AMENDMENT NO. 1 TO AMENDED AND RESTATED SHARED SERVICES AGREEMENT
Exhibit 10.2
Execution Copy
This Amendment No. 1 to Amended and Restated Shared Services Agreement (this “Amendment”) is
made and entered into as of March 17, 2008, by and between DSW Inc., an Ohio corporation (“DSW”),
and Retail Ventures, Inc., an Ohio corporation (“Retail Ventures”).
Recitals
WHEREAS, DSW and Retail Ventures entered into an Amended and Restated Shared Services
Agreement, dated as of October 29, 2006, relating to their arrangement concerning certain shared
services (the “Shared Services Agreement”);
WHEREAS, Retail Ventures has sold its entire membership interest in Value City Department
Stores LLC, an Ohio limited liability company (“Value City”);
WHEREAS, Retail Ventures, Retail Ventures Services, Inc., an Ohio corporation (“RVSI”) and
wholly owned subsidiary of Retail Ventures, Filenes Basement, Inc., a Delaware corporation (“FB”)
and wholly owned subsidiary of Retail Ventures (Retail Ventures, RVSI and FB are collectively
referred to as the “RVI Entities”), and DSW have entered into a certain Transfer and Assignment
Agreement, dated as of March 17, 2008, pursuant to which the RVI Entities transferred certain
assets and contracts related to certain shared services including General Corporate and Financial
Services and Human Resources Services (the “Transfer and Assignment Agreement”); and
WHEREAS, the parties desire to amend the Shared Services Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements described in this
Amendment, the parties hereby agree as follows:
Agreement
| 1. | The following definitions shall be added to Article I Definitions of the Shared Services Agreement: |
“General Corporate, Financial and Human Resources Services” means those services referenced
on Schedule II that were provided by or on behalf of Retail Ventures before the GCFHR
Services Transfer Date and will be provided by DSW after the GCFHR Services Transfer Date.
“GCFHR Services Transfer Date” shall mean the date that is mutually agreed upon by the
Parties for transfer of responsibility for performance of General Corporate, Financial and
Human Resources Services from Retail Ventures to DSW.
1
| 2. | The definition of “Tax Separation Agreement” in Article I Definitions of the Shared Services Agreement is amended in its entirety to read as follows: |
“Tax Separation Agreement” means the Tax Separation Agreement attached as Exhibit A to the
Master Separation Agreement, as such Tax Separation Agreement may be amended from time
to time by mutual agreement of the parties.
| 3. | Schedules I, II and III to the Shared Services Agreement are hereby replaced in their entirety with the schedules attached to this Amendment. |
| 4. | Section 2.02(a) of the Shared Services Agreement shall be amended and restated in its entirety to read as follows: |
(a) Subject to the terms and conditions of this Agreement and in consideration
of the DSW Service Costs described below, DSW agrees to provide to the applicable
Retail Ventures Entities, or to procure the provision to such entities of, and Retail
Ventures agrees to purchase from DSW, the DSW Services. Unless otherwise
specifically agreed by Retail Ventures and DSW, (i) the DSW Services (other than the
Information Technology Services and the General Corporate, Financial and Human
Resources Services) shall be substantially similar in scope, quality, and nature
to those customarily provided to, or procured on behalf of, the Retail Ventures
Entities by DSW and/or its Subsidiaries prior to the Offering Date, (ii) the
Information Technology Services shall be, at a minimum, substantially similar in
scope, quality, and nature to those customarily provided to, or procured on behalf
of, the Retail Ventures Entities by Retail Ventures and/or its Subsidiaries prior to
the Information Technology Services Transfer Date and (iii) the General
Corporate, Financial and Human Resources Services shall be, at a minimum,
substantially similar in scope, quality, and nature to those customarily provided to,
or procured on behalf of, the Retail Ventures Entities by Retail Ventures and/or its
Subsidiaries prior to the GCFHR Services Transfer Date.
