1
CORPORATE SERVICES AGREEMENT
This Agreement is made this 16th day of October, 1996, by and between Value
City Department Stores, Inc. ("VCS") and Schottenstein Stores Corporation
("SSC"). All sections of the previous Agreement dated September 27, 1995 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 liability insurance coverage (through policies of insurance and the
establishment of appropriate reserves) equivalent to "first dollar" coverage
with respect to personal injury, property damage and other claims of third
parties and with respect to self-insured workers' compensation claims (the
"Insurance Program"). 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: the fee for
liability coverage shall be a rate, expressed in dollars, per $1,000 of
projected annual sales, based upon the estimated cost of claims, claims
administration,
2
reserves to cover self-insured claims and premiums charged by insurance carriers
for coverage beyond the self-insured amount. The fee shall be subject to
adjustment on the basis of loss experience. The fee for workers' compensation
coverage shall be a rate, expressed in dollars, per $100 of payroll, based upon
projected payroll and projected expenses for compensation, medical bills paid,
excess coverage, employer's liability coverage, claims administrator's fees,
legal fees and administrative costs, adjusted on the basis of actual payroll,
experienced costs, and required reserves at the end of each year.
SSC will also administer other coverages; e.g., automobile, property
insurance, boiler & machinery, and crime coverages for which VCS will pay
premiums, administrative fees and other charges which SSC may be required to
pay. SSC will provide Safety Consultant services as necessary to VCS which are
included as administrative fees, except for outside consultation services
engaged specifically.
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. VCS will reimburse SSC an amount
equal to 2% of the general contractors original contract cost plus 2% of the
costs from Hanover Signs to cover payroll and other expenses of the SSC
Construction Division related to VCS's projects. 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. VCS and SSC shall share equally
the total payroll and related cost of the SSC employees available to provide
such services.
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.
- 2 -
3
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 1% of the first cost
of the imported merchandise.
11. BUYING - SSC for VCS. One buyer employed by SSC has provided buying
services for the Department Store Division, and shall continue to be available
to provide such services for VCS. Purchases by this buyer shall be made for the
account of VCS, and VCS shall pay to SSC a charge equal to $5,500 per month for
all purchases made by this buyer for VCS. All purchases made by this buyer shall
be subject to the approval of VCS.
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.
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:
------------------------------
VALUE CITY DEPARTMENT STORES, INC.
By:
------------------------------
* Changed since last update
- 3 -
