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* REGISTRANT SEEKS CONFIDENTIAL TREATMENT OF THE MARKED
OMITTED INFORMATION PURSUANT TO RULE 24b-2 UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED, AND 17
C.F.R. SECTION 200.80 (b)(4). UNREDACTED COPIES OF THIS
EXHIBIT HAVE BEEN FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
EXHIBIT 10.31
SERVICES AGREEMENT
Agreement entered into this 7th day of April, 1993 by and between Kmart
Corporation, having its address at 3100 W. Big Beaver Troy, MI (hereinafter
referred to as "Kmart") and The Profit Recovery Group, Inc./Roy Greene
Associates, having its address at 1250 Powers Ferry Road, Marietta, GA 30067
(hereinafter referred to as "Contractor")
WHEREAS, the Contractor is engaged in the business of providing audit
services regarding utility and telecommunications expenses and desires to audit
Kmart's and any of Kmart's subsidiaries' and/or affiliates' utility and
telecommunications expenses, as requested by Kmart; and
WHEREAS, Kmart desires to designate certain of such expenses for the
Contractor to audit pursuant to this Agreement;
NOW THEREFORE, in consideration of the premises and mutual promises and
conditions herein contained, the parties agree as follows:
The Contractor will perform services set forth in this Agreement as
requested by Kmart on behalf of Kmart or any of its subsidiaries and/or
affiliates which Kmart so designates upon notice to the Contractor. If Kmart
designates that any of its subsidiaries and/or affiliates participate in this
Agreement references to "Kmart" hereafter in this Agreement shall refer to Kmart
or any such applicable subsidiaries and/or affiliates for which the Contractor
performs services, as applicable. The Contractor understands and agrees,
however, that each entity for which the Contractor performs services is solely
liable for its own performance under this Agreement.
1. Reasonable Care
The services, products, material and/or equipment described herein will
be provided by the Contractor at the above premises of Kmart at the
times and in the manner set forth herein. Reasonable care and its best
efforts shall be utilized by the Contractor in the performance of this
Agreement.
2. Term/Termination
The term of this Agreement shall be for a period of one (1) year from
the date indicated above. If the Contractor performs services pursuant
hereto at Kmart's request beyond such one (1) year period, this
Agreement shall renew on a month to month basis. Notwithstanding the
foregoing, each party reserves the right to terminate this Agreement
upon notice to the party in the event the other party breaches or fails
to perform any of its obligations in any material respect, attempts to
assign or otherwise transfer it rights, obligations or duties under
this agreement, or in the event the other party becomes insolvent or
proceedings are instituted by or against such party under any provision
of any federal or state bankruptcy or insolvency laws. In addition,
either party may terminate this Agreement at any time without cause
upon seven (7) days notice to the other party. Upon termination, there
shall be nothing due from Kmart to the Contractor beyond any fees due
for services
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performed at the date of termination. The Contractor shall remove all
of its equipment and material from the above premises within three (3)
days of the date of termination.
3. Compliance with all Laws
The Contractor shall be responsible for and does represent that it
shall comply with all federal, state and local laws, rules and
regulations applicable to this Agreement or the performance thereof.
4. Indemnification/Insurance
The Contractor shall reimburse, indemnify, defend and hold Kmart
harmless from and against any damage, loss expense or penalty, or any
claim or action therefor, by or on behalf of any person, arising out of
the performance or failure of performance of this Agreement or due to
any acts or omissions by the Contractor or its employees including but
not limited to, the Contractor's employees' payroll claims (wage
claims, claims for taxes required to be withheld from wages, social
security, etc.) unemployment compensation claims injury or death claims
and all similar claims, even if alleged to have occurred by an act of
negligence or wilful misconduct of Kmart. The Contractor in addition
agrees to obtain and keep in force property damage and bodily injury
liability insurance, naming Kmart as an Insured, and employee fidelity
insurance and shall also maintain Worker's Compensation Insurance as
required by all applicable federal, state or other laws including
Employer's liability insurance. Contractor shall provide evidence of
all insurance listed above at the request of Kmart.