| 5. | Section 3.02 of the Shared Services Agreement shall be amended and restated in its entirety to read as follows: |
SECTION 3.02. Customary Billing. The costs of Services as to which the Customary Billing method applies shall
be equal to the costs customarily charged and/or allocated by one Party and/or one or
more of its Subsidiaries or Departments (the “Billing Party”) to the other Party and/or
one or more of its Subsidiaries or Departments (the “Receiving Party”) immediately
prior to the Information Technology Services Transfer Date or the GCFHR Services
Transfer Date, as applicable (it being understood that from and after the
Information Technology Services Transfer Date or the GCFHR Services Transfer Date,
as applicable, such costs may be increased by the Billing Party in a manner
2
consistent with the manner in which such costs were increased from time to time prior
to the Information Technology Services Transfer Date or the GCFHR Services Transfer
Date, as applicable, and consistent with the semi-annual reconciliation described
in Section 8.01).
| 6. | Section 3.06(a) of the Shared Services Agreement shall be amended and restated in its entirety to read as follows: |
(a) Except as otherwise provided in a Schedule to this Agreement or to the extent
that Retail Ventures and DSW may mutually agree, each Billing Party shall invoice or
notify the Chief Executive Officer or Chief Financial Officer of the Receiving Party
on a monthly basis (not later than the tenth day of each month), in a manner
substantially similar to and consistent with the billing practices used in connection
with services provided by Retail Ventures to the DSW Entities prior to the Offering
Date and, as applicable, the Information Technology Services Transfer Date or the
GCFHR Services Transfer Date (except as otherwise agreed), of the Service Costs
related to services performed or procured by the Billing Party during the prior
calendar month. As used herein, “Service Costs” means the Retail Ventures Service
Costs, if Retail Ventures is the Billing Party, and the DSW Service Costs, if DSW is
the Billing Party. In connection with the invoicing described in this Section
3.06(a), the Billing Party shall provide to the Receiving Party the same billing data
and level of detail as customarily or similar to that provided to the Receiving Party
prior to the Offering Date and, as applicable, the Information Technology Services
Transfer Date or the GCFHR Services Transfer Date and such other related data
as may be reasonably requested by the Receiving Party.
| 7. | Section 4.01(i) of the Shared Services Agreement shall be amended and restated in its entirety to read as follows: |
(i) General Standard of Service. Except as otherwise agreed to in writing by the Parties or as described in this
Agreement, and provided that a Party is not restricted by contract with third parties
or by applicable law, the Parties agree that (i) the nature, quality, and standard of
care applicable to the delivery of the Services hereunder (other than the Information
Technology Services and the General Corporate, Financial and Human Resources
Services) shall be substantially the same as or consistent with that applicable
to the similar services provided by a Party to the other Party prior to the Offering
Date, (ii) the nature, quality, and standard of care applicable to the delivery of
the Information Technology Services hereunder shall be, at a minimum, substantially
the same as or consistent with that applicable to the similar services provided by or
on behalf of Retail Ventures prior to the Information Technology Services Transfer
Date, and (iii) the nature, quality, and standard of care applicable to the
delivery of the General Corporate, Financial and Human Resources Services shall be,
at a
3
minimum, substantially the same as or consistent with that applicable to the
similar services provided by or on behalf of Retail Ventures prior to the GCFHR
Services Transfer Date. Retail Ventures shall use its reasonable efforts to
ensure that the nature and quality of Services provided to DSW associates under
Retail Ventures Plans, either by Retail Ventures directly or through administrators
under contract, shall be undifferentiated as compared with the same services provided
to or on behalf of Retail Ventures associates under Retail Ventures Plans.
