shall not be an Event of Default hereunder unless (a) such
failure is not cured within twenty (20) days after the expiration of such
initial twenty (20) day period, or (b) such failure, in the reasonable judgment
of the Collateral Agent, is reasonably likely to have a Material Adverse Effect.

     11.6. MISREPRESENTATION. The determination by the Administrative Agent that
any representation or warranty at any time made by any Loan Party to any Agent
or any Revolving Credit Lender was not true or complete in all material respects
when given.


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     11.7. ACCELERATION OF OTHER DEBT. BREACH OF LEASE. The occurrence and
continuance of any event of default or other event, which with the giving of
notice, the passage of time or both, would be an event of default under any
Indebtedness of any Loan Party equal to or in excess of One Million Dollars
($1,000,000.00) to any creditor other than the Agent or any Revolving Credit
Lender, (whether or not such Indebtedness has been accelerated), or, Leases
aggregating more than five percent (5%) of all Leases of the Loan Parties
existing from time to time could be terminated due to a default by a Loan Party
thereunder (whether or not the subject creditor or lessor takes any action on
account of such occurrence).

     11.8. DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any breach of any
covenant or Liability imposed by, or of any default under, any agreement between
any Agent or any Revolving Credit Lender and any Loan Party or instrument given
by any Loan Party to any Agent or any Revolving Credit Lender relating to
Indebtedness of any Loan Party in excess of $1,000,000 in the aggregate and the
expiration, without cure, of any applicable grace period (notwithstanding that
the subject Agent or Revolving Credit Lender may not have exercised all or any
of its rights on account of such breach or default).

     11.9. UNINSURED CASUALTY LOSS. The occurrence of any uninsured loss, theft,
damage, or destruction of or to any material portion of the Collateral. For
avoidance of doubt, the theft of credit card and other purchase information
announced by the Borrower on March 8, 2005 shall not constitute an uninsured
casualty loss or Event of Default.

     11.10. ATTACHMENT. JUDGMENT. RESTRAINT OF BUSINESS.

          (a) The entry of any judgment in excess of Two Million Five Hundred
Thousand Dollars ($2,500,000.00) against any Loan Party, which judgment (i) is
not covered by insurance (as to which the insurer has not notified the
applicable Loan Party of the insurer's reservation of rights) or (ii) is not
satisfied, stayed (if a money judgment) or appealed from (with execution or
similar process stayed) within thirty (30) days of its entry.

          (b) The entry of any order or the imposition of any other process
having the force of law, the effect of which is to restrain the conduct by any
Borrower of its business in the ordinary course and which is reasonably likely
to have a Material Adverse Effect.

     11.11. BUSINESS FAILURE. Any act by, against, or relating to any Loan
Party, or its property or assets, which act constitutes the determination, by
any Loan Party, to initiate a program of substantial or total self-liquidation;
application for, consent to, or sufferance of the appointment of a receiver,
trustee, or other Person, pursuant to court action or otherwise, over all, or
any part of any Loan Party's property; the granting of any trust mortgage or
execution of an assignment for the benefit of the creditors of any Loan Party,
or the occurrence of any other voluntary or involuntary liquidation or extension
of debt agreement for any Loan Party; the offering by or entering into by any
Loan Party of any composition, extension, or any other arrangement seeking
relief generally from or extension of the debts of any Loan Party; or the
initiation of any judicial or non-judicial proceeding or agreement by, against,
or including any Loan Party which seeks or intends to accomplish a
reorganization or arrangement with creditors; and/or the initiation by or on
behalf of any Loan Party of the liquidation or winding up of all or


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<PAGE>

any part of any Loan Party's business or operations except that any of the
foregoing actions which are commenced against a Loan Party shall not be deemed
an Event of Default hereunder as long as such action is timely contested in good
faith by that Loan Party by appropriate proceedings and is dismissed within
sixty (60) days of the institution of the foregoing.

     11.12. BANKRUPTCY. The failure by any Loan Party to generally pay the debts
of that Loan Party as they mature; adjudication of bankruptcy or insolvency
relative to any Loan Party; the entry of an order for relief or similar order
with respect to any Loan Party in any proceeding pursuant to the Bankruptcy Code
or any other federal bankruptcy law; the filing of any complaint, application,
or petition by any Loan Party initiating any matter in which any Loan Party is
or may be granted any relief from the debts of that Loan Party pursuant to the
Bankruptcy Code or any other insolvency statute or procedure; the filing of any
complaint, application, or petition against any Loan Party initiating any matter
in which that Loan Party is or may be granted any relief from the debts of that
Loan Party pursuant to the Bankruptcy Code or any other insolvency statute or
procedure, which complaint, application, or petition is not timely contested in
good faith by that Loan Party by appropriate proceedings or, if so contested, is
not dismissed within sixty (60) days of when filed.

     11.13. TERMINATION OF GUARANTY. The termination or attempted termination of
any Facility Guarantee by any Facility Guarantor.

     11.14. CHALLENGE TO LOAN DOCUMENTS.

          (a) Any challenge by or on behalf of any Loan Party to the validity of
any Loan Document or the applicability or enforceability of any Loan Document
strictly in accordance with the subject Loan Document's terms or which seeks to
void, avoid, limit, or otherwise adversely affect any security interest created
by or in any Loan Document or any payment made pursuant thereto.

          (b) Any determination by any court or any other judicial or government
authority that any Loan Document is not enforceable strictly in accordance with
the subject Loan Document's terms or which voids, avoids, limits, or otherwise
adversely affects any security interest created by any Loan Document or any
payment made pursuant thereto.

     11.15. CHANGE IN CONTROL. Any Change in Control.

ARTICLE 12 - RIGHTS AND REMEDIES UPON DEFAULT:

     12.1. ACCELERATION. Upon the occurrence of any Event of Default as
described in Section 11.12, all Indebtedness of the Loan Parties to the
Revolving Credit Lenders shall be immediately due and payable. Upon the
occurrence and continuance of any Event of Default other than as described in
Section 11.12, the Administrative Agent may (and on the issuance of Acceleration
Notice(s) requisite to the causing of Acceleration, the Administrative Agent
shall) declare all Indebtedness of the Borrowers to the Revolving Credit Lenders
to be immediately due and payable and the Agent may exercise all of the Agents'
Rights and Remedies as the applicable Agent from time to time thereafter
determine as appropriate.


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     12.2. RIGHTS OF ENFORCEMENT. The Collateral Agent shall have all of the
rights and remedies of a secured party upon default under the UCC, in addition
to which the Collateral Agent shall have all and each of the following rights
and remedies:

          (a) To give notice to any bank at which any DDA or Collection Account
is maintained and in which Proceeds of Collateral are deposited, to turn over
such Proceeds directly to the Agent.

          (b) To give notice to any customs broker of any of the Borrowers to
follow the instructions of the Collateral Agent as provided in any written
agreement or undertaking of such broker in favor of the Collateral Agent.

          (c) To collect the Receivables Collateral with or without the taking
of possession of any of the Collateral.

          (d) To take possession of all or any portion of the Collateral.

          (e) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or processing as
the Collateral Agent deems advisable and with or without the taking of
possession of any of the Collateral.

          (f) To conduct one or more going out of business sales which include
the sale or other disposition of the Collateral.

          (g) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.

          (h) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.

     12.3. SALE OF COLLATERAL.

     After the occurrence and during the continuance of an Event of Default:

          (a) Any sale or other disposition of the Collateral may be at public
or private sale upon such terms and in such manner as the Collateral Agent deem
advisable, having due regard to compliance with any statute or regulation which
might affect, limit, or apply to the Collateral Agent' disposition of the
Collateral.

          (b) The Collateral Agent, in the exercise of the Collateral Agent'
rights and remedies upon default, may conduct one or more going out of business
sales, in the Collateral Agent' own right or by one or more agents and
contractors. Such sale(s) may be conducted upon any premises owned, leased, or
occupied by any Borrower. The Collateral Agent and any such agents or
contractors, in conjunction with any such sale, may augment the Inventory with
other goods (all of which other goods shall remain the sole property of the
Collateral Agent or such agents or contractors). Any amounts realized from the
sale of such goods which constitute augmentations to the Inventory (net of an
allocable share of the costs and expenses incurred in


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<PAGE>

their disposition) shall be the sole property of the Collateral Agent or such
agents or contractors and neither any Borrower nor any Person claiming under or
in right of any Borrower shall have any interest therein. Upon request of the
Lead Borrower, the Collateral Agent shall promptly furnish, or cause to be
furnished, to the Lead Borrower a reconciliation of the amounts received from
the augmentation of the Inventory and the allocation of costs and expenses
thereto.

          (c) Unless the Collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market (in
which event the Collateral Agent shall provide the Lead Borrower such notice as
may be practicable under the circumstances), the Collateral Agent shall give the
Lead Borrower at least ten (10) days prior notice, by authenticated record, of
the date, time, and place of any proposed public sale, and of the date after
which any private sale or other disposition of the Collateral may be made. Each
Borrower agrees that such written notice shall satisfy all requirements for
notice to that Borrower which are imposed under the UCC or other applicable law
with respect to the exercise of the Collateral Agent' rights and remedies upon
default.

          (d) The Agent and any Revolving Credit Lender may purchase the
Collateral, or any portion of it at any sale held under this Article.

          (e) The Collateral Agent shall deliver the proceeds of the Collateral
Agent' exercise of its rights and remedies upon default to the Administrative
Agent for application pursuant to Section 14.6 hereof.

     12.4. OCCUPATION OF BUSINESS LOCATION. In connection with the Collateral
Agent' exercise of the Collateral Agent' rights under this Article 12, the
Collateral Agent may enter upon, occupy, and use any premises owned or occupied
by each Borrower, and may exclude each Borrower from such premises or portion
thereof as may have been so entered upon, occupied, or used by the Collateral
Agent. The Collateral Agent shall not be required to remove any of the
Collateral from any such premises upon the Collateral Agent' taking possession
thereof, and may render any Collateral unusable to the Borrowers. In no event
shall the Collateral Agent be liable to any Borrower for use or occupancy by the
Collateral Agent of any premises pursuant to this Article 12, nor for any charge
(such as wages for any Borrowers' employees and utilities) incurred in
connection with the Collateral Agent' exercise of the Agent's Rights and
Remedies.

     12.5. GRANT OF NONEXCLUSIVE LICENSE. In connection with the Collateral
Agent' exercise of the Collateral Agent' rights under this Article 12, each
Borrower hereby grants to the Collateral Agent a royalty free nonexclusive
irrevocable license to use, apply, and affix any trademark, trade name, logo, or
the like in which any Borrower now or hereafter has rights, such license being
with respect to the Collateral Agent' exercise of the rights hereunder
including, without limitation, in connection with any completion of the
manufacture of Inventory or sale or other disposition of Inventory.

     12.6. ASSEMBLY OF COLLATERAL. In connection with the Collateral Agent'
exercise of the Collateral Agent' rights under this Article 12, the Collateral
Agent may require any Borrower to assemble the Collateral and make it available
to the Collateral Agent at the


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Borrowers' sole risk and expense at a place or places which are reasonably
convenient to both the Collateral Agent and the Lead Borrower.

     12.7. RIGHTS AND REMEDIES. The rights, remedies, powers, privileges, and
discretions of the Agent hereunder (herein, the "AGENTS' RIGHTS AND REMEDIES")
shall be cumulative and not exclusive of any rights or remedies which it would
otherwise have. No delay or omission by the Agent in exercising or enforcing any
of the Agents' Rights and Remedies shall operate as, or constitute, a waiver
thereof. No waiver by the Agent of any Event of Default or of any default under
any other agreement shall operate as a waiver of any other default hereunder or
under any other agreement. No single or partial exercise of any of the Agents'
Rights or Remedies, and no express or implied agreement or transaction of
whatever nature entered into between the Agent and any Person, at any time,
shall preclude the other or further exercise of the Agents' Rights and Remedies.
No waiver by any Agent of any of the Agents' Rights and Remedies on any one
occasion shall be deemed a waiver on any subsequent occasion, nor shall it be
deemed a continuing waiver. The Agents' Rights and Remedies may be exercised at
such time or times and in such order of preference as the Agent may determine.
The Agents' Rights and Remedies may be exercised without resort or regard to any
other source of satisfaction of the Liabilities.

ARTICLE 13 - REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:

     13.1. REVOLVING CREDIT FUNDING PROCEDURES. Subject to Section 13.2:

          (a) The Administrative Agent shall advise each Revolving Credit
Lender, no later than 12:30 p.m. on a date on which any Revolving Credit Loan
(other than a SwingLine Loan) is to be made on that date. Such advice, in each
instance, may be by telephone or facsimile transmission, provided that if such
advice is by telephone, it shall be confirmed in writing. Advice of a Revolving
Credit Loan shall include the amount of and interest rate applicable to the
subject Revolving Credit Loan.

          (b) Subject to that Revolving Credit Lender's Revolving Credit Dollar
Commitment, each Revolving Credit Lender, by no later than 3:00 p.m. on the day
on which the subject Revolving Credit Loan is to be made, shall Transfer that
Revolving Credit Lender's Revolving Credit Commitment Percentage of the subject
Revolving Credit Loan to the Administrative Agent in immediately available
funds.

     13.2. SWINGLINE LOANS.

          (a) In the event that, when a Base Margin Rate Revolving Credit Loan
is requested, the aggregate unpaid balance of the SwingLine Loan is less than
the SwingLine Loan Ceiling, then the SwingLine Lender may advise the
Administrative Agent that the SwingLine Lender has determined to include up to
the amount of the requested Revolving Credit Loan as part of the SwingLine Loan.
In such event, the SwingLine Lender shall Transfer the amount of the requested
Revolving Credit Loan to the Administrative Agent.

          (b) The SwingLine Loan shall be converted to a Revolving Credit Loan
in which all Revolving Credit Lenders participate as follows:


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<PAGE>

               (i) At any time and from time to time, but no less frequently
     than once during each five (5) Business Day period, the SwingLine Lender
     may advise the Administrative Agent that all, or any part of the SwingLine
     Loan is to be converted to a Revolving Credit Loan in which all Revolving
     Credit Lenders participate.

               (ii) At the times set forth in Section 13.4, the then entire
     unpaid principal balance of the SwingLine Loan shall be converted to a
     Revolving Credit Loan in which all Revolving Credit Lenders participate.

               (iii) At the initiation of a Liquidation, the then entire unpaid
     principal balance of the SwingLine Loan shall be converted to a Revolving
     Credit Loan in which all Revolving Credit Lenders participate.

In either such event, the Administrative Agent shall advise each Revolving
Credit Lender of such conversion as if, and with the same effect as if such
conversion were the making of a Revolving Credit Loan as provided in Section
13.1.

          (c) The SwingLine Lender, in separate capacities, may also be the
Administrative Agent and a Revolving Credit Lender.

          (d) The SwingLine Lender, in its capacity as SwingLine Lender, is not
a "Revolving Credit Lender" for any of the following purposes:

               (i) Except as otherwise specifically provided in the relevant
     Section, any distribution pursuant to Section 14.6.

               (ii) Determination of whether the requisite Loan Commitments have
     Consented to action requiring such Consent.

     13.3. ADMINISTRATIVE AGENT'S COVERING OF FUNDINGS:

          (a) Each Revolving Credit Lender shall make available to the
Administrative Agent, as provided herein, that Revolving Credit Lender's
Revolving Credit Commitment Percentage of the following:

               (i) Each Revolving Credit Loan, up to the maximum amount of that
     Revolving Credit Lender's Revolving Credit Dollar Commitment of the
     Revolving Credit Loans.

               (ii) Up to the maximum amount of that Revolving Credit Lender's
     Revolving Credit Dollar Commitment of each drawing under a L/C and Banker's
     Acceptance (to the extent that such drawing under a L/C or Banker's
     Acceptance is not "covered" by a Revolving Credit Loan as provided herein).

          (b) In all circumstances, the Administrative Agent may:


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               (i) Assume that each Revolving Credit Lender, subject to Section
     13.3(a), timely shall make available to the Administrative Agent that
     Revolving Credit Lender's Revolving Credit Commitment Percentage of each
     Revolving Credit Loan, notice of which is provided pursuant to Section 13.1
     and shall make available, to the extent not "covered" by a Revolving Credit
     Loan, that Revolving Credit Lender's Revolving Credit Commitment Percentage
     of any honoring of an L/C or a Banker's Acceptance.

               (ii) In reliance upon such assumption, make available the
     corresponding amount to the Borrowers (but the Administrative Agent shall
     not be obligated to make such amount available to the Borrowers until
     actual receipt thereof from the Revolving Credit Lenders).

               (iii) Assume that each Revolving Credit Lender timely shall pay,
     and shall make available, to the Administrative Agent all other amounts
     which that Revolving Credit Lender is obligated to so pay and/or make
     available hereunder or under any of the Loan Documents.

          (c) In the event that, in reliance upon any of such assumptions, the
Administrative Agent makes available a Revolving Credit Lender's Revolving
Credit Commitment Percentage of one or more Revolving Credit Loans, or any other
amount to be made available hereunder or under any of the Loan Documents, which
amount a Revolving Credit Lender (a "DELINQUENT REVOLVING CREDIT LENDER") fails
to provide to the Administrative Agent within one (1) Business Day of written
notice of such failure, then:

               (i) The amount which had been made available by the
     Administrative Agent is an "ADMINISTRATIVE AGENT'S COVER" (and is so
     referred to herein).

               (ii) All interest paid by the Borrowers on account of the
     Revolving Credit Loan or coverage of the subject drawing of a L/C or
     Banker's Acceptance which consist of the Administrative Agent's Cover shall
     be retained by the Administrative Agent until the Administrative Agent's
     Cover, with interest, has been paid.

               (iii) The Delinquent Revolving Credit Lender shall pay to the
     Administrative Agent, on demand, interest at a rate equal to the prevailing
     Federal Funds Effective Rate on any Administrative Agent's Cover in respect
     of that Delinquent Revolving Credit Lender.

               (iv) The Administrative Agent shall have succeeded to all rights
     to payment to which the Delinquent Revolving Credit Lender otherwise would
     have been entitled hereunder in respect of those amounts paid by or in
     respect of the Borrowers on account of the Administrative Agent's Cover
     together with interest until it is repaid. Such payments shall be deemed
     made first towards the amounts in respect of which the Administrative
     Agent's Cover was provided and only then towards amounts in which the
     Delinquent Revolving Credit Lender is then participating. For purposes of
     distributions to be made pursuant to Section 13.4(a) (which relates to
     ordinary course distributions) or


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<PAGE>

     Section 14.6 (which relates to distributions of proceeds of a Liquidation)
     below, amounts shall be deemed distributable to a Delinquent Revolving
     Credit Lender (and consequently, to the Administrative Agent to the extent
     to which the Administrative Agent is then entitled) at the highest level of
     distribution (if applicable) at which the Delinquent Revolving Credit
     Lender would otherwise have been entitled to a distribution.

               (v) Subject to Subsection 13.3(c)(iv), the Delinquent Revolving
     Credit Lender shall be entitled to receive any payments from the Borrowers
     to which the Delinquent Revolving Credit Lender is then entitled, provided
     however there shall be deducted from such amount and retained by the
     Administrative Agent any interest to which the Administrative Agent is then
     entitled on account of Section 13.3(c)(ii), above.

          (d) A Delinquent Revolving Credit Lender shall not be relieved of any
obligation of such Delinquent Revolving Credit Lender hereunder (all and each of
which shall constitute continuing obligations on the part of any Delinquent
Revolving Credit Lender).

          (e) A Delinquent Revolving Credit Lender may cure its status as a
Delinquent Revolving Credit Lender by paying the Administrative Agent the
aggregate of the following:

               (i) The Administrative Agent's Cover (to the extent not
     previously repaid by the Borrowers and retained by the Administrative Agent
     in accordance with Subsection 13.3(c)(iv), above) with respect to that
     Delinquent Revolving Credit Lender.

               Plus

               (ii) The aggregate of the amount payable under Subsection
     13.3(c)(iii), above (which relates to interest to be paid by that
     Delinquent Revolving Credit Lender).

               Plus

               (iii) All such costs and expenses as may be incurred by the
     Administrative Agent in the enforcement of the Administrative Agent's
     rights against such Delinquent Revolving Credit Lender.

     13.4. ORDINARY COURSE DISTRIBUTIONS. (This Section 13.4 applies unless the
provisions of Section 14.6 (which relates to distributions in the event of a
Liquidation) becomes operative).

          (a) Weekly, on each Thursday (or more frequently at the Administrative
Agent's option) the Administrative Agent and each Revolving Credit Lender shall
settle up on amounts advanced under the Revolving Credit and payments received
on account of the Revolving Credit (including, without limitation, collected
funds received in the Administrative Agent's Accounts and not released to the
Operating Accounts as provided herein).

          (b) The Administrative Agent shall distribute to the SwingLine Lender
and to each Revolving Credit Lender, such Person's respective pro-rata share of
payments of interest


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<PAGE>

and fees on account of the Revolving Credit when actually received and collected
by the Administrative Agent. For purposes of calculating interest due to a
Revolving Credit Lender, that Revolving Credit Lender shall be entitled to
receive interest on the actual amount contributed by that Revolving Credit
Lender towards the principal balance of the Revolving Credit Loans outstanding
during the applicable period covered by the interest payment made by the
Borrowers. Any net principal reductions to the Revolving Credit Loans received
by the Administrative Agent in accordance with the Loan Documents during such
period shall not reduce such actual amount so contributed, for purposes of
calculation of interest due to that Revolving Credit Lender, until the
Administrative Agent has distributed to that Revolving Credit Lender its
pro-rata share thereof.

          (c) No Revolving Credit Lender shall have any interest in, or right to
receive any part of, the Underwriting Fee, the Structuring Fee or the Collateral
Monitoring Fee to be paid by the Borrowers to the Administrative Agent pursuant
to this Agreement.

          (d) Any amount received by the Administrative Agent as reimbursement
for any cost or expense (including without limitation, reasonable attorneys'
fees) shall be distributed by the Administrative Agent to that Person which is
entitled to such reimbursement as provided in this Agreement (and if such
Person(s) is (are) the Revolving Credit Lenders, pro-rata based upon their
respective Revolving Credit Commitment Percentages at the date on which the
expense, in respect of which such reimbursement is being made, was incurred).

          (e) Each distribution pursuant to this Section 13.4 is subject to
Section 13.3(c), above.

ARTICLE 14 - ACCELERATION AND LIQUIDATION:

     14.1. ACCELERATION NOTICES

          (a) The Administrative Agent may give the Revolving Credit Lenders an
Acceleration Notice at any time following the occurrence of an Event of Default.

          (b) The SuperMajority Lenders may give the Administrative Agent an
Acceleration Notice at any time following the occurrence of an Event of Default.
Such notice may be by multiple counterparts, provided that counterparts executed
by the requisite Revolving Credit Lenders are received by the Administrative
Agent within a period of five (5) consecutive Business Days.

     14.2. ACCELERATION Unless stayed by judicial or statutory process, the
Administrative Agent shall Accelerate the Liabilities on account of the
Revolving Credit within a commercially reasonable time following:

          (a) The Administrative Agent's giving of an Acceleration Notice to the
Revolving Credit Lenders as provided in Section 14.1(a).


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<PAGE>

          (b) The Administrative Agent's receipt of an Acceleration Notice from
the SuperMajority Lenders, in compliance with Section 14.1(b).

     14.3. INITIATION OF LIQUIDATION Unless stayed by judicial or statutory
process, a Liquidation shall be initiated by the Administrative Agent within a
commercially reasonable time following Acceleration of Liabilities on account of
the Revolving Credit.

     14.4. ACTIONS AT AND FOLLOWING INITIATION OF LIQUIDATION

          (a) At the initiation of a Liquidation:

               (i) The unpaid principal balance of the SwingLine Loan (if any)
     shall be converted, pursuant to Section 13.2(b)(iii), to a Revolving Credit
     Loan in which all Revolving Credit Lenders participate.

               (ii) The Administrative Agent and the Revolving Credit Lenders
     shall "net out" each Revolving Credit Lender's respective contributions
     towards the Revolving Credit Loans, so that each Revolving Credit Lender
     holds that Revolving Credit Lender's Revolving Credit Commitment Percentage
     of the Revolving Credit Loans and advances.

          (b) Following the initiation of a Liquidation, each Revolving Credit
Lender shall contribute, towards any L/C and Banker's Acceptance thereafter
honored and not immediately reimbursed by the Borrowers, that Revolving Credit
Lender's Revolving Credit Commitment Percentage of such honoring.

     14.5. COLLATERAL AGENT' CONDUCT OF LIQUIDATION

          (a) Any Liquidation shall be conducted by the Collateral Agent,
subject to the direction of the SuperMajority Lenders.

          (b) The Collateral Agent may establish one or more Nominees to "bid
in" or otherwise acquire ownership to any Post Foreclosure Asset.

          (c) The Collateral Agent shall manage the Nominee and manage and
dispose of any Post Foreclosure Assets with a view towards the realization of
the economic benefits of the ownership of the Post Foreclosure Assets and in
such regard, the Collateral Agent and/or the Nominee may operate, repair,
manage, maintain, develop, and dispose of any Post Foreclosure Asset in such
manner as the Collateral Agent determine as appropriate under the circumstances.

          (d) The Collateral Agent may decline to undertake or to continue
taking a course of action or to execute an action plan (whether proposed by the
Collateral Agent or any Revolving Credit Lender) unless indemnified to the
Collateral Agent' satisfaction by the Revolving Credit Lenders against any and
all liability and expense which may be incurred by the Collateral Agent by
reason of taking or continuing to take that course of action or action plan.


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<PAGE>

          (e) Each Revolving Credit Lender shall execute all such instruments
and documents not inconsistent with the provisions of this Agreement as the
Collateral Agent and/or the Nominee reasonably may request with respect to the
creation and governance of any Nominee, the conduct of the Liquidation, and the
management and disposition of any Post Foreclosure Asset.

     14.6. DISTRIBUTION OF LIQUIDATION PROCEEDS:

          (a) The Collateral Agent may establish one or more reasonably funded
reserve accounts into which proceeds of the conduct of any Liquidation may be
deposited in anticipation of future expenses which may be incurred by the
Collateral Agent in the exercise of rights as a secured creditor of the
Borrowers and prior claims which the Collateral Agent anticipate may need to be
paid.

          (b) The Collateral Agent shall distribute the net proceeds of
Liquidation to the Administrative Agent for application in accordance with the
relative priorities set forth in Section 14.7.

          (c) Each Revolving Credit Lender, on the written request of the
Collateral Agent and/or any Nominee, not more frequently than once each month,
shall reimburse the Collateral Agent and/or any Nominee, pro-rata, for any cost
or expense reasonably incurred by the Collateral Agent and/or the Nominee in the
conduct of a Liquidation, which amount is not covered out of current proceeds of
the Liquidation, which reimbursement shall be paid over to and distributed by
the Collateral Agent.

     14.7. RELATIVE PRIORITIES TO PROCEEDS OF LIQUIDATION

          (a) All distributions of proceeds of a Liquidation shall be net of
payment over to the Collateral Agent as reimbursement for all reasonable third
party costs and expenses incurred by the Collateral Agent and to Lenders'
Special Counsel and to any funded reserve established pursuant to Section
14.6(a).

          (b) Subject to the provisions of Section 14.7(c) below, the proceeds
of a Liquidation, net of those amounts described in Section 13.3(c)(iv), shall
be distributed based on the following priorities:

               (i) To the SwingLine Lender, on account of any SwingLine loans
     not converted to Revolving Credit Loans pursuant to Section 14.4(a)(i); and
     then

               (ii) To the Revolving Credit Lenders (other than any Delinquent
     Revolving Credit Lender), pro-rata, to the unpaid principal balance of the
     Revolving Credit; and then

               (iii) To the Revolving Credit Lenders (other than any Delinquent
     Revolving Credit Lender), pro-rata, to accrued interest on the Revolving
     Credit; and then


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<PAGE>

               (iv) To the Revolving Credit Lenders (other than any Delinquent
     Revolving Credit Lender), pro-rata, to those fees distributable hereunder
     to the Revolving Credit Lenders; and then

               (v) To the Collateral Agent, an amount equal to 105% of the
     Stated Amount of all L/Cs and Bankers' Acceptances then outstanding;

               (vi) To any Delinquent Revolving Credit Lenders, pro-rata to
     amounts to which such Delinquent Revolving Credit Lenders otherwise would
     have been entitled pursuant to Sections 14.7(b)(ii), 14.7(b)(iii),
     14.7(b)(iv); and then

               (vii) To any other Liabilities, including any obligations due on
     account of Hedge Agreements.

ARTICLE 15 - THE AGENT:

     15.1. APPOINTMENT OF THE AGENT

          (a) Each Lender appoints and designates NCBC as the "Administrative
Agent" hereunder and under the Loan Documents.

          (b) Each Lender appoints and designates NCBC as the "Collateral Agent"
hereunder and under the Loan Documents.

          (c) Each Revolving Credit Lender authorizes the Agent:

               (i) To execute those of the Loan Documents and all other
     instruments relating thereto to which any Agent is a party.

               (ii) To take such action on behalf of the Revolving Credit
     Lenders and to exercise all such powers as are expressly delegated to such
     Agent hereunder and in the Loan Documents and all related documents,
     together with such other powers as are reasonably incident thereto.

     15.2. RESPONSIBILITIES OF AGENT

          (a) The Agent shall not have any duties or responsibilities to, or any
fiduciary relationship with, any Revolving Credit Lender except for those
expressly set forth in this Agreement.

          (b) No Agent or any of their respective Affiliates shall be
responsible to any Revolving Credit Lender for any of the following:

               (i) Any recitals, statements, representations or warranties made
     by any Borrower or any other Person.


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<PAGE>

               (ii) Any appraisals or other assessments of the assets of any
     Borrower or of any other Person responsible for or on account of the
     Liabilities.

               (iii) The value, validity, effectiveness, genuineness,
     enforceability, or sufficiency of the Loan Agreement, the Loan Documents or
     any other document referred to or provided for therein.

               (iv) Any failure by any Borrower or any other Person (other than
     the applicable Agent) to perform its respective obligations under the Loan
     Documents.

          (c) Each Agent may employ attorneys, accountants, and other
professionals and agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such attorneys, accountants, and other
professionals or agents or attorneys-in-fact selected by the Agent with
reasonable care. No such attorney, accountant, other professional, agents, or
attorney-in-fact shall be responsible for any action taken or omitted to be
taken by any other such Person.

          (d) No Agent, or any of their respective directors, officers, or
employees shall be responsible for any action taken or omitted to be taken or
omitted to be taken by any other of them in connection herewith in reliance upon
advice of its counsel nor, in any other event except for any action taken or
omitted to be taken as to which a final judicial determination has been or is
made (in a proceeding in which such Person has had an opportunity to be heard)
that such Person had acted in a grossly negligent manner, in actual bad faith,
or in willful misconduct.

          (e) No Agent shall have any responsibility in any event for more funds
than such Agent actually receives and collects.

          (f) Each Agent, in its separate capacity as a Lender, shall have the
same rights and powers hereunder as any other Lender.

     15.3. CONCERNING DISTRIBUTIONS BY THE AGENT

          (a) The Administrative Agent in its reasonable discretion based upon
any Agent's determination of the likelihood that additional payments will be
received, expenses incurred, and/or claims made by third parties to all or a
portion of such proceeds, may delay the distribution of any payment received on
account of the Liabilities.

          (b) The Administrative Agent may disburse funds prior to determining
that the sums which the Agent expects to receive have been finally and
unconditionally paid to any Agent. If and to the extent that the Administrative
Agent does disburse funds and it later becomes apparent that an Agent did not
then receive a payment in an amount equal to the sum paid out, then any
Revolving Credit Lender to whom the Administrative Agent made the funds
available, on demand from the Administrative Agent, shall refund to the
Administrative Agent the sum paid to that Person.


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<PAGE>

          (c) If, in the opinion of the Agent, the distribution of any amount
received by the Agent might involve any Agent in liability, or might be
prohibited hereby, or might be questioned by any Person, then the Administrative
Agent may refrain from making distribution until the Agent's right to make
distribution has been adjudicated by a court of competent jurisdiction.

          (d) The proceeds of any Revolving Credit Lender's exercise of any
right of, or in the nature of, set-off shall be deemed, First, to the extent
that a Revolving Credit Lender is entitled to any distribution hereunder, to
constitute such distribution and Second, shall be shared with the other
Revolving Credit Lenders as if distributed pursuant to (and shall be deemed as
distributions under) Section 14.7.

          (e) Each Revolving Credit Lender recognizes that the crediting of the
Borrowers with the "proceeds" of any transaction in which a Post Foreclosure
Asset is acquired is a non-cash transaction and that, in consequence, no
distribution of such "proceeds" will be made by the Administrative Agent to any
Revolving Credit Lender.

          (f) In the event that (x) a court of competent jurisdiction shall
adjudge that any amount received and distributed by the Agents is to be repaid
or disgorged or (y) those Lenders adversely affected thereby determine to effect
such repayment or disgorgement, then each Revolving Credit Lender to which any
such distribution shall have been made shall repay, to the Agents which had made
such distribution, that Revolving Credit Lender's pro-rata share of the amount
so adjudged or determined to be repaid or disgorged.

     15.4. DISPUTE RESOLUTION: Any dispute among the Revolving Credit Lenders
and/or any Agent concerning the interpretation, administration, or enforcement
of the financing arrangements contemplated by this or any other Loan Document or
the interpretation or administration of this or any other Loan Document which
cannot be resolved amicably shall be resolved in the United States District
Court for the District of Ohio, sitting in Cleveland, Ohio, or in the courts of
Cuyahoga County, Ohio, to the jurisdiction of which courts each Revolving Credit
Lender hereto hereby submits.

     15.5. DISTRIBUTIONS OF NOTICES AND OF DOCUMENTS The Administrative Agent
will forward to each Revolving Credit Lender, promptly after the Administrative
Agent's receipt thereof, a copy of each notice or other document furnished to
the Administrative Agent pursuant to this Agreement, including monthly,
quarterly, and annual financial statements received from the Lead Borrower
pursuant to Article 6 of this Agreement, other than any of the following:

          (a) Routine communications associated with requests for Revolving
Credit Loans and/or the issuance of L/Cs and Banker's Acceptances.

          (b) Routine or nonmaterial communications.

          (c) Any notice or document required by any of the Loan Documents to be
furnished directly to the Revolving Credit Lenders by the Lead Borrower.


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          (d) Any notice or document of which the Administrative Agent has
knowledge that such notice or document had been forwarded to the Revolving
Credit Lenders other than by the Administrative Agent.

     15.6. CONFIDENTIAL INFORMATION

          (a) Each Revolving Credit Lender will maintain, as confidential, all
of the following:

               (i) Proprietary approaches, techniques, and methods of analysis
     which are applied by the Agent in the administration of the credit facility
     contemplated by this Agreement.

               (ii) Proprietary forms and formats utilized by the Agent in
     providing reports to the Revolving Credit Lenders pursuant hereto, which
     forms or formats are not of general currency.

          (b) Nothing included herein shall prohibit the disclosure of any such
information as may be required to be provided by judicial process or by
regulatory authorities having jurisdiction over any party to this Agreement.

     15.7. RELIANCE BY AGENT Each Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, telex, or
facsimile) reasonably believed by such Agent to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons, and
upon advice and statements of attorneys, accountants and other experts selected
by the Agent. As to any matters not expressly provided for in this Agreement,
any Loan Document, or in any other document referred to therein, the Agent shall
in all events be fully protected in acting, or in refraining from acting, in
accordance with the applicable Consent required by this Agreement. Instructions
given with the requisite Consent shall be binding on all Revolving Credit
Lenders.

     15.8. NON-RELIANCE ON AGENT AND OTHER REVOLVING CREDIT LENDERS

          (a) Each Revolving Credit Lender represents to all other Revolving
Credit Lenders and to each Agent that such Revolving Credit Lender:

               (i) Independently and without reliance on any representation or
     act by any Agent or by any other Revolving Credit Lender, and based on such
     documents and information as that Revolving Credit Lender has deemed
     appropriate, has made such Revolving Credit Lender's own appraisal of the
     financial condition and affairs of the Borrowers and decision to enter into
     this Agreement.

               (ii) Has relied upon that Revolving Credit Lender's review of the
     Loan Documents by that Revolving Credit Lender and by counsel to that
     Revolving Credit Lender as that Revolving Credit Lender deemed appropriate
     under the circumstances.


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<PAGE>

          (b) Each Revolving Credit Lender agrees that such Revolving Credit
Lender, independently and without reliance upon any Agent or any other Revolving
Credit Lender, and based upon such documents and information as such Revolving
Credit Lender shall deem appropriate at the time, will continue to make such
Revolving Credit Lender's own appraisals of the financial condition and affairs
of the Borrowers when determining whether to take or not to take any
discretionary action under this Agreement.

          (c) Each Agent, in the discharge of that Agent's duties hereunder,
shall not be required to make inquiry of, or to inspect the properties or books
of, any Person.

          (d) Except for notices, reports, and other documents and information
expressly required to be furnished to the Revolving Credit Lenders by the
Administrative Agent hereunder (as to which, see Section 15.5), no Agent shall
have any affirmative duty or responsibility to provide any Lender with any
credit or other information concerning any Person, which information may come
into the possession of the Agent or any Affiliate of any Agent.

          (e) Each Revolving Credit Lender, at such Revolving Credit Lender's
request, shall have reasonable access to all nonprivileged documents in the
possession of any Agent, which documents relate to the Agent's performance of
their respective duties hereunder.

     15.9. INDEMNIFICATION Without limiting the liabilities of the Borrowers
under this Agreement or any of the other Loan Documents, each Revolving Credit
Lender shall indemnify each Agent, pro-rata, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever (including attorneys'
reasonable fees and expenses and other out-of-pocket expenditures) which may at
any time be imposed on, incurred by, or asserted against such Agent and in any
way relating to or arising out of this Agreement or any other Loan Document or
any documents contemplated by or referred to therein or the transactions
contemplated thereby or the enforcement of any of terms hereof or thereof or of
any such other documents, provided, however, no Revolving Credit Lender shall be
liable for any of the foregoing to the extent that any of the foregoing arises
from any action taken or omitted to be taken by an Agent as to which a final
judicial determination has been or is made (in a proceeding in which such Agent
has had an opportunity to be heard) that such Agent had acted in a grossly
negligent manner, in actual bad faith, or in willful misconduct.

     15.10. RESIGNATION OF AGENT

          (a) Any Agent may resign at any time by giving 30 days prior written
notice thereof to the Revolving Credit Lenders. Upon receipt of any such notice
of resignation, the SuperMajority Lenders shall have the right to appoint a
successor to such Agent (and if no Event of Default has occurred and is
continuing, with the consent of the Lead Borrower, not to be unreasonably
withheld and, in any event, deemed given by the Lead Borrower if no written
objection is provided by the Lead Borrower to the (resigning) Agent within ten
(10) Business Days notice of such proposed appointment). If a successor Agent
shall not have been so appointed and accepted such appointment within 30 days
after the giving of notice by the resigning Agent, then the resigning Agent may
appoint a successor Agent, which shall be a financial institution having a
combined capital and surplus in excess of $100,000,000. The


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<PAGE>

consent of the Lead Borrower otherwise required by this Section 15.10(a) shall
not be required if an Event of Default has occurred and is continuing.

          (b) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor shall thereupon succeed to, and become vested
with, all the rights, powers, privileges, and duties of the (resigning) Agent so
replaced, and the (resigning) Agent shall be discharged from the (resigning)
Agent's duties and obligations hereunder, other than on account of any
responsibility for any action taken or omitted to be taken by the (resigning)
Agent as to which a final judicial determination has been or is made (in a
proceeding in which the (resigning) Person has had an opportunity to be heard)
that such Person had acted in a grossly negligent manner or in bad faith, or in
willful misconduct.

          (c) After any retiring Agent's resignation, the provisions of this
Agreement and of all other Loan Documents shall continue in effect for the
retiring Person's benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent.

     15.11. LEAD ARRANGER, CO-SYNDICATION AGENTS AND CO-DOCUMENTATION AGENTS.

     Notwithstanding the provisions of this Agreement or any of the other Loan
Documents, none of the Lead Arranger, the Co-Syndication Agents or the
Co-Documentation Agents shall have any powers, rights, duties, responsibilities
or liabilities with respect to this Agreement and the other Loan Documents other
than confidentiality provisions contained herein.

ARTICLE 16 - ACTION BY AGENT - CONSENTS - AMENDMENTS - WAIVERS:

     16.1. ADMINISTRATION OF CREDIT FACILITIES

          (a) Except as otherwise specifically provided in this Agreement, each
Agent may take any action with respect to the credit facility contemplated by
the Loan Documents as the applicable Agent determines to be appropriate,
provided, however, no Agent is under any affirmative obligation to take any
action which it is not required by this Agreement or the Loan Documents
specifically to so take.