5. Contractor's Forms
Any provisions of Contractor's proposals, contracts, invoices, billing
statement, acknowledgment forms or any other documents which are
inconsistent with the provisions of this Agreement shall be of no force
or effect.
6. Independent Contractor
The Contractor is and at all times shall be an independent contractor
in performance of this Agreement. The Contractor will exercise control
over its employees and shall be solely responsible for the verification
of identity and employment eligibility, for the payment of any wages,
salaries or other remuneration of its employees and for the payment of
any payroll taxes, contributions for unemployment insurance, social
security, pensions or annuities which are imposed and a result of the
employment of its employees.
7. No Modification
No modification, alteration or amendment of this Agreement shall be
binding on Kmart unless in writing and sent by a duly authorized
representative of Kmart.
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8. No Assignment
The Contractor may not assign or otherwise transfer its rights,
obligations or duties under this Agreement.
9. Entire Agreement
This Agreement shall be the entire agreement between Kmart and the
Contractor with regard to the subject matter hereof. This Agreement
shall supersede all prior understandings, agreements contracts or
arrangements between the parties.
10. Costs and Expenses
All costs, charges and expenses incurred in connection with the
Contractor's performance of this Agreement shall be borne by the
Contractor.
11. Description of Services
Description of services to be supplied by the Contractor, along with
the times and manner of Contractor's performance, are:
a. Utility Expense Audit
At Kmart's request, Contractor shall audit utility expenses,
including billings for electricity, water, sewerage, natural
gas and fuels, as specified by Kmart.
Services Provided. Contractor shall provide the following
services in accordance with the Utility Proposal attached
hereto as Exhibit A and which is incorporated herein by this
reference:
1. Examination of monthly utility charges for services
to determine compliance or possible overpayments,
underpayments and assurance of exact billing for
services of respective utilities. Contractor shall
work directly with the utilities to obtain lower
rates;
2. An initial examination of Kmart's previous twelve
(12) months utility bills. Where overcharges are
identified, Contractor shall audit prior fiscal
and/or calendar years for possible refunds.
Contractor shall copy, box, and ship all documents at
its expense;
3. A continuing analysis of Kmart's future utility bills
for the next eighteen (18) months to ensure that
savings realized continue through the duration of the
payment calculation;
4. Contractor will present to Kmart a final report of
recommendations with a thorough break down by
utility, location and a detailed listing of the total
available savings. Any recommendations submitted are
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subject to Kmart's approval, and once implemented
shall be deemed accepted.
5. Contractor's services will be carried out at such
location(s) as Kmart will designate.
6. Contractor's audit practices limit any disturbances
to Kmart's operation except to answer occasional
questions relating to Kmart's utility services and
operations. This agreement may include any present
facilities and any additional locations Kmart
acquires, as specified by Kmart.
b. Telecommunications Expense Audit
At Kmart's request, contractor shall audit billings and
inventory for telecommunications expenses, as specified by
Kmart.
Services Provided. Contractor shall provide the following
services in accordance with the Utility Proposal attached
hereto as Exhibit B and which is incorporated herein by this
reference:
1. Contractor shall examine monthly telephone charges to
determine possible overpayments or credits due for
discontinued services, and to assure exact billing
for installed services.
2. Contractor shall negotiate with the telephone
companies, other communications carriers, and service
organizations to have the overcharges removed from
service billings and to recover refunds/credits for
past overcharges.
3. Contractor shall review Kmart's present billings to
determine if any changes can be made to the service
type or configuration to enable Kmart to achieve cost
reductions in the future. Formal recommendations will
be presented for any such changes and action will be
taken only with Kmart's express approval.
4. Contractor shall provide Kmart without cost,
information about potential areas of expense control,
where it appears that such information would benefit
Kmart's operation.
5. Contractor shall present to Kmart a final Management
Summary of the audit results, which provides a
detailed listing by vendor, type of service,
telephone account number and location.
6. Contractor's services shall be carried out at such
location(s) as Kmart may designate.