| 8. | Section 9.09(a) is amended to change all references to “0000 Xxxx 0xx Xxxxxx” to “000 XXX Xxxxx.” |
| 9. | In the event that an asset impairment occurs to either party or its subsidiaries because of Value City ceasing to conduct business or a reduction in the sales of Value City, the party on whose books the asset (relating to such impairment) resides at the time of such cessation of business or reduction in sales shall be obligated to take the asset impairment and shall not seek reimbursement from the other party for any charges relating to such asset impairment. |
| 10. | In the event that Value City ceases to conduct business, the parties agree that they will jointly share the “fixed cost” portion of the shared service fees allocated to Value City for Fiscal Year 2008 in the same proportion as DSW and the RVI Entities share fees for such service. For purposes of this Agreement, fixed costs shall mean the costs required to provide the shared service function regardless of whether Value City is receiving service (i.e.: deprecation expense and personnel expense). |
| 11. | Retail Ventures shall be solely responsible for reasonable allocations of costs of the Services to Value City for which Value City is not liable during the first ninety (90) days as the result of contractual terms and limitations contained in the agreement(s) relating to the sale of Value City to Value City Holdings, Inc. / VCHI Acquisition Co. on January 23, 2008. For purposes of this paragraph, “Services” does not include shoe processing. |
| 12. | Capitalized terms used in this Amendment and not defined herein shall have the meanings given to them in the Shared Services Agreement. |
| 13. | The provisions of this Amendment shall become effective as of the date hereof and this Amendment shall not otherwise affect any obligation or liability of either party under the Shared Services Agreement occurring or accruing prior to the date of this Amendment. |
| 14. | Except as expressly amended herein, all terms and provisions of the Shared Services Agreement shall remain unchanged and in full force and effect. |
4
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to Amended and
Restated Shared Services Agreement as of the date set forth above.
| DSW INC. | RETAIL VENTURES, INC. | |||||||||
By:
|
/s/ Xxxxxxx X. Xxxxxx
|
By: | /s/ Xxxxx X. XxXxxxx
|
|||||||
| Title: Senior Vice President, General Counsel | Title: Executive Vice President, CFO | |||||||||
5
SCHEDULE I
TO
AMENDED AND RESTATED
SHARED SERVICES AGREEMENT
DATED October 29, 2006
BETWEEN
RETAIL VENTURES, INC.
AND
DSW INC.
AMENDED AND RESTATED
SHARED SERVICES AGREEMENT
DATED October 29, 2006
BETWEEN
RETAIL VENTURES, INC.
AND
DSW INC.
Revised Effective March 17, 2008
SERVICES TO BE PROVIDED BY RETAIL VENTURES, INC. AND RETAIL VENTURES
SERVICES, INC.
SERVICES, INC.
| DESCRIPTION OF RETAIL VENTURES | RETAIL VENTURES SERVICE COSTS OR | |
| SERVICE | BILLING METHODOLOGY TO DSW | |
1. IMPORT MANAGEMENT AND COMPLIANCE
|
Pass-Through Billing with respect to costs directly related to DSW Entities. Importing fees (including U.S. Customs fees, Duties, Commissions, Ocean Freight, Excel/APL Logistic Carrier fees and other associated expense) are allocated to the businesses by invoice (which historically is a one-to-one relationship to container) to the ratio of the container contents to the whole containers/trailer. | |
| DSW to pay a percentage of the overhead costs based upon percentage of usage. The overhead allocation percentage will be reviewed and determined annually. | ||
2. Management, Oversight and General
(includes deprecation of IT assets related
to shared service assets purchased by RVI,
expenses associated with the Northland
facility lease (pursuant to the terms of
the Master Separation Agreement between the
parties), compliance assistance, legal
services, SSC Corporate services expenses,
and DSW’s portion of D&O insurance
premiuims.)
|
DSW to pay $358,334 per month during the term of the agreement. |
1
SCHEDULE II
TO
TO
AMENDED AND RESTATED
SHARED SERVICES AGREEMENT
DATED October 29, 2006
BETWEEN
RETAIL VENTURES, INC.
AND
DSW INC.
SHARED SERVICES AGREEMENT
DATED October 29, 2006
BETWEEN
RETAIL VENTURES, INC.
AND
DSW INC.