          (b) Except as specifically provided in the following Sections of this
Agreement, whenever a Loan Document or this Agreement provides that action may
be taken or omitted to be taken in an Agent's reasonable, good faith discretion,
the Agent shall have the sole right to take, or refrain from taking, such action
without, and notwithstanding, any vote of the Revolving Credit Lenders:

<TABLE>
<CAPTION>
Actions Described in Section   Type of Consent Required
----------------------------   ------------------------
<S>                            <C>
16.2                           Majority Lenders
16.3                           SuperMajority Lenders
16.4                           Certain Consent
16.5                           Unanimous Consent
</TABLE>


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<PAGE>

<TABLE>
<S>                            <C>
16.6                           Consent of SwingLine Lender
16.7                           Consent of the Agent
</TABLE>

          (c) The rights granted to the Revolving Credit Lenders in those
sections referenced in Section 16.1(b) shall not otherwise limit or impair any
Agent's exercise of its reasonable, good faith discretion under the Loan
Documents.

     16.2. ACTIONS REQUIRING OR ON DIRECTION OF MAJORITY LENDERS

     Except as otherwise provided in this Agreement, the Consent or direction of
the Majority Lenders is required for any amendment, waiver, or modification of
any Loan Document.

     16.3. ACTIONS REQUIRING OR ON DIRECTION OF SUPERMAJORITY LENDERS

     The Consent or direction of the SuperMajority Lenders is required as
follows:

          (a) The SuperMajority Lenders may direct the Administrative Agent to
permit Protective OverAdvances to be outstanding for more than 45 consecutive
Business Days or more than twice in any twelve month period (the Revolving
Credit Lenders recognizing that, except as described in this Section 16.3(a),
any loan or advance under the Revolving Credit which results in a Protective
OverAdvance may be made by the Administrative Agent in its reasonable, good
faith discretion without the Consent of the Revolving Credit Lenders, whether or
not a Default exists, and that each Revolving Credit Lender shall be bound
thereby).

          (b) The SuperMajority Lenders may direct the Administrative Agent to
suspend the Revolving Credit, if any Default is then occurring, following which
direction, and for as long as a Default is then occurring, the only Revolving
Credit Loans which may be made are the following:

               (i) Protective OverAdvances not otherwise prohibited as provided
     in 16.3(a).

               (ii) Revolving Credit Loans made to "cover" the honoring of L/C's
     and Banker's Acceptances.

               (iii) Revolving Credit Loans made with Consent of the
     SuperMajority Lenders.

          (c) The SuperMajority Lenders may undertake the following if an Event
of Default has occurred and is continuing:

               (i) Give the Administrative Agent an Acceleration Notice in
     accordance with Section 14.1(b).

               (ii) Direct the Administrative Agent to increase the rate of
     interest to the default rate of interest as provided in, and to the extent
     permitted by, this Agreement.


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<PAGE>

     16.4. ACTION REQUIRING CERTAIN CONSENT The Consent or direction of the
following is required for the following actions:

          (a) Any forgiveness of all or any portion of any payment Liability:
All Revolving Credit Lenders whose payment Liability is being so forgiven:
(other than any Delinquent Revolving Credit Lender).

          (b) Any decrease in any interest rate or fee payable under any of the
Loan Documents (other than any fee payable to the Administrative Agent (for
which the consent of the Administrative Agent shall be required): All Revolving
Credit Lenders adversely affected thereby (other than any Delinquent Revolving
Credit Lender).

          (c) Any postponement of the scheduled time for payment of any amount
payable under any of the Loan Documents: All Revolving Credit Lenders adversely
affected thereby (other than any Delinquent Revolving Credit Lender).

          (d) Volitional Disgorgement as described in 15.3(f): Each Revolving
Credit Lender (other than any Delinquent Revolving Credit Lender) which is
adversely affected thereby.

          (e) Increase in the SwingLine Ceiling: The consent of the SwingLine
Lender and the Majority Lenders.

     16.5. ACTIONS REQUIRING OR DIRECTED BY UNANIMOUS CONSENT None of the
following may take place except with Unanimous Consent:

          (a) Any release of a material portion of the Collateral, but such
Consent to such release is not required if any of the following conditions is
satisfied:

               (i) Such release is otherwise required or provided for in the
     Loan Documents.

               (ii) Such release is being made to facilitate a Liquidation.

               (iii) No OverLoan exists immediately after giving effect to the
     application to the Loan Account of the net proceeds received on account of
     the transaction in which such release is made.

          (b) Any amendment of the Definitions of "DSW Borrowing Base", DSW
Availability" or of any definition of any component thereof, such that more
credit would be available to a Borrower, based on the same assets, as would have
been available to such Borrower immediately prior to such amendment, it being
understood, however, that:

               (i) The foregoing shall not limit the adjustment by the
     Collateral Agent of any Reserve or the Inventory Advance Rate in the
     Collateral Agent' administration of the Revolving Credit as otherwise
     permitted by this Agreement.


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<PAGE>

               (ii) The foregoing shall not prevent the Administrative Agent, in
     its administration of the Revolving Credit, from restoring any component of
     the DSW Borrowing Base which had been lowered by the Administrative Agent
     back to the value of such component, as stated in this Agreement or to an
     intermediate value.

          (c) Any waiver, amendment, or modification which has the effect of
increasing any Revolving Credit Dollar Commitment, Revolving Credit Commitment
Percentage, or the Revolving Credit Ceiling, except that no Consent shall be
required for any such increase which is the result of the application of the
following Sections of this Agreement:

               (i) Section 16.10 (which relates to NonConsenting Revolving
     Credit Lenders).

               (ii) Section 17.1 (which relates to assignments and assumptions).

          (d) Any release of any Person obligated on account of the Liabilities.

          (e) The making of any Revolving Credit Loan which, when made, exceeds
Availability and is not a Protective OverAdvance, subject, however, to the
following:

               (i) No Consent is required in connection with the making of any
     Revolving Credit Loan to "cover" any honoring of a drawing under any L/C or
     any Banker's Acceptance.

               (ii) Each Lender recognizes that subsequent to the making of a
     Revolving Credit Loan which does not constitute a Protective OverAdvance,
     the unpaid principal balance of the Loan Account may exceed the DSW
     Borrowing Base on account of changed circumstances beyond the control of
     the Agent (such as a drop in collateral value).

          (f) Any amendment which has the effect of modifying the Administrative
Agent's right or ability to make Protective OverAdvances.

          (g) The waiver of the obligation of the Borrowers to reduce the unpaid
principal balance of loans under the Revolving Credit to an amount so that no
OverLoan (other than a Protective OverAdvance) is outstanding.

          (h) Any amendment of this Article 16.

          (i) Any subordination of the Liabilities to any material obligation of
any Borrower, unless such subordination is otherwise required pursuant to this
or is permitted by this Agreement.

          (j) Amendment of any of the following Definitions:

                    "Majority Lender"
                    "Maturity Date"


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<PAGE>

                    "Protective OverAdvance"
                    "SuperMajority Lenders
                    "Unanimous Consent"

     16.6. ACTIONS REQUIRING SWINGLINE LENDER CONSENT No action, amendment, or
waiver of compliance with, any provision of the Loan Documents or of this
Agreement which affects the SwingLine Lender may be undertaken without the
Consent of the SwingLine Lender.

     16.7. ACTIONS REQUIRING AGENT'S CONSENT

          (a) No action, amendment, or waiver of compliance with, any provision
of the Loan Documents or of this Agreement which affects any Agent in its
capacity as Agent may be undertaken without the written consent of such Agent.

          (b) No action referenced herein which affects the rights, duties,
obligations, or liabilities of any Agent shall be effective without the written
consent of such Agent.

     16.8. MISCELLANEOUS ACTIONS

          (a) Notwithstanding any other provision of this Agreement, no single
Revolving Credit Lender independently may exercise any right of action or
enforcement against or with respect to any Borrower.

          (b) Each Agent shall be fully justified in failing or refusing to take
action under this Agreement or any Loan Document on behalf of any Revolving
Credit Lender unless such Agent shall first

               (i) receive such clear, unambiguous, written instructions as such
     Agent deem appropriate; and

               (ii) be indemnified to such Agent's satisfaction by the Revolving
     Credit Lenders against any and all liability and expense which may be
     incurred by such Agent by reason of taking or continuing to take any such
     action, unless such action had been grossly negligent, in willful
     misconduct, or in bad faith.

          (c) The Agent may establish reasonable procedures for the providing of
direction and instructions from the Revolving Credit Lenders to the Agent,
including its reliance on multiple counterparts, facsimile transmissions, and
time limits within which such direction and instructions must be received in
order to be included in a determination of whether the requisite Lenders have
provided their direction, Consent, or instructions.

     16.9. ACTIONS REQUIRING LEAD BORROWER'S CONSENT

          (a) The Lead Borrower's consent is required for any amendment of this
Agreement, except that each of the following Articles of this Agreement may be
amended without the consent of the Lead Borrower:


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<PAGE>

<TABLE>
<CAPTION>
Article   Title of Article
-------   ----------------
<S>       <C>
13        Revolving Credit Fundings and Distributions

14        Acceleration and Liquidation (other than any modifications to the
          requisite percentage of Revolving Credit Lenders which may furnish an
          Acceleration Notice under Section 14.1(b))

15.1      The Agent (provided that the provisions of Section 15.10(a) relating
          to the Lead Borrower's consent to a successor Agent in certain
          circumstances may not be amended without the Lead Borrower's consent).

16        Action By Agents - Consents - Amendments - Waivers (other than as
          provided in Section 16.9(b))

17        Assignments and Participations (provided that the provisions of
          Section 17.1(a)(i) relating to the Lead Borrower's consent to an
          assignment in certain circumstances may not be amended without the
          Lead Borrower's consent).
</TABLE>

          (b) Subject to Section 16.9(c), the following Sections of Article 16
may not be amended without the consent of the Lead Borrower:

<TABLE>
<CAPTION>
Actions Described in Section   Type of Consent Required
----------------------------   ------------------------
<S>                            <C>
16.3                           SuperMajority Lenders
16.5                           Unanimous Consent
16.9                           Actions Requiring Lead Borrower's Consent
</TABLE>

and further provided that no provision of any Article listed in Section 16.9(a)
that (i) obligates any of the Agents to exercise reasonable, good faith
discretion, or (ii) imposes liability on any Person for acting in a grossly
negligent manner, in actual bad faith or willful misconduct, or (iii) imposes
any confidentiality obligation under this Agreement on any Person, may be
amended without the consent of the Lead Borrower.

          (c) The Lead Borrower's consent to the amendment of those provisions
referenced in Section 16.9(b)

               (i) Shall be deemed given unless written objection is made,
     within seven (7) Business Days following the Administrative Agent's giving
     notice to the Lead Borrower of the proposed amendment; and

               (ii) shall not be required following the occurrence of any Event
     of Default.

     16.10. NONCONSENTING REVOLVING CREDIT LENDER


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<PAGE>

          (a) In the event that a Revolving Credit Lender (in this Section
16.10, a "NONCONSENTING REVOLVING CREDIT LENDER") does not provide its Consent
to a proposal by an Agent to take action which requires consent under this
Article 16, then one or more Revolving Credit Lenders who provided Consent to
such action may require the assignment, without recourse and in accordance with
the procedures outlined in Section 17.1, below, of the NonConsenting Revolving
Credit Lender's Loan Commitment hereunder on fifteen (15) days written notice to
the Administrative Agent and to the NonConsenting Revolving Credit Lender.

          (b) At the end of such fifteen (15) days, and provided that the
NonConsenting Revolving Credit Lender delivers the Revolving Credit Note held by
the NonConsenting Revolving Credit Lender to the Administrative Agent (or a lost
note affidavit and indemnity reasonably acceptable to the Administrative Agent),
the Revolving Credit Lenders who have given such written notice shall Transfer
the following to the NonConsenting Revolving Credit Lender:

               (i) Such NonConsenting Revolving Credit Lender's pro-rata share
     of the principal and interest of the Revolving Credit Loans to the date of
     such assignment.

               (ii) All fees distributable hereunder to the NonConsenting
     Revolving Credit Lender to the date of such assignment.

               (iii) Any out-of-pocket costs and expenses for which the
     NonConsenting Revolving Credit Lender is entitled to reimbursement from the
     Borrowers.

          (c) In the event that the NonConsenting Revolving Credit Lender fails
to deliver to the Administrative Agent the Revolving Credit Note held by the
NonConsenting Revolving Credit Lender (or a lost note affidavit and indemnity)
as provided in Section 16.10(b), then:

               (i) The amount otherwise to be Transferred to the NonConsenting
     Revolving Credit Lender shall be Transferred to the Administrative Agent
     and held by the Administrative Agent, without interest, to be turned over
     to the NonConsenting Revolving Credit Lender upon delivery of the Revolving
     Credit Note held by that NonConsenting Revolving Credit Lender (or a lost
     note affidavit and indemnity).

               (ii) The Revolving Credit Note held by the NonConsenting
     Revolving Credit Lender shall have no force or effect whatsoever.

               (iii) The NonConsenting Revolving Credit Lender shall cease to be
     a "Revolving Credit Lender".

               (iv) The Revolving Credit Lender(s) which have Transferred the
     amount to the Administrative Agent as described above shall have succeeded
     to all rights and become subject to all of the obligations of the
     NonConsenting Revolving Credit Lender as "Revolving Credit Lender".


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<PAGE>

          (d) In the event that more than one (1) Revolving Credit Lender wishes
to require such assignment, the NonConsenting Revolving Credit Lender's Loan
Commitment hereunder shall be divided among such Revolving Credit Lenders,
pro-rata based upon their respective Revolving Credit Commitment Percentages,
with the Administrative Agent coordinating such transaction.

          (e) The Administrative Agent shall coordinate the retirement of the
Revolving Credit Note held by the NonConsenting Revolving Credit Lender and the
issuance of Revolving Credit Notes to those Revolving Credit Lenders which
"take-out" such NonConsenting Revolving Credit Lender, provided, however, no
processing fee otherwise to be paid as provided in Section 17.2(b) shall be due
under such circumstances.

ARTICLE 17 - ASSIGNMENTS BY REVOLVING CREDIT LENDERS:

     17.1. ASSIGNMENTS AND ASSUMPTIONS:

          (a) Except as provided herein, each Revolving Credit Lender (in this
Section 17.1(a), an "ASSIGNING REVOLVING CREDIT LENDER") may assign to one or
more Eligible Assignees (in this Section 17.1(a), each an "ASSIGNEE REVOLVING
CREDIT LENDER") all or a portion of that Revolving Credit Lender's interests,
rights and obligations under this Agreement and the Loan Documents (including
all or a portion of its Revolving Credit Dollar Commitment) and the same portion
of the Revolving Credit Loans at the time owing to it, and of the Revolving
Credit Note held by the Assigning Revolving Credit Lender, provided that:

               (i) The Administrative Agent and, subject to the provisions of
     Section 2.22(d) hereof, the Lead Borrower, shall have given its prior
     written consent to such assignment, which consent shall not be unreasonably
     withheld, but need not be given if the proposed assignment would result in
     any resulting Revolving Credit Lender's having a Revolving Credit Dollar
     Commitment of less than the "minimum hold" amount specified in Section
     17.1(a)(iii).

               (ii) Each such assignment shall be of a constant, and not a
     varying, percentage of all the Assigning Revolving Credit Lender's rights
     and obligations under this Agreement.

               (iii) Following the effectiveness of such assignment, the
     Assigning Revolving Credit Lender's Revolving Credit Dollar Commitment (if
     not an assignment of all of the Assigning Revolving Credit Lender's Loan
     Commitment) shall not be less than $5,000,000.00.

     17.2. ASSIGNMENT PROCEDURES. (This Section 17.2 describes the procedures to
be followed in connection with an assignment effected pursuant to this Article
17 and permitted by Section 17.1).


                                      119
<PAGE>

          (a) The parties to such an assignment shall execute and deliver to the
Administrative Agent, for recording in the Register, an Assignment and
Acceptance substantially in the form of EXHIBIT 17.12, annexed hereto (each, an
"ASSIGNMENT AND ACCEPTANCE").

          (b) The Assigning Revolving Credit Lender shall deliver to the
Administrative Agent, with such Assignment and Acceptance, the Revolving Credit
Note held by the subject Assigning Revolving Credit Lender and the
Administrative Agent's processing fee of $3,500.00.

          (c) The Administrative Agent shall maintain a copy of each Assignment
and Acceptance delivered to it and a register or similar list (the "REGISTER")
for the recordation of the names and addresses of the Revolving Credit Lenders
and of the Revolving Credit Dollar Commitment and Revolving Credit Commitment
Percentage of each Revolving Credit Lender. The Register shall be available for
inspection by the Revolving Credit Lenders at any reasonable time and from time
to time upon reasonable prior notice. In the absence of manifest error, the
entries in the Register shall be conclusive and binding on all Revolving Credit
Lenders. The Administrative Agent and the Revolving Credit Lenders may treat
each Person whose name is recorded in the Register as a "Revolving Credit
Lender" hereunder for all purposes of this Agreement.

          (d) The Assigning Revolving Credit Lender and Assignee Revolving
Credit Lender, directly between themselves, shall make all appropriate
adjustments in payments for periods prior to the effective date of an Assignment
and Assumption.

     17.3. EFFECT OF ASSIGNMENT.

          (a) From and after the effective date specified in an Assignment and
Acceptance which has been executed, delivered, and recorded (which effective
date the Administrative Agent may delay by up to five (5) Business Days after
the delivery of such Assignment and Acceptance):

               (i)  The Assignee Revolving Credit Lender:

                    (A) Shall be a party to this Agreement and the Loan
          Documents (and to any amendments thereof) as fully as if the Assignee
          Revolving Credit Lender had executed each..

                    (B) Shall have the rights of a Revolving Credit Lender
          hereunder to the extent of the Revolving Credit Dollar Commitment and
          Revolving Credit Commitment Percentage assigned by such Assignment and
          Acceptance.

               (ii) The Assigning Revolving Credit Lender shall be released from
     the Assigning Revolving Credit Lender's obligations under this Agreement
     and the Loan Documents to the extent of the Loan Commitment assigned by
     such Assignment and Acceptance.


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<PAGE>

               (iii) The Administrative Agent shall undertake to obtain and
     distribute replacement Revolving Credit Notes to the subject Assigning
     Revolving Credit Lender and Assignee Revolving Credit Lender.

          (b) By executing and delivering an Assignment and Acceptance, the
parties thereto confirm to and agree with each other and with all parties to
this Agreement as to those matters which are set forth in the subject Assignment
and Acceptance.

ARTICLE 18 - NOTICES:

     18.1. NOTICE ADDRESSES. All notices, demands, and other communications made
in respect of any Loan Document (other than a request for a loan or advance or
other financial accommodation under the Revolving Credit) shall be made to the
following addresses, each of which may be changed upon seven (7) days written
notice to all others given by certified mail, return receipt requested:

          If to the Administrative Agent:

               National City Business Credit, Inc.
               1965 E. Sixth Street
               Cleveland, Ohio 44114
               Attention: Joseph Kwasny
               Fax: (216) 222-9555

          With a copy to:

               Riemer & Braunstein LLP
               Three Center Plaza
               Boston, Massachusetts 02108
               Attention: David S. Berman, Esquire
               Fax: (617) 880-3456

          If to the Lead Borrower
          And All Borrowers:

               DSW Inc.
               4150 East Fifth Avenue
               Columbus, Ohio 43219
               Attention: Douglas Probst, Chief Financial Officer
               Fax: (614) 443-0972

          With a copy to:

               Schottenstein Stores Corporation
               1800 Moler Road
               Columbus, Ohio 43207


                                       121

<PAGE>

               Attention: Irwin A. Bain, Esquire
               Fax: (614) 443-0972

          With a copy to:

               Vorys, Sater, Seymour and Pease LLP
               52 East Gay Street
               Columbus, Ohio 43215
               Attention: John B. Weimer, Esquire
               Fax: (614) 719-5086

     18.2. NOTICE GIVEN.

          (a) Except as otherwise specifically provided herein, notices shall be
deemed made and correspondence received, as follows (all times being local to
the place of delivery or receipt):

               (i) By certified mail, return receipt requested: the date when
     actually received.

               (ii) By recognized overnight express delivery: the Business Day
     following the day when sent.

               (iii) By Hand: If delivered on a Business Day after 9:00 AM and
     no later than three (3) hours prior to the close of customary business
     hours of the recipient, when delivered. Otherwise, at the opening of the
     then next Business Day.

               (iv) By Facsimile transmission (which must include a header on
     which the party sending such transmission is indicated): If sent on a
     Business Day after 9:00 AM and no later than three (3) hours prior to the
     close of customary business hours of the recipient, one (1) hour after
     being sent. Otherwise, at the opening of the then next Business Day.

     18.3. WIRE INSTRUCTIONS. NOTICE GIVEN. Subject to change in the same manner
that a notice address may be changed (as to which, see Section 18.1), wire
transfers to the Administrative Agent shall be made in accordance with the
following wire instructions:

          National City Bank.
          ABA Number: 041000124
          Account Name: National City Business Credit, Inc.
          Account Number: 3790116
          Reference: DSW

ARTICLE 19 - TERM:

     19.1. TERMINATION OF REVOLVING CREDIT. The Revolving Credit shall remain in
effect (subject to suspension as provided in Section 2.6 hereof) until the
Termination Date.


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<PAGE>

     19.2. ACTIONS ON TERMINATION.

          (a) On the Termination Date, the Borrowers shall pay the
Administrative Agent (whether or not then due), in immediately available funds,
all Liabilities including, without limitation: the following:

               (i) The entire balance of the Loan Account (including the unpaid
     principal balance of the Revolving Credit Loans, and the SwingLine Loan).

               (ii) Any then remaining installments of the Collateral Monitoring
     Fee.

               (iii) Any payments due on account of the indemnification
     obligations included in Section 2.11(f).

               (iv) Any accrued and unpaid Unused Line Fee.

               (v) All unreimbursed costs and expenses of each Agent and of
     Lenders' Special Counsel for which each Borrower is responsible.

               (vi) All other Liabilities.

          (b) On the Termination Date, the Borrowers shall also shall make such
arrangements concerning any L/Cs and Banker's Acceptances then outstanding as
are reasonably satisfactory to the Administrative Agent.

          (c) Until such payment (Section 19.2(a)) and arrangements concerning
L/Cs and Banker's Acceptances (Section 19.2(b)), all provisions of this
Agreement, other than those included in Article 2 which place any obligation on
the Administrative Agent or any Revolving Credit Lender to make any loans or
advances or to provide any financial accommodations to any Borrower shall remain
in full force and effect until all Liabilities shall have been paid in full.

          (d) On the Termination Date, and upon satisfaction by the Loan Parties
of the terms of Section 19.2(a) and (b), above, the Collateral Agent shall
release the Collateral Interests granted the Collateral Agent by the Borrowers
hereunder, which may be upon such conditions and indemnifications as the
Collateral Agent may reasonably require.

ARTICLE 20 - GENERAL:

     20.1. PROTECTION OF COLLATERAL. No Agent has any duty as to the collection
or protection of the Collateral beyond the safe custody of such of the
Collateral as may come into the possession of such Agent.

     20.2. PUBLICITY. Subject to the prior approval of the Lead Borrower (which
approval shall not be unreasonably withheld or delayed), the Administrative
Agent may issue a "tombstone" notice of the establishment of the credit facility
contemplated by this Agreement and may make reference to each Borrower (and may
utilize any logo or other distinctive symbol associated with each Borrower) in
connection with any advertising, promotion, or marketing


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<PAGE>

(including reference in any "case study" of the creditor facility contemplated
hereby) undertaken by the Administrative Agent.

     20.3. CONFIDENTIALITY. Each of the Agents, the Issuer, the Lead Arranger,
the Revolving Credit Lenders, the SwingLine Lender, and any Person subject to
this Section 20.3 by the terms of this Agreement (or behalf of itself, and each
of its directors, officers, and employees) agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) to any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement and any actual or prospective
counterparty or advisors to any swap or derivative transactions relating to the
Loan Parties and the Liabilities (subject to an agreement executed for the
benefit of the Lead Borrower which contains provisions substantially the same as
those of this Section 20.3, (g) with the consent of the Loan Parties or (h) to
the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes legally available to the
Agents, the Issuer, the Lead Arranger or any Revolving Credit Lender on a
nonconfidential basis from a source other than the Loan Parties. For the
purposes of this Section, the term "Information" means all information received
from the Loan Parties relating to their business, other than any such
information that is available to the Agents, the Issuer, the Lead Arranger or
any Revolving Credit Lender on a nonconfidential basis prior to disclosure by
the Loan Parties, provided that, in the case of information received from the
Loan Parties after the date hereof, such information is identified at the time
of delivery as confidential or of the type of information, such as business
plans or financial information as is customarily confidential. Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information that is of a similar nature. The confidentiality
provisions contained in this Agreement shall survive the termination, assignment
or invalidation of this Agreement, or of any of the rights and obligations
contained herein or therein.

     20.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Borrowers and their respective representatives, successors, and assigns and
shall enure to the benefit of each Agent and each Revolving Credit Lender and
their respective successors and assigns, provided, however, no trustee or other
fiduciary appointed with respect to any Borrower shall have any rights
hereunder. In the event that any Agent or any Revolving Credit Lender assigns or
transfers its rights under this Agreement, the assignee shall thereupon succeed
to and become vested with all rights, powers, privileges, and duties of such
assignor hereunder and such assignor shall thereupon be discharged and relieved
from its duties and obligations hereunder.


                                       124

<PAGE>

     20.5. SEVERABILITY. Any determination that any provision of this Agreement
or any application thereof is invalid, illegal, or unenforceable in any respect
in any instance shall not affect the validity, legality, or enforceability of
such provision in any other instance, or the validity, legality, or
enforceability of any other provision of this Agreement.

     20.6. AMENDMENTS. COURSE OF DEALING.

          (a) This Agreement and the other Loan Documents incorporate all
discussions and negotiations between each Borrower and each Agent and each
Revolving Credit Lender, either express or implied, concerning the matters
included herein and in such other instruments, any custom, usage, or course of
dealings to the contrary notwithstanding. No such discussions, negotiations,
custom, usage, or course of dealings shall limit, modify, or otherwise affect
the provisions hereof or thereof. No failure by any Agent or any Revolving
Credit Lender to give notice to the Lead Borrower of any Borrower's having
failed to observe and comply with any warranty or covenant included in any Loan
Document shall constitute a waiver of such warranty or covenant or the amendment
of the subject Loan Document. No change made by any Agent to the manner by which
Borrowing Base is determined shall obligate the Agent to continue to determine
Borrowing Base in that manner.

          (b) Each Borrower may undertake any action otherwise prohibited
hereby, and may omit to take any action otherwise required hereby, upon and with
the express prior written consent of the Administrative Agent. Subject to
Article 16, no consent, modification, amendment, or waiver of any provision of
any Loan Document shall be effective unless executed in writing by or on behalf
of the party to be charged with such modification, amendment, or waiver (and if
such party is the Administrative Agent then by a duly authorized officer
thereof). Any modification, amendment, or waiver provided by the Administrative
Agent shall be in reliance upon all representations and warranties theretofore
made to the Administrative Agent by or on behalf of the Borrowers (and any
guarantor, endorser, or surety of the Liabilities) and consequently may be
rescinded in the event that any of such representations or warranties was not
true and complete in all material respects when given.

     20.7. POWER OF ATTORNEY. In connection with all powers of attorney included
in this Agreement (which may be exercised only after the occurrence and during
the continuance of an Event of Default), each Borrower hereby grants unto the
Administrative Agent (acting through any of its officers) full power to do any
and all things necessary or appropriate in connection with the exercise of such
powers as fully and effectually as that Borrower might or could do, hereby
ratifying all that said attorney shall do or cause to be done by virtue of this
Agreement. No power of attorney set forth in this Agreement shall be affected by
any disability or incapacity suffered by any Borrower and each shall survive the
same. All powers conferred upon each Agent by this Agreement, being coupled with
an interest, shall be irrevocable until this Agreement is terminated by a
written instrument executed by a duly authorized officer of each Agent. The
Administrative Agent, as agent for the Borrowers under any power of attorney
included in this Agreement and the other Loan Documents, is not a fiduciary for
any Borrower, but instead, in exercising any one or more rights with respect to
such powers of attorney, may do so for the sole and exclusive benefit of the
Revolving Credit Lenders, and not for the benefit of any Borrower. The Borrowers
acknowledge and agree that the provisions of Title 20,


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<PAGE>

Pennsylvania Consolidated Statutes Section 5601 et seq., as amended (including,
without limitation, Act 39 of 1999) shall not be applicable to any one or more
powers of attorney contained in any Loan Document previously, concurrently or in
the future executed and delivered by the Borrowers.

     20.8. APPLICATION OF PROCEEDS. The proceeds of any collection, sale, or
disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the
Administrative Agent determines in its sole reasonable, good faith discretion,
consistent, however, with Sections 14.6 and 14.7 and any other applicable
provisions of this Agreement. The Borrowers shall remain liable for any
deficiency remaining following such application.

     20.9. INCREASED COSTS. If, after the date hereof, as a result of any change
in any Requirement of Law, or change of the interpretation or application
thereof by any court or by any governmental or other authority or entity charged
with the administration thereof, whether or not having the force of law, which:

          (a) subjects any Revolving Credit Lender to any taxes or changes the
basis of taxation, or increases any existing taxes, on payments of principal,
interest or other amounts payable by any Borrower to any Agent or any Revolving
Credit Lender under this Agreement (except for taxes on any Agent or any
Revolving Credit Lender based on net income or capital imposed by the
jurisdiction in which the principal or lending offices of such Agent or that
Revolving Credit Lender are located);

          (b) imposes, modifies or deems applicable any reserve, cash margin,
special deposit or similar requirements against assets held by, or deposits in
or for the account of or loans by or any other acquisition of funds by the
relevant funding office of any Revolving Credit Lender;

          (c) imposes on any Revolving Credit Lender any other condition with
respect to any Loan Document; or

          (d) imposes on any Revolving Credit Lender a requirement to maintain
or allocate capital in relation to the Liabilities;

and the result of any of the foregoing, in such Revolving Credit Lender's
reasonable opinion, is to increase the cost to that Revolving Credit Lender of
making or maintaining any loan, advance or financial accommodation or to reduce
the income receivable by that Revolving Credit Lender in respect of any loan,
advance or financial accommodation by an amount which that Revolving Credit
Lender deems to be material, then upon written notice from the Administrative
Agent, from time to time, to the Lead Borrower (such notice to set out in
reasonable detail the facts giving rise to and a summary calculation of such
increased cost or reduced income), the Borrowers shall forthwith pay to the
Administrative Agent, for the benefit of the subject Revolving Credit Lender,
upon receipt of such notice, that amount which shall compensate the subject
Revolving Credit Lender for such additional cost or reduction in income.


                                       126

<PAGE>

     20.10. REPLACEMENT OF REVOLVING CREDIT LENDER. If (a) any Revolving Credit
Lender incurs increased costs and requests compensation under Section 2.18(d) or
Section 20.9, (b) any Revolving Credit Lender is a Delinquent Revolving Credit
Lender, then the Lead Borrower may

          (a) request such Revolving Credit Lender or Issuer to use reasonable
efforts to designate a different lending office for funding or booking its loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches, or Affiliates, if in the judgment of such Revolving Credit
Lender or Issuer, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.18(d) or Section 20.9 hereof, and (ii)
would not subject such Revolving Credit Lender or Issuer to any unreimbursed
cost or expense, and would not otherwise be disadvantageous to such Revolving
Credit Lender or Issuer. The Lead Borrower shall pay all reasonable costs and
expenses incurred by such Revolving Credit Lender or Issuer in connection with
any such designation of assignment; and

          (b) at its sole expense and effort, upon notice to such Revolving
Credit Lender and the Administrative Agent, require such Revolving Credit Lender
to assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Article 17), all its interests, rights and obligations
under this Agreement to an assignee that shall assume such obligations (which
assignee may be another Revolving Credit Lender, if a Revolving Credit Lender
accepts such assignment), provided that (i) if such assignee is not an existing
Revolving Credit Lender, the Lead Borrower shall have received the prior written
consent of the Administrative Agent, which consent shall not unreasonably be
withheld, (ii) such Revolving Credit Lender shall have received payment of an
amount equal to the outstanding principal of its Revolving Credit Loans and
participations in unreimbursed drawings under L/Cs and Banker's Acceptances and
SwingLine Loans, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Lead Borrower (in the case of
all other amounts) and (iii) such assignment will result in a reduction in such
compensation, payments or costs. A Revolving Credit Lender shall not be required
to make any such assignment and delegation if, prior thereto, as a result of a
waiver by such Revolving Credit Lender or otherwise, the circumstances entitling
the Lead Borrower to require such assignment and delegation cease to apply.

     20.11. COSTS AND EXPENSES OF THE AGENT AND ISSUER.

          (a) The Borrowers shall pay from time to time on demand all Costs of
Collection and all reasonable costs, expenses, and disbursements (including
reasonable attorneys' fees and expenses) which are incurred by each Agent or the
Issuer in connection with the preparation, negotiation, execution, and delivery
of this Agreement and of any other Loan Documents, and all other reasonable
costs, expenses, and disbursements which may be incurred in connection with or
in respect to the credit facility contemplated hereby or which otherwise are
incurred with respect to the Liabilities.

          (b) The Borrowers shall pay from time to time on demand all reasonable
costs and expenses (including reasonable attorneys' fees and expenses) incurred,
following the


                                       127

<PAGE>

occurrence of any Event of Default, by the Revolving Credit Lenders to Lenders'
Special Counsel.

          (c) Each Borrower authorizes the Administrative Agent to pay all such
fees and expenses and in the Administrative Agent's reasonable, good faith
discretion, to add such fees and expenses to the Loan Account.

          (d) The undertaking on the part of each Borrower in this Section 20.11
shall survive payment of the Liabilities and/or any termination, release, or
discharge executed by any Agent in favor of any Borrower, other than a
termination, release, or discharge which makes specific reference to this
Section 20.11.

     20.12. COPIES AND FACSIMILES. Each Loan Document and all documents and
papers which relates thereto which have been or may be hereinafter furnished any
Agent or any Revolving Credit Lender may be reproduced by that Revolving Credit
Lender or by any Agent by any photographic, microfilm, xerographic, digital
imaging, or other process, and such Person making such reproduction may destroy
any document so reproduced. Any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business). Any facsimile which
bears proof of transmission shall be binding on the party which or on whose
behalf such transmission was initiated and likewise shall be so admissible in
evidence as if the original of such facsimile had been delivered to the party
which or on whose behalf such transmission was received.

     20.13. OHIO LAW. This Agreement and all rights and obligations hereunder,
including matters of construction, validity, and performance, shall be governed
by the law of State of Ohio.

     20.14. CONSENT TO JURISDICTION.

          (a) Each Borrower agrees that any legal action, proceeding, case, or
controversy against any Borrower with respect to any Loan Document may be
brought in the courts of Franklin County, Ohio or in the United States District
Court, District of Ohio, sitting in Columbus, Ohio, as the Administrative Agent
may elect in the Administrative Agent's sole reasonable, good faith discretion.
By execution and delivery of this Agreement, each Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.

          (b) Each Borrower WAIVES any objection based on forum non conveniens
and any objection to venue of any action or proceeding instituted under any of
the Loan Documents and consents to the granting of such legal or equitable
remedy as is deemed appropriate by the Court.

          (c) Nothing herein shall affect the right of any Agent to bring legal
actions or proceedings in any other competent jurisdiction.


                                       128

<PAGE>

          (d) Each Borrower agrees that any action commenced by any Borrower
asserting any claim arising under or in connection with this Agreement or any
other Loan Document shall be brought solely in the courts of Franklin County,
Ohio or in the United States District Court, District of Ohio, sitting in
Columbus, Ohio, and that such Courts shall have exclusive jurisdiction with
respect to any such action.

     20.15. INDEMNIFICATION. Each Borrower shall indemnify, defend, and hold
each Agent, the Issuer, and each Revolving Credit Lender and any Participant and
any of their respective employees, officers, agents, Subsidiaries, and
Affiliates (each, an "INDEMNIFIED PERSON") harmless of and from any claim
brought or threatened against any Indemnified Person by any Borrower, any
guarantor or endorser of the Liabilities, or any other Person (as well as from
reasonable attorneys' fees, expenses, and disbursements in connection therewith)
on account of the relationship of the Borrowers or of any guarantor or endorser
of the Liabilities, including all costs, expenses, liabilities, and damages as
may be suffered by any Indemnified Person in connection with (x) the Collateral;
(y) the occurrence of any Event of Default; or (z) the exercise of any rights or
remedies under any of the Loan Documents (each of claims which may be defended,
compromised, settled, or pursued by the Indemnified Person with counsel of the
Lender's selection, but at the expense of the Borrowers) other than any claim as
to which a final determination is made in a judicial proceeding (in which the
Agent and any other Indemnified Person has had an opportunity to be heard),
which determination includes a specific finding that the Indemnified Person
seeking indemnification had acted in a grossly negligent manner or in actual bad
faith or in willful misconduct. This indemnification shall survive payment of
the Liabilities and/or any termination, release, or discharge executed by any
Agent in favor of the Borrowers, other than a termination, release, or discharge
duly executed on behalf of the Agent which makes specific reference to this
Section 20.15.

     20.16. RULES OF CONSTRUCTION. The following rules of construction shall be
applied in the interpretation, construction, and enforcement of this Agreement
and of the other Loan Documents:

          (a) Unless otherwise specifically provided for herein (and then only
to the extent so provided), interest and any fee or charge which is stated as a
per annum percentage shall be calculated based on a 360 day year and actual days
elapsed with respect to LIBOR Loans and on a 365/366 day year and actual days
elapsed with respect to Base Margin Loans.

          (b) Words in the singular include the plural and words in the plural
include the singular.

          (c) Unless otherwise specifically provided for herein or in a specific
Loan Document (and then only to the extent so provided), as between the parties
hereto or to any Loan Document, the definitions of the following terms, as
included in the UCC, are deemed to be as follows for purposes of the performance
of obligations arising under or in respect of any Loan Document:

               (i) "Authenticate" means "signed".


                                       129

<PAGE>

               (ii) "Record" means written information in a tangible form.

          (d) Titles, headings (indicated by being underlined or shown in SMALL
CAPITALS) and any Table of Contents are solely for convenience of reference; do
not constitute a part of the instrument in which included; and do not affect
such instrument's meaning, construction, or effect.

          (e) The words "includes" and "including" are not limiting.

          (f) Text which follows the words "including, without limitation" (or
similar words) is illustrative and not limitational.

          (g) Text which is shown in italics (except for parenthesized
italicized text), shown in BOLD, shown IN ALL CAPITAL LETTERS, or in any
combination of the foregoing, shall be deemed to be conspicuous.

          (h) The words "may not" are prohibitive and not permissive.

          (i) Any reference to a Person's "knowledge" (or words of similar
import) are to such Person's knowledge assuming that such Person has undertaken
reasonable and diligent investigation with respect to the subject of such
"knowledge" (whether or not such investigation has actually been undertaken).

          (j) Terms which are defined in one section of any Loan Document are
used with such definition throughout the instrument in which so defined.

          (k) The term "Dollars" and the symbol "$" each refers to United States
Dollars.

          (l) Unless limited by reference to a particular Section or provision,
any reference to "herein", "hereof", or "within" is to the entire Loan Document
in which such reference is made.

          (m) References to "this Agreement" or to any other Loan Document is to
the subject instrument as amended to the date on which application of such
reference is being made.

          (n) Except as otherwise specifically provided, all references to time
are to Cleveland, Ohio time.

          (o) In the determination of any notice, grace, or other period of time
prescribed or allowed hereunder:

               (i) Unless otherwise provided (A) the day of the act, event, or
     default from which the designated period of time begins to run shall not be
     included and the last day of the period so computed shall be included
     unless such last day is not a Business Day, in which event the last day of
     the relevant period shall be the then next Business Day and (B) the period
     so computed shall end at 5:00 PM on the relevant Business Day.


                                       130

<PAGE>

               (ii) The word "from" means "from and including".

               (iii) The words "to" and "until" each mean "to, but excluding".

               (iv) The word "through" means "to and including".

          (p) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section 20.17
hereof, provided, however, in the event of any inconsistency between the
provisions of this Agreement and any other Loan Document, the provisions of this
Agreement shall govern and control.

     20.17. AGENT'S CONSENT. Unless otherwise explicitly provided herein, any
Agent's consent to any action of any Borrower which is prohibited unless such
consent is given may be given or refused by such Agent in its sole reasonable,
good faith discretion and without reference to Section 2.16 hereof.