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12. Payment
Kmart agrees to pay Contractor the fee for the services described in
item 11 above, after being invoiced in accordance with the provisions
of item 13 below. Payments shall be made as follows:
a. Utility Expense Audit
Contractor's fee for these services will be paid from the
recoveries and reduced future costs. There are two levels to
the fee structure, these are:
1. Credits & Refunds
Contractor shall document all claims for the specific
amounts as they are received by Kmart. Contractor's
compensation for credits and refunds will be thirty
percent (30%) of all collected claims. Contractor
shall invoice for claims once claims are collected by
Kmart and Kmart shall pay within sixty (60) days of
receipt of invoice.
2. Cost Reductions
Contractor shall compute and document Kmart's
calendar 1992 Average Monthly Cost for Utilities,
broken down into summer and winter rates, as
applicable, and taking into account seasonal rate
changes and high energy fluctuations that occur
monthly (the "1992 Average Monthly Cost").
Based on Kmart's 1992 usage, Contractor shall prepare
documents and all claims for reduction or elimination
of future costs associated with a rate change. The
Monthly "Utility Cost Reduction" is defined as any
savings realized by Kmart on or before December 31,
1994, based on Kmart's 1992 usage and rates.
Contractor's Fee shall be thirty percent (30%) of the
Monthly Utility Cost Reduction multiplied by eighteen
(18) months. Contractor shall issue an invoice to
Kmart for Contractor's Fee. Payment of invoices are
due within sixty (60) days from Kmart's receipt of
Contractor's invoice accompanied by complete
documentation satisfactory to Kmart establishing the
Monthly Utility Cost Reduction provided that
Contractor continues to perform all services set
forth under Section II herein and Kmart continues to
realize the Monthly Cost Reduction for the full
eighteen (18) months. Kmart reserves the right to
deduct from any future payments due Contractor any
savings that do not continue through the full
eighteen (18) month period. Kmart shall not be liable
to Contractor for any costs or fees associated with
savings which are first realized after December 31,
1994.
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b. Telecommunications Expense Audit
Contractor's fee for these services will be invoiced as
follows:
Where action is taken by Contractor which results in refunds
or credits for past overcharges, Contractor's fee shall be
thirty percent 30% of recovered monies. An invoice will be
rendered after the credit or refunds are received and Kmart
shall pay within sixty (60) days of receipt of such invoice.
Refunds or credits may include the following:
* Overbillings
* Telephone company errors (incorrect tariff applications,
mileage calculations, taxes, existing discount applications)
Where a recommendation is made by Contractor which results
within twelve (12) months after the recommendation is made in
the monthly reduction of on-going cost and such
recommendations is approved in writing by Kmart and
implemented by Contractor ("Monthly Telecommunication Cost
Reduction"), Contractor's Fee for the agreed upon savings will
be thirty percent (30%) of the Monthly Telecommunication Cost
Reduction multiplied by eighteen (18) months. Recommendations
may include but are not limited to the following:
* Reductions in facilities and/or in the monthly costs of
facilities and services (on a per location basis, as requested
by Kmart)
* Removal of unused facilities
* Maximizing volume discounts
* Reduction in local usage cost
* Maintenance agreement optimization
Contractor shall issue an invoice to Kmart for Contractor's
Fee with documentation acceptable to Kmart proving the Monthly
Telecommunication Cost Reduction. Payment of Contractor's
invoices are due within sixty (60) days from date of Kmart's
receipt of invoice provided that Contractor continues to
perform all services set forth under Section II herein and
Kmart continues to realize the Monthly Telecommunication Cost
Reduction.
c. Contractors Fees for both Utility and Telecommunications
The aforestated fees shall remain fixed for the full duration of this
Agreement unless the parties mutually agree in writing to another fee.
The fee for Contractor's services hereunder is contingent and is only
due to the extent that Kmart continues to realize such Monthly Cost
Reductions for the full eighteen (18) months after the Contractor's
recommendation.