Revised Effective March 17, 2008
SERVICES TO BE PROVIDED BY DSW INC.
| DSW SERVICE COSTS | ||||
| DSW SERVICE COSTS OR | OR BILLING | |||
| DESCRIPTION OF DSW | BILLING METHODOLOGY TO | METHOLOGY TO | ||
| SERVICE | RETAIL VENTURES | FILENE’S BASEMENT | ||
1. GENERAL CORPORATE AND
FINANCIAL SERVICES |
||||
(i) PAYROLL SERVICES
(including preparation and
distribution of employee
checks; payment of payroll
taxes, garnishment and
other deductions to
appropriate parties;
preparation and filing of
employer tax returns; and
preparation of annual W-2s
for employees)
|
RVI to pay $0 per month during the term of the Agreement. | FB to pay $9,417 per month during the term of the Agreement. | ||
(ii) Sox and AUDITING Fees
(including coordination of
external audit services
and assistance with
compliance with
Xxxxxxxx-Xxxxx
requirements)
|
RVI to pay 50% of audit fees relating to the shared audit of internal controls. | N/A | ||
(iii) ACCOUNTS PAYABLE,
and SALES AUDIT
|
RVI to pay $5,417 per month during the term of the Agreement. | FB to pay $31,917 per month during the term of the Agreement. | ||
(iv) GENERAL LEDGER AND
PREPARATION OF QUARTERLY,
ANNUAL AND OTHER SEC
REPORTS; ASSISTANCE WITH
THE PREPARATION OF ANNUAL
REPORT TO SHAREHOLDERS;
AND PREPARATION OF ERISA
REPORTS.
|
RVI to pay $29,500 per month during the term of the Agreement. | FB to pay $20,167 per month during the term of the Agreement. |
1
| DSW SERVICE COSTS | ||||
| DSW SERVICE COSTS OR | OR BILLING | |||
| DESCRIPTION OF DSW | BILLING METHODOLOGY TO | METHOLOGY TO | ||
| SERVICE | RETAIL VENTURES | FILENE’S BASEMENT | ||
(v) TAX SERVICES
(including preparation and
filing of all federal,
state and local tax
returns, reports and other
required filings;
coordination and
management of tax audits
and other similar
proceedings; and
assistance with tax
planning, tax strategy and
compliance with the Tax
Separation Agreement)
|
RVI to pay $3,750 per month during the term of the Agreement. | FB to pay $8,667 per month during the term of the Agreement. | ||
2. HUMAN RESOURCES
(ALL COST CENTERS)
|
When pre-approved by RVI, Pass-Through Billing with respect to costs directly related to RVI Entities. RVI to pay $0 per month during the term of the Agreement for overhead costs. | When pre-approved by FB, Pass-Through Billing with respect to costs directly related to FB. FB to pay $25,583 per month during the term of the Agreement for overhead costs. | ||
3. RISK MANAGEMENT
(including management of
insurance and workers
compensation coverage;
administration of claims
services; negotiation and
acquisition of insurance
coverages including, but
not limited to, property
and business interruption,
casualty (including
workers compensation),
director and officer
liability and other
liability coverages)
|
a) Insurance
premium costs
billed as specified
in Schedule III. RVI to pay $0 per month during the term of the Agreement for overhead costs. |
a) Insurance
premium costs
billed as specified
in Schedule III. B) FB to pay $6,333 per month during the term of the Agreement for overhead costs. |
||
4. INTERNAL AUDIT
|
RVI to pay $16,417 per month during the term of the Agreement for overhead costs.Shared Section 404 audit fees from outside auditor to be split 50/50. | FB to pay $24,583 per month during the term of the Agreement for overhead costs. |
2
| DSW SERVICE COSTS | ||||
| DSW SERVICE COSTS OR | OR BILLING | |||
| DESCRIPTION OF DSW | BILLING METHODOLOGY TO | METHOLOGY TO | ||
| SERVICE | RETAIL VENTURES | FILENE’S BASEMENT | ||
5. INFORMATION TECHNOLOGY
(ALL COST CENTERS)
|
Pass-Through Billing with respect to costs directly related to Retail Ventures Entities (100% allocated cost centers). | Pass-Through Billing with respect to costs directly related to Retail Ventures Entities (100% allocated cost centers). | ||
| RVI to pay $0 per month during the term of the Agreement with respect to overhead, Services and depreciation shared by DSW Entities and Retail Ventures Entities. | FB to pay $246,866 per month during the term of the Agreement with respect to overhead, Services and depreciation shared by DSW Entities and Retail Ventures Entities. | |||
6. Legal Services
|
When pre-approved by RVI, Pass-Through Billing with respect to costs directly related to RVI Entities. | N/A | ||
Total monthly fixed charges
|
$55,084 | $373,533 |
3
SCHEDULE III
TO
AMENDED AND RESTATED
SHARED SERVICES AGREEMENT
DATED October 29, 2006
BETWEEN
RETAIL VENTURES, INC.