     20.18. PARTICIPATIONS: Each Revolving Credit Lender may sell participations
to one or more financial institutions (each, a "PARTICIPANT") in that Revolving
Credit Lender's interests herein provided that no such participation shall
include any provision which accords that Participant with any rights, vis a vis
any Agent, with respect to any requirement herein for approval by a requisite
number or proportion of the Revolving Credit Lenders. No such sale of a
participation shall relieve a Revolving Credit Lender from that Revolving Credit
Lender's obligations hereunder nor obligate any Agent to any Person other than a
Revolving Credit Lender.

     20.19. RIGHT OF SET-OFF. Any and all deposits or other sums at any time
credited by or due to any Borrower from any Agent or any Revolving Credit Lender
or any Participant or from any Affiliate of any of the foregoing, and any cash,
securities, instruments or other property of any Borrower in the possession of
any of the foregoing (other than in Exempt DDA accounts), whether for
safekeeping or otherwise (regardless of the reason such Person had received the
same) shall at all times constitute security for all Liabilities and for any and
all obligations of each Borrower to such Agent and such Revolving Credit Lender
or any Participant or such Affiliate, and (a) after the occurrence and during
the continuance of an Event of Default, or (b) after the service of process upon
any Agent or any Revolving Credit Lender or any Participant seeking to attach,
by trustee, mesne, or other process, any funds of any Loan Party on deposit
with, or assets of any Loan Party in the possession of, such Agent or that
Revolving Credit or such Participant, in excess of Five Hundred Thousand Dollars
($500,000.00), may be applied or set off against the Liabilities and against
such obligations at any time, whether or not such are then due and whether or
not other collateral is then available to the Agent or that Revolving Credit
Lender.

     20.20. PLEDGES TO FEDERAL RESERVE BANKS: Nothing included in this Agreement
shall prevent or limit any Revolving Credit Lender, to the extent that such
Revolving Credit Lender is subject to any of the twelve Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act (12 U.S.C. Section 341)
from pledging all or any portion of that Lender's interest and rights under this
Agreement, provided, however, neither such pledge nor the enforcement thereof


                                       131

<PAGE>

shall release the pledging Revolving Credit Lender from any of its obligations
hereunder or under any of the Loan Documents.

     20.21. MAXIMUM INTEREST RATE. Regardless of any provision of any Loan
Document, neither any Agent nor any Revolving Credit Lender shall be entitled to
contract for, charge, receive, collect, or apply as interest on any Liability,
any amount in excess of the maximum rate imposed by Applicable Law. Any payment
which is made which, if treated as interest on a Liability would result in such
interest's exceeding such maximum rate shall be held, to the extent of such
excess, as additional collateral for the Liabilities as if such excess were
"Collateral."

     20.22. WAIVERS.

          (a) Each Borrower (and all guarantors, endorsers, and sureties of the
Liabilities) make each of the waivers included in Section 20.22(b), below,
knowingly, voluntarily, and intentionally, and understands that each Agent and
each Revolving Credit Lender, in establishing the facilities contemplated hereby
and in providing loans and other financial accommodations to or for the account
of the Borrowers as provided herein, whether not or in the future, is relying on
such waivers.

          (b) EACH BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY
RESPECTIVELY WAIVES THE FOLLOWING:

               (i) Except as otherwise specifically required hereby, notice of
     non-payment, demand, presentment, protest and all forms of demand and
     notice, both with respect to the Liabilities and the Collateral.

               (ii) Except as otherwise specifically required hereby, the right
     to notice and/or hearing prior to any Agent's exercising of the Agent's
     rights upon default.

               (iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY
     IN WHICH ANY AGENT OR ANY REVOLVING CREDIT LENDER IS OR BECOMES A PARTY
     (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST ANY AGENT OR
     ANY REVOLVING CREDIT LENDER OR IN WHICH ANY AGENT OR ANY REVOLVING CREDIT
     LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT
     OF OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN ANY BORROWER OR
     ANY OTHER PERSON AND EACH AGENT AND EACH REVOLVING CREDIT LENDER LIKEWISE
     WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).

               (iv) Any defense, counterclaim, set-off, recoupment, or other
     basis on which the amount of any Liability, as stated on the books and
     records of any Agent, could be reduced or claimed to be paid otherwise than
     in accordance with the tenor of and written terms of such Liability.


                                       132
<PAGE>

               (v) Any claim to consequential, special, or punitive damages.

     20.23. ADDITIONAL WAIVERS.

          (a) The Liabilities are the joint and several obligations of each Loan
Party. To the fullest extent permitted by applicable law, the obligations of
each Loan Party hereunder shall not be affected by (i) the failure of any Agent
or any Revolving Credit Lender to assert any claim or demand or to enforce or
exercise any right or remedy against any other Loan Party under the provisions
of this Agreement, any other Loan Document or otherwise, (ii) any rescission,
waiver, amendment or modification of, or any release from any of the terms or
provisions of, this Agreement, any other Loan Document, or any other agreement,
including with respect to any other Borrower of the Liabilities, or (iii) the
failure to perfect any security interest in, or the release of, any of the
security held by or on behalf of the Collateral Agent or any Revolving Credit
Lender.

          (b) The obligations of each Loan Party hereunder shall not be subject
to any reduction, limitation, impairment or termination for any reason (other
than the indefeasible payment in full in cash of the Liabilities), including any
claim of waiver, release, surrender, alteration or compromise of any of the
Liabilities, and shall not be subject to any defense or set-off, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Liabilities or otherwise. Without limiting the
generality of the foregoing, the obligations of each Loan Party hereunder shall
not be discharged or impaired or otherwise affected by the failure of any Agent
or any Revolving Credit Lender to assert any claim or demand or to enforce any
remedy under this Agreement, any other Loan Document or any other agreement, by
any waiver or modification of any provision of any thereof, by any default,
failure or delay, willful or otherwise, in the performance of the Liabilities,
or by any other act or omission that may or might in any manner or to any extent
vary the risk of any Loan Party or that would otherwise operate as a discharge
of any Loan Party as a matter of law or equity (other than the indefeasible
payment in full in cash of all the Liabilities).

          (c) To the fullest extent permitted by applicable law, each Loan Party
waives any defense based on or arising out of any defense of any other Loan
Party or the unenforceability of the Liabilities or any part thereof from any
cause, or the cessation from any cause of the liability of any other Loan Party,
other than the indefeasible payment in full in cash of all the Liabilities. Each
Agent and the Revolving Credit Lenders may, at their election, foreclose on any
security held by one or more of them by one or more judicial or nonjudicial
sales, accept an assignment of any such security in lieu of foreclosure,
compromise or adjust any part of the Liabilities, make any other accommodation
with any other Loan Party, or exercise any other right or remedy available to
them against any other Loan Party, without affecting or impairing in any way the
liability of any Loan Party hereunder except to the extent that all the
Liabilities have been indefeasibly paid in full in cash. Pursuant to applicable
law, each Loan Party waives any defense arising out of any such election even
though such election operates, pursuant to applicable law, to impair or to
extinguish any right of reimbursement or subrogation or other right or remedy of
such Loan Party against any other Loan Party, as the case may be, or any
security.


                                      133

<PAGE>

          (d) Upon payment by any Loan Party of any Liabilities, all rights of
such Loan Party against any other Loan Party arising as a result thereof by way
of right of subrogation, contribution, reimbursement, indemnity or otherwise
shall in all respects be subordinate and junior in right of payment to the prior
indefeasible payment in full in cash of all the Liabilities, as more
particularly set forth in an Indemnity, Subrogation and Contribution Agreement
to be entered into amongst the Loan Parties. In addition, any indebtedness of
any Loan Party now or hereafter held by any other Loan Party is hereby
subordinated in right of payment to the prior payment in full of the
Liabilities. None of the Loan Parties will demand, sue for, or otherwise attempt
to collect any such indebtedness. If any amount shall erroneously be paid to any
Loan Party on account of (a) such subrogation, contribution, reimbursement,
indemnity or similar right or (b) any such indebtedness of any Loan Party, such
amount shall be held in trust for the benefit of the Agent and the Revolving
Credit Lenders and shall forthwith be paid to the Administrative Agent to be
credited against the payment of the Liabilities, whether matured or unmatured,
in accordance with the terms of the Loan Documents.

     20.24. PATRIOT ACT NOTICES. Each Lender hereby notifies the Borrowers that
pursuant to the requirements of the Patriot Act, it is required to obtain,
verify and record information that identifies the Borrowers, which information
includes the name and address of each Borrower and other information that will
allow such Lender to identify such Borrower in accordance with the Patriot Act.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK]


                                      134

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as a sealed instrument as
of the day and year first above written.

                                        DSW INC.
                                        ("LEAD BORROWER")


                                        By: /s/ James A. McGrady
                                            ------------------------------------
                                        Name: James A. McGrady
                                        Title: Vice President


                                        "OTHER BORROWERS":

                                        DSW SHOE WAREHOUSE, INC.


                                        By: /s/ James A. McGrady
                                            ------------------------------------
                                        Name: James A. McGrady
                                        Title: Chief Financial Officer


                                     DSW-1

<PAGE>

                                        NATIONAL CITY BUSINESS CREDIT, INC.
                                        (ADMINISTRATIVE AGENT, COLLATERAL AGENT,
                                        SWINGLINE LENDER AND REVOLVING CREDIT
                                        LENDER)


                                        By: /s/ Joseph L. Kwasny
                                            ------------------------------------
                                        Name: Joseph L. Kwasny
                                        Title: Director


                                     DSW-2

<PAGE>

                                        NATIONAL CITY BANK
                                        (ISSUER AND LEAD ARRANGER)


                                        By: /s/ Joseph L. Kwasny
                                            ------------------------------------
                                        Name: Joseph L. Kwasny
                                        Title: Senior Vice President


                                     DSW-3

<PAGE>

                                        THE CIT GROUP/BUSINESS CREDIT, INC.
                                        (CO-SYNDICATION AGENT AND REVOLVING
                                        CREDIT LENDER)


                                        By: /s/ Manual Borges
                                            ------------------------------------
                                        Name: Manual Borges
                                        Title: Vice President


                                     DSW-4

<PAGE>

                                        BANK OF AMERICA, N.A. (CO-SYNDICATION
                                        AGENT AND REVOLVING CREDIT LENDER)


                                        By: /s/ James Ward
                                            ------------------------------------
                                        Name: James Ward
                                        Title: Managing Director


                                     DSW-5

<PAGE>

                                        GENERAL ELECTRIC CAPITAL CORPORATION
                                        (CO-DOCUMENTATION AGENT AND REVOLVING
                                        CREDIT LENDER)


                                        By: /s/ Stephen Metivier
                                            ------------------------------------
                                        Name: Stephen Metivier
                                        Title: Vice President


                                     DSW-6

<PAGE>

                                        WELLS FARGO RETAIL FINANCE, LLC
                                        (CO-DOCUMENTATION AGENT AND REVOLVING
                                        CREDIT LENDER)


                                        By: /s/ Cory Lofts
                                            ------------------------------------
                                        Name: Cory Lofts
                                        Title: Vice President account Executive


                                     DSW-7

<PAGE>

                                        LASALLE BANK NATIONAL ASSOCIATION
                                        (REVOLVING CREDIT LENDER)


                                        By: /s/ Sara H. Dekuiper
                                            ------------------------------------
                                        Name: Sara H. Dekuiper
                                        Title: Assistant Vice President


                                     DSW-8

<PAGE>

                                        HSBC BUSINESS CREDIT (USA) INC.
                                        (REVOLVING CREDIT LENDER)


                                        By: /s/ Dan Bueno
                                            ------------------------------------
                                        Name: Dan Bueno
                                        Title: Vice President


                                     DSW-9
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23
<SEQUENCE>8
<FILENAME>l19155aexv10w23.htm
<DESCRIPTION>EXHIBIT 10.23
<TEXT>
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<TITLE>Exhibit 10.23</TITLE>
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<P align="right" style="font-size: 10pt">Exhibit&nbsp;10.23



<P align="center" style="font-size: 10pt"><B>DSW INC.</B>



<P align="center" style="font-size: 10pt"><B>2005 EQUITY INCENTIVE PLAN</B>



<P align="center" style="font-size: 10pt"><B>1.00 PURPOSE AND EFFECTIVE DATE</B>


<P align="left" style="font-size: 10pt"><B>1.01 Purpose. </B>This Plan is intended to foster and promote the long-term financial success of the
Company and Related Entities and to materially increase shareholder value by <B>&#091;1&#093; </B>providing
Consultants, Employees and Eligible Directors an opportunity to acquire an ownership interest in
the Company and <B>&#091;2&#093; </B>enabling the Company and Related Entities to attract and retain the services of
outstanding Consultants, Employees and Eligible Directors upon whose judgment, interest and special
efforts the successful conduct of the Group&#146;s business is largely dependent.


<P align="left" style="font-size: 10pt"><B>1.02 Effective Date. </B>This Plan is effective on the date it is approved by the Board subject to
approval by the Company&#146;s shareholders. Any Award granted before shareholder approval will be null
and void if the shareholders do not approve the Plan within the period just described.



<P align="center" style="font-size: 10pt"><B>2.00 DEFINITIONS</B>


<P align="left" style="font-size: 10pt">When used in this Plan, the following terms have the meanings given to them in this section unless
another meaning is expressly provided elsewhere in this document or clearly required by the
context. When applying these definitions and any other word, term or phrase used in this Plan, the
form of any word, term or phrase will include any and all of its other forms.


<P align="left" style="font-size: 10pt"><B>Act. </B>The Securities Exchange Act of 1934, as amended, or any successor statute of similar effect
even if the Company is not subject to the Act.


<P align="left" style="font-size: 10pt"><B>Affiliated SAR. </B>An SAR that is granted in conjunction with an Option and which is always deemed to
have been exercised at the same time that the related Option is exercised. The deemed exercise of
an Affiliated SAR will not reduce the number of shares of Stock subject to the related Option,
except to the extent of the exercise of the related Option.


<P align="left" style="font-size: 10pt"><B>Annual Meeting. </B>The annual meeting of the Company&#146;s shareholders.


<P align="left" style="font-size: 10pt"><B>Annual Retainer. </B>The annual cash retainer and any other fees paid to each Eligible Director for
service as a member of the Board and as a member of any Board committee.


<P align="left" style="font-size: 10pt"><B>Annual Retainer Deferral Form. </B>The form each Eligible Director must complete to defer all or a
portion of his or her Annual Retainer.


<P align="left" style="font-size: 10pt"><B>Award. </B>Any Incentive Stock Option, Nonstatutory Stock Option, Performance Share, Performance Unit,
Restricted Stock, Restricted Stock Unit, Stock Appreciation Right and Stock Unit granted under the
Plan.


<P align="left" style="font-size: 10pt"><B>Award Agreement. </B>The written or electronic agreement between the Company and each Participant that
describes the terms and conditions of each Award and the manner in which it will

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P align="left" style="font-size: 10pt">be settled if earned. If there is a conflict between the terms of this Plan and the terms of the
Award Agreement, the terms of this Plan will govern.


<P align="left" style="font-size: 10pt"><B>Beneficiary. </B>The person a Participant designates to receive (or to exercise) any Plan benefits (or
rights) that are unpaid (or unexercised) when he or she dies. A Beneficiary may be designated only
by following the procedures described in Section&nbsp;15.02; neither the Company nor the Committee is
required to infer a Beneficiary from any other source.


<P align="left" style="font-size: 10pt"><B>Board. </B>The Company&#146;s board of directors.


<P align="left" style="font-size: 10pt"><B>Cause. </B>Unless the Committee specifies otherwise in the Award Agreement, with respect to any
Participant and subject to any cure provision included in any written agreement between the
Participant and the Company:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>A material failure to substantially perform his or her position or duties;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Engaging in illegal or grossly negligent conduct that is materially injurious to the
Company or any Related Entity;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>A material violation of any law or regulation governing the Company or any Related
Entity;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>Commission of a material act of fraud or dishonesty which has had or is likely to have a
material adverse effect upon the Company&#146;s (or any Related Entity&#146;s) operations or financial
conditions;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;5&#093; </B>A material breach of the terms of any other agreement (including any employment
agreement) with the Company or any Related Entity.; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;6&#093;
</B>A breach of any term of this Plan or Award Agreement.

<P align="left" style="font-size: 10pt">If a Participant Terminates (or is Terminated) for any reason other than Cause and the Company
subsequently discovers an act, failure or event that, if known before the Participant&#146;s Termination
would have justified a Termination for Cause and that act, event or failure was actively concealed
by the Participant and could not have been discovered through reasonable diligence before the
Participant Terminated, that Participant will be retroactively treated as having been Terminated
for Cause.


<P align="left" style="font-size: 10pt"><B>Change in Control. </B>The earliest of any of the following events to occur after completion of the
initial public offering of the Company&#146;s stock which is the subject of the Registration
Statement:


<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093;
</B>During any period consisting of 12 consecutive calendar months beginning after completion
of the initial public offering of the Company&#146;s stock which is the subject of the
Registration Statement, the members of the Board specified in the Registration Statement
(&#147;Incumbent Directors&#148;) cease for any reason other than death to constitute at least a
majority of the members of the Board, provided <B>&#091;a&#093; </B>that any director whose election, or nomination for election by the Company&#146;s shareholders, was approved by a





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<P align="left" style="margin-left:3%; font-size: 10pt">vote of at least a majority of the then Incumbent Directors also will be treated as an Incumbent
Director unless that person was nominated for election to the Board (or otherwise became a
member of the Board) in connection with an actual or threatened election contest relating to
the election or removal of Board members or other threatened or actual solicitation of
proxies of consent by or in behalf of any &#147;person,&#148; including a &#147;group&#148; &#091;as those terms are
used in Act &#167;&#167;13(d) and 14(d)(2)&#093;, <B>&#091;b&#093; </B>this element of this definition will not apply if the
Company reorganizes into an entity that does not have a board of directors or analogous
governing body and that reorganization is not a Change in Control under another element of
this definition and <B>&#091;c&#093; </B>if the Company becomes a subsidiary of another entity (i.e., another
entity owns, directly or indirectly, more than 50&nbsp;percent of the total combined voting power
of all classes of Stock) in a transaction that is not a Change in Control under another
element of this definition, subpart &#091;1&#093; of this definition will be applied by reference to
changes to the board of directors of the parent entity (or of the ultimate parent entity).



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Any &#147;person, &#148; including a &#147;group&#148; &#091;as these terms are used in Act &#167;&#167;13(d) and 14(d)(2)&#093;
becomes the &#147;beneficial owner&#148; (as defined in Rule&nbsp;13d-3 under the Act), directly or
indirectly, of 30&nbsp;percent or more of the combined voting power of the Company and of
securities of the Company sufficient to elect a majority of the members of the Board but
disregarding the effect of <B>&#091;a&#093; </B>any acquisition by a person who on the Effective Date is the
beneficial owner of 30&nbsp;percent or more of the combined voting power of the Company, <B>&#091;b&#093; </B>any
acquisition directly from the Company, including a public offering of securities, <B>&#091;c&#093; </B>any
acquisition by the Company or any Related Entity, <B>&#091;d&#093; </B>any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any Related Entity
or <B>&#091;e&#093; </B>any acquisition through a transaction described in subpart &#091;3&#093;, &#091;4&#093; or &#091;5&#093; of this
definition, <B>&#091;f&#093; </B>any acquisition by Retail Ventures, Inc. or any corporation, partnership or
other form of unincorporated entity of which Retail Ventures, Inc. owns, directly or
indirectly, 50&nbsp;percent or more of the total combined voting power of all classes of stock,
if the entity is a corporation, or of the capital or profits interest, if the entity is a
partnership or another form of unincorporated entity, <B>&#091;g&#093; </B>any acquisition by Schottenstein
Stores Corporation (the persons identified in subparts &#091;a&#093;, &#091;c&#093;, &#091;f&#093; and &#091;g&#093; of this subpart
being sometimes referred to as &#147;Permitted Acquirers&#148;), <B>&#091;h&#093; </B>any acquisition by any one or
more of the trusts established for the benefit of any of Jay L. Schottenstein, Susan S.
Diamond, Ann Desche, Lori Schottenstein, Geraldine Schottenstein or any of their respective
spouses, children or lineal descendants or any person controlled by any such trust or
trusts, <B>&#091;i&#093; </B>any acquisition by an entity that files SEC Form 13-G in connection with its
ownership of Stock unless and until that entity files SEC Form 13-D in connection with its
ownership of Stock or <B>&#091;j&#093; </B>any acquisition by Cerberus Partners, Ltd. unless, at the time of
the acquisition, the Permitted Acquirers, as defined in subpart &#091;2&#093;&#091;g&#093; of this definition
and the trusts described in subpart &#091;2&#093;&#091;h&#093; of this definition, directly or indirectly, own
less than 10&nbsp;percent of the voting power of the Company&#146; stock.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>The completion of a transaction or a series of related transactions effecting <B>&#091;a&#093; </B>the
merger or other business combination of the Company with or into another entity other than a
Permitted Acquirer in which the shareholders of the Company immediately before the effective date of such merger or other business combination own less than 50&nbsp;percent


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<P align="left" style="margin-left:3%; font-size: 10pt">of the voting power in such entity; or <B>&#091;b&#093; </B>the sale or other disposition of all or
substantially all of the assets of the Company except a sale or other disposition to <B>&#091;i&#093; </B>an
entity in which the shareholders of the Company immediately before the sale or disposition
own more than 50&nbsp;percent of the voting power of such entity after that transaction or <B>&#091;ii&#093; </B>a
Permitted Acquirer.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>Liquidation or dissolution of the Company other than a liquidation or dissolution into
an entity <B>&#091;a&#093; </B>in which the shareholders of the Company before the effective date of the
liquidation or dissolution own more than 50&nbsp;percent of the voting power of such entity after
the liquidation or dissolution or <B>&#091;b&#093; </B>which is a Permitted Acquirer.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;5&#093; </B>Any other transaction or event that the Board, in its sole discretion, decides will have
as material an effect on the Company as any transaction or event described in subparts &#091;1&#093;
through &#091;4&#093; of this definition but which is not otherwise described in this section.

<P align="left" style="font-size: 10pt">However, and regardless of any other provision of this Plan or element of this definition, a Change
in Control will not occur solely as a result of the initial public offering of the Company&#146;s stock
which is the subject of the Registration Statement or of any event directly related to that initial
public offering.


<P align="left" style="font-size: 10pt"><B>Change in Control Price. </B>The highest price per share of Stock offered in conjunction with any
transaction resulting in a Change in Control (as determined in good faith by the Committee if any
part of the offered price is payable other than in cash) or, in the case of a Change in Control
occurring solely by reason of events not related to a transfer of Stock, the highest Fair Market
Value of a share of Stock on any of the 30 consecutive trading days ending on the last trading day
before the Change in Control occurs.


<P align="left" style="font-size: 10pt"><B>Code. </B>The Internal Revenue Code of 1986, as amended or superseded after the Effective Date and any
applicable rulings or regulations issued under the Code.



<P align="left" style="font-size: 10pt"><B>Committee.</B>




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>In the case of any Award to Eligible Directors, the entire Board;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>In the case of Award granted to Participants other than Eligible Directors before the
Company becomes a &#147;publicly held corporation&#148; as defined in Code &#167;162(m)(2), the entire
Board; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>In the case of Awards made to Participants other than Eligible Directors after the
Company becomes a &#147;publicly held corporation&#148; as defined in Code &#167;162(m)(2), the Board&#146;s
Compensation Committee which also constitutes a &#147;compensation committee&#148; within the meaning
of Treas. Reg. &#167;1.162-27(c)(4). The Committee will be comprised of at least two persons
<B>&#091;a&#093; </B>each of whom is <B>&#091;i&#093; </B>an outside director, as defined in Treas. Reg. &#167;1.162-27(e)(3)(i)
and <B>&#091;ii&#093; </B>a &#147;non-employee&#148; director within the meaning of Rule&nbsp;16b-3 under the Act and <B>&#091;b&#093;</B>
none of whom may receive remuneration from the Company or any Related Entity in any capacity other than as a director, except as permitted
under Treas. Reg. &#167;1.162-27(e)(3)(ii).


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<P align="left" style="font-size: 10pt"><B>Company. </B>DSW Inc., an Ohio corporation, and any and all successors to it.


<P align="left" style="font-size: 10pt"><B>Consultant. </B>Any person, other than an Employee or an Eligible Director, who provides significant
services to the Company or any Related Entity.


<P align="left" style="font-size: 10pt"><B>Covered Officer. </B>Those Employees whose compensation is subject to limited deductibility under Code
&#167;162(m) as of the last day of any calendar year ending with or within any Performance Period.


<P align="left" style="font-size: 10pt"><B>Disability. </B>Unless the Committee specifies otherwise in the Award Agreement:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>With respect to an Incentive Stock Option, as defined in Code &#167;22(e)(3).



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>With respect to any Award subject to Code &#167;409A, the Participant is <B>&#091;a&#093; </B>unable to engage
in any substantial gainful activity by reason of any medically determinable physical or
mental impairment arising before Termination which can be expected to result in death or can
be expected to last for a continuous period of not less than 12 continuous months beginning
before Termination; or <B>&#091;b&#093; </B>by reason of any readily determinable physical or mental
impairment arising before Termination which can be expected to result in death or can be
expected to last for a continuous period of not less than 12&nbsp;months beginning before
Termination, receiving income replacement benefits for a period of not less than 3&nbsp;months
beginning before Termination under an accident and health plan covering employees of the
Participant&#146;s employer; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>With respect to any Award not described in subpart &#091;1&#093; or &#091;2&#093; of this definition, the
Participant&#146;s inability, with a reasonable accommodation, to perform his or her duties on a
full-time basis for a period of more than six-consecutive calendar months due to a physical
or mental infirmity arising before Termination.

<P align="left" style="font-size: 10pt"><B>Eligible Director. </B>A person who, on an applicable Grant Date <B>&#091;1&#093; </B>is an elected member of the Board
or of a Related Board (or has been appointed to the Board or to a Related Board to fill an
unexpired term and will continue to serve at the expiration of that term only if elected by
shareholders) and <B>&#091;2&#093; </B>is not an Employee. For purposes of applying this definition, an Eligible
Director&#146;s status will be determined as of the Grant Date applicable to each affected Award.


<P align="left" style="font-size: 10pt"><B>Employee. </B>Any person who, on any applicable date, is a common law employee of the Company or any
Related Entity. A worker who is classified as other than a common law employee but who is
subsequently reclassified as a common law employee of the Company for any reason and on any basis
will be treated as a common law employee only from the date that reclassification occurs and will
not retroactively be reclassified as an Employee for any purpose of this Plan.


<P align="left" style="font-size: 10pt"><B>Exercise Price. </B>The price at which a Participant may exercise an Award.


<P align="left" style="font-size: 10pt"><B>Fair Market Value. </B>The value of one share of Stock on any relevant date, determined under the
following rules:



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<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>If the Stock is traded on an exchange, the reported &#147;closing price&#148; on the relevant
date, if it is a trading day, otherwise on the next trading day;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>If the Stock is traded over-the-counter with no reported closing price, the mean between
the lowest bid and the highest asked prices on that quotation system on the relevant date if
it is a trading day, otherwise on the next trading day; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>If neither subparts &#091;1&#093; nor &#091;2&#093; of this definition apply, the fair market value as
determined by the Committee in good faith and, with respect to Incentive Stock Options,
consistent with rules prescribed under Code &#167;422.

<P align="left" style="font-size: 10pt"><B>Freestanding SAR. </B>An SAR that is not associated with an Option and is granted under Section&nbsp;10.00.


<P align="left" style="font-size: 10pt"><B>Grant Date. </B>The later of <B>&#091;1&#093; </B>the date the Committee establishes the terms of an Award or <B>&#091;2&#093; </B>the
date specified in the Award Agreement.


<P align="left" style="font-size: 10pt"><B>Group. </B>The Company and all Related Entities. The composition of the Group will be determined as
of any relevant date.


<P align="left" style="font-size: 10pt"><B>Incentive Stock Option. </B>Any Option granted under Section&nbsp;6.00 that, on the Grant Date, meets the
conditions imposed under Code &#167;422 and is not subsequently modified in a manner inconsistent with
Code &#167;422.


<P align="left" style="font-size: 10pt"><B>Nonstatutory Stock Option. </B>Any Option granted under Section&nbsp;6.00 that is not an Incentive Stock
Option.


<P align="left" style="font-size: 10pt"><B>Option. </B>The right granted to a Participant to purchase a share of Stock at a stated price for a
specified period of time. Subject to Section&nbsp;6.00, an Option may be either <B>&#091;1&#093; </B>an Incentive Stock
Option or <B>&#091;2&#093; </B>a Nonstatutory Stock Option.


<P align="left" style="font-size: 10pt"><B>Participant. </B>Any Consultant, Employee or Eligible Director to whom an outstanding Award has been
granted.


<P align="left" style="font-size: 10pt"><B>Performance-Based Award. </B>An Award granted subject to Section&nbsp;11.00.


<P align="left" style="font-size: 10pt"><B>Performance Criteria. </B>The criteria described in Section&nbsp;11.02.


<P align="left" style="font-size: 10pt"><B>Performance Period. </B>The period over which the Committee will determine if applicable Performance
Criteria have been met.


<P align="left" style="font-size: 10pt"><B>Performance Share. </B>An Award granted under Section&nbsp;9.00.


<P align="left" style="font-size: 10pt"><B>Performance Unit. </B>An Award granted under Section&nbsp;9.00.


<P align="left" style="font-size: 10pt"><B>Plan. </B>The DSW Inc. 2005 Equity Incentive Plan.


<P align="left" style="font-size: 10pt"><B>Plan Year. </B>The Company&#146;s fiscal year.



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<P align="left" style="font-size: 10pt"><B>Registration Statement. </B>The Form S-1 Registration Statement filed with the Securities and Exchange
Commission on March&nbsp;14, 2005 (Registration #333-123289), as amended at the time it is declared
effective by the Securities and Exchange Commission.


<P align="left" style="font-size: 10pt"><B>Related Board. </B>The board of directors of any incorporated Related Entity or the governing body of
any unincorporated Related Entity.


<P align="left" style="font-size: 10pt"><B>Related Entity. </B>Any corporation, partnership or other form of unincorporated entity <B>&#091;1&#093; </B>of which
the Company owns, directly or indirectly, 50&nbsp;percent or more of the total combined voting power of
all classes of stock, if the entity is a corporation, or of the capital or profits interest, if the
entity is a partnership or another form of unincorporated entity or <B>&#091;2&#093; </B>which owns 50&nbsp;percent or
more of the total combined voting power of all classes of the Stock.


<P align="left" style="font-size: 10pt"><B>Restricted Stock. </B>An Award granted under Section&nbsp;8.01.


<P align="left" style="font-size: 10pt"><B>Restricted Stock Unit. </B>An Award granted under Section&nbsp;8.02.


<P align="left" style="font-size: 10pt"><B>Restriction Period. </B>The period over which the Committee will determine if a Participant has met
conditions placed on Restricted Stock or Restricted Stock Units.


<P align="left" style="font-size: 10pt"><B>Retirement. </B>Unless the Committee specifies otherwise in the Award Agreement, the date:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>An Employee Terminates on or after reaching age 65 and completing at least five years of
service; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>An Eligible Director Terminates as a Board or a Related Board member after completing
one full term as a member of the Board or the board of directors of a Related Entity after
reaching age 65.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>For purposes of applying this definition:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>No consultant will be deemed to have &#147;Retired&#148; regardless of the circumstances
surrounding his or her Termination;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>A Participant&#146;s status as an Employee or an Eligible Director will be determined
as of the Grant Date applicable to each affected Award; and



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;c&#093; </B>An Eligible Director serving on the Board and/or one or more Related Boards may
Retire from one board while continuing to serve as a member of other Group boards
(or governing bodies). In this case, the Eligible Director&#146;s Retirement will affect
only Awards granted with respect to his or her service on the board (or other
governing body) from which he or she is Retiring.

<P align="left" style="font-size: 10pt"><B>Stock. </B>The Class&nbsp;A common stock, without par value, issued by the Company or any security issued
by the Company in substitution, exchange or in place of these shares.


<P align="left" style="font-size: 10pt"><B>Stock Appreciation Right (or &#147;SAR&#148;). </B>An Award granted under Section&nbsp;10.00 that is a Tandem SAR, an
Affiliated SAR or a Freestanding SAR.



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<P align="left" style="font-size: 10pt"><B>Stock Unit. </B>A right to receive payment of the Fair Market Value of a share of Stock as provided in
Section&nbsp;7.00.


<P align="left" style="font-size: 10pt"><B>Tandem SAR. </B>An SAR that is associated with an Option and which expires when that Option expires or
is exercised, as described in Section&nbsp;10.00.


<P align="left" style="font-size: 10pt"><B>Termination or Terminated.</B>




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Unless the Committee specifies otherwise in the Award Agreement:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>Cessation of the employee-employer relationship between an Employee and the
Company and all Related Entities for any reason;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>A Participant who is an Employee of a Related Entity at a Grant Date <B>&#091;i&#093; </B>will
not be treated as having Terminated solely because his or her employer ceases to be
a Related Entity and that individual continues to be employed by the former Related
Entity (in which case the former employee will be treated as having Terminated or
not Terminated under this definition as if the former Related Entity had remained a
Related Entity) but <B>&#091;ii&#093; </B>will be treated as having Terminated if (and to the extent
that) his or her Award is replaced by the former Related Entity following procedures
and principles described in Code &#167;424 within 90&nbsp;days after the disaffiliation;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;c&#093; </B>With respect to a Participant who is a Consultant, a cessation of the service
relationship between the Consultant and the Company and all Related Entities, unless
there is a simultaneous reengagement of the Consultant by the Company or a Related
Entity;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;d&#093; </B>With respect to a Participant who is an Eligible Director, cessation of his or
her service on the Board or a Related Board for any reason.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>For purposes of this definition:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>An Eligible Director serving on the Board and/or one or more Related Boards may
Terminate from one board while continuing to serve as a member of other Related
Boards. In this case, the Eligible Director&#146;s Termination will affect only Awards
granted with respect to his or her Terminating board membership.



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>With respect to any Award (including an Incentive Stock Option granted to an
Employee) a Termination will not have occurred while the Employee is absent from
active employment for a period of not more than three months (or, if longer, the
period during which reemployment rights are protected by law, contract or written
agreement, including the Award Agreement, between the Participant and the Company)
due to illness, military service or other leave of absence approved by the
Committee.



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;c&#093; </B>Subject to other rules described in the Plan and the Award Agreement, an
Employee whose status changes from an Employee to a Consultant will not be


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<P align="left" style="margin-left:6%; font-size: 10pt">treated as having Terminated. In these circumstances, the former Employee will be treated
as having Terminated under rules applicable to Consultants.


<P align="center" style="font-size: 10pt"><B>3.00 PARTICIPATION</B>



<P align="left" style="font-size: 10pt"><B>3.01 Participation.</B>




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Consistent with the terms of the Plan and subject to Section&nbsp;3.02, the Committee will
<B>&#091;a&#093; </B>decide which Consultants, Employees and Eligible Directors will be granted Awards; and
<B>&#091;b&#093; </B>specify the type of Award to be granted and the terms upon which an Award will be
granted and may be earned.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>The Committee may establish different terms and conditions <B>&#091;a&#093; </B>for each type of Award,
<B>&#091;b&#093; </B>for each Participant receiving the same type of Award; and <B>&#091;c&#093; </B>for the same Participants
for each Award the Participant receives, whether or not those Awards are granted at
different times.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>The Committee (or the Board, as appropriate) also may amend the Plan and the Award
Agreements without any additional consideration to affected Participants to the extent
necessary to avoid penalties arising under Code &#167;409A, even if those amendments reduce,
restrict or eliminate rights granted under the Plan or Award Agreement (or both) before
those amendments.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>Unless permitted by Code 409A, no Award subject to Code &#167;409A will be granted under this
Plan to any person who is performing services only for an entity that is not an affiliate of
the Company within the meaning of Code &#167;414(b) and (c).


<P align="left" style="font-size: 10pt"><B>3.02 Conditions of Participation. </B>By accepting an Award, each Participant agrees:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>To be bound by the terms of the Award Agreement and the Plan and to comply with other
conditions imposed by the Committee; and



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>That the Committee (or the Board, as appropriate) may amend the Plan and the Award
Agreements without any additional consideration to the extent necessary to avoid penalties
arising under Code &#167;409A, even if those amendments reduce, restrict or eliminate rights
granted under the Plan or Award Agreement (or both) before those amendments.


<P align="center" style="font-size: 10pt"><B>4.00 ADMINISTRATION</B>


<P align="left" style="font-size: 10pt"><B>4.01 Committee Duties. </B>The Committee is responsible for administering the Plan and has all powers
appropriate and necessary to that purpose. Consistent with the Plan&#146;s objectives, the Committee
may adopt, amend and rescind rules and regulations relating to the Plan, to the extent appropriate
to protect the Company&#146;s and the Group&#146;s interests and has complete discretion to make all other
decisions (including whether a Participant has incurred a Disability) necessary or advisable for the administration and interpretation of the Plan. Any action by the Committee will
be final, binding and conclusive for all purposes and upon all persons.



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<P align="left" style="font-size: 10pt"><B>4.02 Delegation of Ministerial Duties. </B>In its sole discretion, the Committee may delegate any
ministerial duties associated with the Plan to any person (including Employees) that it deems
appropriate. However, the Committee may not delegate any duties it is required to discharge under
Code &#167;162(m).


<P align="left" style="font-size: 10pt"><B>4.03 Award Agreement. </B>At the time an Award is made, the Committee will prepare and deliver an Award
Agreement to each affected Participant. The Award Agreement:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Will describe <B>&#091;a&#093; </B>the type of Award and when and how it may be exercised or earned and
<B>&#091;b&#093; </B>any Exercise Price associated with each Award.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>To the extent different from the terms of the Plan, will describe <B>&#091;a&#093; </B>any conditions
that must be met before the Award may be exercised or earned, <B>&#091;b&#093; </B>any objective restrictions
placed on Awards and any performance related conditions and Performance Criteria that must
be met before those restrictions will be released and <B>&#091;c&#093; </B>any other applicable terms and
conditions affecting the Award.

<P align="left" style="font-size: 10pt"><B>4.04 Restriction on Repricing. </B>Regardless of any other provision of this Plan, neither the Company
nor the Committee may &#147;reprice&#148; (as defined under rules issued by the exchange on which the Stock
then is traded) any Award without the prior approval of the shareholders.



<P align="center" style="font-size: 10pt"><B>5.00 STOCK SUBJECT TO PLAN</B>


<P align="left" style="font-size: 10pt"><B>5.01 Number of Shares of Stock. </B>Subject to Section&nbsp;5.03, the number of shares of Stock issued
under the Plan may not be larger than 4,600,000 of which up to 4,600,000 may be issued through
Incentive Stock Options. The shares of Stock to be delivered under the Plan may consist, in whole
or in part, of treasury Stock or authorized but unissued Stock not reserved for any other purpose.


<P align="left" style="font-size: 10pt"><B>5.02 Unfulfilled Awards. </B>Any Stock subject to an Award that, for any reason, is forfeited,
cancelled, terminated, relinquished, exchanged or otherwise settled without the issuance of Stock
or without payment of cash equal to the difference between the Award&#146;s Fair Market Value and its
Exercise Price (if any) may again be granted under the Plan and, in the discretion of the Committee
and subject to the limits described in Section&nbsp;5.01, may be subject to a subsequent Award. Any
decision by the Committee under this section will be final and binding on all Participants.


<P align="left" style="font-size: 10pt"><B>5.03 Adjustment in Capitalization. </B>If, after the Effective Date, there is a Stock dividend or
Stock split, recapitalization (including payment of an extraordinary dividend), merger,
consolidation, combination, spin-off, distribution of assets to shareholders, exchange of shares,
or other similar corporate change affecting Stock, the Committee will appropriately adjust <B>&#091;1&#093; </B>the
number of Awards that may or will be granted to Participants during a Plan Year, <B>&#091;2&#093; </B>the aggregate
number of shares of Stock available for Awards under Section&nbsp;5.01 or subject to outstanding Awards
(as well as any share-based limits imposed under this Plan), <B>&#091;3&#093; </B>the respective Exercise Price,
number of shares and other limitations applicable to outstanding or subsequently granted Awards and <B>&#091;4&#093; </B>any other factors, limits or terms affecting any outstanding or
subsequently granted Awards.



