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CORPORATE SERVICES AGREEMENT
* This Agreement is made this 1st day of June, 2000, by and between Value City
Department Stores, Inc. and its wholly owned subsidiaries (collective referred
to as "VCS") and Schottenstein Stores Corporation ("SSC"). All sections of the
previous Agreement dated October 13, 1997 are replaced by this Agreement.
1. RECITALS.
A. Pursuant to an agreement dated June, 1991 (the "Exchange
Agreement"), SSC has agreed to transfer to VCS substantially all of the
business, properties and assets formerly constituting the Department Store
Division of SSC (the "Department Store Division"), and the employees of the
Department Store Division will become employees of VCS.
B. Prior to the transfer of the business, properties and assets of
the Department Store Division to VCS, employees of the Department Store Division
have provided services to other divisions of SSC, and employees of other
divisions of SSC provided services to the Department Store Division.
C. VCS and SSC desire to provide for the continued sharing of
services as set forth in this Agreement.
2. EXECUTIVE COMPENSATION. Certain executives work for VCS and SSC and
are paid by SSC. VCS shall reimburse SSC for a percentage of the executives'
salaries. That percentage will be based on the number of hours the executive
spends on VCS business versus the executive's total hours worked, such payments
to be made in monthly installments.
3. INTERNAL LEGAL ADVICE. The in-house legal staff of SSC shall be
available to VCS for consultation and advice and for the performance of such
legal services as VCS shall reasonably request. VCS shall pay to SSC a
percentage of the payroll and related costs of such legal services equal to the
percentage of time the professional staff spends on VCS legal work versus total
professional staff hours available, such payments to be made in monthly
installments.
4. PENSION AND BENEFIT PLAN ADMINISTRATION. The Department Store
Division has provided administrative services, and VCS will continue to provide
administrative services, with respect to the SSC Benefit Plans (as defined in
the Exchange Agreement). SSC shall pay VCS for such services during each fiscal
year a percentage of the payroll and related cost to VCS of such services equal
to the percentage of the total number of participants in such plans represented
by the number of employees of SSC who are participants in such plans at the end
of the preceding fiscal year, such payment to be made in monthly installments.
5. INSURANCE AND RISK MANAGEMENT. SSC has maintained and shall continue
to maintain casualty insurance coverage through casualty insurance policies
commonly used by the industry, shall establish appropriate financial reserves
equivalent to "first dollar" insurance coverage including, if any, self-insured
or deductible amounts for any exposure covered by the casualty insurance
policies, and shall, with respect to workers compensation maintain appropriate
insurance (excluding West Virginia which VCS maintains through the state) or
qualify as a self-insurer to meet the various requirements of the states in
which SSC operates. The policies taken together shall be the "Insurance
Program."
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SSC shall continue to maintain and administer and to make available the
Insurance Program for the benefit and coverage of VCS. For continued coverage
under the Insurance Program, VCS shall pay to SSC an annual fee calculated on
the same basis as the calculation of the cost of participation by the Department
Store Division in the insurance program to wit:
- for liability coverage of all forms, the fee shall be a rate, expressed in
dollars, per $1,000 of projected annual sales, which rate shall be based on
the estimated cost of claims, claims administration, reserves to cover
self-insured retentions, premiums charged by insurance carriers including
primary policies, umbrella and excess policies, loss control and
administrative fees.
- for workers compensation, the fee shall be a rate, expressed in dollars,
per $100 of payroll, which rate shall be based on projected payroll and
other remuneration, and calculated based on projected expenses, medical
bills, excess insurance, estimated compensation and administrative expense
for loss control and insurance administration.
The fee for liability coverage shall be subject to adjustment in future
fiscal years. SSC may increase or decrease the insurance premium for coverage in
future fiscal years to reflect the adjustments needed.
The fee for workers compensation coverage shall be subject to
adjustment in future fiscal years. SSC may increase or decrease the insurance
premium for coverage in future fiscal years to reflect the adjustments needed.
Notwithstanding the duration of this Service Agreement or any other
section of this Service Agreement pertaining to the duration of VCS and SSC
commitments to each other, the participation of VCS in the Insurance Program in
a given fiscal year does not obligate VCS to participate in the Insurance
Program in subsequent fiscal years after the given fiscal year.
6. STORE PLANNING, DESIGN AND CONSTRUCTION. VCS will provide, upon
request from SSC, store planning, design and construction services. SSC shall
reimburse VCS for the payroll and related cost of VCS employees providing such
services on the basis of the number of hours spent by such employees or projects
performed by such employees during each fiscal year and the cost to VCS of
materials supplied.