AND
DSW INC.
AMENDED AND RESTATED
SHARED SERVICES AGREEMENT
DATED October 29, 2006
BETWEEN
RETAIL VENTURES, INC.
AND
DSW INC.
Amended Effective March 17, 2008
INSURANCE POLICIES MAINTAINED BY RETAIL VENTURES
The Insurance Polices described in Part (a) below shall be maintained by
Retail Ventures, Inc. (“Retail Ventures”) on behalf of DSW Inc. (“DSW”) and its Subsidiaries
pursuant to the terms of the Amended and Restated Shared Services Agreement between Retail Ventures
and DSW dated October 29, 2006, of which this Schedule is a part. The insurance premiums related
to such policies to be paid by DSW, or for which Retail Ventures shall be reimbursed by DSW, are
set forth or described in Part (b) of this Schedule. Capitalized terms not otherwise defined in
this Schedule shall have the respective meanings assigned to them in the Amended and Restated
Shared Services Agreement.
| (a) | LIST OF INSURANCE POLICIES | |
| (a) | Liability: Zurich American Insurance Co. #ACO903070302 – primary — $1MM/occurrence (DSW only) Zurich American Insurance Co., #ACO382218606 – primary — $1MM/occurrence (RVI only) National Union Fire Ins. Co., #9835015 – umbrella — $25MM/occ/agg Zurich American Insurance Co.,#AEC508637504 – excess GL — $25MM/occ/agg Lexington Insurance, #1172913 – excess GL — $25MM/occ/agg National Union Fire, #8766505 – excess GL — $25MM/occ/agg Liberty International, #LQ1B7107876407 – excess GL — $50MM/occ/agg Great American Insurance, #TUE 0-00-00-00-00 – excess GL — $25MM/occ/agg National Surety, #SHX-000-90474420 – excess GL — $25MM/occ/agg |
|
| (b) | Property: FM Global Insurance, #NC346 — $1,000,000,000 blanket limit FM Global Insurance, #NC346 – earthquake — $5MM agg Arrowhead Group, #309153XF-1 – excess earthquake — $10MM/occ/agg (DSW only) Insurance Company of the West, #XHO216132702 – excess earthquake — $15MM/occ/agg (DSW only) Federal Flood Policies – various locations & policy numbers — $500K |
|
| (c) | Automobile Travelers Indemnity Insurance Co., #TC2J-CAP-393K3380 — $2MM CSL |
|
| (d) | Cargo Lloyd’s of London, #CC106040Z, $10MM/occ/agg Lloyd’s of London, #MC106070Z, excess cargo, $5MM/occ/agg |
|
| (e) | Workers Compensation Travelers Insurance Company, #TC2HUB-466K1644– statutory limits Travelers Insurance Company, #TRJUB-466K1656 – retro AZ, MA & WI |
1
| Ohio – Self-Insured under S1200005342 Arch Insurance, #11WCX5942600, excess WC over Ohio SI, statutory limits |
||
| (f) | Directors and Officers Liability Insurance (DSW only) Federal Insurance Co. (Chubb) #6802-9501 – primary — $10MM XL Specialty Insurance, #ELU106200-08, excess D&O — $10MM Allied World Assurance Co., #C007705/003, excess D&O — $10MM XXXX Xxxxxxxxx Xxxxxxx, #XXX000000, excess D&O, $10MM AXIS Reinsurance Company, #MAN714919012008, excess D&O — $10MM Travelers Insurance, #ECO6801162, excess D&O, $10MM US Specialty (HCC), #14-MGU-08-A17173, excess D&O — $10MM Great American Insurance, #DFX3911869, excess D&O — $5MM Houston Casualty Insurance, #14MG09A9263, Side A coverage — $15MM (RVI only) Federal Insurance Co. (Chubb) #8169-6117 – primary — $10MM XL Specialty Insurance, #ELU106226-08, excess D&O — $10MM Allied World Assurance (AWAC), #C007628/003, excess D&O — $10MM XXXX Xxxxxxxxx Xxxxxxx, #XXX000000, excess D&O, $10MM AXIS Reinsurance Company, #MAN714352012008, excess D&O — $10MM Travelers Insurance, #ECO6801163, excess D&O, $10MM US Specialty (HCC), #14-MGU-08-A17183, excess D&O — $10MM Great American Insurance, #DFX0009650, excess D&O — $10MM Liberty Mutual Insurance, #DO3AT361551004, excess D&O — $10MM National Union Fire (AIG), #000-00-00, excess D&O — $10MM XL Specialty Insurance, #14MG-09-A9265, Side A coverage — $15MM |