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<P align="left" style="font-size: 10pt"><B>5.04 Limits on Awards to Covered Officers. </B>During any Plan Year, no Covered Officer may receive
<B>&#091;1&#093; </B>Options and Stock Appreciation Rights covering more than 500,000 shares (adjusted as provided
in Section&nbsp;5.03), including Awards that are cancelled &#091;or deemed to have been cancelled under
Treas. Reg. &#167;1.162-27(e)(2)(vi)(B)&#093; during each Plan Year granted, <B>&#091;2&#093; </B>other Awards covering more
than 100,000 share (adjusted as provided in Section&nbsp;5.03), including Awards that are cancelled &#091;or
deemed to have been cancelled under Treas. Reg. &#167;1.162-27(e)(2)(vi)(B)&#093; during each Plan Year
granted or <B>&#091;3&#093; </B>receive more than $3,000,000 in cash settlement of Awards.



<P align="center" style="font-size: 10pt"><B>6.00 OPTIONS</B>


<P align="left" style="font-size: 10pt"><B>6.01 Grant of Options. </B>At any time during the term of this Plan, the Committee may grant <B>&#091;1&#093;</B>
Incentive Stock Options or Nonstatutory Stock Options to Employees and <B>&#091;2&#093; </B>Nonstatutory Stock
Options to Consultants and Eligible Directors.


<P align="left" style="font-size: 10pt"><B>6.02 Exercise Price. </B>Except as required to implement Section&nbsp;6.06, each Option will bear an
Exercise Price at least equal to Fair Market Value on the Grant Date. However, the Exercise Price
associated with an Incentive Stock Option will be at least 110&nbsp;percent of the Fair Market Value of
a share of Stock on the Grant Date with respect to any Incentive Stock Options issued to an
Employee who, on the Grant Date, owns &#091;as defined in Code &#167;424(d)&#093; Stock possessing more than 10
percent of the total combined voting power of all classes of Stock (or the combined voting power of
any Related Entity), determined under rules issued under Code &#167;422.


<P align="left" style="font-size: 10pt"><B>6.03 Exercise of Options. </B>Subject to any terms, restrictions and conditions specified in the Plan,
the Award Agreement and unless specified otherwise in the Award Agreement:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Options granted to Employees and Consultants will be exercisable according to the
following schedule:

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Number of Full Years Beginning After</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Cumulative Percentage</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Grant Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Vested</TD>
</TR>

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    <TD align="center" valign="top">1 but fewer than 2
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">20&nbsp;percent</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">2 but fewer than 3
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">40&nbsp;percent</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">3 but fewer than 4
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">60&nbsp;percent</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">4 but fewer than 5
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">80&nbsp;percent</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">5 or more
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100&nbsp;percent</TD>
</TR>
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</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Regardless of the vesting schedule just described but subject to Section&nbsp;12.00 and the terms of the
Award Agreement, Options that are not exercisable at Termination will be fully and immediately
exercisable if the Employee Terminates because of death, Retirement or Disability or the Consultant
Terminates because of death or Disability but will be forfeited if the Employee or Consultant
Terminates for any other reason.




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Options granted to Eligible Directors will be exercisable:


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<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>12 complete consecutive calendar months beginning after the Grant Date, if the
Eligible Director has not then Terminated; and



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>Will be fully and immediately exercisable if the Eligible Director Terminates
because of death, Retirement or Disability but will be forfeited if the Eligible
Director Terminates for any other reason.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>However:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>Any Option to purchase a fraction of a share of Stock will automatically be
converted to an Option to purchase an additional whole share.



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>Unless the Committee specifies otherwise in the Award Agreement, no Participant
may exercise Options for fewer than the smaller of <B>&#091;i&#093; </B>100 shares of Stock or <B>&#091;ii&#093;</B>
the full number of shares of Stock for which Options are then exercisable.



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;c&#093; </B>No Option may be exercised more than ten years after it is granted (five years
in the case of an Incentive Stock Option granted to an Employee who owns &#091;as
defined in Code &#167;424(d)&#093; on the Grant Date Stock possessing more than 10&nbsp;percent of
total combined voting power of all classes of Stock or the combined voting power of
any Related Entity, determined under rules issued under Code &#167;422).


<P align="left" style="font-size: 10pt"><B>6.04 Incentive Stock Options. </B>Notwithstanding anything in the Plan to the contrary:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>No provision of this Plan relating to Incentive Stock Options will be interpreted,
amended or altered, nor will any discretion or authority granted under the Plan be
exercised, in a manner that is inconsistent with Code &#167;422 or, without the consent of any
affected Participant, to cause any Incentive Stock Option to fail to qualify for the federal
income tax treatment afforded under Code &#167;421.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>The aggregate Fair Market Value of the Stock (determined as of the Grant Date) with
respect to which Incentive Stock Options are exercisable for the first time by any
Participant during any calendar year (under all option plans of the Company and all Related
Entities of the Company) will not exceed $100,000 &#091;or other amount specified in Code
&#167;422(d)&#093;, determined under rules issued under Code &#167;422.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>No Incentive Stock Option will be granted to any person who is not an Employee on the
Grant Date.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>An Incentive Stock Option granted to an Employee who, without Terminating, <B>&#091;a&#093; </B>becomes a
Consultant after the Grant Date or <B>&#091;b&#093; </B>is no longer an Employee because he or she is
employed by an entity that no longer is a Related Entity, <B>&#091;c&#093; </B>will be treated as a
Nonstatutory Stock Option beginning at the end of the third month after the former Employee becomes a Consultant or the date the former Employee&#146;s employer no longer is a
Related Entity, whichever is applicable.


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<P align="left" style="font-size: 10pt"><B>6.05 Exercise of and Payment for Options. </B>Unless the Committee specifies otherwise in the Award
Agreement, the Exercise Price associated with each Option must be paid in cash. However, the
Committee may, in its discretion, develop and extend to some or all Participants, other procedures
through which Participants may pay the Exercise Price, including a cashless exercise and allowing a
Participant to tender Stock he or she already has owned for at least six months before the exercise
date, either by actual delivery of the previously owned Stock or by attestation, valued at its Fair
Market Value on the exercise date, as partial or full payment of the Exercise Price. A Participant
may exercise an Option only by sending to the Committee a completed exercise notice (in the form
prescribed by the Committee) along with payment of the Exercise Price. As soon as administratively
feasible after those steps are taken, the Committee will issue to the Participant the appropriate
shares certificates.


<P align="left" style="font-size: 10pt"><B>6.06 Substitution of Options. </B>In the Committee&#146;s discretion, persons who become Employees as a
result of a transaction described in Code &#167;424(a) or Employees holding options issued by a former
Related Entity at the occurrence of a transaction described in Code &#167;424(a) may receive Options in
exchange for options granted by their former employer or the former Related Entity subject to the
rules and procedures prescribed under Code &#167;424.


<P align="left" style="font-size: 10pt"><B>6.07 Transferability of Stock. </B>Unless the Committee specifies otherwise in the Award Agreement or
as otherwise specifically provided in the Plan, Stock acquired through an Option will be
transferable, subject to applicable federal securities laws, the requirements of any national
securities exchange or system on which shares of Stock are then listed or traded or any blue sky or
state securities laws.



<P align="center" style="font-size: 10pt"><B>7.00 STOCK UNITS</B>



<P align="left" style="font-size: 10pt"><B>7.01 Granting Stock Units.</B>




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Each Eligible Director may elect to receive all or a portion of his or her Annual
Retainer in cash or Stock Units by returning to the Committee an Annual Retainer Deferral
Form specifying <B>&#091;a&#093; </B>the portion (stated in 25&nbsp;percent increments) of the Annual Retainer to
be converted to Stock Units, <B>&#091;b&#093; </B>the date Stock Units are to be settled and <B>&#091;c&#093; </B>the period
(which may not be longer than 10&nbsp;years) over which the value of Stock Units is to be
distributed.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Each Eligible Director that has followed the procedur<B>e </B>described in Section&nbsp;7.03 to
receive Stock Units in lieu of all or a portion of his or her Annual Retainer will receive a
number of Stock Units calculated by dividing the dollar amount of Annual Retainer to be
received in Stock Units by the Fair Market Value of a share of Stock on the first trading
day following the date of the Annual Meeting for which the deferred value of the Annual
Retainer otherwise would have been paid, rounded to the next highest whole share of Stock.


<P align="left" style="font-size: 10pt"><B>7.02 Settling Stock Units.</B>




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Stock Units always will be settled in shares of Stock unless the Award Agreement
specifies another form of settlement.


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<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>All Stock Units will be settled as of <B>&#091;a&#093; </B>the date the Eligible Director ceases to be a
member of the Board or <B>&#091;b&#093; </B>the date the Eligible Director specifies on an Annual Retainer
Deferral Form.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>If Stock Units are to be settled in cash, the amount distributed will be calculated by
multiplying the number of Stock Units to be settled in cash by Fair Market Value.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>If Stock Units are to be settled in shares of Stock, the number of shares of Stock
distributed will equal the whole number of Stock Units to be settled in Stock, with the Fair
Market Value of any fractional share of Stock distributed in cash.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;5&#093; </B>If an Eligible Director dies before all of his or her Stock Units have been settled, the
value of any unpaid Stock Units will be paid in a lump sum in cash to his or her
Beneficiary.

<P align="left" style="font-size: 10pt"><B>7.03 Election Procedures. </B>To be effective, a completed Annual Retainer Deferral Form must be
delivered to the Committee not later than:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>The first day of the calendar year for which the Annual Retainer is earned and otherwise
would have been paid in cash; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Not later than 30&nbsp;days after the Eligible Director first becomes eligible to make an
election under this section, although an election under this subpart will apply only to the
portion of the Annual Retainer attributable to services performed after the date of that
election.

<P align="left" style="font-size: 10pt">Once filed, elections made on an Annual Retainer Deferral Form may be revoked or changed by filing
a subsequent Annual Retainer Deferral Form with the Committee. However, that revocation or change
will be effective only with respect to any Annual Retainer to be earned for any calendar year
beginning after the effective date of the revocation or change. Also, the Committee will adopt
rules relating to changes in the time and manner in which Stock Units may be settled.



<P align="center" style="font-size: 10pt"><B>8.00 RESTRICTED STOCK/RESTRICTED STOCK UNITS</B>


<P align="left" style="font-size: 10pt"><B>8.01 Restricted Stock. </B>Subject to the terms of this Plan, the Committee may grant Restricted Stock
to Participants at any time during the term of this Plan under terms and conditions that the
Committee specifies in the Award Agreement and the terms of the Plan.




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated
or hypothecated until the end of the applicable Restriction Period. At the Committee&#146;s sole
discretion, all shares of Restricted Stock will:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>Be held by the Company as escrow agent during the Restriction Period; or



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>Be issued to the Participant in the form of certificates bearing a legend
describing the restrictions imposed on the shares.


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<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Restricted Stock will be:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>Forfeited (or if shares were issued to the Participant for a cash payment, those shares will be resold to the Company for the amount paid), if all restrictions have
not been met at the end of the Restriction Period, and again become available under
the Plan; or



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>Released from escrow and distributed (or any restrictions described in the
certificate removed) as soon as practicable after the last day of the Restriction
Period, if all restrictions have then been met.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>During the Restriction Period, and unless the Award Agreement provides otherwise, each
Participant to whom Restricted Stock has been issued as described in Section&nbsp;8.01&#091;1&#093;&#091;b&#093;:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>May exercise full voting rights associated with that Restricted Stock; and



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>Will be entitled to receive all dividends and other distributions paid with
respect to that Restricted Stock; provided, however, that if any dividends or other
distributions are paid in shares of Stock, those shares will be subject to the same
restrictions on transferability and forfeitability as the shares of Restricted Stock
with respect to which they were issued.

<P align="left" style="font-size: 10pt"><B>8.02 Restricted Stock Units. </B>Subject to the terms of this Plan, the Committee may grant
Restricted Stock Units to Participants at any time during the term of this Plan under terms and
conditions that the Committee specifies in the Award Agreement and to the terms of the Plan.




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Restricted Stock Units may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Restricted Stock Units will be:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>Forfeited, if all restrictions have not been met at the end of the Restriction
Period, and again become available under the Plan; or



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>Settled in shares of Stock unless the Award Agreement specifies another form of
settlement.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>If Restricted Stock Units are settled, <B>&#091;a&#093; </B>in shares of Stock, the number of shares of
Stock distributed will be equal to the number of Restricted Stock Units to be settled, <B>&#091;b&#093;</B>
in cash, the amount distributed will be equal to the number of Restricted Stock Units to be
settled multiplied by the Fair Market Value of a share of Stock on the settlement date or
<B>&#091;c&#093; </B>in a combination of shares of Stock or cash, the number of shares of Stock distributed
and the amount of cash distributed will be computed under subpart 8.02&#091;3&#093;&#091;b&#093; and &#091;c&#093;.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>During the Restriction Period, Participants may not exercise any voting rights
associated with the shares of Stock underlying his or her Restricted Stock Units or to


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<P align="left" style="margin-left:3%; font-size: 10pt">receive any dividends or other distributions otherwise payable with respect to the shares of
Stock underlying his or her Restricted Stock Units.

<P align="left" style="font-size: 10pt"><B>8.03 Vesting. </B>Subject to any terms, restrictions and conditions specified in the Plan or the Award
Agreement and unless specified otherwise in the Award Agreement, time-based restrictions imposed on
Restricted Stock or Restricted Stock Units will lapse under the following schedule:


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Number of Full Years Beginning</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Cumulative Percentage</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>After Grant Date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Vested</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Fewer than 4
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">0&nbsp;percent</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">4 or more
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100&nbsp;percent</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Also, and unless the Committee specifies otherwise in the Award Agreement, restrictions that have
not lapsed at Termination will fully and immediately lapse if the Participant Terminates because of
death, Retirement or Disability but will be forfeited if the Participant Terminates for any other
reason.



<P align="center" style="font-size: 10pt"><B>9.00. PERFORMANCE SHARES AND PERFORMANCE UNITS</B>


<P align="left" style="font-size: 10pt"><B>9.01 Generally. </B>Any Award may be granted <B>&#091;1&#093; </B>to Covered Officers in a manner that qualifies as
&#147;performance-based compensation&#148; under Code &#167;162(m) or <B>&#091;2&#093; </B>to Employees who are not Covered
Employees or to Consultants in a manner determined by the Committee. Subject to any terms,
restrictions and conditions specified in the Plan and the Award Agreement, the granting or vesting
of Performance-Based Awards will, in the Committee&#146;s sole discretion, be based on achieving
performance objectives derived from one or more of the Performance Criteria.


<P align="left" style="font-size: 10pt"><B>9.02 Earning Performance Shares and Performance Units. </B>Except as otherwise provided in the Plan
or the Award Agreement, as of the end of each Performance Period, the Committee will certify to the
Board the extent to which each Participant has or has not met his or her Performance Criteria and
Performance Shares or Performance Units will be:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Forfeited, to the extent that Performance Criteria have not been met at the end of the
Performance Period, and again become available to be granted under the Plan; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Valued and distributed, in a single lump sum, to Participants, in the form of cash,
Stock or a combination of both (as specified by the Committee in the Award Agreement) as
soon as practicable after the last day of the Performance Period to the extent that related
Performance Criteria have been met.

<P align="left" style="font-size: 10pt"><B>9.03 Rights Associated with Performance Shares and Performance Units. </B>During the Performance
Period, and unless the Award Agreement provides otherwise:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Participants may not exercise voting rights associated with their Performance Shares or
Performance Units; and


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<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>All dividends and other distributions paid with respect to any Performance Shares or
Performance Units will be held by the Company as escrow agent during the Performance Period.
At the end of the Performance Period, these dividends will be distributed to the
Participant or forfeited as provided in Section&nbsp;9.02. No interest or other accretion will
be credited with respect to any dividends held in this escrow account. If any dividends or
other distributions are paid in shares of Stock, those shares will be subject to the same
restrictions on transferability and forfeitability as the shares of Stock with respect to
which they were issued.


<P align="center" style="font-size: 10pt"><B>10.00 STOCK APPRECIATION RIGHTS</B>


<P align="left" style="font-size: 10pt"><B>10.01 SAR Grants. </B>Subject to the terms of the Plan, the Committee may grant Affiliated SARs,
Freestanding SARs and Tandem SARs (or a combination of each) to Employees or Consultants at any
time during the term of this Plan.


<P align="left" style="font-size: 10pt"><B>10.02 Exercise Price. </B>Unless the Committee specifies otherwise in the Award Agreement, the
Exercise Price specified in the Award Agreement will:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>In the case of an Affiliated SAR, not be less than 100&nbsp;percent of the Fair Market Value
of a share of Stock on the Grant Date;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>In the case of a Freestanding SAR, not be less than 100&nbsp;percent of the Fair Market Value
of a share of Stock on the Grant Date; and



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>In the case of a Tandem SAR, not be less than the Exercise Price of the related Option.

<P align="left" style="font-size: 10pt"><B>10.03 Exercise of Affiliated SARs. </B>Affiliated SARs will be deemed to be exercised on the date the
related Option is exercised. However:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>An Affiliated SAR will expire no later than the date the related Option expires;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>The value of the payout with respect to the Affiliated SAR will not be more than the
Exercise Price of the related Option; and



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>An Affiliated SAR may be exercised only if the Fair Market Value of the shares of Stock
subject to the related Option is larger than the Exercise Price of the related Option.

<P align="left" style="font-size: 10pt"><B>10.04 Exercise of Freestanding SARs. </B>Freestanding SARs will be exercisable subject to the terms
specified in the Award Agreement.


<P align="left" style="font-size: 10pt"><B>10.05 Exercise of Tandem SARs. </B>Tandem SARs may be exercised with respect to all or part of the
shares of Stock subject to the related Option by surrendering the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the
shares of Stock for which its related Option is then exercisable. However:



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<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>A Tandem SAR will expire no later than the date the related Option expires or is
exercised;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>The value of the payout with respect to the Tandem SAR will not be more than 100&nbsp;percent
of the difference between the Exercise Price of the related Option and the Fair Market Value
of a share of Stock subject to the related Option at the time the Tandem SAR is exercised;
and



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>A Tandem SAR may be exercised only if the Fair Market Value of a share of Stock subject
to the Option is larger than the Exercise Price of the related Option.


<P align="left" style="font-size: 10pt"><B>10.06 Settling SARs.</B>




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>A Participant exercising a Tandem SAR or a Freestanding SAR will receive an amount equal
to:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>The difference between the Fair Market Value of a share of Stock on the exercise
date and the Exercise Price multiplied by



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>The number of shares of Stock with respect to which the Tandem SAR or
Freestanding SAR is exercised.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Tandem SARs and Freestanding SARs always will be settled in shares of Stock unless the
Award Agreement specifies another form of settlement.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>A Participant will not receive any cash or other amount when exercising an Affiliated
SAR. Instead, the value of the Affiliated SAR being exercised will be applied to reduce
(but not below zero) the Exercise Price of the related Option.

<P align="left" style="font-size: 10pt">At the discretion of the Committee, the value of any Tandem SAR or Freestanding SAR being exercised
will be settled in cash, shares of Stock or any combination of both.



<P align="center" style="font-size: 10pt"><B>11.00 PERFORMANCE-BASED AWARD</B>


<P align="left" style="font-size: 10pt"><B>11.01 Generally. </B>Any Restricted Stock, Restricted Stock Units or Stock Units granted under the
Plan to <B>&#091;1&#093; </B>Covered Officers may be granted in a manner that qualifies as &#147;performance-based
compensation&#148; under Code &#167;162(m) or <B>&#091;2&#093; </B>Employees who are not Covered Officers or who are
Consultants, in a manner determined by the Committee. As determined by the Committee in its sole
discretion, either the granting or vesting of Performance-Based Awards will be based on achieving
performance objectives derived from one or more of the Business Criteria over the Performance
Period established by the Committee.



<P align="left" style="font-size: 10pt"><B>11.02 Performance Criteria.</B>





<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>The Performance Criteria upon which the payment or vesting of an Award to a Covered
Officer that is intended to qualify as &#147;performance-based compensation&#148; under Code &#167;162(m)
will be based on one or more (or a combination of) the following Performance Criteria and
may be applied solely with reference to the Company (and/or



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<P align="left" style="margin-left:3%; font-size: 10pt">any Related Entity) or
relatively between the Company (and/or any Related Entity) and one or more unrelated
entities:




<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>Net earnings or net income (before or after taxes);



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>Earnings per share;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;c&#093; </B>Net sales or revenue growth;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;d&#093; </B>Net operating profit;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;e&#093; </B>Return measures (including, but not limited to, return on assets, capital,
invested capital, equity, sales, or revenue);



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;f&#093; </B>Cash flow (including, but not limited to, operating cash flow, free cash flow,
cash flow return on equity, and cash flow return on investment);



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;g&#093; </B>Earnings before or after taxes, interest, depreciation, and/or amortization;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;h&#093; </B>Gross or operating margins;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;i&#093; </B>Productivity ratios;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;j&#093; </B>Share price (including, but not limited to, growth measures and total
shareholder return);



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;k&#093; </B>Expense targets;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;l&#093; </B>Margins;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;m&#093; </B>Operating efficiency;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;n&#093; </B>Market share;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;o&#093; </B>Customer satisfaction;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;p&#093; </B>Working capital targets; and



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;q&#093; </B>Economic value added (net operating profit after tax minus the sum of capital
multiplied by the cost of capital).



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Performance Criteria upon which the payment or vesting of an Award to Participants who
are not Covered Officers may be based on one or more (or a combination of) the Performance
Criteria listed in Section&nbsp;11.02&#091;1&#093; or on other factors the Committee believes are relevant
and appropriate.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>Different Performance Criteria may be applied to individual Participants or to groups of
Participants and, as specified by the Committee, may be based on the results achieved <B>&#091;a&#093;</B>
separately by the Company or any Related Entity<B>, &#091;b&#093; </B>any combination of


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<P align="left" style="margin-left:3%; font-size: 10pt">the Company and
Related Entities<B>, </B>or <B>&#091;c&#093; </B>any combination of segments, products or divisions of the Company
and Related Entities.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>The Committee:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>Will make appropriate adjustments to Performance Criteria to reflect the effect
on any Performance Criteria of any stock dividend or stock split affecting Stock,
recapitalization (including, without limitation, the payment of an extraordinary
dividend), merger, consolidation, combination, spin-off, distribution of assets to
shareholders, exchange of shares or similar corporate change. Also, the Committee
will make a similar adjustment to any portion of a Performance Criteria that is not
based on Stock but which is affected by an event having an effect similar to those
just described.



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>May make appropriate adjustments to Performance Criteria to reflect a
substantive change in a Participant&#146;s job description or assigned duties and
responsibilities.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;5&#093; </B>Performance Criteria will be established in an Award Agreement <B>&#091;a&#093; </B>as soon as
administratively practicable after established but <B>&#091;b&#093; </B>in the case of Covered Officers, no
later than the earlier of <B>&#091;i&#093; </B>90&nbsp;days after the beginning of the applicable Performance
Period; or <B>&#091;ii&#093; </B>the expiration of 25&nbsp;percent of the applicable Performance Period.

<P align="left" style="font-size: 10pt"><B>11.03 Earning Awards. </B>Subject to any terms, restrictions and conditions specified in the Plan or
the Award Agreement, as of the end of each Performance Period, the Committee will certify to the
Board the extent to which each Participant has or has not met his or her Performance Criteria.
Performance-Based Awards will be:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Forfeited, if Performance Criteria have not been met at the end of the Performance
Period; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Subject to Section&nbsp;5.04, valued and distributed as soon as practicable after the last
day of the Performance Period to the extent that related Performance Criteria have been met.


<P align="center" style="font-size: 10pt"><B>12.00 TERMINATION/BUY OUT</B>


<P align="left" style="font-size: 10pt"><B>12.01 Retirement. </B>Unless otherwise specified in the Award Agreement or this Plan, all Awards that
are exercisable when a Participant Retires may be exercised at any time before the earlier of <B>&#091;1&#093;</B>
the expiration date specified in the Award Agreement or <B>&#091;2&#093; </B>one year (three months in the case of
Incentive Stock Options) beginning on the Retirement date (or any shorter period specified in the
Award Agreement).


<P align="left" style="font-size: 10pt"><B>12.02 Death or Disability. </B>Unless otherwise specified in the Award Agreement or this Plan, all
Awards that are exercisable when a Participant Terminates because of death or Disability may be exercised by the Participant or the Participant&#146;s Beneficiary at any time before the earlier of
<B>&#091;1&#093; </B>the expiration date specified in the Award Agreement or <B>&#091;2&#093; </B>one year beginning on the date

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<P align="left" style="font-size: 10pt">of death or Termination because of Disability (or any shorter period specified in the Award
Agreement).


<P align="left" style="font-size: 10pt"><B>12.03 Termination for Cause. </B>Unless otherwise specified in the Award Agreement or this Plan, all
Awards that are outstanding (whether or not then exercisable) if a Participant Terminates (or is
deemed to have been Terminated for Cause) will be forfeited.


<P align="left" style="font-size: 10pt"><B>12.04 Termination for any Other Reason. </B>Unless otherwise specified in the Award Agreement or this
Plan or subsequently, any Awards that are outstanding when a Participant Terminates for any reason
not described in Sections&nbsp;12.01 through 12.03 and which are then exercisable, or which the
Committee has, in its sole discretion, decided to make exercisable, may be exercised at any time
before the earlier of <B>&#091;1&#093; </B>the expiration date specified in the Award Agreement or <B>&#091;2&#093; </B>90&nbsp;days
beginning on the Termination date (or any shorter period specified in the Award Agreement) and all
Awards that are not then exercisable will terminate on the Termination date.


<P align="left" style="font-size: 10pt"><B>12.05 Expiration of Options in Connection with Termination Associated with Merger, Etc. </B>Regardless
of any other provision of this Plan (and unless otherwise provided in an Award Agreement or this
Plan), Options held by a Participant who Terminates in connection with a transaction described in
Code &#167;424 will expire immediately upon the date of Termination but only if and to the extent that
another party to that transaction will grant substitute options in exchange for the Options to be
cancelled and otherwise comply with the rules and procedures prescribed under the provisions of
Code &#167;424 governing that substitution. In all other cases, Options held by a Participant who
Terminates in connection with a transaction described in Code &#167;424, will expire as otherwise
provided in this Plan and the Award Agreement.


<P align="left" style="font-size: 10pt"><B>12.06 Buy Out of Awards.</B>




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>At any time before a Change in Control or the commencement of activity that may
reasonably be expected to result in a Change in Control, the Committee, in its sole
discretion and without the consent of the affected Participant, may cancel any or all
outstanding Awards held by that Participant, whether or not exercisable, by providing to
that Participant written notice (&#147;Buy Out Notice&#148;) of its intention to exercise the rights
reserved in this section. If a Buy Out Notice is given, in the case of an Option, the
Company also will pay to each affected Participant the difference between <B>&#091;a&#093; </B>the Fair
Market Value of the Stock underlying each exercisable Option (or portion of an Option) to be
cancelled and <B>&#091; b&#093; </B>the Exercise Price associated with each exercisable Option to be
cancelled. With respect to any Award other than an Option, the Company will pay to each
affected Participant the Fair Market Value of the Stock subject to the Award. However,
unless otherwise specified in the Award Agreement, no payment will be made with respect to
any Awards that are not exercisable or are subject to a restriction when cancelled under
this section. The Company will complete any buy out made under this section as soon as
administratively possible after the date of the Buy Out Notice. At the Committee&#146;s option,
payment of the buy out amount may be made in cash, in whole shares of Stock or partly in
cash and partly in shares of Stock. The number of whole shares of Stock, if any, included in the buy out amount will be determined by dividing the


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<P align="left" style="margin-left:3%; font-size: 10pt">amount of the payment to be made in shares of Stock by the Fair Market Value as of the date
of the Buy Out Notice.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>At any time before a Change in Control or the commencement of activity that may
reasonably be expected to result in a Change in Control, the Committee, in its sole
discretion, may offer to buy for cash or by substitution of another Award any or all
outstanding Awards held by any Participant, whether or not exercisable, by providing to that
Participant written notice (&#147;Buy Out Offer&#148;) of its intention to exercise the rights
reserved in this section and other information, if any, required to be included under
applicable security laws. If a Buy Out Offer is given, the Company also will transfer to
each Participant accepting the offer the value (determined under procedures adopted by the
Committee) of the Award to be purchased or exchanged. The Company will complete any buy out
made under this section as soon as administratively possible after the date of the Buy Out
Offer and the shares of Stock subject to the Awards purchased will be recredited as provided
in Section&nbsp;5.02.


<P align="center" style="font-size: 10pt"><B>13.00 CHANGE IN CONTROL</B>


<P align="left" style="font-size: 10pt"><B>13.01 Accelerated Vesting and Settlement. </B>Subject to Section&nbsp;13.02 on the date of any Change in
Control:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; &#091;a&#093; </B>Each Option outstanding on the date of a Change in Control (whether or not
exercisable) will be cancelled in exchange <B>&#091;i&#093; </B>for cash equal to the excess of the Change in
Control Price over the Exercise Price associated with the cancelled Option or, <B>&#091;ii&#093; </B>at the
Committee&#146;s discretion, for whole shares of Stock with a Fair Market Value equal to the
excess of the Change in Control Price over the Exercise Price associated with the cancelled
Option and the Fair Market Value of any fractional share of Stock will be distributed in
cash, and <B>&#091;b&#093; </B>all related Affiliated and Tandem SARs will be cancelled.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>All Performance Criteria associated with Performance Shares or Performance Units will be
deemed to have been met on the date of the Change in Control, all Performance Periods
accelerated to the date of the Change in Control and all outstanding Performance Shares and
Performance Units (including those subject to the acceleration described in this subpart)
will be distributed in a single lump sum cash payment;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>All Freestanding SARs will be deemed to be exercisable and will be liquidated in a
single lump sum cash payment;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>All Stock Units will be distributed immediately in the form provided in the Annual
Retainer Deferral Form; and



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;5&#093; </B>All restrictions then imposed Restricted Stock or Restricted Stock Units will lapse.

<P align="left" style="font-size: 10pt"><B>13.02 Effect of Code &#167;280G. </B>Unless otherwise specified in the Award Agreement or in another
written agreement between the Participant and the Company or a Related Entity executed
simultaneously with or before any Change in Control, if the sum (or value) of the payments described in Section&nbsp;13.01 constitute an &#147;excess parachute payments&#148; as defined in

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<P align="left" style="font-size: 10pt">Code &#167;280G(b)(1) when combined with all other parachute payments attributable to the same Change in
Control, the Company or other entity making the payment (&#147;Payor&#148;) will reduce the Participant&#146;s
benefits under this Plan so that the Participant&#146;s total &#147;parachute payment&#148; as defined in Code
&#167;280G(b)(2)(A) under this and all other agreements will be $1.00 less than the amount that
otherwise would generate an excise tax under Code &#167;4999. If the reduction described in the
preceding sentence applies, within 10 business days of the effective date of the event generating
the payments (or, if later, the date of the Change in Control), the Payor will apprise the
Participant of the amount of the reduction (&#147;Notice of Reduction&#148;). Within 10 business days of
receiving that information, the Participant may specify how and against which benefit or payment
source, (including benefits and payment sources other than this Plan) the reduction is to be
applied (&#147;Notice of Allocation&#148;). The Payor will be required to implement these directions within
10 business days of receiving the Notice of Allocation. If the Payor has not received a Notice of
Allocation from the Participant within 10 business days of the date of the Notice of Reduction or
if the allocation provided in the Notice of Allocation is not sufficient to fully implement the
reduction described in this section, the Payor will apply the reduction described in this section
proportionately based on the amounts otherwise payable under Section&nbsp;13.01 or, if a Notice of
Allocation has been returned that does not sufficiently implement the reduction described in this
section, on the basis of the reductions specified in the Notice of Allocation.



<P align="center" style="font-size: 10pt"><B>14.00 AMENDMENT, MODIFICATION AND TERMINATION OF PLAN</B>


<P align="left" style="font-size: 10pt">The Board or the Committee may terminate, suspend or amend the Plan at any time without shareholder
approval except to the extent that shareholder approval is required to satisfy applicable
requirements imposed by <B>&#091;1&#093; </B>Rule&nbsp;16b-3 under the Act, or any successor rule or regulation, <B>&#091;2&#093;</B>
applicable requirements of the Code or <B>&#091;3&#093; </B>any securities exchange, market or other quotation
system on or through which the Company&#146;s securities are listed or traded. Also, no Plan amendment
may <B>&#091;4&#093; </B>result in the loss of a Committee member&#146;s status as a &#147;non-employee director&#148; as defined
in Rule&nbsp;16b-3 under the Act, or any successor rule or regulation, with respect to any employee
benefit plan of the Company, <B>&#091;5&#093; </B>cause the Plan to fail to meet requirements imposed by Rule&nbsp;16b-3
or <B>&#091;6&#093; </B>without the consent of the affected Participant (and except as specifically provided
otherwise in this Plan or the Award Agreement) adversely affect any Award granted before the
amendment, modification or termination. However, nothing in this section will restrict the
Committee&#146;s right to exercise the discretion retained in Section&nbsp;12.06 or the right to amend the
Plan and any Award Agreements without any additional consideration to affected Participants to the
extent necessary to avoid penalties arising under Code &#167;409A, even if those amendments reduce,
restrict or eliminate rights granted under the Plan or Award Agreement (or both) before those
amendments.



<P align="center" style="font-size: 10pt"><B>15.00 MISCELLANEOUS</B>


<P align="left" style="font-size: 10pt"><B>15.01 Assignability. </B>Except as described in this section, an Award may not be transferred except
by will or the laws of descent and distribution and, during the Participant&#146;s lifetime, may be
exercised only by the Participant, the Participant&#146;s guardian or legal representative. However,
with the permission of the Committee, a Participant or a specified group of Participants may
transfer Awards (other than Incentive Stock Options) to a revocable inter vivos trust, of which the Participant is the settlor, or may transfer Awards (other than an Incentive Stock Option) to

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<P align="left" style="font-size: 10pt">any member of the Participant&#146;s immediate family, any trust, whether revocable or irrevocable,
established solely for the benefit of the Participant&#146;s immediate family, any partnership or
limited liability company whose only partners or members are members of the Participant&#146;s immediate
family or an organization described in Code &#167;501(c)(3) (&#147;Permissible Transferees&#148;). Any Award
transferred to a Permissible Transferee will continue to be subject to all of the terms and
conditions that applied to the Award before the transfer and to any other rules prescribed by the
Committee. A Permissible Transferee &#091;other than an organization described in Code &#167;501(c)(3)&#093; may
not retransfer an Award except by will or the laws of descent and distribution and then only to
another Permissible Transferee.


<P align="left" style="font-size: 10pt"><B>15.02 Beneficiary Designation. </B>Each Participant may name a Beneficiary or Beneficiaries (who may
be named contingently or successively) to receive or to exercise any vested Award that is unpaid or
unexercised at the Participant&#146;s death. Each designation made will revoke all prior designations
made by the same Participant, must be made on a form prescribed by the Committee and will be
effective only when filed in writing with the Committee. If a Participant has not made an
effective Beneficiary designation, the deceased Participant&#146;s Beneficiary will be his or her
surviving spouse or, if none, the deceased Participant&#146;s estate. The identity of a Participant&#146;s
designated Beneficiary will be based only on the information included in the latest beneficiary
designation form completed by the Participant and will not be inferred from any other evidence.


<P align="left" style="font-size: 10pt"><B>15.03 No Guarantee of Continuing Services. </B>Nothing in the Plan may be construed as:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Interfering with or limiting the right of the Company or any Related Entity to Terminate
any Employee&#146;s employment at any time;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Conferring on any Participant any right to continue as an Employee or director of the
Company or any Related Entity;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093;</B>Guaranteeing that any Employee will be selected to be a Participant; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093;</B>Guaranteeing that any Participant will receive any future Awards.


<P align="left" style="font-size: 10pt"><B>15.04 Tax Withholding.</B>




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>The Company will withhold from other amounts owed to the Participant, or require a
Participant to remit to the Company, an amount sufficient to satisfy federal, state and
local withholding tax requirements on any Award, exercise or cancellation of an Award or
purchase of Stock. If these amounts are not to be withheld from other payments due to the
Participant (or if there are no other payments due to the Participant), the Company will
defer payment of cash or issuance of shares of Stock until the earlier of:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>Thirty days after the settlement date; or



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>The date the Participant remits the required amount.


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<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>If the Participant has not remitted the required amount within 30&nbsp;days after the
settlement date, the Company will permanently withhold from the value of the Awards to be
distributed the minimum amount required to be withheld to comply with applicable federal,
state and local income, wage and employment taxes and distribute the balance to the
Participant.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>In its sole discretion, which may be withheld for any reason or for no reason, the
Committee may permit a Participant to elect, subject to conditions the Committee
establishes, to reimburse the Company for this tax withholding obligation through one or
more of the following methods:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>By having shares of Stock otherwise issuable under the Plan withheld by the
Company (but only to the extent of the minimum amount that must be withheld to
comply with applicable state, federal and local income, employment and wage tax
laws);



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>By delivering to the Company previously acquired shares of Stock that the
Participant has owned for at least six months;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;c&#093; </B>By remitting cash to the Company; or



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;d&#093; </B>By remitting a personal check immediately payable to the Company.

<P align="left" style="font-size: 10pt"><B>15.05 Indemnification. </B>Each individual who is or was a member of the Committee or of the Board
will be indemnified and held harmless by the Company against and from any loss, cost, liability or
expense that may be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit or proceeding to which he or she may be made a party or in
which he or she may be involved by reason of any action taken or not taken under the Plan as a
Committee or Board member and against and from any and all amounts paid, with the Company&#146;s
approval, by him or her in settlement of any matter related to or arising from the Plan as a
Committee or Board member or paid by him or her in satisfaction of any judgment in any action, suit
or proceeding relating to or arising from the Plan against him or her as a Committee or Board
member, but only if he or she gives the Company an opportunity, at its own expense, to handle and
defend the matter before he or she undertakes to handle and defend it in his or her own behalf.
The right of indemnification described in this section is not exclusive and is independent of any
other rights of indemnification to which the individual may be entitled under the Company&#146;s
organizational documents, by contract, as a matter of law or otherwise. The foregoing right of
indemnification is not exclusive and is independent of any other rights of indemnification to which
the person may be entitled under the Company&#146;s organizational documents, by contract, as a matter
of law or otherwise.


<P align="left" style="font-size: 10pt"><B>15.06 No Limitation on Compensation. </B>Nothing in the Plan is to be construed to limit the right of
the Company to establish other plans or to pay compensation to its employees or directors, in cash
or property, in a manner not expressly authorized under the Plan.


<P align="left" style="font-size: 10pt"><B>15.07 Requirements of Law. </B>The grant of Awards and the issuance of shares of Stock will be subject
to all applicable laws, rules and regulations and to all required approvals of any governmental
agencies or national securities exchange, market or other quotation system. Also,

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<P align="left" style="font-size: 10pt">no shares of Stock will be issued under the Plan unless the Company is satisfied that the issuance
of those shares of Stock will comply with applicable federal and state securities laws.
Certificates for shares of Stock delivered under the Plan may be subject to any stock transfer
orders and other restrictions that the Committee believes to be advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission, any stock exchange or
other recognized market or quotation system upon which the Stock is then listed or traded, or any
other applicable federal or state securities law. The Committee may cause a legend or legends to
be placed on any certificates issued under the Plan to make appropriate reference to restrictions
within the scope of this section.


<P align="left" style="font-size: 10pt"><B>15.08 Term of Plan. </B>The Plan will be effective upon its adoption by the Board and approval by the
affirmative vote of the Company&#146;s shareholders under applicable rules and procedures described in
Code &#167;&#167;162(m) and 422. Subject to Section&nbsp;14.00, the Plan will continue until the tenth
anniversary of the date it is adopted by the Board or approved by the Company&#146;s shareholders,
whichever is earliest.


<P align="left" style="font-size: 10pt"><B>15.09 Governing Law. </B>The Plan, and all agreements hereunder, will be construed in accordance with
and governed by the laws (other than laws governing conflicts of laws) of the State of Ohio.


<P align="left" style="font-size: 10pt"><B>15.10 No Impact on Benefits. </B>Plan Awards are incentives designed to promote the objectives
described in Section&nbsp;1.00. Also, Awards are not compensation for purposes of calculating a
Participant&#146;s rights under any employee benefit plan that does not specifically require the
inclusion of Awards in calculating benefits.