Periodically SSC Construction Division, upon request from VCS,
will coordinate construction projects for VCS. The percentage to charge each
entity for SSC's Construction Division's payroll and benefits will be adjusted
every August and January and will be based on the estimated amount of each
entity's projects to be handled by the construction division. Such payments will
be made in monthly installments based on the latest estimates of projects to be
completed for VCS by the construction division. SSC travel expenditures
specifically for VCS projects will also be reimbursed if properly identified.
7. ADVERTISING. SSC shall make available to VCS, upon request, the
person or persons employed by SSC as announcers or in other aspects of the
production of radio and television commercials. The percentage to charge each
entity for SSC's advertising expense will be adjusted every July and January and
will be based on the amount of xxxxxxxx from SOS to each entity. Whatever
percentage VCS's xxxxxxxx are to the total xxxxxxxx received from SOS
Productions for the prior six months will be the same
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percentage used to charge VCS for their portion of SSC's advertising expense.
Such payments will be made in monthly installments.
8. CREDIT UNION ADMINISTRATION. SSC has provided and intends to
continue to make available to its employees the Schottenstein Associates'
Federal Credit Union (the "Credit Union"). The Credit Union has been available
to employees of the Department Store Division, and VCS and SSC intend that the
Credit Union shall continue to be available to employees of VCS. The Department
Store Division has provided, and VCS shall continue to provide administrative
services in connection with the operation of the Credit Union, including the
keeping of membership lists, the processing of loan applications, and the making
and servicing of loans. SSC shall pay VCS for such services that percentage of
the payroll cost to VCS of VCS employees providing such services equal to the
percentage of the total number of VCS and SSC employees who are members of the
Credit Union represented by the total number of employees of SSC who are members
of the Credit Union at the end of the preceding fiscal year, such payment to be
made in monthly installments.
9. SAFETY INSPECTION AND MAINTENANCE. Employees of SSC will perform
safety and fire protection inspections and related maintenance of stores
operated by VCS. VCS shall reimburse SSC for the payroll and related costs of
SSC employees engaged to perform such inspections and maintenance on the basis
of the number of hours spent by such employees or projects performed by such
employees during each fiscal year. Charges are to be made monthly.
*10. IMPORTING - SSC handles all of the paperwork related to VCS
importing of merchandise to insure all import regulations are followed and
proper duties are paid. For these services, SSC charges VCS either 1% of the
first cost of the imported merchandise or a fixed cost per item depending on the
type of merchandise.
*11. REAL ESTATE MANAGEMENT FEES. Schottenstein Management Co., ("SMC"),
an affiliate of SSC, may from time to time provide real estate management
services for certain of the properties leased by Value City. The services to be
provided involve the collection of subtenant rents, maintenance of common areas
and other services typically performed by a real estate management company. VCS
shall pay to SMC a fee equal to 7% of gross subtenant rents billed by SMC. In
addition, SMC shall provide to VCS, at no additional charge, real estate
brokerage services to market existing vacant space and any rentable space that
should become available.
12. ADDITIONAL SERVICES; DISCONTINUATION OF SERVICES. The parties
recognize that circumstances may change during the course of their relationship,
that the provision of services not contemplated by this Agreement for either
party by the other may prove to be desirable and beneficial, and that services
contemplated by this Agreement may no longer be required. The parties therefore
agree that, should additional services be desired, they will negotiate in good
faith with each other the nature of those services and the payment to be made
therefor, to the end that the provision of such services by the party providing
them shall not be unduly burdensome and the payment to be made for such services
shall not be unfair to the party receiving them. Should services provided
pursuant to this Agreement be determined to be unnecessary or undesirable, the
parties, by mutual agreement, may discontinue them by appropriate amendment to
this Agreement. Should additional services be deemed desirable, the parties
shall likewise amend this Agreement to specify such services and the payment to
be made therefor.
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13. ANNUAL REVIEW. The services performed by SSC for VCS and by VCS for
SSC pursuant to this Agreement and the cost thereof shall be subject to review
not later than 90 days following the end of each fiscal year of VCS by the
members of the Audit committee of the Board of Directors of VCS. This Agreement
may be terminated by VCS if the members of the Audit Committee shall find its
operation to be unduly burdensome or to result in disproportionate expense to
VCS.
14. EFFECTIVE DATE. This Agreement is effective as of the beginning of
the fiscal year.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers, thereunto duly authorized, as of the date first
above written.
SCHOTTENSTEIN STORES CORPORATION
By: /s/ Xxx Xxxxxxxxxxxxx
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VALUE CITY DEPARTMENT STORES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
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* Changed since last update