|
| (g) | Executive Protection Insurance National Union Fire, #6790009, crime — $10MM/occ/agg National Union Fire, #647-7736, K&R — $10MM unlimited National Union Fire, #000-00-00, fiduciary — $5MM |
|
| (h) | Other AIG Cat Excess, #5348415, excess punitive damages — $25MM/occ/agg Hanseatic Insurance, #HIPD201225, excess punitive damages — $25MM/occ/agg AIG Cat Excess, #5348416, excess punitive damages — $25MM/occ/agg AIG Cat Excess, #5348417, excess punitive damages — $25MM/occ/agg Continental Insurance Co., #PST 28 352 9925, foreign package — $1MM/occ Safeonline, LLC, Binder#9BQKJ , Cyber Risk (first party) — $5MM (DSW only) ACE American Lloyd’s, Binder #9BQKF, Cyber Risk (third party) $5MM (DSW only) |
2
| (b) | CALCULATION OF PREMIUM |
(i) DSW shall promptly pay or reimburse Retail Ventures 100% of premium expenses,
deductibles or retention amounts Retail Ventures may incur in connection with Insurance
Policies that relate solely to the DSW Business.
(ii) DSW shall promptly pay or reimburse Retail Ventures its proportionate share of premium
expenses, deductibles or retention amounts Retail Ventures may incur in connection with
Insurance Policies that relate the Retail Ventures Business and the DSW Business. The
“Retail Ventures Business” means any business of Retail Ventures other than the DSW
Business. DSW’s proportionate will be calculated as follows:
(A) LIABILITY INSURANCE costs shall be prorated based on the ratio of DSW’s sales as
compared to total sales.
(B) PROPERTY INSURANCE costs shall be prorated based on the ratio of the value of DSW
property covered by the insurance policy as compared to the total value of all property
covered by the insurance policy. [“VALUE OF PROPERTY” IS DEFINED AS RETAIL INVENTORY,
FIXTURES, LEASEHOLDS, REAL PROPERTY, RENTAL INCOME AND BUSINESS INTERRUPTION.]
(C) AUTOMOBILE INSURANCE costs shall be charged on each insured vehicle owned or leased
by DSW which is covered by the insurance policy.
(D) CARGO INSURANCE costs shall be prorated based on the ratio of the duties paid for
DSW imports covered by the insurance policy as compared to the total duties paid for all
imports covered by the insurance policy.
(E) WORKERS COMPENSATION costs shall be prorated based on an actual per state rate
against projected payrolls plus estimated claims cost per location.
(F) EXECUTIVE PROTECTION AND OTHERS—Executive Protection Insurance (or crime), and
foreign package coverage shall be prorated based on the ratio of sales for DSW as compared
to the total sales covered by the policy. Fiduciary coverage for benefit plans shall be
allocated based on 401K deposit percentages. Federal Flood Program policies are allocated
to each location for which a policy is required to be purchased based on its Federal Flood
Zone determination.
3