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<DESCRIPTION>EXHIBIT 10.24
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<P align="right" style="font-size: 10pt">Exhibit 10.24


<P align="center" style="font-size: 10pt"><B>DSW INC.</B>



<P align="center" style="font-size: 10pt"><B>2005 CASH INCENTIVE COMPENSATION PLAN</B>



<P align="center" style="font-size: 10pt"><B>l.00 PURPOSE AND EFFECTIVE DATE</B>


<P align="left" style="font-size: 10pt"><B>1.01 Purpose: </B>This Plan is intended to foster and promote the financial success of the Company and
Related Entities and to increase shareholder value by <B>&#091;1&#093; </B>providing Participants an opportunity to
earn incentive compensation if specified objectives are met and <B>&#091;2&#093; </B>enabling the Company to attract
and retain the services of outstanding employees upon whose judgment, interest and special efforts
the successful conduct of the Company&#146;s business is largely dependent.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.02 Effective Date: </B>This Plan is effective on the date it is approved by the Board subject to
approval by the Company&#146;s shareholders. Any Award granted before shareholder approval will be null
and void if the shareholders do not approve the Plan within the period just described.


<P align="center" style="font-size: 10pt"><B>2.00 DEFINITIONS</B>


<P align="left" style="font-size: 10pt">When used in this Plan, the following terms have the meanings given to them in this section unless
another meaning is expressly provided elsewhere in this document or clearly required by the
context. When applying these definitions and any other word, term or phrase used in this Plan, the
form of any word, term or phrase will include any and all of its other forms.


<P align="left" style="font-size: 10pt"><B>Act. </B>The Securities Exchange Act of 1934, as amended or any successor statute of similar effect
even if the Company is not subject to the Act.


<P align="left" style="font-size: 10pt"><B>Award. </B>A grant made under this Plan consisting of an opportunity to earn a cash bonus if terms and
conditions specified in the Award Agreement are met.


<P align="left" style="font-size: 10pt"><B>Award Agreement. </B>The written or electronic agreement between the Company and each Participant that
describes the terms and conditions that must be met if an Award is to be earned. If there is a
conflict between the terms of this Plan and the terms of the Award Agreement, the terms of the Plan
will govern.


<P align="left" style="font-size: 10pt"><B>Award Date. </B>The later of <B>&#091;1&#093; </B>the date the Committee establishes the terms of an Award or <B>&#091;2&#093; </B>the
date specified in the Award Agreement.


<P align="left" style="font-size: 10pt"><B>Board. </B>The Company&#146;s board of directors.


<P align="left" style="font-size: 10pt"><B>Cause. </B>Unless the Committee specifies otherwise in the Award Agreement, with respect to any
Participant and subject to any cure provision included in any written agreement between the
Participant and the Company:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>A material failure to substantially perform his or her position or duties;


<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Engaging in illegal or grossly negligent conduct that is materially injurious to the
Company or any Related Entity;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>A material violation of any law or regulation governing the Company or any Related
Entity;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>Commission of a material act of fraud or dishonesty which has had or is likely to have a
material adverse effect upon the Company&#146;s (or any Related Entity&#146;s) operations or financial
conditions;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;5&#093; </B>A material breach of the terms of any other agreement (including any employment
agreement) with the Company or any Related Entity; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;6&#093; </B>A breach of any term of this Plan or Award Agreement.

<P align="left" style="font-size: 10pt">If a Participant Terminates (or is Terminated) for any reason other than Cause and the Company
subsequently discovers an act, failure or event that, if known before the Participant&#146;s Termination
would have justified a Termination for Cause and that act, event or failure was actively concealed
by the Participant and could not have been discovered through reasonable diligence before the
Participant Terminated, that Participant will be retroactively treated as having been Terminated
for Cause.


<P align="left" style="font-size: 10pt"><B>Change in Control. </B>The earliest of any of the following events to occur after the completion of
the initial public offering of the Company&#146;s stock which is the subject of the Registration
Statement:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>During any period consisting of 12-consecutive calendar months beginning after
completion of the initial public offering of the Company&#146;s stock which is the subject of the
Registration Statement, the members of the Board specified in the Registration Statement
(&#147;Incumbent Directors&#148;) cease for any reason other than death to constitute at least a
majority of the members of the Board, provided <B>&#091;a&#093; </B>that any director whose election, or
nomination for election by the Company&#146;s shareholders, was approved by a vote of at least a
majority of the then Incumbent Directors also will be treated as an Incumbent Director
unless that person was nominated for election to the Board (or otherwise became a member of
the Board) in connection with an actual or threatened election contest relating to the
election or removal of Board members or other threatened or actual solicitation of proxies
of consent by or in behalf of any &#147;person,&#148; including a &#147;group&#148; &#091;as those terms are used in
Act &#167;&#167;13(d) and 14(d)(2)&#093;, <B>&#091;b&#093; </B>this element of this definition will not apply if the Company
reorganizes into an entity that does not have a board of directors or analogous governing
body and that reorganization is not a Change in Control under another element of this
definition and <B>&#091;c&#093; </B>if the Company becomes a subsidiary of another entity (i.e., another
entity owns, directly or indirectly, more than 50&nbsp;percent of the total combined voting power
of all classes of Stock) in a transaction that is not a Change in Control under another
element of this definition, subpart &#091;1&#093; of this definition will be applied by reference to
changes to the board of directors of the parent entity (or of the ultimate parent entity).


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<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Any &#147;person,&#148; including a &#147;group&#148; &#091;as these terms are used in Act &#167;&#167;13(d) and 14(d)(2)&#093;
becomes the &#147;beneficial owner&#148; (as defined in Rule&nbsp;13d-3 under the Act), directly or
indirectly, of 30&nbsp;percent or more of the combined voting power of the Company and of
securities of the Company sufficient to elect a majority of the members of the Board but
disregarding the effect of <B>&#091;a&#093; </B>any acquisition by a person who on the Effective Date is the
beneficial owner of 30&nbsp;percent or more of the combined voting power of the Company, <B>&#091;b&#093; </B>any
acquisition directly from the Company, including a public offering of securities, <B>&#091;c&#093; </B>any
acquisition by the Company or any Related Entity, <B>&#091;d&#093; </B>any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any Related Entity
or <B>&#091;e&#093; </B>any acquisition through a transaction described in subpart &#091;3&#093;, &#091;4&#093; or &#091;5&#093; of this
definition, <B>&#091;f&#093; </B>any acquisition by Retail Ventures, Inc. or any corporation, partnership or
other form of unincorporated entity of which Retail Ventures, Inc. owns, directly or
indirectly, 50&nbsp;percent or more of the total combined voting power of all classes of stock,
if the entity is a corporation, or of the capital or profits interest, if the entity is a
partnership or another form of unincorporated entity, <B>&#091;g&#093; </B>any acquisition by Schottenstein
Stores Corporation (the persons identified in subparts &#091;a&#093;, &#091;c&#093;, &#091;f&#093; and &#091;g&#093; of this subpart
being sometimes referred to as &#147;Permitted Acquirers&#148;) <B>&#091;h&#093; </B>any acquisition by any one or more
of the trusts established for the benefit of any of Jay L. Schottenstein, Susan S. Diamond,
Ann Desche, Lori Schottenstein, Geraldine Schottenstein or any of their respective spouses,
children or lineal descendants or any person controlled by any such trust or trusts, <B>&#091;i&#093; </B>any
acquisition by an entity that files SEC Form 13-G in connection with its ownership of Stock
unless and until that entity files SEC Form 13-D in connection with its ownership of Stock
or <B>&#091;j&#093; </B>any acquisition by Cerberus Partners, Ltd/ unless, at the time of the acquisition,
the Permitted Acquirers, as defined in subpart &#091;2&#093;&#091;g&#093; of this definition and the trusts
described in subpart &#091;2&#093;&#091;h&#093; of this definition, directly or indirectly, own less than 10
percent of the voting power of the Company&#146;s stock.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>The completion of a transaction or a series of related transactions effecting <B>&#091;a&#093; </B>the
merger or other business combination of the Company with or into another entity other than a
Permitted Acquirer in which the shareholders of the Company immediately before the effective
date of such merger or other business combination own less than 50&nbsp;percent of the voting
power in such entity; or <B>&#091;b&#093; </B>the sale or other disposition of all or substantially all of
the assets of the Company except a sale or other disposition to <B>&#091;i&#093; </B>an entity in which the
shareholders of the Company immediately before the sale or disposition own more than 50
percent of the voting power of such entity after that transaction or <B>&#091;ii&#093; </B>a Permitted
Acquirer.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>Liquidation or dissolution of the Company other than a liquidation or dissolution into
an entity <B>&#091;a&#093; </B>in which the shareholders of the Company before the effective date of the
liquidation or dissolution own more than 50&nbsp;percent of the voting power of such entity after
the liquidation or dissolution or <B>&#091;b&#093; </B>which is a Permitted Acquirer.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;5&#093; </B>Any other transaction or event that the Board, in its sole discretion, decides will have
as material an effect on the Company as any transaction or event described in


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<P align="left" style="margin-left:3%; font-size: 10pt">subparts &#091;1&#093; through &#091;4&#093; of this definition but which is not otherwise described in this
section.

<P align="left" style="font-size: 10pt">However, and regardless of any other provision of this Plan or element of this definition, a Change
in Control will not occur solely as a result of the initial public offering of the Company&#146;s stock
which is the subject of the Registration Statement or of any event directly related to that initial
public offering.


<P align="left" style="font-size: 10pt"><B>Code. </B>The Internal Revenue Code of 1986, as amended or superseded after the Effective Date and any
applicable rulings or regulations issued under the Code.


<P align="left" style="font-size: 10pt"><B>Committee. </B>The Board&#146;s Compensation Committee which also constitutes a &#147;compensation committee&#148;
within the meaning of Treas. Reg. &#167;1.162-27(c)(4). The Committee will be comprised of at least
two persons <B>&#091;1&#093; </B>each of whom is <B>&#091;a&#093; </B>an outside director, as defined in Treas. Reg.
&#167;1.162-27(e)(3)(i) and <B>&#091;b&#093; </B>a &#147;non-employee&#148; director within the meaning of Rule&nbsp;16b-3 under the Act
and <B>&#091;2&#093; </B>none of whom may receive remuneration from the Company or any Related Entity in any
capacity other than as a director, except as permitted under Treas. Reg. &#167;1.162-27(e)(3)(ii).


<P align="left" style="font-size: 10pt"><B>Company. </B>DSW Inc. an Ohio corporation, and any and all successors to it.


<P align="left" style="font-size: 10pt"><B>Covered Officer. </B>Those employees whose compensation is subject to limited deductibility under Code
&#167;162(m) as of the last day of any calendar year ending with or within any Performance Period.


<P align="left" style="font-size: 10pt"><B>Disability. </B>Unless the Committee specifies otherwise in the Award Agreement, the Participant&#146;s
inability with a reasonable accommodation, to perform his or her duties on a full-time basis for a
period of more than six-consecutive calendar months beginning before Termination due to a physical
or mental infirmity.


<P align="left" style="font-size: 10pt"><B>Employee. </B>Any person who, on any applicable date, is a common law employee of the Company or any
Related Entity. A worker who is classified as other than a common law employee but who is
subsequently reclassified as a common law employee of the Company for any reason and on any basis
will be treated as a common law employee only from the date that reclassification occurs and will
not retroactively be reclassified as an Employee for any purpose of this Plan.


<P align="left" style="font-size: 10pt"><B>Participant. </B>Any Employee to whom an Award has been granted.


<P align="left" style="font-size: 10pt"><B>Performance Criteria. </B>The criteria described in Section&nbsp;5.01.


<P align="left" style="font-size: 10pt"><B>Performance Period. </B>The period over which the Committee will determine if applicable Performance
Criteria have been met.


<P align="left" style="font-size: 10pt"><B>Plan. </B>The DSW Inc. 2005 Cash Incentive Compensation Plan.



<P align="center" style="font-size: 10pt">4
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<P align="left" style="font-size: 10pt"><B>Registration Statement. </B>The Form S-1 Registration Statement filed with the Securities and Exchange
Commission on March&nbsp;14, 2005 (Registration #333-123289), as amended at the time it is declared
effective by the Securities Exchange Commission.


<P align="left" style="font-size: 10pt"><B>Related Entity. </B>Any corporation, partnership or other form of unincorporated entity <B>&#091;1&#093; </B>of which
the Company owns, directly or indirectly, 50&nbsp;percent or more of the total combined voting power of
all classes of stock, if the entity is a corporation, or of the capital or profits interest, if the
entity is a partnership or another form of unincorporated entity or <B>&#091;2&#093; </B>which owns 50&nbsp;percent or
more of the total combined voting power of all classes of the Stock.


<P align="left" style="font-size: 10pt"><B>Retirement. </B>The date a Participant Terminates on or after reaching age 65 and completing at least
five years of service.


<P align="left" style="font-size: 10pt"><B>Stock. </B>The Class&nbsp;A common stock, without par value, issued by the Company or any security issued
by the Company in substitution, exchange or in place of these shares.


<P align="left" style="font-size: 10pt"><B>Termination or Terminated. </B>Unless the Committee specifies otherwise in the Award Agreement, <B>&#091;1&#093;</B>
cessation of the employee-employer relationship between a Participant and the Company and all
Related Entities for any reason or <B>&#091;2&#093; </B>with respect to a Participant who is an Employee of a
Related Entity, a severance or diminution of the Company&#146;s direct or indirect ownership after which
that entity is no longer a Related Entity and after which that person is not an Employee of the
Company or any entity that then is a Related Entity. However, <B>&#091;3&#093; </B>a Termination will not have
occurred while the Participant is absent from active employment for a period of not more than three
months (or, if longer, the period during which reemployment rights are protected by law, contract
or written agreement, including the Award Agreement, between the Participant and the Company) due
to illness, military service or other leave of absence approved by the Committee and <B>&#091;4&#093; </B>in the
Committee&#146;s discretion, a Termination will not have occurred for the duration of a pending
Performance Period if a Participant&#146;s status is changed from Employee to a consultant or
independent contractor during a Performance Period established before that status change occurred.



<P align="center" style="font-size: 10pt"><B>3.00 PARTICIPATION</B>



<P align="left" style="font-size: 10pt"><B>3.01 Participation.</B>




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Consistent with the terms of the Plan and subject to Section&nbsp;3.02, the Committee will
<B>&#091;a&#093; </B>decide which Employees will be granted Awards; and <B>&#091;b&#093; </B>specify the type of Award to be
granted and the terms upon which an Award will be granted and may be earned.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>The Committee may establish different terms and conditions <B>&#091;a&#093; </B>for each Award, <B>&#091;b&#093; </B>for
each Participant receiving the same type of Award; and <B>&#091;c&#093; </B>for the same Participants for
each Award the Participant receives.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>The Committee (or the Board, as appropriate) also may amend the Plan and the Award
Agreements without any additional consideration to affected Participants to the


<P align="center" style="font-size: 10pt">5
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<P align="left" style="margin-left:3%; font-size: 10pt">extent necessary to avoid penalties arising under Code &#167;409A, even if those amendments
reduce, restrict or eliminate rights granted under the Plan or Award Agreement (or both)
before those amendments.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>Unless permitted by Code &#167;409A, no Award subject to Code &#167;409A will be granted under
this Plan to any person who is performing services only for an entity that is not an
affiliate of the Company within the meaning of Code &#167;414(b) and (c).

<P align="left" style="font-size: 10pt"><B>3.02 Conditions of Participation. </B>By accepting an Award, each Participant agrees:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>To be bound by the terms of the Award Agreement and the Plan and to comply with other
conditions imposed by the Committee; and



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>That the Committee (or the Board, as appropriate) may amend the Plan and the Award
Agreements without any additional consideration to the extent necessary to avoid penalties
arising under Code &#167;409A, even if those amendments reduce, restrict or eliminate rights
granted under the Plan or Award Agreement (or both) before those amendments.


<P align="center" style="font-size: 10pt"><B>4.00 ADMINISTRATION</B>


<P align="left" style="font-size: 10pt"><B>4.01 Committee Duties. </B>The Committee is responsible for administering the Plan and has all powers
appropriate and necessary to that purpose. Consistent with the Plan&#146;s objectives, the Committee
may adopt, amend and rescind rules and regulations relating to the Plan, to the extent appropriate
to protect the Company&#146;s and any Related Entity&#146;s interests and has complete discretion to make all
other decisions (including whether a Participant has incurred a Disability) necessary or advisable
for the administration and interpretation of the Plan. Any action by the Committee will be final,
binding and conclusive for all purposes and upon all persons.


<P align="left" style="font-size: 10pt"><B>4.02 Delegation of Ministerial Duties. </B>In its sole discretion, the Committee may delegate any
ministerial duties associated with the Plan to any person (including Employees) that it deems
appropriate. However, the Committee may not delegate any duties it is required to discharge under
Code &#167;162(m).


<P align="left" style="font-size: 10pt"><B>4.03 Award Agreement. </B>At the time an Award is made, the Committee will prepare and deliver an Award
Agreement to each affected Participant. The Award Agreement:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Will describe the Award and when and how it may be earned;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>To the extent different from the terms of the Plan, will describe <B>&#091;a&#093; </B>any conditions
that must be met before the Award may be earned, including Performance Criteria and <B>&#091;b&#093; </B>any
other applicable terms and conditions affecting the Award.


<P align="center" style="font-size: 10pt"><B>5.00 AWARDS</B>


<P align="left" style="font-size: 10pt"><B>5.0l&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performance Criteria.</B>



<P align="center" style="font-size: 10pt">6
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>The Performance Criteria upon which the payment of an Award to a Covered Officer that is
intended to qualify as &#147;performance-based compensation&#148; under Code &#167;162(m) will be based on
one or more (or a combination of) the following Performance Criteria and may be applied
solely with reference to the Company (and/or any Related Entity) or relatively between the
Company (and/or any Related Entity) and one or more unrelated entities:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>Net earnings or net income (before or after taxes);



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>Earnings per share;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;c&#093; </B>Net sales or revenue growth;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;d&#093; </B>Net operating profit;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;e&#093; </B>Return measures (including, but not limited to, return on assets, capital,
invested capital, equity, sales, or revenue);



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;f&#093; </B>Cash flow (including, but not limited to, operating cash flow, free cash flow,
cash flow return on equity, and cash flow return on investment);



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;g&#093; </B>Earnings before or after taxes, interest, depreciation, and/or amortization;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;h&#093; </B>Gross or operating margins;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;i&#093; </B>Productivity ratios;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;j&#093; </B>Share price (including, but not limited to, growth measures and total
shareholder return);



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;k&#093; </B>Expense targets;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;l&#093; </B>Margins;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;m&#093; </B>Operating efficiency;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;n&#093; </B>Market share;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;o&#093; </B>Customer satisfaction;



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;p&#093; </B>Working capital targets; and



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;q&#093; </B>Economic value added (net operating profit after tax minus the sum of capital
multiplied by the cost of capital).



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Performance Criteria upon which the payment of an Award to Participants who are not
Covered Officers may be based on one or more (or a combination of) the


<P align="center" style="font-size: 10pt">7
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt">Performance Criteria listed in Section&nbsp;5.01 or on other factors the Committee believes are
relevant and appropriate.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>Different Performance Criteria may be applied to individual Participants or to groups of
Participants and, as specified by the Committee, may be based on the results achieved <B>&#091;a&#093;</B>
separately by the Company or any Related Entity<B>, &#091;b&#093; </B>any combination of the Company and
Related Entities<B>, </B>or <B>&#091;c&#093; </B>any combination of segments, products or divisions of the Company
and Related Entities.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>The Committee:



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;a&#093; </B>Will make appropriate adjustments to Performance Criteria to reflect the effect
on any Performance Criteria of any stock dividend or stock split affecting Stock,
recapitalization (including, without limitation, the payment of an extraordinary
dividend), merger, consolidation, combination, spin-off, distribution of assets to
shareholders, exchange of shares or similar corporate change. Also, the Committee
will make a similar adjustment to any portion of a Performance Criteria that is not
based on Stock but which is affected by an event having an effect similar to those
just described.



<P align="left" style="margin-left:6%; font-size: 10pt"><B>&#091;b&#093; </B>May make appropriate adjustments to Performance Criteria to reflect a
substantive change in an Participant&#146;s job description or assigned duties and
responsibilities.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;5&#093; </B>Performance Criteria will be established in an Award Agreement <B>&#091;a&#093; </B>as soon as
administratively practicable after established but <B>&#091;b&#093; </B>in the case of Covered Officers, no
later than the earlier of <B>&#091;i&#093; </B>90&nbsp;days after the beginning of the applicable Performance
Period; or <B>&#091;ii&#093; </B>the expiration of 25&nbsp;percent of the applicable Performance Period.

<P align="left" style="font-size: 10pt"><B>5.02 Earning Awards. </B>Subject to any terms, restrictions and conditions specified in the Plan or
the Award Agreement, as of the end of each Performance Period, the Committee will certify to the
Board the extent to which each Participant has or has not met his or her Performance Criteria.
Awards will be:




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Forfeited, if Performance Criteria have not been met at the end of the Performance
Period; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Subject to Section&nbsp;5.04, valued and distributed, in a single lump sum cash payment, in
the form specified in the Award Agreement as soon as practicable after the last day of the
Performance Period to the extent that related Performance Criteria have been met.

<P align="left" style="font-size: 10pt"><B>5.03 Maximum Award. </B>The maximum Award that any Covered Officer may earn in any single calendar
year is $3,000,000.


<P align="left" style="font-size: 10pt"><B>5.04 Deferral of Distribution. </B>Each Participant may direct the Company to defer payment of all or
any portion of his or her Award by electing to have that amount <B>&#091;1&#093; </B>credited to his or her



<P align="center" style="font-size: 10pt">8
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">account under any nonqualified deferred compensation plan &#091;as defined in Section&nbsp;201(2) of the
Employee Retirement Income Security Act of 1974, as amended&#093; maintained by the Company and
designated by the Committee as an appropriate repository for these deferrals or any successor plan
and <B>&#091;2&#093; </B>distributed under the terms of that plan. This election must be made at a time and in a
manner that complies with Code &#167;409A.



<P align="left" style="font-size: 10pt"><B>5.05 Effect of Termination.</B>




<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; Termination Other Than For Death or Disability. </B>Except in the case of a Termination on
account of death or Disability, no Award will be paid to a Participant who Terminates before
the end of a Performance Period.



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; Termination Because of Death or Disability. </B>A prorated Award will be paid to a
Participant (or to his or her Beneficiary) who Terminates on account of death or Disability
but only if the Performance Criteria applicable to that Performance Period are met at the
end of that Performance Period. The amount paid will equal the Award the Disabled or dead
Participant would have received had his or her employment not Terminated before the end of
the Performance Period multiplied by the number of days between the beginning of the
Performance Period during which the Termination occurred on account of death or Disability
and divided by the total number of days in that Performance Period. This amount, if any,
will be paid at the same time and in the same manner as the Award would have been paid if
the Disabled or dead Participant had not Terminated.


<P align="center" style="font-size: 10pt"><B>6.00 CHANGE IN CONTROL</B>


<P align="left" style="font-size: 10pt"><B>6.01 Accelerated Vesting and Settlement. </B>Subject to Section&nbsp;6.02, on the date of any Change in
Control, all Performance Criteria will be deemed to have been met on the date of the Change in
Control, all Performance Periods will be accelerated to the date of the Change in Control and all
Awards will be distributed in full as of the date of the Change in Control.


<P align="left" style="font-size: 10pt"><B>6.02 Effect of Code &#167;280G. </B>Unless otherwise specified in the Award Agreement or in another written
agreement between the Participant and the Company or a Related Entity executed simultaneously with
or before any Change in Control, if the sum (or value) of the payments described in Section&nbsp;6.01
constitute an &#147;excess parachute payments&#148; as defined in Code &#167;280G(b)(1) when combined with all
other parachute payments attributable to the same Change in Control, the Company or other entity
making the payment (&#147;Payor&#148;) will reduce the Participant&#146;s benefits under this Plan so that the
Participant&#146;s total &#147;parachute payment&#148; as defined in Code &#167;280G(b)(2)(A) under this and all other
agreements will be $1.00 less than the amount that otherwise would generate an excise tax under
Code &#167;4999. If the reduction described in the preceding sentence applies, within 10 business days
of the effective date of the event generating the payments (or, if later, the date of the Change in
Control), the Payor will apprise the Participant of the amount of the reduction (&#147;Notice of
Reduction&#148;). Within 10 business days of receiving that information, the Participant may specify
how and against which benefit or payment source (including benefits and payment sources other than
this Plan) the reduction is to be applied (&#147;Notice of Allocation&#148;). The Payor will be required to
implement



<P align="center" style="font-size: 10pt">9
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">these directions within 10 business days of receiving the Notice of Allocation. If the Payor has
not received a Notice of Allocation from the Participant within 10 business days of the date of the
Notice of Reduction or if the allocation provided in the Notice of Allocation is not sufficient to
fully implement the reduction described in this section, the Payor will apply the reduction
described in this section proportionately based on the amounts otherwise payable under Section&nbsp;6.01
or, if a Notice of Allocation has been returned that does not sufficiently implement the reduction
described in this section, on the basis of the reductions specified in the Notice of Allocation.



<P align="center" style="font-size: 10pt"><B>7.00 AMENDMENT,
MODIFICATION AND TERMINATION OF PLAN</B>


<P align="left" style="font-size: 10pt">The Board or the Committee may terminate, suspend or amend the Plan at any time without shareholder
approval except to the extent that shareholder approval is required to satisfy applicable
requirements imposed by <B>&#091;1&#093; </B>Rule&nbsp;16b-3 under the Act, or any successor rule or regulation, <B>&#091;2&#093;</B>
applicable requirements of the Code or <B>&#091;3&#093; </B>any securities exchange, market or other quotation
system on or through which the Company&#146;s securities are listed or traded. Also, no Plan amendment
may <B>&#091;4&#093; </B>result in the loss of a Committee member&#146;s status as a &#147;non-employee director&#148; as defined
in Rule&nbsp;16b-3 under the Act, or any successor rule or regulation, with respect to any employee
benefit plan of the Company, <B>&#091;5&#093; </B>cause the Plan to fail to meet requirements imposed by Rule&nbsp;16b-3
or <B>&#091;6&#093; </B>without the consent of the affected Participant (and except as specifically provided
otherwise in this Plan or the Award Agreement) adversely affect any Award granted before the
amendment, modification or termination. However, nothing in this section will restrict the
Committee&#146;s right to amend the Plan and any Award Agreements without any additional consideration
to affected Participants to the extent necessary to avoid penalties arising under Code &#167;409A, even
if those amendments reduce, restrict or eliminate rights granted under the Plan or Award Agreement
(or both) before those amendments.



<P align="center" style="font-size: 10pt"><B>8.00 MISCELLANEOUS</B>


<P align="left" style="font-size: 10pt"><B>8.01 Assignability. </B>Except as described in this section, an Award may not be transferred except by
will or the laws of descent and distribution.


<P align="left" style="font-size: 10pt"><B>8.02 Beneficiary Designation. </B>Each Participant may name a Beneficiary or Beneficiaries (who may be
named contingently or successively) to receive or to exercise any Award that becomes payable on
account of or after the Participant&#146;s death. Each designation made will revoke all prior
designations made by the same Participant, must be made on a form prescribed by the Committee and
will be effective only when filed in writing with the Committee. If a Participant has not made an
effective Beneficiary designation, the deceased Participant&#146;s Beneficiary will be his or her
surviving spouse or, if none, the deceased Participant&#146;s estate. The identity of a Participant&#146;s
designated Beneficiary will be based only on the information included in the latest beneficiary
designation form completed by the Participant and will not be inferred from any other evidence.


<P align="left" style="font-size: 10pt"><B>8.03 No Guarantee of Continuing Services. </B>Nothing in the Plan may be construed as:



<P align="center" style="font-size: 10pt">10
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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;1&#093; </B>Interfering with or limiting the right of the Company or any Related Entity to Terminate
any Employee&#146;s employment at any time;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;2&#093; </B>Conferring on any Participant any right to continue as an Employee of the Company or any
Related Entity;



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;3&#093; </B>Guaranteeing that any Employee will be selected to be a Participant; or



<P align="left" style="margin-left:3%; font-size: 10pt"><B>&#091;4&#093; </B>Guaranteeing that any Participant will receive any future Awards.

<P align="left" style="font-size: 10pt"><B>8.04 Tax Withholding. </B>The Company will withhold from the Award or from other amounts owed to the
Participant an amount sufficient to satisfy federal, state and local withholding tax requirements
on any Award.


<P align="left" style="font-size: 10pt"><B>8.05 Indemnification. </B>Each individual who is or was a member of the Committee or of the Board will
be indemnified and held harmless by the Company against and from any loss, cost, liability or
expense that may be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit or proceeding to which he or she may be made a party or in
which he or she may be involved by reason of any action taken or not taken under the Plan as a
Committee or Board member and against and from any and all amounts paid, with the Company&#146;s
approval, by him or her in settlement of any matter related to or arising from the Plan as a
Committee or Board member or paid by him or her in satisfaction of any judgment in any action, suit
or proceeding relating to or arising from the Plan against him or her as a Committee or Board
member, but only if he or she gives the Company an opportunity, at its own expense, to handle and
defend the matter before he or she undertakes to handle and defend it in his or her own behalf.
The right of indemnification described in this section is not exclusive and is independent of any
other rights of indemnification to which the individual may be entitled under the Company&#146;s
organizational documents, by contract, as a matter of law or otherwise. The foregoing right of
indemnification is not exclusive and is independent of any other rights of indemnification to which
the person may be entitled under the Company&#146;s organizational documents, by contract, as a matter
of law or otherwise.


<P align="left" style="font-size: 10pt"><B>8.06 No Limitation on Compensation. </B>Nothing in the Plan is to be construed to limit the right of
the Company to establish other plans or to pay compensation to its employees or directors, in cash
or property, in a manner not expressly authorized under the Plan.


<P align="left" style="font-size: 10pt"><B>8.07 Requirements of Law. </B>The grant of Awards and the issuance of shares of Stock will be subject
to all applicable laws, rules and regulations and to all required approvals of any governmental
agencies or national securities exchange, market or other quotation system.


<P align="left" style="font-size: 10pt"><B>8.08 Governing Law. </B>The Plan, and all agreements hereunder, will be construed in accordance with
and governed by the laws (other than laws governing conflicts of laws) of the State of Ohio.


<P align="left" style="font-size: 10pt"><B>8.09 No Impact on Benefits. </B>Plan Awards are incentives designed to promote the objectives
described in Section&nbsp;1.00. Also, Awards are not compensation for purposes of calculating a



<P align="center" style="font-size: 10pt">11
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">Participant&#146;s rights under any employee benefit plan that does not specifically require the
inclusion of Awards in calculating benefits.




<P align="center" style="font-size: 10pt">12
</DIV>


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.45
<SEQUENCE>10
<FILENAME>l19155aexv10w45.txt
<DESCRIPTION>EXHIBIT 10.45
<TEXT>
<PAGE>

                                                                   Exhibit 10.45

                                      LEASE

LANDLORD: JLP-HARVARD PARK, LLC
          1798 FREBIS AVENUE
          COLUMBUS OH 43206-0410

TENANT:   DSW INC.
          4150 EAST FIFTH AVENUE
          COLUMBUS, OHIO 43219

PREMISES: Approximately 20,000 square feet at
          Chagrin Highlands, Warrensville, Ohio

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
SECTION 1.  PREMISES.....................................................     3
SECTION 2.  LANDLORD'S AND TENANT'S WORK.................................     3
SECTION 3.  TERM.........................................................     5
SECTION 4.  MINIMUM RENT.................................................     6
SECTION 5.  PERCENTAGE RENT..............................................     7
SECTION 6.  TITLE ENCUMBRANCES; LANDLORD REPRESENATATIONS,
WARRANTIES AND COVENANTS.................................................     8
SECTION 7.  RIGHT TO REMODEL.............................................    10
SECTION 8.  UTILITIES....................................................    10
SECTION 9.  GLASS........................................................    11
SECTION 10. PERSONAL PROPERTY............................................    11
SECTION 11. RIGHT TO MORTGAGE............................................    11
SECTION 12. SUBLEASE OR ASSIGNMENT.......................................    11
SECTION 13. COMMON AREAS.................................................    12
SECTION 14. OPERATION OF COMMON AREAS....................................    12
SECTION 15. COMMON AREA MAINTENANCE, TENANT'S SHARE......................    13
SECTION 16. EMINENT DOMAIN...............................................    15
SECTION 17. TENANT'S TAXES...............................................    15
SECTION 18. RISK OF GOODS................................................    15
SECTION 19. USE AND OCCUPANCY............................................    15
SECTION 20. NUISANCES....................................................    18
SECTION 21. WASTE AND REFUSE REMOVAL.....................................    18
SECTION 22. DAMAGE AND DESTRUCTION OF PREMISES...........................    18
SECTION 23. LANDLORD REPAIRS.............................................    19
SECTION 24. TENANT'S REPAIRS.............................................    19
SECTION 25. COVENANT OF TITLE AND PEACEFUL POSSESSION....................    20
SECTION 26. TENANT'S AND LANDLORD'S INSURANCE; INDEMNITY.................    21
SECTION 27. REAL ESTATE TAXES............................................    23
SECTION 28. TENANT'S INSURANCE CONTRIBUTION..............................    24
SECTION 29. FIXTURES.....................................................    25
SECTION 30. SURRENDER....................................................    25
SECTION 31. HOLDING OVER.................................................    25
SECTION 32. NOTICE.......................................................    25
SECTION 33. DEFAULT......................................................    25
SECTION 34. WAIVER OF SUBROGATION........................................    28
SECTION 35. LIABILITY OF LANDLORD; EXCULPATION...........................    28
SECTION 36. RIGHTS CUMULATIVE............................................    28
SECTION 37. MITIGATION OF DAMAGES........................................    29
</TABLE>


                                        i

<PAGE>

<TABLE>
<S>                                                                          <C>
SECTION 38. SIGNS........................................................    29
SECTION 39. ENTIRE AGREEMENT.............................................    29
SECTION 40. TENANT'S PROPERTY............................................    29
SECTION 41. BINDING UPON SUCCESSORS......................................    30
SECTION 42. HAZARDOUS SUBSTANCES.........................................    30
SECTION 43. TRANSFER OF INTEREST.........................................    31
SECTION 44. ACCESS TO PREMISES...........................................    31
SECTION 45. HEADINGS.....................................................    31
SECTION 46. NON-WAIVER...................................................    31
SECTION 47. SHORT FORM LEASE.............................................    31
SECTION 48. ESTOPPEL CERTIFICATE.........................................    31
SECTION 49. TENANT'S REIMBURSEMENT.......................................    32
SECTION 50. TENANT'S TERMINATION RIGHT...................................    32
SECTION 51. NO BROKER....................................................    32
SECTION 52. UNAVOIDABLE DELAYS...........................................    32
SECTION 53. TIMELY EXECUTION OF LEASE....................................    33
SECTION 54. ACCORD AND SATISFACTION......................................    33
SECTION 55. WAIVER OF JURY TRIAL.........................................    33
SECTION 56. LEASEHOLD FINANCING..........................................    33
</TABLE>

LIST OF EXHIBITS:

EXHIBIT "A"   SITE PLAN
EXHIBIT "B"   LEGAL DESCRIPTION
EXHIBIT "C"   LANDLORD'S WORK
EXHIBIT "D"   TENANT'S WORK
EXHIBIT "E"   EXISTING USE EXCLUSIVES AND PROHIBITED USES
EXHIBIT "F"   SIGNAGE
EXHIBIT "G"   TENANT IMPROVEMENTS
EXHIBIT "H"   LANDLORD'S WAIVER
EXHIBIT "I"   RECOGNITION AND NON-DISTURBANCE AGREEMENT (FEE MORTGAGEE)


                                       ii
<PAGE>

                                     LEASE

     THIS AGREEMENT OF LEASE, made this 7th day of April, 2006, by and between
JLP-HARVARD PARK, LLC, an Ohio limited liability company (hereinafter referred
to as "Landlord"), with offices at 1798 Frebis Avenue, Columbus, Ohio
43206-3764, and DSW INC., an Ohio corporation (hereinafter referred to as
"Tenant") with offices at 4150 East Fifth Avenue, Columbus, Ohio 43219.

                                   WITNESSETH:

SECTION 1. PREMISES

     (a) Landlord, in consideration of the rents to be paid and covenants and
agreements to be performed by Tenant, does hereby lease unto Tenant premises
comprised of approximately 20,000 square feet of leasable space (the "Premises")
in the shopping center owned by Landlord containing approximately 230,000 square
feet of leasable space on approximately 25 acres and commonly known as Chagrin
Highlands, in the City of Cleveland, County of Cuyahoga and State of Ohio (the
"Center"). The location, size, and area of the Premises and of the Center as of
the Commencement Date (defined below) will be substantially as shown on Exhibit
"A" attached hereto and made a part hereof (the "Site Plan"). A legal
description of the Center is attached hereto as Exhibit "B" and made a part
hereof.

     (b) The square footage specified in Section 1(a) shall be certified to
Tenant by Landlord's architect prior to the Rent Commencement Date (defined in
Section 3(b) below). Tenant shall have ninety (90) days from the receipt of such
certification to verify or object to Landlord's measurement. If Tenant objects
to Landlord's measurement within said ninety (90) day period, the parties shall
work together in good faith to resolve the differing square footage
calculations. In computing the square footage of the Premises, the Premises
shall be measured from the exterior surface of exterior walls and the middle of
interior walls, excluding the square footage of any mechanical and utility
rooms, escalators, elevators, stairs and any other common area space located
within the Premises. If the square footage of the Premises as verified and
confirmed by Tenant pursuant to this Section 1(b) is less than the size
specified in Section 1(a), Base Rent (defined in Section 4(a) below) and other
charges shall be proportionately adjusted, but the foregoing shall not be
construed as permitting a material variance in dimensions or area.

     (c) Landlord covenants that the Center is or shall be developed in
accordance with the Site Plan and that it shall be used as a retail shopping
center throughout the term of this Lease. Landlord shall not take or consent to
any action which materially adversely affects access to, visibility of, parking
for or use of the Premises. Notwithstanding the foregoing, no modification or
replacement to the Center shall (i) reduce the ratio of parking spaces (for
standard size American cars) to gross leasable area of buildings in the Center
below five (5) spaces per 1,000 square feet of leasable space, (ii) alter or
make any changes, including any reduction or rearrangement of parking spaces, to
that portion of the Center indicated on the Site Plan as the "Protected Area",
(iii) interfere with truck access to the loading doors of the Premises, (iv)
materially adversely interfere with customer access to the Premises, (v)
materially adversely interfere with the visibility of the Premises from the
roads providing direct access to the Center, or (vi) result in the construction
of any buildings in the area designated "No Build Area" on the Site Plan. In
performing any construction work, repairs or maintenance in the Center permitted
under this Lease after Tenant has taken physical possession of the Leased
Premises, Landlord shall use good faith, commercially reasonable efforts to
prevent any interference with parking for, access to or visibility or use of the
Premises or the business of Tenant or any subtenant or licensee of Tenant.

SECTION 2. LANDLORD'S AND TENANT'S WORK

     (a) Prior to delivery of possession of the Premises to Tenant, Landlord
shall construct, at its expense, the improvements to the Premises described on
Exhibit "C" attached hereto and made a part hereof consistent with plans and
specifications approved by Tenant as set forth in Section 2(e) below (the
"Landlord's Work"). Landlord agrees to deliver the Premises to Tenant with
Landlord's Work substantially completed (as defined in Section 2(c)) between
July

<PAGE>

15, 2006 and September 15, 2006 (the "Delivery Period"). Landlord shall give
Tenant notice (the "Estimated Delivery Notice") no later than April 1, 2006 of
the status of Landlord's construction and the estimated date that Landlord shall
deliver the Premises to Tenant with Landlord's Work substantially completed (the
"Estimated Delivery Date"). Landlord may revise the Estimated Delivery Date any
time prior to May 1, 2006 (the "Final Delivery Notice Date"), by which time
Landlord shall have given Tenant a final notice (the "Final Delivery Notice") of
a firm delivery date (the "Final Delivery Date") upon which the Landlord's Work
shall be substantially completed and the Leased Premises delivered to Tenant.
Upon the sending of the Final Delivery Notice, Landlord shall have no further
right to modify the Final Delivery Date. Neither the Estimated Delivery Date nor
the Final Delivery Date shall be (y) earlier than (i) thirty (30) days after the
date Tenant receives the Estimated Delivery Notice or the Final Delivery Notice,
as applicable, or (ii) the first day of the Delivery Period or (z) later than
the last day of the Delivery Period. If Landlord does not provide a Final
Delivery Notice on or before the earlier of the Final Delivery Notice Date and
thirty (30) days prior to the Estimated Delivery Date or if the date provided
for in such Final Delivery Notice does not comply with the requirements of this
Section 2, the Estimated Delivery Date shall be deemed to be the Final Delivery
Date, provided such date complies with the requirements of this Section 2. If
Landlord does not provide an Estimated Delivery Date on or before the Final
Delivery Notice Date or if such date does not comply with the requirements of
this Section 2, then the Final Delivery Date shall be deemed to be the last day
of the Delivery Period.

     (b) In the event that the Premises and Landlord's Work are not
substantially completed and delivered to Tenant on or before the Final Delivery
Date, the Base Rent due hereunder shall be adjusted so that, after the Rent
Commencement Date, Tenant shall receive a credit against Base Rent thereafter
due Landlord equal to one (1) day of Base Rent for each day after the Final
Delivery Date until delivery of the Premises is made to Tenant consistent with
the terms of this Lease, including substantial completion of the Landlord's
Work. Tenant shall not be obligated to accept possession of the Premises prior
to the later of (a) substantial completion of Landlord's Work, (b) the first day
of the Delivery Period and (c) the Final Delivery Date. Time is of the essence
regarding all dates set forth in this Section 2.

     (c) For purposes of this Lease, the Landlord's Work shall be deemed
"substantially completed" when (i) all of the Landlord's Work has been completed
except for "punch list items" that do not affect the Tenant's use of or the
appearance of the Premises or Tenant's ability to perform Tenant's Work (as
defined in Section 2(f) below), (ii) Landlord has satisfied the requirements of
Section 2(g), and (iii) Tenant has been furnished with a fully executed
non-disturbance agreement from the holder(s) of any then existing Mortgages,
which agreement is consistent with Section 11 of this Lease. Landlord shall
complete the punch list items within thirty (30) days of the date Tenant
notifies Landlord of same. Upon performance of such punch list, Tenant shall
promptly acknowledge Landlord's completion thereof. Punch list items shall not
be deemed completed until an authorized representative of Tenant has provided
Landlord written acknowledgment of same. Landlord agrees that any and all work
performed by Landlord after delivery of the Leased Premises to Tenant shall not
unreasonably interfere with Tenant's performance of Tenant's Work, and Landlord
shall be responsible for any and all costs resulting from any such unreasonable
interference.

     (d) Actual possession of the Premises shall have been delivered to Tenant
water-tight, free of Hazardous Substances, in a good, structurally sound
condition, with all of Landlord's Work substantially completed, which
substantial completion shall be evidenced by Landlord's architect to Tenant.

     (e) The Landlord's Work and Tenant's Work shall be performed (i) in a good
and workmanlike manner and in accordance with plans and specifications approved
by the other party, which approval shall not be unreasonably withheld or delayed
and (ii) in compliance with all applicable governmental codes, laws, ordinances
and regulations.

     (f) Landlord and Tenant agree that they shall conduct a joint walk through
of the Premises approximately two (2) weeks prior to the Final Delivery Date to
ascertain the status of Landlord's construction. Tenant agrees to provide, at
its expense, upon delivery of the Premises to Tenant, the improvements to the
Premises described on Exhibit "D" attached hereto and made a part hereof (the
"Tenant's Work").


                                       4

<PAGE>

     (g) Completion of Construction of Leased Premises. Prior to the Final
Delivery Date, Landlord shall satisfy the following conditions:

          1. Landlord shall furnish Tenant with a temporary certificate of
          occupancy and other necessary approvals which must be issued by the
          appropriate governmental authorities prior to the commencement of
          Tenant's Work and the occupancy and use of the Premises as
          contemplated. Landlord agrees to provide a permanent certificate of
          occupancy prior to Tenant's merchandising and, if required by the
          issuing authority, the setting of fixtures for the Premises, and
          otherwise as soon as available in the ordinary course of the issuing
          authority's practice.

          2. The architect engaged by Landlord shall execute a certificate of
          completion that the Premises has been constructed in a good and
          workmanlike manner in accordance with the plans and specifications
          approved by Tenant and the other requirements for Landlord's Work
          hereunder.

          3. Tenant shall have been furnished with a fully executed original of
          a commercially reasonable non-disturbance and attornment agreement
          pursuant to Section 11 hereof.

          4. Tenant shall have been notified no later than sixty (60) days prior
          to the Final Delivery Date of all applicable local governmental
          authority code requirements, if any, for the installation of Tenant's
          fixtures at the Premises and for low voltage electrical work in
          connection with the installation of Tenant's music, telephone and
          security systems at the Premises.

          5. Tenant shall have been furnished with a list of all subcontractors
          who performed work on the Premises, along with direct contact
          information for, the work discipline of, and the work performed by
          each.

          6. Tenant shall have been furnished with two (2) copies of all
          contractors', subcontractors' and suppliers' warranties relating to
          the Premises.

          7. Tenant shall have been furnished with two (2) copies of all
          operations and maintenance manuals relating to materials and systems
          used or installed in the construction of the Premises.

          8. Tenant shall have been furnished with two (2) copies of the record
          drawings for the construction of the Premises, marked to reflect
          actual locations of all components of the Premises.

     (h) In addition to any guarantees provided to Tenant elsewhere in this
Lease, Landlord hereby unconditionally guarantees all of Landlord's Work against
defective workmanship and materials for one (1) year from the Commencement Date
(as defined in Section 3(a)).

     (i) Landlord shall perform any additional work not required to be performed
by Tenant under this Lease in order for Landlord to obtain a permanent
certificate of occupancy for the Premises, whether such work relates to the
Premises or other portions of the Center.

SECTION 3. TERM

     (a) The "Commencement Date" of this Lease shall be the later of (i) the
date actual, physical possession of the Premises is delivered to Tenant with the
Landlord's Work substantially completed and (ii) the Final Delivery Date.

     (b) The initial term (the "Initial Term") of the Lease shall commence on
the earlier of (i) the date on which the Tenant opens for business in the
Premises, and (ii) sixty (60) days after the Commencement Date (the "Rent
Commencement Date") and end on the last day of the fifteenth (15th) full Lease
Year. The term "Lease Year" shall mean a period of twelve (12) consecutive
calendar months. The first Lease Year during the term hereof shall commence on
the first day of the first February following the Rent Commencement Date. Each
subsequent


                                       5

<PAGE>

Lease Year shall begin on the anniversary of the first Lease Year. The period
from the Rent Commencement Date to the first day of the first February following
the Rent Commencement Date (the "Initial Period") shall be a partial Lease Year.

     (c) If the Commencement Date has not occurred on or before September 15,
2006, then unless Tenant otherwise elects, the Commencement Date shall not occur
and Tenant shall not be obligated to accept delivery of the Leased Premises
until January 2, 2007. If for any reason, the Commencement Date has not occurred
by March 1, 2007, Tenant shall have the right and option to either (i) terminate
this Lease or (ii) elect that the Commencement Date not occur, and, thereby
defer delivery of the Leased Premises, until June 15, 2007. The remedies set
forth in this paragraph shall be in addition to any and all other rights and
remedies provided for Tenant in the Lease or available to Tenant in law or at
equity.

     (d) Tenant shall have three (3) consecutive separate options to extend the
term of this Lease for successive renewal terms of five (5) Lease Years each.
Tenant may exercise each such renewal option by giving written notice to
Landlord at least one hundred eighty (180) days prior to the end of the then
current term or renewal term.

     (e) The Initial Term and any renewal terms are hereinafter collectively
referred to as the "term".

     (f) Beginning on the date of this Lease and ending on the Commencement
Date, Tenant, its employees and agents shall have the right to enter the
Premises or any part thereof at reasonable times during regular business hours
for the purpose of making such inspections as Tenant may deem reasonably
necessary. In consideration of Tenant's right to inspect the Premises, Tenant
agrees to indemnify, defend and hold Landlord harmless from any and all loss,
damage, claims, costs, demands or expenses (including reasonable attorney's
fees) resulting from such entry on the Premises by Tenant or its agents.

     (g) From the date upon which the Premises are delivered to Tenant for its
work until the Commencement Date of the lease term, Tenant shall observe and
perform all of its obligations under this Lease (except Tenant's obligation to
operate and pay Base Rent, percentage rent and Tenant's Proportionate Share
(defined in Section 15(c) below) of "Maintenance Costs" (defined and provided
for in Section 15(b) hereof Real Estate Taxes (defined and provided for in
Section 27(b) hereof) and insurance (provided for in Section 28 hereof). In the
event Tenant fails to open for business within one hundred twenty (120) days
after the date possession of the Premises has been delivered to Tenant,
Landlord, in addition to any and all other available remedies, may require
Tenant to pay to Landlord, in addition to all other rent and charges herein, as
liquidated damages and not as a penalty, an amount equal to one-three hundred
sixty five thousandths (1/365) of the annual Base Rent for each day such failure
to open continues.

SECTION 4. MINIMUM RENT

     (a) From and after the Rent Commencement Date, Tenant covenants and agrees
to pay on a monthly basis during the term "Base Rent" in the following amounts
to Landlord at the address listed above or such other place as Landlord may by
thirty (30) days' prior written notice to Tenant direct:

<TABLE>
<CAPTION>
                       ANNUAL RENT                           ANNUAL
   LEASE YEAR     (BASED ON 12 MONTHS)   MONTHLY RENT   PER SQUARE FOOT
   ----------     --------------------   ------------   ---------------
<S>               <C>                    <C>            <C>
1-5 (initial)            $18.00           $30,000.00      $360,000.00
6-10 (initial)           $19.80           $33,000.00      $396,000.00
11-15 (initial)          $21.78           $36,300.00      $435,600.00
16-20 (option)           $23.96           $39,933.33      $479,200.00
21-25 (option)           $26.35           $43,916.67      $527,000.00
26-30 (option)           $28.99           $48,316.67      $579,800.00
</TABLE>


                                       6

<PAGE>

The monthly installments of Base Rent payable under this Section 4 shall be paid
in advance on or before the first day of each calendar month from and after the
Rent Commencement Date during the term hereof without notice or demand therefor
and without any offsets or deductions whatsoever except as otherwise provided in
this Lease. Base Rent for any partial month shall be prorated based upon a
thirty (30) day month. Base Rent for any Initial Period shall be the same as the
Base Rent for the first Lease Year. As used in this Lease, "Rent" shall mean
Base Rent in addition to all other sums due and owing from Tenant to Landlord
under this Lease.

     (b) In the event any sums required under this Lease to be paid are not
received when due, then all such amounts shall bear interest from the due date
thereof until the date paid at the rate of interest equal to two percent (2%)
over the prime rate in effect from time to time as established by National City
Bank, Columbus, Ohio (the "Interest Rate"), and shall be due and payable by
Tenant without notice or demand, Tenant shall pay the foregoing interest thereon
in addition to all default remedies of Landlord pursuant to Section 33 below.

     (c) Notwithstanding anything herein contained to the contrary, Tenant shall
initially pay to Landlord as additional Rent, simultaneously with the payment of
Base Rent, payable in equal monthly installments, the estimated monthly amount
of Tenant's Proportionate Share of Maintenance Costs (provided for in Section 15
hereof), Real Estate Taxes (provided for in Section 27 hereof) and insurance
(provided for in Section 28 hereof).

SECTION 5. PERCENTAGE RENT

     (a) Beginning with the first Lease Year, Tenant shall pay to Landlord, in
addition to Base Rent, upon the conditions and at the times hereinafter set
forth, percentage rent equal to two percent (2%) of Tenant's gross sales (as
hereinafter defined) in excess of the number obtained by dividing (a) Base Rent
for the applicable lease year by (b) the number .04. The annual percentage rent
shall be paid by Tenant to Landlord within ninety (90) days after the end of
each Lease Year. Each such payment shall be accompanied by a statement signed by
an authorized representative of Tenant setting forth Tenant's gross sales for
such Lease Year. For purposes of permitting verification by Landlord of the
gross sales reported by Tenant, Landlord shall have the right, not more than one
(1) time per Lease Year, upon not less than five (5) business days notice to
Tenant, to audit during normal business hours in Tenant's corporate office,
Tenant's books and records relating to Tenant's gross sales for a period of two
(2) years after the end of each Lease Year. Landlord agrees that no contingency
fee auditor shall be employed by Landlord for the purpose of conducting any such
audit. If such an audit reveals that Tenant has understated its gross sales by
more than three percent (3%) for any Lease Year, Tenant, in addition to paying
the additional percentage rent due, shall pay the reasonable cost of the audit
within thirty (30) days of Tenant's receipt of Landlord's demand for the same
and copies of all bills or invoices on which such cost is based.

     (b) Each Lease Year shall constitute a separate accounting period, and the
computation of percentage rental due for any one period shall be based on the
gross sales for such Lease Year.

     (c) The term "gross sales" as used in this Lease is hereby defined to mean
the gross dollar aggregate of all sales or rental or manufacture or production
of merchandise and all services, income and other receipts whatsoever of all
business conducted in, at or from any part of the Premises, whether for cash,
credit, check, charge account, gift or merchandise certificate purchased or for
other disposition of value regardless of collection. Should any departments,
divisions or parts of Lessee's business be conducted by any subleases,
concessionaires, licensees, assignees or others, then there shall be included in
Lessee's gross sales, all "gross sales" of such department, division or part,
whether the receipts be obtained at the Premises or elsewhere in the same manner
as if such business had been conducted by Lessee. Gross sales shall exclude the
following: (i) all credit, refunds, and allowances granted to customers; (ii)
all excise taxes, sales taxes, and other taxes levied or imposed by any
governmental authority upon or in connection with such sales; (iii) bulk sales
of goods in connection with the sale of Tenant's business; (iv) sales of
fixtures, furniture, equipment and other items not made in the ordinary course
of business; (v) salvage sales of damaged merchandise; (vi) discount sales made
to employees of the Tenant and Tenant's subsidiaries and affiliated
corporations, if any; (vii) exchanges of merchandise between Tenant's warehouse
or other stores and other similar movements of


                                       7

<PAGE>

merchandise; (viii) returns to suppliers; (ix) the proceeds from vending
machines and coin operated telephones and commissions on such proceeds to the
extent such proceeds and commissions are less than five percent (5%) of Gross
Sales exclusive of such proceeds and commissions; (x) uncollectible customer
charges and bad checks; (xi) disallowed credit card amounts and credit card
service charges or fees retained by the credit card company; (xii) delivery
charges; and (xiii) customer credit insurance.

     (d) The percentage rental, if any, shall be paid within ninety (90) days
after the end of each lease year, accompanied by a statement in writing signed
by Tenant setting forth its gross sales from the sale of all items for such
lease year. Tenant shall keep at its principal executive offices, where now or
hereafter located, true and accurate accounts of all receipts from the Premises.
Landlord, its agents and accountants, shall have access to such records at any
and all times during regular business hours for the purpose of examining or
auditing the same. Tenant shall also furnish to Landlord any and all reasonable
supporting data relating to gross sales and any deductions therefrom as Landlord
may reasonably require. Landlord agrees to keep any information obtained
therefrom confidential, except as may be required for Landlord's tax returns, or
in the event of litigation or arbitration where such matters are material.

     (e) Tenant shall at all times maintain accurate records which shall be
available for Landlord's inspection at any reasonable time.

     (f) If Landlord, for any reason, questions or disputes any statement of
percentage rental prepared by Tenant, then Landlord, at its own expense, may
employ such non-contingency fee accountants as Landlord may select to audit and
determine the amount of gross sales for the period or periods covered by such
statements. If the report of the accountants employed by Landlord shall show any
additional percentage rental payable by Tenant, then Tenant shall pay to
Landlord such additional percentage rental plus interest at one (1) point over
the prime rate, commencing on the date such percentage rentals should have been
paid, within thirty (30) days after such report has been forwarded to Tenant,
unless Tenant shall, within said thirty (30) day period, notify Landlord that
Tenant questions or disputes the correctness of such report. In the event that
Tenant questions or disputes the correctness of such report, the accountants
employed by Tenant and the accountants employed by Landlord shall endeavor to
reconcile the question(s) or dispute(s) within thirty (30) days after the notice
from Tenant questioning or disputing the report of Landlord's accountants. In
the event that it is finally determined by the parties that Tenant has
understated percentage rent for any Lease year by three percent (3%) or more,
Tenant shall pay the cost of the audit. Furthermore, if Tenant's gross sales
cannot be verified due to the insufficiency or inadequacy of Tenant's records,
then Tenant shall pay the cost of the audit. The cost of any audit resulting
from failure to report percentage rent after written notification of default
shall be at the sole cost of Tenant.

SECTION 6. TITLE ENCUMBRANCES; LANDLORD REPRESENATATIONS, WARRANTIES AND
     COVENANTS

     (a) Tenant's rights under this Lease are subject and subordinate to those
title matters set forth in Landlord's owner's title policy issued by Chicago
Title Insurance Company, being Policy No. 24510646, dated September 15, 2005, a
copy of which has been provided to Tenant, specifically including but not
limited to the terms and conditions of a certain Declaration of Covenants,
Conditions and Restrictions for Chagrin Highlands, dated May 4, 1999, executed
by the City of Cleveland, Ohio, as Declarant and filed for record on May 5, 1999
and recorded as Cuyahoga County Recorder's AFN 19990551070, as subsequently
supplemented and amended (collectively, the "Declaration"). Tenant agrees that
it shall abide by the terms and conditions of the Declaration.

     (b) Landlord covenants, represents and warrants to Tenant that: (i) the
Declaration has not been modified, amended or terminated; (ii) the Declaration
is currently in full force and effect; (iii) to its actual knowledge as of the
date hereof, no default under the Declaration exists thereunder beyond any
applicable notice and cure period; and (iv) the Declaration is, and shall
remain, superior in lien to all mortgages and related liens affecting the Center
and all other land which is encumbered by the Declaration. Tenant shall comply
with the terms and conditions of the Declaration to the extent same affects the
Premises (it being agreed that Tenant shall not be obligated to expend any sums
in connection with such compliance).


                                       8

<PAGE>

     (c) Landlord shall, during the term: (i) perform and observe all of the
terms, covenants, provisions and conditions of the Declaration on Landlord's
part to be performed and observed; (ii) defend, indemnify and hold harmless
Tenant from and against and all claims, demands, causes of action, suits,
damages, liabilities and expenses of any nature arising out of or in connection
with the enforcement of, or a claimed breach by, Landlord of any covenant, term,
condition or provision of the Declaration; and (iii) diligently enforce, at its
sole expense, the covenants, agreements and obligations of the Declaration.
Tenant shall, during the term, defend, indemnify and hold harmless Landlord from
and against and all claims, demands, causes of action, suits, damages,
liabilities and expenses of any nature arising out of or in connection with the
enforcement of, or a claimed breach by, Tenant of any covenant, term, condition
or provision of the Declaration.

     (d) Whenever, pursuant to the Declaration, the consent or approval of
Landlord shall be required by or requested, and such consent or approval could
diminish the rights or increase the obligations of Tenant thereunder or under
this Lease, or could adversely affect Tenant's use or occupancy of the Premises,
or the conduct of Tenant's business therein, such consent or approval shall not
be granted without the prior written consent of Tenant, which consent may be
withheld in its sole and absolute discretion.

     (e) Landlord shall not amend, or modify the Declaration if such amendment
or modification could diminish the rights or increase the obligations of Tenant
thereunder of under this Lease, or could adversely affect Tenant's use or
occupancy of the Premises or the conduct of Tenant's business therein, nor shall
Landlord terminate the Declaration.

     (f) Landlord shall obtain any third-party approvals required under Article
VIII of the Declaration for the performance of Landlord's Work (including,
without limitation, Tenant's elevations and signage, as shown on Exhibit "F"
hereto), Tenant's Work and the operation of Tenant's business in the Premises.

     (g) Landlord further represents, warrants and/or covenants:

          1. That it has the right to enter into this Lease and that the
          person(s) signing this Lease on its behalf has authority to enter into
          this Lease and to bind Landlord to the terms, covenants and conditions
          contained herein.

          2. That it has good and marketable fee simple title to the Premises
          and the Center is free and clear of all easements, restrictions, liens
          and encumbrances except as described in Section 6(a) above.

          3. That the Premises, including without limitation, the roof and HVAC
          system, are or as of the Commencement Date shall be, in good condition
          and repair.

          4. That the Premises is, or as of the Commencement Date shall be,
          properly zoned for use by the Tenant as a retail footwear location and
          there are no restrictive covenants or other title encumbrances which
          restrict in any way the use of the Premises as a retail footwear
          location.

          5. That Landlord has, or as of the Commencement Date shall have,
          obtained all necessary approvals and permits from appropriate
          governmental authorities for the development of the Center in
          accordance with the Site Plan and for the construction and occupancy
          of the Premises by Tenant as a retail footwear location.

          6. That Landlord has not entered into, and shall not hereafter prior
          to the expiration or termination of this Lease enter into, any leases,
          agreements or restrictive covenants that would prohibit or interfere
          with the use of the Premises by the Tenant as a retail footwear
          location.

          7. In the event the legal description of the Center described on
          Exhibit "B" hereto indicates that the Center is composed of more than
          one (1) parcel or lot, there exists no strips or gores between such
          parcels or lots which are not owned by Landlord.


                                       9

<PAGE>
          8. No third-party consents or approvals are required in order for
          Landlord to enter into this Lease, or for the performance of
          Landlord's Work.

          9. The Center now has, and on the Commencement Date shall have,
          access to and from Richmond Road and Harvard Road, as shown on the
          Site Plan, for the passage of vehicular traffic.

          10. As of the date of this Lease, there are no sign ordinances,
          restrictive covenants, uniform sign plans or other signage
          restrictions which would prevent the Premises from having the signage
          (including, without limitation, the square foot area and size of
          letters) as depicted on Exhibit "F" hereof.

SECTION 7. RIGHT TO REMODEL

     (a) Tenant may, at Tenant's expense, make repairs and alterations to the
interior non-structural portions of the Premises and remodel the interior of the
Premises, excepting structural and exterior changes, in such manner and to such
extent as may from time to time be deemed necessary by Tenant for adapting to
the Premises to the requirements and uses of Tenant and for the installation of
its fixtures, appliances and equipment. Any structural or exterior alteration
may only be made by Tenant with the prior written approval of Landlord, which
approval may be granted or withheld in Landlord's sole discretion. All plans for
any structural alterations shall be submitted to Landlord for endorsement of its
approval prior to commencement of work. Upon Landlord's request, Tenant shall be
obligated, if it remodels and/or alters the Premises, to restore the Premises
upon vacating the same. Tenant will indemnify and save harmless the Landlord
from and against all mechanics liens or claims by reason of repairs, alterations
or improvements which may be made by Tenant to the Premises. Inasmuch as any
such alterations, additions or other work in or to the Premises may constitute
or create a hazard, inconvenience or annoyance to the public and other tenants
in the Center, Tenant shall, if so directed in writing by Landlord, erect
barricades, temporarily close the Premises, or affected portion thereof, to the
public or take whatever measures are necessary to protect the building
containing the Premises, the public and the other tenants of the Center for the
duration of such alterations, additions or other work. If Landlord determines,
in its sole judgment, that Tenant has failed to take any of such necessary
protective measures, and Tenant fails to cure same within ten (10) days after
notice thereof, Landlord may do so and Tenant shall reimburse Landlord for the
cost thereof within ten (10) days after Landlord bills Tenant therefor.

     (b) All such work, including Tenant's Work pursuant to Exhibit "D" shall be
performed lien free by Tenant. In the event a mechanic's lien is filed against
the premises or the Center, Tenant shall discharge or bond off same within ten
(10) days from the filing thereof. If Tenant fails to discharge said lien,
Landlord may bond off or pay same without inquiring into the validity or merits
of such lien, and all sums so advanced shall be paid on demand by Tenant as
additional rent.

SECTION 8. UTILITIES

     (a) Prior to the Commencement Date, Landlord shall provide, at Landlord's
expense, by separate meter, electric, water, sewer, and other utilities to the
Premises sufficient to meet Tenant's requirements. Landlord shall further
provide, or cause to be provided, all such utility services to the Premises
during the term of this Lease. Tenant agrees to be responsible and pay for all
public utility services rendered or furnished to the Premises during the term
hereof, including, but not limited to, heat, water, gas, electric, steam,
telephone service and sewer services, together with all taxes, levies or other
charges on such utility services when the same become due and payable. Tenant
shall be responsible for all utility services and costs inside the premises.
Landlord shall not be liable for the quality or quantity of or interference
involving such utilities unless due directly to Landlord's negligence.

     (b) During the term hereof, whether the Premises are occupied or
unoccupied, Tenant agrees to maintain heat sufficient to heat the Premises so as
to avert any damage to the Premises on account of cold weather.

     (c) Tenant agrees to be responsible for its rubbish removal from the
Premises. Tenant shall be permitted to maintain and operate, at no extra charge:
(i) a trash compactor in the


                                       10

<PAGE>
portion of the Common Areas designated on Site Plan as "Trash Compactor Pad";
and (ii) a trash container(s) in the portion(s) of the Common Areas designated
on Site Plan as "Trash Container Pad". Tenant, at its sole cost and expense,
shall keep the trash compactor and containers neat and clean and repair any
damage caused by use and storage of such compactor and containers.

SECTION 9. GLASS

     The Tenant shall maintain the glass part of the Premises, promptly
replacing any breakage and fully saving the Landlord harmless from any loss,
cost or damage resulting from such breakage or the replacement thereof.

SECTION 10. PERSONAL PROPERTY

     The Tenant further agrees that all personal property of every kind or
description that may at any time be in or on the Premises shall be at the
Tenant's sole risk, or at the risk of those claiming under the Tenant, and that
the Landlord shall not be liable for any damage to said property or loss
suffered by the business or occupation of the Tenant caused in any manner
whatsoever.

SECTION 11. RIGHT TO MORTGAGE

     (a) Landlord reserves the right to subject and subordinate this Lease at
all times to the lien of any deed of trust, mortgage or mortgages now or
hereafter placed upon Landlord's interest in the Premises; provided, however,
that no default by Landlord, under any deed of trust, mortgage or mortgages,
shall affect Tenant's rights under this Lease, so long as Tenant performs the
obligations imposed upon it hereunder and is not in default hereunder, and
Tenant attorns to the holder of such deed of trust or mortgage, its assignee or
the purchaser at any foreclosure sale. Any such subordination shall be
contingent upon Tenant receiving a commercially reasonable subordination,
non-disturbance and attornment agreement ("SNDA"). It is a condition, however,
to the subordination and lien provisions herein provided, that Landlord shall
procure from any such mortgagee an agreement in writing, which shall be
delivered to Tenant or contained in an SNDA, providing in substance that so long
as Tenant shall faithfully discharge the obligations on its part to be kept and
performed under the terms of this Lease and is not in default under the terms
hereof, its tenancy will not be disturbed nor this Lease affected by any default
under such mortgage. The parties acknowledge that the SNDA attached hereto as
Exhibit "I" is commercially reasonable. Landlord represents and warrants that,
as of the date of this Lease and the Commencement Date, there are no mortgages,
ground leases or other encumbrances that could dispossess Tenant's leasehold
interest hereunder (collectively, "Mortgages") on Landlord's fee title to the
Center. Landlord agrees that Tenant's obligations under this Lease shall be
contingent upon Tenant entering into an SNDA with the holder of such Mortgage on
or before the Commencement Date.

     (b) Wherever notice is required to be given to Landlord pursuant to the
terms of this Lease, Tenant will likewise give such notice to any mortgagee of
Landlord's interest in the Premises upon notice of such mortgagee's name and
address from Landlord. Furthermore, such mortgagee shall have the same rights to
cure any default on the part of Landlord that Landlord would have had.

SECTION 12. SUBLEASE OR ASSIGNMENT

     (a) Tenant may assign Tenant's interest in this Lease or sublet all or any
portion of the Premises to a nationally or regionally recognized retailer
without Landlord's consent. Any other assignment or subletting not specifically
provided for in this Section 12 shall be subject to Landlord's prior written
consent, which consent shall not be unreasonably withheld. Landlord's review of
the proposed assignee or subtenant shall be limited to business reputation,
business experience, a retail use compatible with then existing tenant mix of
the Center, and financial ability to perform its obligations under this Lease or
the proposed sublease, as the case may be. In any such event, Tenant shall
remain fully and primarily liable hereunder. Tenant's right to assign or sublet
shall be subject to any then existing exclusives or primary use exclusives for
tenants leasing more than 15,000 square feet of space in the Center.


                                       11

<PAGE>

     Tenant may, without the consent of Landlord, (i) grant licenses and/or
concessions within the Premises or (ii) assign or sublet all or any portion of
the Premises to (a) any parent, affiliate or subsidiary corporation of Tenant;
(b) a transferee or successor by merger, consolidation or acquisition of Tenant
or its parent or subsidiary; or (c) a transferee with a good business reputation
who is acquiring all or substantially all of the stores of Tenant in the State
of Ohio or the assets of Tenant, its parent or subsidiary. Any such assignee or
sublessee shall be bound by the terms of this Lease. Tenant shall deliver to
Landlord in the ordinary course of its business an instrument whereby the
assignee or entity succeeding to Tenant's interest hereunder agrees to be bound
by the terms of this Lease.

     (b) Landlord may assign Landlord's interest in this Lease without the
consent of Tenant (a) to any entity to which Landlord transfers its fee interest
in the Premises provided such entity (i) agrees in writing to be bound by all
the terms of this Lease and (ii) such assignment is pursuant to a bona fide
arm's length transaction not designed to reduce Landlord's liability or to
otherwise exempt Landlord from any provision of this Lease or (b) subject to
Section 12, as security for any indebtedness undertaken by Landlord.

SECTION 13. COMMON AREAS

     Landlord grants to Tenant and its customers, agents, employees, licensees,
invitees and subtenants, a non-exclusive easement in common with the other
tenants of the Center for the use of all Common Areas. Landlord hereby covenants
and agrees that Landlord shall not grant any party other than tenants of the
Center and their customers, agents, employees, licensees, invitees and
subtenants a right to utilize the parking areas in the Center, and Landlord
shall use commercially reasonable efforts to restrict the use of the parking
areas to such parties. "Common Areas" means all areas and facilities in the
Center provided and so designated by Landlord and made available by Landlord in
the exercise of good business judgment for the common use and benefit of tenants
of the Center and their customers, employees and invitees. Common Areas shall
include (to the extent the same are constructed), but not be limited to, the
parking areas, sidewalks, landscaped areas, corridors, stairways, boundary walls
and fences, incinerators, truckways, service roads, and service areas not
reserved for the exclusive use of Tenant or other tenants.

SECTION 14. OPERATION OF COMMON AREAS

     (a) From and after the Commencement Date, Landlord, at its cost and
expense, shall operate the Center and maintain the Common Areas and the Center
in a clean and safe condition and repair so that Tenant and its customers,
guests, invitees, licensees, officers and employees can use and enjoy the same.
The obligations of Landlord pursuant hereto shall include, without limitation,
the maintenance of the Center and any pylon structure(s) (excluding therefrom
Tenant's advertising panels), regular cleaning of the Common Areas, removal of
trash and debris from the Common Areas, repairing the asphalt and concrete
portions of the Common Areas (including potholes, curbs and sidewalks),
repairing common utility lines and facilities, repairing storm drains, repairing
parking lot lights, maintaining the landscaped portion of the Common Areas
(including regular grass cutting), maintaining floodlights and other necessary
means of illumination sufficient to illuminate the Common Areas during twilight
and evening hours that Tenant's store is open for business and in operation,
prompt removal of snow and ice on every occasion where safety of the Common
Areas or access to the Premises is impeded, and periodic restriping of the
parking area. Landlord shall at all times have exclusive control of the Common
Areas and may at any time and from time to time: (i) promulgate, modify and
amend reasonable rules and regulations for the use of the Common Areas, which
rules and regulations shall be binding upon Tenant upon delivery of a copy
thereof to Tenant; (ii) temporarily close any part of the Common Areas,
including but not limited to closing the streets, sidewalks, road or other
facilities to the extent necessary to prevent a dedication thereof or the
accrual of rights of any person or of the public therein; (iii) exclude and
restrain anyone from the use or occupancy of the Common Areas or any part
thereof except bona fide customers and suppliers of the tenants of the Center
who use said areas in accordance with the rules and regulations established by
Landlord; and (iv) engage others to operate and maintain all or any part of the
Common Areas, on such terms and conditions as Landlord shall, in its sole
judgment, deem reasonable and proper; and (v) make such changes in the Common
Areas as in its opinion are in the best interest of the Center, including but
not limited to changing the location of walkways, service areas, driveways,


                                       12

<PAGE>

entrances, existing automobile parking spaces and other facilities, changing the
direction and flow of traffic and establishing prohibited areas; provided,
however, that any such change shall be subject to the terms and conditions of
Section 1(c) of this Lease.

     (b) Tenant shall keep all Common Areas free of obstructions created or
permitted by Tenant. Tenant shall permit the use of the Common Areas only for
normal parking and ingress and egress by its customers and suppliers to and from
the Premises. If in Landlord's opinion unauthorized persons are using any of the
Common Areas by reason of Tenant's occupancy of the Premises, Landlord shall
have the right at any time to remove any such unauthorized persons from said
areas or to restrain unauthorized persons from said areas. Landlord, Tenant, and
others constructing improvements or making repairs or alterations in the Center
shall have the right to make reasonable use of portions of the Common Areas.

     (c) Throughout the term, Landlord shall keep the Common Areas fully lighted
and open to the customers of the Center seven (7) days a week from dusk until
11:00 p.m. Monday through Saturday and until 7:00 p.m. on Sunday ("Normal
Hours"). Upon request of Tenant, Landlord shall keep the Common Areas lighted
for as long as after Normal Hours as Tenant shall request, provided Tenant shall
pay for a share of the reasonable cost of said requested lighting, which share
shall be equal to the product of (i) such costs, and (ii) a fraction, the
numerator of which shall be the number of square feet of leasable space within
the Premises and the denominator of which shall be the aggregate number of
square feet of leasable space of all premises within the Center (including the
Premises) open later than Normal Hours (excluding, however, those tenants and
occupants who separately control and pay for their own Common Area lighting). In
addition to the foregoing, Landlord shall provide for low level security
lighting from one (1) hour after the close of business in the Premises until
dawn.

SECTION 15. COMMON AREA MAINTENANCE, TENANT'S SHARE

     (a) Tenant shall initially pay to Landlord as additional rental,
simultaneously with the payment of Base Rent called for under Section 4(a), the
estimated monthly amount of Tenant's Proportionate Share of the "Maintenance
Costs" (as defined in Section 15(c) below) for the operation and maintenance of
the Common Areas as set forth in Section 4(c), One and 10/100 Dollars ($1.10)
per square foot, payable in equal monthly installments of One Thousand Eight
Hundred Thirty-Three and 33/100 Dollars ($1,833.33) as the estimated monthly
amount of Tenant's Proportionate Share of the "Maintenance Costs" (as defined in
Section 15(b) below) for the operation and maintenance of the common areas.

     (b) The Maintenance Costs for the common areas shall be computed on an
accrual basis, under generally accepted accounting principles, and shall include
all costs of operating, maintaining, repairing and replacing the common areas,
including by way of example but not limitation: (i) cost of labor (including
worker's compensation insurance, employee benefits and payroll taxes); (ii)
materials, and supplies used or consumed in the maintenance or operation of the
common area; (iii) the cost of operating and repairing of the lighting; (iv)
cleaning, painting, removing of rubbish or debris, snow and ice, private
security services, and inspecting the common areas; (v) the cost of repairing
and/or replacing paving, curbs, walkways, markings, directional or other signs;
landscaping, and drainage and lighting facilities; (vi) rental paid for
maintenance of machinery and equipment; and (vii) a reasonable allowance to
Landlord for Landlord's supervision, which allowance shall not in an accounting
year exceed ten percent (10%) of the total of all Maintenance Costs (excluding
insurance costs) for such accounting year (all of the foregoing are collectively
referred to herein as "Maintenance Costs"). Notwithstanding the foregoing, the
following shall be excluded, deducted or credited from Maintenance Costs when
computing Tenant's Proportionate Share of same: (a) Net recoveries received by
Landlord from tenants as a result of any act, omission, default or negligence or
as the result of breaches by tenants of the provisions of their leases and/or
other amounts received by Landlord from third parties, which recoveries and/or
amounts reimburse Landlord for or reduce Maintenance Costs; (b) Gross revenues
from charges, if any, made for the use of the parking facilities and other
Common Areas or facilities of the Center (including, without limitation, the
sale or rental of advertising space); (c) The cost of the land underlying and
the construction of the Center, whether initially or in connection with any
replacement or expansion thereof and whether mandated by law or otherwise,
including, without limitation, costs of correcting (I) defective


                                       13

<PAGE>

conditions in the Center resulting from defects in or inadequacy of the initial
design or construction of the same, or (II) code violations, including the
payment of fines or citations in connection therewith; (d) The depreciation or
amortization of the Center or any part thereof or any equipment or other
property used in connection therewith; (e) the initial cost of the installation
of the parking areas or facilities or the amortization or depreciation of such
initial cost; (f) The cost of providing or performing improvements, work or
repairs to or within (I) any portion of the premises of any other tenants or
occupants in the Center, (II) any other building which is not part of the Common
Areas or (III) any portion of the Center the use of which is not available to
Tenant; (g) Any reserves for future expenditures or liabilities which would be
incurred subsequent to the then current accounting year; (h) Any bad debt loss,
rent loss or reserves for bad debt or rent loss; (i) Legal fees, audit fees,
leasing commissions, advertising expenses and other costs incurred in connection
with (I) the original development or original leasing of the Center, (II) the
future re-leasing of the Center, (III) any advertising or promotion of the
Center or any part thereof, and (IV) disputes with other tenants or third
parties; (j) Costs of repairing or restoring any portion of the Center damaged
or destroyed by any casualty or peril whether insured, uninsured or uninsurable;
(k) Costs in connection with the cleanup or removal of hazardous materials; (l)
The cost of compliance with the Americans with Disabilities Act of 1990, as
amended, and all regulations promulgated pursuant thereto; (m) Net recoveries
from insurance policies taken out by Landlord to the extent that the proceeds
reimburse Landlord for expenses which have previously been included or which
would otherwise be included in Maintenance Costs; (n) Costs associated with
repairs or improvements the need for which arose prior to the date of this
Lease; (o) Costs of a capital nature, including all capital improvements,
alterations, repairs and/or replacements (for purposes of this Lease, "costs of
a capital nature" shall mean the cost of any item or service the useful life of
which exceeds 36 months); (p) Costs relating to the negligence of Landlord or
its contractors, agents or employees or the payment of any claims or damages
relating to the same; (r) Any insurance costs.

     (c) Landlord shall maintain accurate and detailed records of all
Maintenance Costs for the common areas in accordance with generally accepted
accounting principles. For purposes of this Lease, "Tenant's Proportionate
Share" shall be the product of the applicable cost or expense multiplied by a
fraction, the numerator of which shall be the gross leasable area (expressed in
square feet) of the Premises and the denominator of which shall be the gross
leasable area (expressed in square feet) of all leasable space in the Center.
Tenant's Proportionate Share of that portion of the Center owned by Landlord is
estimated to be 8.69%, during the first Lease Year.

     (d) The actual amount of Tenant's Proportionate Share of all Maintenance
Costs shall be computed by Landlord within one hundred eighty (180) days after
the end of each accounting year (which Landlord may change from time to time).
At this time Landlord shall furnish to Tenant a statement showing in reasonable
detail the actual Maintenance Costs incurred during such accounting year and
Tenant's Proportionate Share thereof (prorated for any partial Lease year, with
appropriate adjustments to reflect any change in the floor area of the premises
or the gross leasable area of a building occurring during such accounting year).
Any excess payments from Tenant shall be applied to the next installments of the
Maintenance Costs hereunder, or refunded by Landlord. Any underpayments by
Tenant shall be paid to Landlord within thirty (30) days after receipt of such
reconciliation statement. Tenant's estimated monthly Maintenance Cost hereunder
may be adjusted by written notice from Landlord. Notwithstanding anything
contained in this Section 15 to the contrary, Landlord and Tenant agree that the
actual amount of Tenant's Proportionate Share of Maintenance Costs, excluding
costs for snow and ice removal, shall not increase by more than five percent
(5%) in any lease year over the previous Lease Year, and that Tenant's
Proportionate Share of Maintenance Costs for the first lease year, excluding
costs for snow and ice removal and common area utilities, shall not exceed One
and 25/100 Dollars ($1.25) per square foot.

     (e) If Tenant, for any reason in the exercise of good business judgment,
questions or disputes any statement of Maintenance Costs prepared by Landlord,
then Tenant, at its own expense, may employ such accountants as Tenant may
select to review Landlord's books and records solely with respect to Maintenance
Costs during the prior two Lease years and to determine the amount of
Maintenance Costs for the period or periods covered by such statements. If the
report of the accountants employed by Tenant shall show any overcharge paid by
Tenant, then Tenant shall receive a credit from Landlord for such difference.
Any


                                       14

<PAGE>

underpayment shall be paid by Tenant. Tenant agrees that no contingency fee
auditors shall be employed by Tenant for the purpose of conducting any such
audit. In the event that Landlord questions or disputes the correctness of such
report, the accountants employed by Tenant and the accountants employed by
Landlord shall endeavor to reconcile the question(s) or dispute(s) within thirty
(30) days after the notice from Tenant questioning or disputing the report of
Landlord's accountants. In the event that it is finally determined by the
parties that Landlord has overstated Maintenance Costs for any Lease year by
three percent (3%) or more, Landlord shall pay the reasonable cost of the audit.
Furthermore, if Landlord's Maintenance Costs cannot be verified due to the
insufficiency or inadequacy of Landlord's records, then Landlord shall pay the
cost of the audit.

SECTION 16. EMINENT DOMAIN

     (a) In the event the entire premises or any part thereof shall be taken or
condemned either permanently or temporarily for any public or quasi-public use
or purpose by any competent authority in appropriation proceedings or by any
right of eminent domain, the entire compensation or award therefore, including
leasehold, reversion and fee, shall belong to the Landlord and Tenant hereby
assigns to Landlord all of Tenant's right, title and interest in and to such
award.

     (b) In the event that only a portion of the Premises, not exceeding twenty
percent (20%) of same, shall be so taken or condemned, and the portion of the
Premises not taken can be repaired within ninety (90) days from the date of
which possession is taken for the public use so as to be commercially fit for
the operation of Tenant's business, the Landlord at its own expense shall so
repair the portion of the Premises not taken and there shall be an equitable
abatement of rent for the remainder of the term and/or extended terms. The
entire award paid on account thereof shall be paid to the Landlord. If the
portion of the Premises not taken cannot be repaired within ninety (90) days
from the date of which possession is taken so as to be commercially fit for the
operation of Tenant's business, then this Lease shall terminate and become null
and void from the time possession of the portion taken is required for public
use, and from that date on the parties hereto shall be released from all further
obligations hereunder except as herein stated and Tenant shall have no claim for
any compensation on account of its leasehold interest. No other taking,
appropriation or condemnation shall cause this Lease to be terminated. Any such
appropriation or condemnation proceedings shall not operate as or be deemed an
eviction of Tenant or a breach of Landlord's covenant of quiet enjoyment and
Tenant shall have no claim for any compensation on account of its leasehold
interest.

     (c) In the event that more than twenty percent (20%) of the Premises shall
at any time be taken by public or quasi-public use or condemned under eminent
domain, then at the option of the Landlord or Tenant upon the giving of thirty
(30) days written notice (after such taking or condemnation), this Lease shall
terminate and expire as of the date of such taking and any prepaid rental shall
be prorated as of the effective date of such termination.

SECTION 17. TENANT'S TAXES

     Tenant further covenants and agrees to pay promptly when due all taxes
assessed against Tenant's fixtures, furnishings, equipment and stock-in trade
placed in or on the Premises during the term of this Lease.

SECTION 18. RISK OF GOODS

     All personal property, goods, machinery, and merchandise in said Premises
shall be at Tenant's risk if damaged by water, fire, explosion, wind or accident
of any kind, and Landlord shall have no responsibility therefore or liability
for any of the foregoing and Tenant hereby releases Landlord from such
liability.

SECTION 19. USE AND OCCUPANCY

     (a) Tenant agrees to initially open and operate a DSW for the retail sales
of shoes and other footwear in the Premises, fully staffed and stocked and
equivalent to other DSW stores operated by Tenant in the State of Ohio. The
Premises during the term of this Lease shall be


                                       15

<PAGE>

occupied for the operating and conducting therein of a retail shoe store or any
other lawful retail purpose. Any use other than a retail shoe store shall be
consistent with the then existing character of the Center, and shall not violate
those exclusives and prohibited uses set forth on Exhibit "E" attached hereto
and made a part hereof, which are the exclusives and prohibited uses in effect
for the Center as of the date hereof, for so long as and to the extent said
exclusives and prohibited uses are still in full force and effect, as well as
exclusives and prohibited uses hereafter granted for (i) tenants leasing more
than 15,000 square feet of space elsewhere within the Center and (ii) Ulta(3)
Cosmetics, for so long as and to the extent said exclusives are still in full
force and effect.

     (b) For so long as Tenant is continuously and regularly operating its
business in the Premises, Landlord will not lease any space within the Center or
permit any space within the Center (to the extent Landlord has control) to be
used by any person, persons, partnership or entity who devotes five percent (5%)
or more of its selling area to the sale of footwear (the "Exclusive Use"). The
foregoing limitation shall not apply to typical shoe departments found in
department stores, junior department stores, general merchandise and discount
stores, and clothing retailers, such as Filene's Basement, Marshalls, TJ Maxx
and similar type stores so long as such shoe departments are consistent with the
typical shoe departments of each such retailer. Any portion of the Center which
is sold by Landlord during the term shall contain a deed restriction
incorporating the foregoing Exclusive Use.

     Landlord acknowledges that in the event of a breach or an attempted or
prospective breach of this Section 19(b), Tenant's remedies at law would be
inadequate. Therefore, in any such event, if such breach is not cured within
thirty (30) days after written notice from Tenant to Landlord, Tenant shall be
entitled, at its option and without limitation of any other remedy permitted by
law or equity or by this Lease, (i) to elect to pay in lieu of Base Rent and
percentage rent due under this Lease two percent (2%) of Tenant's gross sales
calculated according to Tenant's standard procedures in accordance with
generally accepted accounting principles, (ii) to cancel this Lease on one
hundred eighty (180) days written notice to Landlord, and/or (iii) to full and
adequate relief by temporary or permanent injunction. Notwithstanding the
foregoing, the remedy of lease cancellation shall not be applicable if the
violation of this Section 19(b) is due to the breach of another tenant's lease
and Landlord is, in Tenant's good faith judgment, diligently pursuing
appropriate legal proceedings to halt the violation and such violation is so
halted within sixty (60) days of Landlord's receipt of Tenant's notice.

     (c) Tenant shall at all times conduct its operations on the Premises in a
lawful manner and shall, at Tenant's expense, comply with all laws, rules,
orders, ordinances, directions, regulations, and requirements of all
governmental authorities, now in force or which may hereafter be in force, which
shall impose any duty upon Landlord or Tenant with respect to the business of
Tenant and the use, occupancy or alteration of the Premises. Tenant shall comply
with all requirements of the Americans with Disabilities Act, and shall be
solely responsible for all alterations within the Premises in connection
therewith. Tenant covenants and agrees that the Premises shall not be abandoned
or left vacant and that only minor portions of the Premises shall be used for
office or storage space in connection with Tenant's business conducted in the
Premises.

     Without being in default of this Lease, Tenant shall have the right to
cease operating (go dark) at any time and for whatever reason after the first
(1st) lease year. Notwithstanding the foregoing, Tenant's right to vacate (go
dark), shall not release or excuse the Tenant from any obligations or
liabilities, including the payment of minimum rent and additional rent and other
charges, under this Lease without the express written consent of Landlord. In
the event Tenant fails to (i) open and operate within ninety (90) days after
delivery of the Premises or (ii) operate for one hundred twenty (120) or more
consecutive days, Landlord shall have the right, effective upon thirty (30) days
prior written notice to Tenant, to terminate the Lease as Landlord's sole
remedy, provided that if Tenant recommences operating fully stocked in
substantially all of the premises within such thirty (30) days, Landlord's
termination shall be null and void. In the event Tenant fails to open and
operate as provided above or shall cease operating as provided above, Landlord's
sole remedy on account thereof shall be limited to the right to elect to
recapture the premises and terminate the Lease, whereupon there shall be no
further liability of the parties hereunder. Such termination shall be effective
upon written notice to Tenant any time prior to Tenant reopening for business in
the Premises. Provided, however, in the event Landlord has not


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<PAGE>

so elected to recapture, Tenant shall have right to notify Landlord of Tenant's
intention to reopen for business in the Premises within sixty (60) days,
followed by Tenant's actually reopening for business fully stocked in
substantially all of the Premises within such sixty (60) day period, which
notice and actual reopening shall toll Landlord's right to recapture.

     (d) Landlord and Tenant agree that no space in the Center, including the
Premises, shall be used as a bowling alley, deep discount retailer, theater
showing either film, television or the like or live entertainment, health club,
games/amusement room, indoor playground, adult bookstore, flea market, bingo
parlor, bar, tavern or cocktail lounge (except if incidental to a restaurant as
permitted below), restaurant (except as permitted below), adult book or adult
video store (defined for the purposes hereof as a store devoting ten percent
(10%) or more of its floor space to offering books and/or video materials for
sale or for rent which are directed to or restricted to adult customers due to
sexually explicit subject matter or for any other reason making it inappropriate
for general use), adult theater or "strip-tease" establishment, automotive
maintenance or automotive repair facility, warehouse, car wash, pawn shop, check
cashing service, establishment selling second hand goods, flea market,
entertainment or recreational facility (as defined below), training or
educational facility (as defined below); the renting, leasing, selling or
displaying of any boat, motor vehicle or trailer; industrial or manufacturing
purposes; a carnival, circus or amusement park; a gas station, facility for the
sale of paraphernalia for use with illicit drugs, funeral home, blood bank or
mortuary, gambling establishment, banquet hall, auditorium or other place of
public assembly, second-hand or surplus store, gun range; the sale of fireworks;
a veterinary hospital or animal raising facility; the storage of goods not
intended to be sold from the Center; a video rental store (except as permitted
below), karate center, central laundry or dry cleaning plant, supermarket or any
facility which is illegal or dangerous, constitutes a nuisance, emits offensive
odors, fumes, dust or vapors or loud noise or sounds or is inconsistent with
community oriented shopping centers. For the purposes of this Section 19(d), the
phrase "entertainment or recreational facility" shall include, without
limitation, a movie or live theater or cinema, bowling alley, skating rink, gym,
health spa or studio, dance hall or night club, billiard or pool hall, massage
parlor, health club, game parlor or video arcade (which shall be defined as any
store containing more than five (5) electronic games) or any other facility
operated solely for entertainment purposes (such as a "laser tag" or "virtual
reality" theme operation), except for a "Curves" or similar operation provided
the same is not located immediately adjacent to the Premises. For the purposes
of this Section 19(d), the phrase "training or educational facility" shall
include, without limitation, a beauty school, nail salon, barber college,
reading room, place of instruction or any other operation catering primarily to
students or trainees as opposed to customers. Notwithstanding the foregoing,
Landlord may lease any premises in the Center for use as (i) a restaurant
located no closer than one hundred feet (100') from the exterior walls of the
Premises, (ii) a specialty grocery store or specialty supermarket (such as a
Wild Oats) located no closer than one hundred feet (100') from the exterior
walls of the Premises, and (iii) a national video rental store which has a
prohibition against the rental or sale of adult videos and which is located no
closer than one hundred feet (100') from the exterior walls of the Premises. The
total floor area of all restaurants and medical, dental, professional and
business offices located within the Center shall not exceed fifteen percent
(15%) of the gross leasable area of the Center. Any portion of the Center which
is sold by Landlord during the term shall contain a deed restriction
incorporating the foregoing restrictions.

     Landlord acknowledges that in the event of a breach or an attempted or
prospective breach of this Section 19(d), Tenant's remedies at law would be
inadequate. Therefore, in any such event, if such breach is not cured within
sixty (60) days after written notice from Tenant to Landlord, Tenant shall be
entitled, at its option and without limitation of any other remedy permitted by
law or equity or by this Lease, (i) to elect to pay in lieu of Base Rent and
percentage rent due under this Lease two percent (2%) of Tenant's gross sales
calculated according to Tenant's standard procedures in accordance with
generally accepted accounting principles, and/or (ii) to full and adequate
relief by temporary or permanent injunction. Notwithstanding the foregoing, the
remedy of lease cancellation shall not be applicable if the violation of this
Section 19(d) is due to the breach of another tenant's lease and Landlord is, in
Tenant's good faith judgment, diligently pursuing appropriate legal proceedings
to halt the violation and such violation is so halted within one hundred twenty
(120) days of Landlord's receipt of Tenant's notice.


                                       17
<PAGE>

     (e) Landlord and Tenant agree that (a) no auction, fire or
going-out-of-business sales shall be conducted in the Center except a
going-out-of-business sale conducted during the last thirty (30) days of an
existing retail operation, (b) no exterior identification signs attached to any
building in the Center shall be (i) flashing, moving or audible signs or (ii)
signs employing exposed neon tubes, exposed ballast boxes or exposed
transformers, and (c) no sidewalk sales shall be allowed in the Center.

SECTION 20. NUISANCES

     Tenant shall not perform any acts or carry on any practice which may injure
the Premises or be a nuisance or menace to other tenants in the Center.

SECTION 21. WASTE AND REFUSE REMOVAL

     Tenant covenants that it will use, maintain and occupy said Premises in a
careful, safe, lawful and proper manner and will not commit waste therein.
Landlord or its agent shall have access at all reasonable times to the Premises
for purposes of inspecting and examining the condition and maintenance of the
Premises. Tenant agrees to remove all refuse from the Premises in a timely,
clean and sanitary manner. Tenant shall provide a refuse collection container at
the rear of the Premises to accommodate Tenant's refuse and Tenant shall
routinely clean up around trash containers. Tenant shall contract with a
licensed and insured refuse collection contractor to timely remove refuse
therefrom and the location of the container shall be approved by Landlord.

SECTION 22. DAMAGE AND DESTRUCTION OF PREMISES

     (a) Landlord shall at all times during the term of this Lease carry
property insurance on the building containing the Premises, including the
"Structural Portions" (defined in Section 24(a) below) and common utility lines
up to the point they serve individual tenant's premises. Landlord shall be under
no obligation to maintain insurance on any improvements installed by or for the
benefit of Tenant's use of the premises or otherwise owned by Tenant. Landlord
may elect to self-insure its obligations hereunder and/or use whatever
deductibles as Landlord deems appropriate, in its sole discretion.

     (b) If the Premises shall be damaged, destroyed, or rendered untenantable,
in whole or in part, by or as the result or consequence of fire or other
casualty during the term hereof, Landlord shall repair and restore the same to a
good tenantable condition with reasonable dispatch. During such period of
repair, the rent herein provided for in this Lease shall abate (i) entirely in
case all of the Premises are untenantable; and (ii) proportionately if only a
portion of the Premises is untenantable and Tenant is able to economically
conduct its business from the undamaged portion of the Premises. The abatement
shall be based upon a fraction, the numerator of which shall be the square
footage of the damaged and unusable area of the Premises and the denominator
shall be the total square footage of the Premises. Said abatement shall cease at
such time as the Premises shall be restored to a tenantable condition.

     (c) In the event the Premises, because of such damage or destruction, are
not repaired and restored to a tenantable condition with reasonable dispatch
within one hundred fifty (150) days from the date of receipt of insurance
proceeds for such damage or destruction, Tenant or Landlord may, at their
option, terminate this Lease within sixty (60) days following such one hundred
fifty (150) day period but prior to the repair and restoration of same by giving
prior written notice to the other party and thereupon Landlord and Tenant shall
be released from all future liability and obligations under this Lease.

     (d) If one-third (1/3) or more of the ground floor area of the Premises are
damaged or destroyed during the last two (2) years of the original or any
extended term of this Lease, Landlord shall have the right to terminate this
Lease by written notice to Tenant within sixty (60) days following such damage
or destruction, unless Tenant shall, within thirty (30) days following receipt
of such notice, offer to extend the term of this Lease for an additional period
of five (5) years from the date such damage or destruction is repaired and
restored. If Tenant makes said offer to extend, Landlord and Tenant shall
determine the terms and conditions of said extension within thirty (30) days
thereafter or Tenant's offer shall not be deemed to prevent Landlord from


                                       18

<PAGE>

canceling this Lease. If such terms and conditions have been mutually agreed to
by the parties, then Landlord shall accept Tenant's offer and shall repair and
restore the Premises with reasonable dispatch thereafter.

     (e) If Landlord is required or elects to repair and restore the Premises as
herein provided, Tenant shall repair or replace its stock in trade, trade
fixtures, furniture, furnishings and equipment and other improvements including
floor coverings, and if Tenant has closed, Tenant shall promptly reopen for
business. Anything contained in this Section 22 to the contrary notwithstanding,
Landlord's restoration and repair obligations under Section 22 shall in no event
include restoration or repair of Tenant's Work or improvements.

SECTION 23. LANDLORD REPAIRS

     (a) Landlord shall keep in good order, condition, and repair, maintain and
replace, as necessary, the following: (i) structural portions of the Premises;
(ii) downspouts; (iii) gutters; (iv) the roof of the Building of which the
Premises forms a part; and (v) any utility and other systems or lines serving
the Premises but located outside of the Premises, except (as to all items) for
damage caused by any negligent act or omission of Tenant or its customers,
employees, agents, invitees, licensees or contractors, which shall be repaired
or replaced as necessary, at the sole cost and expense of Tenant. "Structural
Portions" shall mean only the following: (vi) foundations; (vii) exterior walls
except for interior faces); (viii) concrete slabs; (ix) the beams and columns
bearing the main load of the roof; and (x) the floors (but not floor coverings).

     (b) Notwithstanding the provisions of Section 23(a) above, Landlord shall
not be obligated to repair the following: (i) the exterior or interior of any
doors, windows, plate glass, or showcases surrounding the Premises or the store
front or (ii) damage to Tenant's improvements or personal property caused by any
casualty, burglary, break-in, vandalism, acts of terrorism, war or act of G-d.
Landlord shall, in any event, have ten (10) days after notice from Tenant
stating the need for repairs to complete same, or commence and proceed with due
diligence to complete same. Landlord shall be obligated to replace all HVAC
components as and when necessary so long as Tenant has fulfilled its obligations
under Section 24(a)(ii) below. Except as specifically set forth herein, Tenant
expressly hereby waives the provisions of any law permitting repairs by a tenant
at Landlord's expense.

     (c) The provisions of this Section 23 shall not apply in the case of damage
or destruction by fire or other casualty or a taking under the power of eminent
domain in which events the obligations of Landlord shall be controlled by
Section 22 and Section 16 respectively.

     (d) Landlord shall assign to Tenant all warranties covering all matters
required by the terms hereof to be repaired and maintained by Landlord.

     (e) If Landlord fails to make any of the repairs required to be made under
this Lease within thirty (30) days after written notice from Tenant, Tenant, in
addition to any other rights it may have hereunder or at law or in equity, shall
have the right to make said repairs on behalf of Landlord and to bill Landlord
for the reasonable cost thereof. Landlord shall have thirty (30) days to
reimburse Tenant. In the event of an emergency or if any such repairs are
immediately necessary for the proper use and enjoyment of the Premises, no prior
thirty (30) days notice shall be required, Tenant, after diligent effort to
first notify Landlord, forthwith make said repairs on behalf of Landlord and
bill Landlord for the reasonable cost thereof. Tenant has not received
reimbursement for any repairs permitted to be made under this Section 23(e)
within such thirty (30) day period, Tenant shall have the right to deduct the
cost of repairs from Rent otherwise due Landlord.

SECTION 24. TENANT'S REPAIRS

     (a) Tenant shall keep and maintain, at Tenant's expense, all and every
other part of the Premises in good order, condition and repair, including, by
way of example but not limitation: (i) all leasehold improvements; (ii) all HVAC
unit(s), equipment and systems (including all components thereof) serving the
Premises; (iii) interior plumbing and sewage facilities; (iv) all interior
lighting; (v) electric signs; (vi) all interior walls; (vii) floor coverings;
(viii) ceilings; (ix) appliances and equipment; (x) all doors, exterior
entrances, windows and


                                       19

<PAGE>

window moldings; (xi) plate glass; (xii) signs and showcases surrounding and
within the Premises; (xiii) the store front; (xiv) sprinkler systems including
supervisory alarm service in accordance with National Fire Protection
Association standards and current local and state fire protection standards to
ensure property operation.

     (b) Sprinkler systems, if any, located in Tenant's area shall be maintained
in accordance with National Fire Protection Association standards to ensure
proper operation. Sprinkler control valves (interior and exterior) located in
Tenant's area shall be monitored by supervisory alarm service. In the event
local or state codes do not require alarm systems, Tenant shall provide alarm
service on all sprinkler systems to detect water flow and tampering with
exterior and interior main control valves of the sprinkler system servicing
Tenant's premises. Moreover, it shall be Tenant's responsibility to contact
Chuck Seall, Commercial Property Manager at 1798 Frebis Avenue, Columbus, Ohio
43206-3764 at (614) 445-8461, in the event the sprinkler system in the Premises
is ever shut off for any reason, and advise same of any damage occasioned or
caused by the actions of Tenant, its agents, invitees, or employees, and/or as a
result of Tenant's repair obligations hereunder. In the event fifty percent
(50%) or more of the total number of sprinkler heads require replacement at any
one time as part of ordinary maintenance, but excluding repairs or replacements
that arise from (x) repairs, installations alterations, or improvements made by
or for Tenant or anyone claiming under Tenant, or (y) the fault or misuse of
Tenant or anyone claiming under Tenant, such cost shall be fifty percent (50%)
borne by Landlord and fifty percent (50%) borne by Tenant. Tenant, at Tenant's
sole cost and expense, shall replace all sprinkler heads due to repairs,
installations, alterations, or improvements made by or for Tenant or anyone
claiming under Tenant, the fault or misuse of Tenant or anyone claiming under
Tenant, painting or environmental exposure from Tenant's operations. All other
costs of maintaining the sprinkler system in the Premises shall be paid by
Tenant.

     (c) If Landlord deems any repair which Tenant is required to make hereunder
to be necessary, Landlord may demand that Tenant make such repair immediately.
If Tenant refuses or neglects to make such repair and to complete the same with
reasonable dispatch, Landlord may make such repair and Tenant shall, on demand,
immediately pay to Landlord the cost of said repair, together with annual
interest at the Interest Rate. Landlord shall not be liable to Tenant for any
loss or damage that may accrue to Tenant's stock or business by reason of such
work or its results.

     (d) Neither Tenant nor any of its contractors are permitted access to or
permitted to perform alterations of any kind to the roof of the Premises.

     (e) Tenant shall pay promptly when due the entire cost of work in the
Premises undertaken by Tenant under this Lease (including, but not limited to,
Tenant's Work and/or alterations permitted under Section 7 of this Lease) so
that the Premises and the Center shall at all times be free of liens for labor
and materials arising from such work; to procure all necessary permits before
undertaking any such work; to do all of such work in a good and workmanlike
manner, employing materials of good quality; to perform such work only with
contractors previously reasonably approved of in writing by Landlord; to comply
with all governmental requirements; and save Landlord and its agents, officers,
employees, contractors and invitees harmless and indemnified from all liability,
injury, loss, cost, damage and/or expense (including reasonable attorneys' fees
and expenses) in respect of any injury to, or death of, any person, and/or
damage to, or loss or destruction of, any property occasioned by or growing out
of any such work.

SECTION 25. COVENANT OF TITLE AND PEACEFUL POSSESSION

     Subject to the provisions of Section 11 hereof, Landlord shall, on or
before the date on which Tenant is permitted to install its merchandise and
fixtures in the Premises, have good and marketable title to the Premises in fee
simple and the right to make this Lease for the term aforesaid. At such time,
Landlord shall put Tenant into complete and exclusive possession of the
Premises, and if Tenant shall pay the rental and perform all the covenants and
provisions of this Lease to be performed by the Tenant, Tenant shall, during the
term hereby demised, freely, peaceably, and quietly enjoy and occupy the full
possession of the Premises and the common facilities of the Center, subject,
however, to the terms and conditions of this Lease.


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<PAGE>

SECTION 26. TENANT'S AND LANDLORD'S INSURANCE; INDEMNITY

     (a) Tenant's Commercial General Liability Insurance. Commencing as of the
Commencement Date, and thereafter throughout the term of this Lease, Tenant
shall, at Tenant's sole cost and expense, provide and maintain or cause to be
provided and maintained a commercial general liability policy (including
coverage for product and contractual liability), naming Tenant as an insured
(and naming Landlord as an additional insured, said additional insured's
coverage under Tenant's commercial general liability policy to be primary),
protecting Tenant, the business operated by Tenant, and any additional insureds
(including Landlord) against claims for bodily injury (including death) and
property damage occurring within the Premises. Such insurance shall afford
protection to the limits of not less than One Million Dollars ($1,000,000.00)
per occurrence and Five Hundred Thousand Dollars ($500,000.00) with respect to
property damage for fire legal liability. Tenant may use commercially reasonable
deductibles Tenant customarily carries in the conduct of its business; however,
Tenant shall be responsible for all such deductibles or self-insured retention
level. All liability policies shall be written on an occurrence form.

     (b) Worker's Compensation. Commencing as of the Commencement Date, and
thereafter throughout the term of this Lease, Tenant shall, at Tenant's sole
cost and expense, provide and maintain or cause to be provided and maintained
workers' compensation insurance (meeting the requirements of the state workers'
compensation laws) and employer liability insurance covering all of Tenant's
employees at the Premises. Tenant shall also use good faith efforts to ensure
all contractors, sub-contractors, vendors, leased employees, and temporary
employees are properly insured for workers' compensation.

     (c) Tenant's Umbrella. Commencing as of the Commencement Date, and
thereafter throughout the term of this Lease, Tenant shall, at Tenant's sole
cost and expense, provide and maintain or cause to be provided and maintained an
umbrella liability insurance policy with a Ten Million Dollar ($10,000,000.00)
policy limits, which umbrella policy (or policies) shall list the commercial
general liability, product liability, contractual liability and employer
liability policies required hereunder, and any other liability policy or
policies carried by, or for the benefit of, Tenant as underlying policies. Said
umbrella liability insurance policy shall also name Landlord as an additional
insured (said additional insured's coverage under Tenant's umbrella liability
policy to be primary). All liability policies shall be written on an occurrence
form.

     (d) Tenant's Property Insurance. Commencing as of the Commencement Date,
and thereafter throughout the term of this Lease, Tenant shall, at Tenant's sole
cost and expense, provide and maintain or cause to be provided and maintained a
property insurance policy insuring Tenant's contents, fixtures, equipment and
personal property located within the Premises and/or owned by Tenant for all the
hazards and perils normally covered by the Causes of Loss-Special Form. Said
property insurance policy shall include endorsements for coverage against: (i)
earthquake and flood (including, but not limited to, mud slide, flood hazard or
fault area(s), as designated on any map prepared or issued for such purpose by
any governmental authority); and (ii) increased costs of construction and
demolition due to law and ordinance. The foregoing property coverage shall be
provided in amounts sufficient to provide one hundred percent (100%) of the full
replacement cost of Tenant's contents, fixtures, equipment and personal property
located within the Premises and/or owned by Tenant. If for any reason the Causes
of Loss-Special Form is not customarily used in the insurance industry, then the
property insurance policy then in effect shall at least provide coverage for the
following perils: fire, lightning, windstorm and hail, explosion, smoke,
aircraft and vehicles, riot and civil commotion, vandalism and malicious
mischief, sprinkler leakage, sinkhole and collapse, volcanic action, earthquake
or earth movement, and flood, and increased costs of construction and demolition
due to law, ordinance and inflation. The property insurance policy required to
be maintained by Tenant under this Section 26(d) shall: (y) not provide coverage
for Tenant's Improvements (defined in Section 45 below), which Tenant's
Improvements shall be insured by Landlord as required under Section 26(a);

     (e) Landlord's Property Insurance. Commencing as of the Commencement Date,
and thereafter throughout the term of this Lease, Landlord shall, at Landlord's
sole cost and expense, provide and maintain or cause to be provided and
maintained a property insurance policy insuring all buildings (and building
additions) and other improvements in the Center, Tenant's


                                       21

<PAGE>

store building, and Tenant Improvements (but excluding those items insured by
Tenant as required under Section 26(d)) for all the hazards and perils normally
covered by the Causes of Loss-Special Form. Said property insurance policy shall
include endorsements for coverage against: (i) earthquake and flood (including,
but not limited to, mud slide, flood hazard or fault area(s), as designated on
any map prepared or issued for such purpose by any governmental authority); and
(ii) increased costs of construction and demolition due to law and ordinance.
The foregoing property coverage shall be provided in amounts sufficient to
provide one hundred percent (100%) of the full replacement cost of all buildings
(and building additions) and other improvements in the Center, Tenant's store
building, and Tenant Improvements (but excluding those items insured by Tenant
as required under Section 26(d)). If for any reason the Causes of Loss-Special
Form is not customarily used in the insurance industry, then the property
insurance policy then in effect shall at least provide coverage for the
following perils: fire, lightning, windstorm and hail, explosion, smoke,
aircraft and vehicles, riot and civil commotion, vandalism and malicious
mischief, sprinkler leakage, sinkhole and collapse, volcanic action, earthquake
or earth movement, and flood, and increased costs of construction and demolition
due to law, ordinance and inflation. Neither Tenant nor any of its affiliates or
subtenants shall be liable to Landlord for any loss or damage (including loss of
income), regardless of cause, resulting from fire, flood, act of G-d or other
casualty.

     (f) Landlord's Commercial General Liability Insurance. Commencing as of the
Commencement Date, and thereafter throughout the term of this Lease, Landlord
shall, at Landlord's sole cost and expense, provide and maintain or cause to be
provided and maintained a commercial general liability policy (including
coverage for contractual liability), naming Landlord as an insured (and naming
Tenant as an additional insured, said additional insured's coverage under
Landlord's commercial general liability policy to be primary), protecting
Landlord, the business operated by Landlord, and any additional insureds
(including Tenant) against claims for bodily injury (including death) and
property damage occurring upon, in or about the Center (other than the Premises
and those areas insured by other tenants at the Center), including Common Areas.
Such insurance shall afford protection to the limits of not less than One
Million Dollars ($1,000,000.00) per occurrence and Five Hundred Thousand Dollars
($500,000.00) with respect to property damage for fire legal liability. All
liability policies shall be written on an occurrence form. Landlord may use
commercially reasonable deductibles Landlord customarily carries in the conduct
of its business; however, Landlord shall be responsible for all such deductibles
or self-insured retention levels.

     (g) Landlord's Umbrella. Commencing as of the Commencement Date, and
thereafter throughout the term of this Lease, Landlord shall, at Landlord's sole
cost and expense, provide and maintain or cause to be provided and maintained an
umbrella liability insurance policy with a Ten Million Dollar ($10,000,000.00)
minimum annual aggregate, which umbrella policy (or policies) shall list
Landlord's commercial general liability and contractual liability policies
required hereunder, and any other liability policy or policies carried by, or
for the benefit of, Landlord as underlying policies. Said umbrella liability
policy shall also name Tenant as an additional insured (said additional
insured's coverage under Landlord's umbrella liability policy to be primary).
All liability policies shall be written on an occurrence form.

     (h) All insurance provided for in this Section 26 shall be effected under
standard form policies issued by insurers of recognized responsibility
authorized to do business in the state in which the Premises are located;
provided, however, that Landlord or Tenant may self-insure any of the amounts
herein stated pursuant to a bona fide self-insurance retention program so long
as the amounts so self-insured by such party do not exceed ten percent (10%) of
such party's net worth as computed in accordance with generally accepted
accounting principles consistently applied by such party.

     (i) Prior to the Commencement Date, and thereafter during the term hereof
within fifteen (15) days after request therefor by either party, and within
fifteen (15) days after each policy renewal date, Tenant and Landlord shall
furnish the other party with certificates of insurance evidencing all insurance
coverage required herein. All such certificates shall: (i) evidence the
continuous existence during the term hereof of the insurance required hereunder;
(ii) include attachment of an additional insured endorsement; (iii) name any and
all non-standard exclusions or limitations; and (iv) contain a provision that
the insurance carrier shall not cancel or modify the insurance coverage without
giving at least ten (10) days prior written notice thereof


                                       22

<PAGE>

to both Landlord and Tenant at their last known address as provided for herein.
Current certificates of insurance shall be delivered to both Landlord and Tenant
in time sufficient to assure that both Landlord and Tenant shall always possess
certificates of insurance evidencing current insurance coverage. All insurance
carriers shall be licensed to do business in the state in which the Premises is
located and shall have a Best's Key Rating Guide rating of A- VIII.

     (j) Landlord and Tenant shall neither do nor suffer anything to be done
whereby any of the insurance required by the provisions of this Section 26 shall
or may be invalidated in whole or in part. Landlord shall not permit or suffer
to be done in any part of the Center any activities which shall increase the
rate of any insurance to be maintained by Tenant over that rate normal and
customary for Tenant's type of business or which shall increase the rate on any
insurance maintained by Landlord for which Tenant is required to reimburse
Landlord pursuant to Section 28 hereof. Should such occur, Landlord shall pay,
without reimbursement from Tenant, all costs and expenses of such insurance over
the base rate. Tenant shall not permit or suffer to be done in any part of the
Premises any activities which shall increase the rate of any insurance to be
maintained by Landlord over the base rate. Should such occur, Tenant shall pay
all costs and expenses of such insurance over the base rate.

     (k) Notwithstanding anything to the contrary hereinabove contained, Tenant
or Landlord, may, at its option, include any of the insurance coverage
hereinabove set forth in general or blanket policies of insurance. All insurance
required hereunder shall be consistent with sound insurance practices.

     (l) Tenant and Landlord shall cooperate with each other in connection with
the collection of any insurance monies that may be due in the event of loss and
Landlord shall execute and deliver to Tenant such proofs of loss and other
instruments which may be required for the purpose of obtaining the recovery of
any such insurance monies.

     (m) Tenant Indemnity. Subject to Section 34 of this Lease, Tenant shall
indemnify Landlord, Landlord's agents, employees, officers or directors, against
all damages, claims and liabilities arising from any alleged products liability
or from any accident or injury whatsoever caused to any person, firm or
corporation during the demised term in the Premises, unless such claim arises
from a breach or default in the performance by Landlord of any covenant or
agreement on its part to be performed under this Lease or, to the extent not
required to be insured hereunder, the negligence of Landlord. The
indemnification herein provided shall include all reasonable costs, counsel
fees, expenses and liabilities incurred in connection with any such claim or any
action or proceeding brought thereon.

     (n) Landlord Indemnity. Subject to Section 34 of this Lease, Landlord shall
indemnify Tenant, Tenant's officers, directors, employees and agents against all
damages, claims and liabilities arising from any accident or injury whatsoever
caused to any person, firm or corporation during the demised term in the Center
(excluding therefrom the Premises), unless such claim arises from a breach or
default in the performance by Tenant of any covenant or agreement on Tenant's
part to perform under this Lease or, to the extent not required to be insured
hereunder, the negligence of Tenant. The indemnification herein provided shall
include all reasonable costs, counsel fees, expenses and liabilities incurred in
connection with any such claim or any action or proceeding brought thereon.

SECTION 27. REAL ESTATE TAXES

     (a) Tenant shall pay Tenant's Proportionate Share (as defined in Section
15(c) above) of any "Real Estate Taxes" (defined in Section 27(b) below) imposed
upon the Center that become due and payable during each lease year included
within the period commencing with the Commencement Date and ending with the
expiration of the term of this Lease. Tenant shall initially pay to landlord as
additional rental, simultaneously with the payment of Base Rent called for under
Section 4(a), the estimated monthly amount of Tenant's Proportionate Share of
Real Estate Taxes as set forth in Section 4(c) of Two and 50/100 Dollars ($2.50)
per square foot, payable in equal monthly installments of Four Thousand One
Hundred Sixty-Six and 67/100 Dollars ($4,166.67) as the estimated amount of
Tenant's Proportionate Share of Real Estate Taxes. Within one hundred twenty
(120) days after the end of each accounting year (which Landlord may change from
time to time), Landlord shall provide Tenant with an annual


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<PAGE>

reconciliation of Real Estate Taxes and a statement of the actual amount of
Tenant's Proportionate Share thereof. Any excess payments from Tenant shall be
applied to the next installments of Real Estate Taxes hereunder, or refunded by
Landlord. Any underpayments by Tenant shall be paid to Landlord within thirty
(30) days after receipt of such reconciliation statement. Tenant's estimated
monthly installment of Real Estate Taxes payable hereunder may be adjusted by
written notice from Landlord.

     (b) For the purpose of this Lease, the term "Real Estate Taxes" shall
include any special and general assessments, water and sewer rents and other
governmental impositions imposed upon or against the Center of every kind and
nature whatsoever, extraordinary as well as ordinary, foreseen and unforeseen
and each and every installment thereof, which shall or may during the lease term
be levied, assessed or imposed upon or against such Center and of all expenses,
including reasonable attorneys' fees, administrative hearing and court costs
incurred in contesting or negotiating the amount, assessment or rate of any such
real estate taxes, minus any refund received by Landlord.

     (c) Notwithstanding any provision of this Lease to the contrary, Tenant
shall not be obligated to pay for any assessment for special improvements
heretofore installed or in the process of installation in connection with the
initial development of the Center, and Landlord hereby agrees to pay for the
same.

     (d) The real estate taxes for any lease year shall be the real estate taxes
that become due and payable during such lease year. If any lease year shall be
greater than or less than twelve (12) months, or if the real estate tax year
shall be changed, an appropriate adjustment shall be made. If there shall be
more than one taxing authority, the real estate taxes for any period shall be
the sum of the real estate taxes for said period attributable to each taxing
authority. If, upon the assessment day for real estate taxes for any tax year
fully or partly included within the term of this Lease, a portion of such
assessment shall be attributable to buildings in the process of construction, a
fair and reasonable adjustment shall be made to carry out the intent of this
Section 27.

     (e) Upon request, Landlord shall submit to Tenant true copies of the real
estate tax bill for each tax year or portion of a tax year included within the
term of this Lease and shall bill Tenant for the amount to be paid by Tenant
hereunder. Said bill shall be accompanied by a computation of the amount payable
by Tenant and such amount shall be paid by Tenant within thirty (30) days after
receipt of said bill.

     (f) Should the State of Ohio or any political subdivision thereof or any
governmental authority having jurisdiction thereof, impose a tax and/or
assessment (other than an income or franchise tax) upon or against the rentals
payable hereunder, in lieu of or in addition to assessments levied or assessed
against the Premises, or Center, then such tax and/or assessment shall be deemed
to constitute a tax on real estate for the purpose of this Section 27.

SECTION 28. TENANT'S INSURANCE CONTRIBUTION

     Tenant shall pay as additional rent, Tenant's Proportionate Share (as
defined in Section 15(c) above) of the premiums for the insurance maintained by
Landlord on all buildings and improvements, as well as liability insurance, for
the Center, including the Common Areas, as set forth above in Section 28, for
each Lease Year during the term of this Lease. The premiums for the first and
last Lease Years shall be prorated. Tenant shall pay Tenant's Proportionate
Share of such premiums annually upon demand for such payment by Landlord.
Tenant's Proportionate Share thereof shall be paid by Tenant within thirty (30)
days after Landlord's demand therefore. Tenant shall initially pay to Landlord
as additional rental, simultaneously with the payment of Base Rent called for
under Section 4(a), the estimated monthly amount of Tenant's Proportionate Share
of such insurance premiums as set forth in Section 4(c), of 15/100 Dollars
($0.15) per square foot of space in the Premises, payable in equal monthly
installments of Two Hundred Fifty Dollars ($250.00) as the estimated amount of
Tenant's Proportionate Share of such insurance premiums. Within one hundred
twenty (120) days after the end of each accounting year (which Landlord may
change from time to time), Landlord shall provide Tenant with a reconciliation
of the premiums for the insurance maintained by Landlord hereunder and a
statement of the actual amount of Tenant's Proportionate Share thereof. Any
excess payments


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<PAGE>

from Tenant shall be applied to the next installments of insurance premiums
payable by Tenant hereunder, or refunded by Landlord. Any underpayments by
Tenant shall be paid to Landlord within thirty (30) days after receipt of such
reconciliation statement. Tenant's monthly installment of insurance premiums
payable hereunder may be adjusted by written notice from Landlord.

SECTION 29. FIXTURES

     Provided that Tenant shall repair any damage caused by removal of its
property and provided that the Tenant is not in default under this Lease, Tenant
shall have the right to remove from the Premises all of its signs, shelving,
electrical, and other fixtures and equipment, window reflectors and backgrounds
and any and all other trade fixtures which it has installed in and upon the
Premises.

SECTION 30. SURRENDER

     The Tenant covenants and agrees to deliver up and surrender to the Landlord
the physical possession of the Premises upon the expiration of this Lease or its
termination as herein provided in as good condition and repair as the same shall
be at the commencement of the initial term, loss by fire and/or ordinary wear
and tear excepted, and to deliver all of the keys to Landlord or Landlord's
agents.

SECTION 31. HOLDING OVER

     There shall be no privilege of renewal hereunder (except as specifically
set forth in this Lease) and any holding over after the expiration by the Tenant
shall be from day to day on the same terms and conditions (with the exception of
rental which shall be prorated on a daily basis at one hundred twenty-five
percent (125%) the daily rental rate of the most recent expired term) at
Landlord's option; and no acceptance of rent by or act or statement whatsoever
on the part of the Landlord or his duly authorized agent in the absence of a
written contract signed by Landlord shall be construed as an extension of the
term or as a consent for any further occupancy.

SECTION 32. NOTICE

     Any consent, waiver, notice, demand, request or response thereto or other
instrument required or permitted to be given under this Lease shall be given by
overnight courier or by certified United States mail, return receipt requested,
postage prepaid: (a) if to Landlord, at the address set forth in Section 1; and
(b) if to Tenant, at the address set forth in Section 1 with duplicate copies to
(i) General Counsel, 4150 E. Fifth Avenue, Columbus, Ohio 43219 and (ii) Randall
S. Arndt, Esq., Schottenstein Zox & Dunn, 250 West Street, Columbus, Ohio 43215.
Either party may change its address for notices by notice in the manner set
forth above, given at least thirty (30) days in advance. All such consents,
waivers, notices, demands, requests or other instruments shall be deemed given
upon receipt thereof or upon the refusal of the addressee to receive the same.

SECTION 33. DEFAULT

     (a) Elements of Default: The occurrence of any one or more of the following
events shall constitute a default of this Lease by Tenant:

          1. Tenant fails to pay any monthly installment of rent within ten (10)
     days after the same shall be due and payable, except for the first two (2)
     times in any consecutive twelve (12) month period, in which event Tenant
     shall have five (5) days after receipt of written notice of such failure to
     pay before such failure shall constitute a default;

          2. Tenant fails to perform or observe any term, condition, covenant or
     obligation required to be performed or observed by it under this Lease for
     a period of twenty (20) days after notice thereof from Landlord; provided,
     however, that if the term, condition, covenant or obligation to be
     performed by Tenant is of such nature that the same cannot reasonably be
     cured within twenty (20) days and if Tenant commences such performance or
     cure within said twenty (20) day period and thereafter diligently
     undertakes to complete the same, then such failure shall not be a default
     hereunder if it is cured within a


                                       25

<PAGE>

     reasonable time following Landlord's notice, but in no event later than
     forty-five (45) days after Landlord's notice.

          3. A trustee or receiver is appointed to take possession of
     substantially all of Tenant's assets in, on or about the Premises or of
     Tenant's interest in this Lease (and Tenant or any guarantor of Tenant's
     obligations under this Lease does not regain possession within sixty (60)
     days after such appointment); Tenant makes an assignment for the benefit of
     creditors; or substantially all of Tenant's assets in, on or about the
     Premises or Tenant's interest in this Lease are attached or levied upon
     under execution (and Tenant does not discharge the same within sixty (60)
     days thereafter).

          4. A petition in bankruptcy, insolvency, or for reorganization or
     arrangement is filed by or against Tenant or any guarantor of Tenant's
     obligations under this Lease pursuant to any Federal or state statute, and,
     with respect to any such petition filed against it, Tenant or such
     guarantor fails to secure a stay or discharge thereof within sixty (60)
     days after the filing of the same.

     (b) Landlord's Remedies: Upon the occurrence of any event of default,
Landlord shall have the following rights and remedies, any one or more of which
may be exercised without further notice to or demand upon Tenant:

          1. Landlord may re-enter the Premises and cure any default of Tenant,
     in which event Tenant shall reimburse Landlord for any reasonable
     out-of-pocket cost and expenses which Landlord may incur to cure such
     default; and Landlord shall not be liable to Tenant for any loss or damage
     which Tenant may sustain by reason of Landlord's action.

          2. Landlord may terminate this Lease or Tenant's right to possession
     under this Lease as of the date of such default, without terminating
     Tenant's obligation to pay rent due hereunder, in which event (A): neither
     Tenant nor any person claiming under or through Tenant shall thereafter be
     entitled to possession of the Premises, and Tenant shall immediately
     thereafter surrender the Premises to Landlord; (B) Landlord may re-enter
     the Premises and dispose Tenant or any other occupants of the Premises by
     force, summary proceedings, ejectment or otherwise, and may remove their
     effects, without prejudice to any other remedy which Landlord may have for
     possession or arrearages in rent; and (C) notwithstanding a termination of
     this Lease, Landlord shall use good faith efforts to re-let all or any part
     of the Premises for at least the balance of the term of this Lease for
     commercially reasonable rent, whereupon Tenant shall be obligated to pay to
     Landlord as liquidated damages the difference between the rent provided for
     herein and that provided for in any lease covering a subsequent re-letting
     of the Premises, such deficiency to be computed and paid monthly at the
     times that Rent is payable hereunder, together with all of Landlord's
     reasonable costs and expenses for preparing the Premises for re-letting,
     including all repairs which are Tenant's obligations hereunder, reasonable
     broker's and attorney's fees, and all loss or damage which Landlord may
     sustain by reason of such termination, re-entry and re-letting, it being
     expressly understood and agreed that the liabilities and remedies specified
     herein shall survive the termination of this Lease. Notwithstanding a
     termination of this Lease by Landlord, Tenant shall remain liable for
     payment of all rentals and other charges and costs imposed on Tenant
     herein, in the amounts, at the times and upon the conditions as herein
     provided. Landlord shall credit against such liability of the Tenant all
     amounts received by Landlord from such re-letting after first reimbursing
     itself for all reasonable costs incurred in curing Tenant's defaults and
     re-entering, preparing and refinishing the Premises for re-letting, and
     re-letting the Premises.

          3. Upon termination of this Lease pursuant to Section 33(b)2, Landlord
     may recover possession of the Premises under and by virtue of the
     provisions of the laws of the State of Ohio, or by such other proceedings,
     including reentry and possession, as may be applicable.

          4. If the Tenant shall not remove all of Tenant's property from said
     Premises as provided in this Lease, Landlord, at its option, may remove any
     or all of said property in any manner that Landlord shall choose and store
     same without liability for loss thereof,


                                       26

<PAGE>

     and Tenant will pay the Landlord, on demand, any and all reasonable
     expenses incurred in such removal and storage of said property for any
     length of time during which the same shall be in possession of Landlord or
     in storage, or Landlord may, upon thirty (30) days prior notice to Tenant,
     sell any or all of said property in such manner and for such price as the
     Landlord may reasonably deem best and apply the proceeds of such sale upon
     any amounts due under this Lease from the Tenant to the Landlord, including
     the reasonable expenses of removal and sale.

          5. Any damage or loss of rent sustained by Landlord may be recovered
     by Landlord, at Landlord's option, at the time of the reletting, or in
     separate actions, from time to time, as said damage shall have been made
     more easily ascertainable by successive relettings, or at Landlord's option
     in a single proceeding deferred until the expiration of the term of this
     Lease (in which event Tenant hereby agrees that the cause of action shall
     not be deemed to have accrued until the date of expiration of said term) or
     in a single proceeding prior to either the time of reletting or the
     expiration of the term of this Lease.

          6. In the event of a breach by Tenant of any of the covenants or
     provisions hereof, Landlord shall have the right of injunction and the
     right to invoke any remedy allowed at law or in equity as if reentry,
     summary proceedings, and other remedies were not provided for herein.
     Mention in this Lease of any particular remedy shall not preclude Landlord
     from any other remedy, in law or in equity. Tenant hereby expressly waives
     any and all rights of redemption granted by or under any present or future
     laws in the event of Tenant being evicted or dispossessed for any cause, or
     in the event of Landlord obtaining possession of the Premises by reason of
     the violation by Tenant of any of the covenants and conditions of this
     Lease or other use.

          7. Tenant hereby expressly waives any and all rights of redemption
     granted by or under any present or future laws, in the event of eviction or
     dispossession of Tenant by Landlord under any provision of this Lease. No
     receipt of monies by Landlord from or for the account of Tenant or from
     anyone in possession or occupancy of the Premises after the termination of
     this Lease or after the giving of any notice shall reinstate, continue or
     extend the term of this Lease or affect any notice given to the Tenant
     prior to the receipt of such money, it being agreed that after the service
     of notice or the commencement of a suit, or after final judgment for
     possession of said Premises, the Landlord may receive and collect any rent
     or other amounts due Landlord and such payment shall not waive or affect
     said notice, said suit or said judgment.

     (c) Additional Remedies and Waivers: The rights and remedies of Landlord
set forth herein shall be in addition to any other right and remedy now or
hereinafter provided by law and/or equity and all such rights and remedies shall
be cumulative and shall not be deemed inconsistent with each other, and any two
or more or all of said rights and remedies may be exercised at the same time or
at different times and from time to time without waiver thereof of any right or
remedy provided or reserved to Landlord. No action or inaction by Landlord shall
constitute a waiver of a default and no waiver of default shall be effective
unless it is in writing, signed by the Landlord.

     (d) Default by Landlord. Any failure by Landlord to observe or perform any
provision, covenant or condition of this Lease to be observed or performed by
Landlord, if such failure continues for thirty (30) days after written notice
thereof from Tenant to Landlord, shall constitute a default by Landlord under
this Lease, provided, however, that if the nature of such default is such that
the same cannot reasonably be cured within a thirty (30) day period, Landlord
shall not be deemed to be in default if it shall commence such cure within such
thirty (30) day period and thereafter rectify and cure such default with due
diligence.

     (e) Interest on Past Due Obligations: All monetary amounts required to be
paid by Tenant or Landlord hereunder which are not paid on or before the due
date thereof shall, from and after such due date, bear interest at the Interest
Rate, and shall be due and payable by such party without notice or demand.

     (f) Tenant's Remedies. In the event of default by the Landlord with respect
to the Premises, Tenant shall have the option to cure said default. Landlord
shall reimburse Tenant for


                                       27

<PAGE>

the reasonable costs incurred by Tenant in curing such default within thirty
(30) days after invoice thereof by Tenant, together with reasonable evidence
supporting such invoiced amount. Tenant shall also have any and all rights
available under the laws of the state in which the Premises are situated;
provided, however, that any right of offset available to Tenant shall be subject
to the provisions of Section 35 below.

SECTION 34. WAIVER OF SUBROGATION

     Landlord and Tenant, and all parties claiming under each of them, mutually
release and discharge each other from all claims and liabilities arising from or
caused by any casualty or hazard covered or required hereunder to be covered in
whole or in part by insurance coverage required to be maintained by the terms of
this Lease on the Premises or in connection with the Center or activities
conducted with the Premises, and waive any right of subrogation which might
otherwise exist in or accrue to any person on account thereof. All policies of
insurance required to be maintained by the parties hereunder shall contain
waiver of subrogation provisions so long as the same are available.

SECTION 35. LIABILITY OF LANDLORD; EXCULPATION

     (a) Except with respect to any damages resulting from the gross negligence
of Landlord, its agents, or employees, Landlord shall not be liable to Tenant,
its agents, employees, or customers for any damages, losses, compensation,
accidents, or claims whatsoever. The foregoing notwithstanding, it is expressly
understood and agreed that nothing in this Lease contained shall be construed as
creating any liability whatsoever against Landlord personally, and in particular
without limiting the generality of the foregoing, there shall be no personal
liability to pay any indebtedness accruing hereunder or to perform any covenant,
either express or implied, herein contained, or to keep, preserve or sequester
any property of Landlord and that all personal liability of Landlord to the
extent permitted by law, of every sort, if any, is hereby expressly waived by
Tenant, and by every person now or hereafter claiming any right or security
hereunder; and that so far as the parties hereto are concerned, the owner of any
indebtedness or liability accruing hereunder shall look solely to the Premises
and the Center for the payment thereof.

     (b) If the Tenant obtains a money judgment against Landlord, any of its
officers, directors, shareholders, partners, members or their successors or
assigns under any provisions of or with respect to this Lease or on account of
any matter, condition or circumstance arising out of the relationship of the
parties under this Lease, Tenant's occupancy of the building or Landlord's
ownership of the Center, Tenant shall be entitled to have execution upon any
such final, unappealable judgment only upon Landlord's fee simple or leasehold
estate in the Center (whichever is applicable) and not out of any other assets
of Landlord, or any of its officers, directors, shareholders, members or
partners, or their successor or assigns; and Landlord shall be entitled to have
any such judgment so qualified as to constitute a lien only on said fee simple
or leasehold estate.

     Notwithstanding the above, Tenant shall have the right to offset any final,
unappealable judgment against twenty five percent (25%) of all minimum rent and
all percentage rental (but no other additional rent components) if not paid to
Tenant by Landlord within thirty (30) days thereafter.

     (c) It is expressly agreed that nothing in this Lease shall be construed as
creating any personal liability of any kind against the assets of any of the
officers, directors, members, partners or shareholders of Tenant, or their
successors and assigns.

SECTION 36. RIGHTS CUMULATIVE

     Unless expressly provided to the contrary in this Lease, each and every one
of the rights, remedies and benefits provided by this Lease shall be cumulative
and shall not be exclusive of any other of such rights, remedies and benefits or
of any other rights, remedies and benefits allowed by law.


                                       28
<PAGE>

SECTION 37. MITIGATION OF DAMAGES

     Notwithstanding any of the terms and provisions herein contained to the
contrary, Landlord and Tenant shall each have the duty and obligation to
mitigate, in every reasonable manner, any and all damages that may or shall be
caused or suffered by virtue of defaults under or violation of any of the terms
and provisions of this Lease agreement committed by the other.

SECTION 38. SIGNS

     (a) Landlord shall, at its sole cost and expense, construct, erect and
maintain at the location(s) shown on the Site Plan, pylon sign(s) upon which
Tenant's advertising panel shall be installed, provided same are approved by the
applicable local governmental authority. Tenant's advertising panel shall be in
the position and shall otherwise be as shown on Exhibit "F" attached hereto and
made a part hereof. Landlord hereby approves Tenant's advertising panel for the
pylon sign(s) as shown on said Exhibit "F". Thereafter, throughout the term of
this Lease, Tenant shall have continuous representation on (a) such pylon
sign(s) and any replacement pylon sign(s) consistent with Exhibit "F" and (b)
any new pylon signs erected at the Center, and Tenant shall have no worse
representation on any such new pylon sign(s) than any other tenant of the Center
leasing the same or less square feet of leasable space as Tenant.

     (b) Tenant shall have the right to install its standard signs and awnings
on the exterior of the Leased Premises provided that the same are in compliance
with local code. Landlord agrees to provide an adequate building facia for
Tenant's signs. Tenant shall also have the right to place signs or banners in
the windows of the Premises provided the same have been professionally prepared.

     (c) Tenant shall have the right to alter its exterior and pylon signs with
Landlord's consent, which consent shall not be unreasonably withheld; provided,
however, Tenant shall have no obligation to obtain Landlord's consent to any
change in Tenant's signage if such signage is consistent with Tenant's then
prototypical signage.

SECTION 39. ENTIRE AGREEMENT

     This Lease shall constitute the entire agreement of the parties hereto; all
prior agreements between the parties, whether written or oral, are merged herein
and shall be of no force and effect. This Lease cannot be changed, modified, or
discharged orally but only by an agreement in writing signed by the party
against whom enforcement of the change, modification or discharge is sought.

SECTION 40. TENANT'S PROPERTY

     All equipment, inventory, trade fixtures and other property owned by the
Tenant and located in the Premises shall remain the personal property of the
Tenant and shall be exempt from the claims of the Landlord or any mortgagee or
lienholder of the Landlord without regard to the means by which they are
installed or attached specifically not including, however, the Tenant
Improvements (defined in Section 49(a) below) which throughout the term and upon
the expiration of this Lease shall be and remain the property of Landlord. The
Landlord expressly waives any statutory or common law landlord's lien and any
and all rights granted under any present or future laws to levy or distrain for
rent (whether in arrears or in advance) against the aforesaid property of the
Tenant on the Premises and further agrees to execute any reasonable instruments
evidencing such waiver, at any time or times hereafter upon the Tenant's request
including the "Landlord's Waiver" described in Section 56(c) hereof. The Tenant
shall have the right, at any time or from time to time, to remove such trade
fixtures or equipment. If such removal damages any part of the Premises, the
Tenant shall repair such damages. Tenant is expressly authorized to finance,
pledge, and encumber its own trade fixtures, equipment, and inventory for
purposes of financing such trade fixtures, equipment and inventory.


                                       29

<PAGE>

SECTION 41. BINDING UPON SUCCESSORS

     The covenants, conditions, and agreements made and entered into by the
parties hereto shall be binding upon and inure to the benefit of their
respective heirs, representatives, successor and assigns.

SECTION 42. HAZARDOUS SUBSTANCES

     (a) During the term of this Lease, Tenant shall not suffer, allow, permit
or cause the generation, accumulation, storage, possession, release or threat of
release of any hazardous substance or toxic material, as those terms are used in
the Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended, and any regulations promulgated thereunder, or any other present or
future federal, state or local laws, ordinances, rules, and regulations. Tenant
shall indemnify and hold Landlord harmless from any and all liabilities,
penalties, demands, actions, costs and expenses (including without limitation
reasonable attorney fees), remediation and response costs incurred or suffered
by Landlord directly or indirectly arising due to the breach of Tenant's
obligations set forth in this Section. Such indemnification shall survive
expiration or earlier termination of this Lease. At the expiration or sooner
termination hereof, Tenant shall return the Premises to Landlord in
substantially the same condition as existed on the date of commencement hereof
free of any hazardous substances in, on or from the Premises.

     (b) Landlord hereby represents and warrants that, except as set forth in
those certain Phase I Environmental Site Assessments dated March 22, 2004 and
September 14, 2004, respectively, prepared by R.E. Warner & Associates Inc.: (i)
it has not used, generated, discharged, released or stored any hazardous
substances on, in or under the Center and has received no notice and has no
knowledge of the presence in, on or under the Center of any such hazardous
substances; (ii) to Landlord's knowledge there have never been any underground
storage tanks at the Center, whether owned by the Landlord or its predecessors
in interest; (iii) to Landlord's knowledge there have never been accumulated
tires, spent batteries, mining spoil, debris or other solid waste (except for
rubbish and containers for normal scheduled disposal in compliance with all
applicable laws) in, on or under the Center; (iv) to Landlord's knowledge it has
not spilled, discharged or leaked petroleum products other than de minimis
quantities in connection with the operation of motor vehicles on the Center; (v)
to Landlord's knowledge there has been no graining, filling or modification of
wetlands (as defined by federal, state or local law, regulation or ordinance) at
the Center; and (vi) to Landlord's knowledge there is no asbestos or
asbestos-containing material in the Premises. The representations and warranties
set forth in this subparagraph shall apply to any contiguous or adjacent
property owed by the Landlord. Landlord hereby indemnifies Tenant for any and
all loss, cost, damage or expense to Tenant resulting from any misrepresentation
or breach of the foregoing representations and warranties.

     (c) If any such hazardous substances are discovered at the Center (unless
introduced by the Tenant, its agents or employees) or if any asbestos or
asbestos containing material is discovered in the Premises (unless introduced by
the Tenant, its agents or employees), and removal, encapsulation or other
remediation is required by applicable laws, the Landlord immediately and with
all due diligence and at no expense to the Tenant shall take all measures
necessary to comply with all applicable laws and to remove such hazardous
substances or asbestos from the Center and/or encapsulate or remediate such
hazardous substances or asbestos, which removal and/or encapsulation or
remediation shall be in compliance with all environmental laws and regulations,
and the Landlord shall repair and restore the Center at its expense. From the
date such encapsulation, remediation and restoration is complete, the rent due
hereunder shall be reduced by the same percentage as the percentage of the
Premises which, in the Tenant's reasonable judgment, cannot be safely,
economically or practically used for the operation of the Tenant's business.
Anything herein to the contrary notwithstanding, if in the Tenant's reasonable
judgment, such removal, encapsulation, remediation and restoration cannot be
completed within one hundred eighty (180) days or the same is not actually
completed by Landlord within such one hundred eighty (180) day period following
the date such hazardous substances or asbestos are discovered and such condition
materially adversely affects Tenant's ability to conduct normal business
operations in the premises, then the Tenant may terminate this Lease by written
notice to the Landlord within thirty (30) days after such 180 day period, which
notice shall be effective on Landlord's receipt thereof. Landlord shall comply
with OSHA 29


                                       30

<PAGE>

CFR 1910.1001 (j) to notify tenants, including Tenant, of asbestos related
activities in the Premises and the Center including, but not limited to,
selection of the certified/licensed asbestos abatement contractor, scope of the
abatement work, and final clearance testing procedures and results.

SECTION 43. TRANSFER OF INTEREST

     If Landlord should sell or otherwise transfer its interest in the Premises,
upon an undertaking by the purchaser or transferee to be responsible for all the
covenants and undertakings of Landlord accruing subsequent to the date of such
sale or transfer, Tenant agrees that Landlord shall thereafter have no liability
to Tenant under this Lease or any modifications or amendments thereof, or
extensions thereof, except for such liabilities which might have accrued prior
to the date of such sale or transfer of its interest by Landlord.

SECTION 44. ACCESS TO PREMISES

     Landlord and its representatives shall have free access to the Premises at
all reasonable times for the purpose of: (a) examining the same or to make any
alterations or repairs to the Premises that Landlord may deem necessary for its
safety or preservation; (b) exhibiting the Premises for sale or mortgage
financing; (c) during the last three (3) months of the term of this Lease, for
the purpose of exhibiting the Premises and putting up the usual notice "for
rent" which notice shall not be removed, obliterated or hidden by Tenant,
provided, however, that any such action by Landlord shall cause as little
inconvenience as reasonably practicable and such action shall not be deemed an
eviction or disturbance of Tenant nor shall Tenant be allowed any abatement of
rent, or damages for an injury or inconvenience occasioned thereby.

SECTION 45. HEADINGS

     The headings are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope or intent of this Lease.

SECTION 46. NON-WAIVER

     No payment by Tenant or receipt by Landlord or its agents of a lesser
amount than the rent in this Lease stipulated shall be deemed to be other than
on account of the stipulated rent nor shall an endorsement or statement on any
check or any letter accompanying any check or payment of rent be deemed an
accord and satisfaction and Landlord or its agents may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy in this Lease provided.

SECTION 47. SHORT FORM LEASE

     This Lease shall not be recorded, but a short form lease, which describes
the property herein demised, gives the term of this Lease and refers to this
Lease, shall be executed by the parties hereto, upon demand of either party and
such short form lease may be recorded by Landlord or Tenant at any time either
deems it appropriate to do so. The cost and recording of such short form lease
shall belong to the requesting party.

SECTION 48. ESTOPPEL CERTIFICATE

     Each party agrees that at any time and from time to time on ten (10) days
prior written request by the other, it will execute, acknowledge and deliver to
the requesting party a statement in writing stating that this Lease is
unmodified and in full force and effect (or, if there have been modifications,
stating the modifications, and that the Lease as so modified is in full force
and effect, and the dates to which the rent and other charges hereunder have
been paid, and such other information as may reasonably re requested, it being
intended that any such statements delivered pursuant to this Section may be
relied upon by any current or prospective purchaser of or any prospective holder
of a mortgage or a deed of trust upon or any interest in the fee or any
leasehold or by the mortgagee, beneficiary or grantee of any security or
interest, or any assignee of any thereof or under any mortgage, deed of trust or
conveyance for security purposes now or hereafter done or made with respect to
the fee of or any leasehold interest in the Premises


                                       31

<PAGE>

SECTION 49. TENANT'S REIMBURSEMENT

     (a) Landlord shall pay Tenant Two Hundred Forty Thousand Dollars
($240,000.00) (the "Tenant Reimbursement"), as payment for all costs incurred on
behalf of Tenant for the purchase, erection, and installation of Tenant
Improvements on or within the Premises. "Tenant Improvements" shall consist of
the work described in the attached Exhibit "G". The Tenant Reimbursement shall
be paid by Landlord to Tenant within ten (10) days of the later of (i) Tenant
opening for business in the Premises and (ii) Tenant providing to Landlord a
lien waiver from Tenant's general contractor. In the event Landlord does not
timely pay the Tenant Reimbursement to Tenant, (a) Landlord shall pay to Tenant
interest on such unpaid amounts the Interest Rate and (b) Tenant shall have the
right to deduct any and all such amounts owed Tenant against payments of Rent
thereafter due Landlord until such time as Tenant has been credited the full
amount of the Tenant Reimbursement plus applicable interest.

     (b) Notwithstanding anything to the contrary contained in this Lease, the
Tenant Improvements shall, at all times during the term of this Lease and upon
the expiration or earlier termination of this Lease, be the property of
Landlord. Tenant shall not acquire any interest, equitable or otherwise, in any
Tenant Improvement.

SECTION 50. TENANT'S TERMINATION RIGHT

     In the event (i) that Tenant's gross sales (as defined in Section 5 of this
Lease) shall be less than Six Million Six Hundred Thousand Dollars
($6,600,000.00) in either of the eighth (8th) or ninth (9th) Lease Years of the
initial term hereof, and (ii) Tenant was open and operating for business for the
Permitted Use during the Center's standard business days and hours during the
eighth (8th) and ninth (9th) Lease Years (unless Tenant was not open and
operating on account of casualty or condemnation), Tenant shall have the right,
at Tenant's sole election, provided that Tenant is not then in default of the
terms of this Lease beyond any applicable notice and cure periods, on or before
the date (the "Last Termination Notice Date") which is thirty (30) days after
the end of the ninth (9th) Lease Year, to send to Landlord a notice terminating
this Lease as of the last day of the tenth (10th) Lease Year (the "Tenant's
Termination Date"). In the event that Tenant shall so terminate this Lease in
accordance with the provisions of this Section 50, then the term of this Lease
shall terminate and expire on Tenant's Termination Date with the same force and
effect as though said date was the scheduled expiration date of the term under
this Lease. Notwithstanding the giving of such termination notice and Tenant's
exercise of its termination right under this Section 50, Tenant shall perform
and observe all of Tenant's obligations under this Lease through and including
the Tenant's Termination Date and Tenant shall pay to Landlord, on or before the
Tenant's Termination Date, the sum of One Hundred Thousand Dollars
($100,000.00). In the event Tenant exercises the termination right provided for
in this Section 50, Landlord shall have the right, upon ten (10) days prior
written notice, at Tenant's corporate headquarters, to examine Tenant's books
and records relating to gross receipts at the Premises, provided such right
shall expire sixty (60) days after Tenant notifies Landlord of Tenant's exercise
of Tenant's election to terminate the Lease pursuant to the provisions of this
Section 50.

SECTION 51. NO BROKER

     Landlord and Tenant each represent to the other that they have not entered
into any agreement or incurred any obligation in connection with this
transaction which might result in the obligation to pay a brokerage commission
to any broker. Each party shall indemnify and hold the other party harmless from
and against any claim or demand by any broker or other person for bringing about
this Lease who claims to have dealt with such indemnifying party, including all
expenses incurred in defending any such claim or demand (including reasonable
attorney's fees).

SECTION 52. UNAVOIDABLE DELAYS

     In the event either party hereto (the "Delayed Party") shall be delayed or
hindered in or prevented from the performance of any act required under this
Lease by reason of strikes, lockouts, labor troubles, inability to procure
materials, failure of power, the unforeseen application of restrictive
governmental laws or regulations, riots, insurrection, war, acts of terrorism or
other reason of a like nature not the fault of the Delayed Party in performing
work or


                                       32

<PAGE>

doing acts required under the terms of this Lease, then performance of such act
shall be excused for the period of the delay, and the period for the performance
of any such act shall be extended for a period equivalent to the period of such
delay, provided that the Delayed Party notified the other party within fifteen
(15) days of the Delayed Party being informed of the occurrence of the event
causing such delay. The provisions of this Section 52 shall not operate to
excuse either party from the payment of any rental or other monetary sums due
under the terms of this Lease.

SECTION 53. TIMELY EXECUTION OF LEASE

     Landlord and Tenant agree that this Lease, and the parties' obligations
hereunder, shall automatically be null and void and this Lease shall terminate
automatically without further action of the parties if both parties do not
execute this Lease and both parties have not received an original thereof within
sixty (60) days after the date of execution hereof by the first party to execute
this Lease.

SECTION 54. ACCORD AND SATISFACTION

     No payment by Tenant or receipt by Landlord of a lesser amount than the
entire rent and all other additional rents and charges hereunder shall be deemed
to be other than payment on account of the earliest stipulated rent and other
additional rents and charges hereunder, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment for rent or other
additional rent and charges be deemed an accord and satisfaction, and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance of such rent and other additional rents and charges or
pursue any other right or remedy available to the Landlord.

SECTION 55. WAIVER OF JURY TRIAL

     Landlord and Tenant do hereby knowingly, voluntarily and intentionally
waive the right to a trial by jury of any and all issues either now or
hereinafter provided by law in any action or proceeding between the parties
hereto, or their successors, arising directly or indirectly out of or in any way
connected with this Lease or any of its provisions, Tenant's use or occupancy of
said premises and/or any claim for personal injury or property damage including,
without limitation, any action to rescind or cancel this Lease, and any claim or
defense asserting that this Lease was fraudulently induced or is otherwise void
or voidable. It is intended that said waiver shall apply to any and all
defenses, rights and/or counterclaims in any action or proceeding at law or in
equity. This waiver is a material inducement for Landlord and Tenant to enter
into this Lease.

SECTION 56. LEASEHOLD FINANCING

     (a) Landlord acknowledges and agrees that Tenant may from time to time
during the term, without the consent of Landlord, mortgage or otherwise finance
and encumber, whether by leasehold deed of trust or mortgage, collateral
assignment of this Lease, lease/sublease-back, and/or assignment/leaseback, any
and/or all of its leasehold estate hereunder, and property and rights in and to
the Leased Premises granted to it under this Lease, as security for the payment
of an indebtedness (any and all of which are herein referred to as a "Leasehold
Mortgage" and the holder thereof is herein referred to as "Leasehold
Mortgagee"). Any such Leasehold Mortgage shall be a lien only upon Tenant's
leasehold estate hereunder and Tenant's interests in this Lease and shall not
encumber Landlord's fee simple title to the Center or the Leased Premises.
Pursuant to any such Leasehold Mortgage, the Leasehold Mortgagee or another
person or entity (a "Successor-Tenant") may acquire title to Tenant's interest
in the leasehold estate in the Leased Premises in any lawful way, including but
not limited to, through foreclosure, assignment in lieu of foreclosure, or
otherwise. In such event, the Successor-Tenant shall succeed to the rights of
Tenant under this Lease, including the right to possession of the Leased
Premises, in which event Landlord shall recognize the Successor-Tenant as the
tenant under this Lease, the same as if such Successor-Tenant were the original
tenant hereunder.

     (b) Tenant shall notify Landlord (and any Fee Mortgagee, as hereinafter
defined in Section 56(d) below), in the manner hereinafter provided for the
giving of notice, of the execution of such Leasehold Mortgage and the name and
place for service of notice upon Leasehold Mortgagee. Upon such notification of
Landlord that Tenant has entered into a


                                       33

<PAGE>

Leasehold Mortgage, Landlord hereby agrees for the benefit of such Leasehold
Mortgagee, and upon written request by Tenant, to execute and deliver to Tenant
and Leasehold Mortgagee a "Landlord's Agreement" whereby Landlord agrees to
recognize the interest of Leasehold Mortgagee and any Successor-Tenant
hereunder, on commercially reasonable terms and conditions acceptable to
Leasehold Mortgagee.

     (c) Landlord does hereby waive any statutory or other lien of the Landlord
in Tenant's present and after-acquired assets, including among other things,
Tenant's inventory and equipment. To evidence such waiver for the benefit of
Tenant's existing lender, Landlord shall, simultaneously with the execution and
delivery of this Lease, execute and deliver to Tenant the "Landlord's Waiver"
attached hereto and made a part hereof as Exhibit "H".

     (d) In the event that, at any time prior to the execution of this Lease and
the recordation of a memorandum of lease in accordance with Section 47 hereof,
Landlord has mortgaged or otherwise encumbered the fee simple title to the
Premises, Landlord shall deliver to Tenant a commercially reasonable SNDA (as
defined in Section 11) containing terms substantially similar to the terms of
the document so entitled attached hereto and made a part hereof as Exhibit "I",
duly executed by the holder of any such mortgage or encumbrance (the "Fee
Mortgagee"). Landlord agrees that Tenant's obligations hereunder shall be
contingent upon delivery by Landlord to Tenant of an SNDA executed by the Fee
Mortgagee on or before the Commencement Date, as more fully set forth in Section
11.


                                       34

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and
year first above written.

                                        LANDLORD:

                                        JLP-HARVARD PARK, LLC
                                        an Ohio limited liability company

                                        By: Jubilee Limited Partnership,
                                            an Ohio limited partnership
                                        Its: Sole Member

                                        By: Schottenstein Professional Asset
                                            Management Corporation, an Ohio
                                            corporation
                                        Its: General Partner


                                        By: /s/ Jay L. Schottenstien
                                            ------------------------------------
                                        Name: Jay L. Schottenstien
                                              ----------------------------------
                                        Title: Chairman
                                               ---------------------------------


                                        TENANT:

                                        DSW INC.,
                                        an Ohio corporation


                                        By: /s/ Bill Jordan
                                            ------------------------------------
                                        Name: Bill Jordan
                                        Title: Vice President - General Counsel


                                       35



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>11
<FILENAME>l19155aexv21w1.txt
<DESCRIPTION>EXHIBIT 21.1
<TEXT>
<PAGE>


                                                                      EXHIBIT 21

                                    DSW INC.
                              List of Subsidiaries


                                                          State of
                     Name                               Incorporation
--------------------------------------------------     -----------------

DSW Shoe Warehouse, Inc.                                   Missouri
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>12
<FILENAME>l19155aexv23w1.txt
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<PAGE>


                                                                   EXHIBIT 23.1


            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement (File
No. 333-126244) of our report dated April 12, 2006, relating to the
consolidated financial statements and financial statement schedule of DSW Inc.,
appearing in the Annual Report on Form 10-K of DSW Inc. for the year ended
January 28, 2006.

/s/ Deloitte & Touche LLP

Columbus, Ohio
April 12, 2006

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24.1
<SEQUENCE>13
<FILENAME>l19155aexv24w1.txt
<DESCRIPTION>EXHIBIT 24.1
<TEXT>
<PAGE>

                                                                      EXHIBIT 24

                                POWER OF ATTORNEY

Each director and/or officer of DSW Inc. (the "Corporation") whose signature
appears below hereby appoints Peter Z. Horvath, Douglas J. Probst, and William
L. Jordan as the undersigned's attorney or any of them individually as the
undersigned's attorney, to sign, in the undersigned's name and behalf and in any
and all capacities stated below, and to cause to be filed with the Securities
and Exchange Commission (the "Commission"), the Corporation's Annual Report on
Form 10-K (the "Form 10-K") for the fiscal year ended January 28, 2006, and
likewise to sign and file with the Commission any and all amendments to the Form
10-K, and the Corporation hereby appoints such persons as its attorneys-in-fact
and each of them as its attorney-in-fact with like authority to sign and file
the Form 10-K and any amendments thereto granting to each attorney-in-fact full
power of substitution and revocation, and hereby ratifying all that any such
attorney-in-fact or the undersigned's substitute may do by virtue hereof.

      IN WITNESS WHEREOF, we have hereunto set our hands effective as of the
10th day of April, 2006.

Signature                        Title

/s/ Jay L. Schottenstein         Chairman and Chief Executive Officer
-------------------------------  (Principal Executive Officer)
Jay L. Schottenstein

/s/ Douglas J. Probst            Executive Vice President, Chief Financial
-------------------------------  Officer, and Treasurer
Douglas J. Probst                (Principal Financial and Accounting Officer)

/s/ Carolee Friedlander          Director
-------------------------------
Carolee Friedlander

/s/ Philip B. Miller             Director
-------------------------------
Philip B. Miller

/s/ James D. Robbins             Director
-------------------------------
James D. Robbins

/s/ Harvey L. Sonnenberg         Director
-------------------------------
Harvey L. Sonnenberg

/s/ Allan J. Tanenbaum           Director
-------------------------------
Allan J. Tanenbaum

/s/ Heywood Wilansky             Director
-------------------------------
Heywood Wilansky
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>14
<FILENAME>l19155aexv31w1.txt
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<PAGE>

                                                                    EXHIBIT 31.1

                                 CERTIFICATIONS

I, Jay L. Schottenstein, certify that:

1.   I have reviewed this Annual Report on Form 10-K for the fiscal year ended
     January 28, 2006 of DSW Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
     financial reporting (as defined in Exchange Act Rules 13a-15(f) and
     15d-15(f)) for the registrant and have:

     a.  Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         registrant, including its consolidated subsidiaries, is made known to
         us by others within those entities, particularly during the period in
         which this report is being prepared;

     b.  [Reserved]

     c.  Evaluated the effectiveness of the registrant's disclosure controls and
         procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the end
         of the period covered by this report based on such evaluation; and

     d.  Disclosed in this report any change in the registrant's internal
         control over financial reporting that occurred during the registrant's
         fourth fiscal quarter that has materially affected, or is reasonably
         likely to materially affect, the registrant's internal control over
         financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a.  All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

     b.  Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         control over financial reporting.


Dated:  April 12, 2006                    By:    /s/ Jay L. Schottenstein
                                              ----------------------------------
                                              Jay L. Schottenstein, Chairman and
                                              Chief Executive Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>15
<FILENAME>l19155aexv31w2.txt
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<PAGE>


                                                                    EXHIBIT 31.2

                                 CERTIFICATIONS

I, Douglas J. Probst, certify that:

1.   I have reviewed this Annual Report on Form 10-K for the fiscal year ended
     January 28, 2006 of DSW Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
     financial reporting (as defined in Exchange Act Rules 13a-15(f) and
     15d-15(f)) for the registrant and have:

     a.  Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         registrant, including its consolidated subsidiaries, is made known to
         us by others within those entities, particularly during the period in
         which this report is being prepared;

     b.  [Reserved]

     c.  Evaluated the effectiveness of the registrant's disclosure controls and
         procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the end
         of the period covered by this report based on such evaluation; and

     d.  Disclosed in this report any change in the registrant's internal
         control over financial reporting that occurred during the registrant's
         fourth fiscal quarter that has materially affected, or is reasonably
         likely to materially affect, the registrant's internal control over
         financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a.  All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

     b.  Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         control over financial reporting.


Dated:  April 12, 2006          By:     /s/ Douglas J. Probst
                                    --------------------------------------------
                                    Douglas J. Probst, Executive Vice President,
                                    Chief Financial Officer, and Treasurer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>16
<FILENAME>l19155aexv32w1.txt
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<PAGE>


                                                                    EXHIBIT 32.1

                           SECTION 1350 CERTIFICATION*

     In connection with the Annual Report of DSW Inc. (the "Company") on Form
10-K for the fiscal year ended January 28, 2006 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Jay L. Schottenstein,
Chairman and Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of my knowledge:

     (1)  The Report fully complies with the requirements of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all
          material respects, the financial condition and result of operations of
          the Company.


Dated:  April 12, 2006                    By:    /s/ Jay L. Schottenstein
                                              ----------------------------------
                                              Jay L. Schottenstein, Chairman and
                                              Chief Executive Officer

*    This Certification is being furnished as required by Rule 13a-14(b) under
     the Securities Exchange Act of 1934 (the "Exchange Act") and Section 1350
     of Chapter 63 of Title 18 of the United States Code, and shall not be
     deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise
     subject to the liability of that section. This Certification shall not be
     deemed to be incorporated by reference into any filing under the Securities
     Act of 1933 or the Exchange Act, except as otherwise stated in such filing.

     A signed original of this written statement required by Section 906 has
     been provided to the Company and will be retained by the Company and
     furnished to the Securities and Exchange Commission or its staff upon
     request.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>17
<FILENAME>l19155aexv32w2.txt
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<PAGE>



                                                                    EXHIBIT 32.2

                           SECTION 1350 CERTIFICATION*

         In connection with the Annual Report of DSW Inc. (the "Company") on
Form 10-K for the fiscal year ended January 28, 2006 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Douglas
J. Probst, Senior Vice President, Chief Financial Officer, and Treasurer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:

     (1)  The Report fully complies with the requirements of section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all
          material respects, the financial condition and result of operations of
          the Company.


Dated:  April 12, 2006          By:     /s/ Douglas J. Probst
                                    --------------------------------------------
                                    Douglas J. Probst, Executive Vice President,
                                    Chief Financial Officer, and Treasurer

*    This Certification is being furnished as required by Rule 13a-14(b) under
     the Securities Exchange Act of 1934 (the "Exchange Act") and Section 1350
     of Chapter 63 of Title 18 of the United States Code, and shall not be
     deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise
     subject to the liability of that section. This Certification shall not be
     deemed to be incorporated by reference into any filing under the Securities
     Act of 1933 or the Exchange Act, except as otherwise stated in such filing.

     A signed original of this written statement required by Section 906 has
     been provided to the Company and will be retained by the Company and
     furnished to the Securities and Exchange Commission or its staff upon
     request.

</TEXT>
</DOCUMENT>
</SUBMISSION>