Contractor shall refund to Kmart, or, at Kmart's option, Kmart shall
deduct from any amounts due Contractor, any portion of Contractor's Fee
paid by Kmart which
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represents any savings which are not actually realized by Kmart
throughout the full eighteen (18) month period.
13. Invoicing
All invoices presented to Kmart shall set forth the following
information: Name and address of the Contractor; Duns number (if the
Contractor has been assigned a Duns number): Invoice number; Date and
dollar amount of fee due as well as any supporting documentation as
required by Kmart.
14. Confidentiality
Contractor agrees not to disclose to any third party any information
whatsoever acquired in the process in examining documents and records
under this Agreement or otherwise acquired in the performance of this
Agreement except with the prior written consent of Kmart which may be
withheld for any reason.
15. Nonexclusive
The Contractor understands and agrees that this is a nonexclusive
agreement and that Kmart is not guaranteeing to the Contractor any
level of business. Kmart may, in its sole discretion, offer to the
Contractor for audit whatever expenses it chooses to refer.
16. Contractor understands and agrees that all information, documentation
and other materials which Contractor obtains from Kmart and/or the
utility and or telecommunications service provider pursuant to this
Agreement belongs to Kmart. Contractor shall deliver all such
information, documentation and other materials to Kmart when Contractor
has completed each audit hereunder or upon termination of this
Agreement, whichever occurs first.
ATTEST KMART CORPORATION
By: /s/
- ---------------------------------- ----------------------------------
Profit Recovery Group, Inc.
- ---------------------------------- -------------------------------------
(Contractor)
By: /s/
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ADDENDUM TO SERVICES AGREEMENT
DATED APRIL 7, 1993 BY AND BETWEEN
KMART CORPORATION ("KMART") AND
THE PROFIT RECOVERY GROUP
INTERNATIONAL, INC. ("CONTRACTOR")
The parties hereto hereby agree that the agreement described above ("Agreement")
is amended as follows to include Contractor's performance of Primary Audit
Services of various accounts payable media, including advertising,
transportation, expense, utilities, allowances, deals, etc. (not meant to be a
complete listing for review), for the fiscal years 1996, 1997, and 1998, all of
which Kmart shall determine in its sole discretion.
1.) Paragraphs 11 and 12 of the Agreement are deleted in their entireties and
are replaced with the following paragraphs:
"Additional Services Provided.
Contractor shall provide the following services:
a) Examination of Kmart's Accounts Payable operation at Contractor's own
expense to determine whether or not and to what extent overpayments and/or
under deductions have been made. Contractor agrees to reimburse Kmart for
any supply and/or data gathering costs associated with these audits. All
significant expenses to be pre-approved by Profit Recovery Group;
b) Writing chargebacks and submitting them with supporting data to Kmart's
Accounts Payable Manager (or whomever else Kmart designates) within the
guidelines to be established by Kmart for verification and processing;
c) Semi-annually, Contractor shall provide a computer analysis of audit
results with a breakdown by vendor, type of deduction, department, and a
summary of the audit results by type (Management Summary). Contractor
shall review with Kmart any control and operational weaknesses observed,
and make practical recommendations for correcting them;
d) Contractor shall comply with all monthly reporting requirements as set
forth on page 2 in the September 19, 1996 "Request for Proposal" as well
as with all modifications to such requirements requested by Kmart;
e) Provide Kmart, without cost, information about customs of the trade and
especially commendable practices or systems where it appears that such
information would benefit Kmart. Contractor shall also provide Kmart any
other information of like nature which Kmart may desire that does not
infringe upon Profit Recovery Group/Client confidentiality agreements;
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f) Contractor is responsible for the safekeeping of Kmart documents and data
files and shall return any or all documents to Kmart upon request within
10 days of receipt of request;
g) The operation of Kmart's Accounts Payable Department shall not be
disturbed except to answer an occasional question relating to systems,
practices and filing. Chargebacks and supporting data shall be prepared by
Contractor for processing by Kmart through its customary procedures;
h) Contractor's services shall be carried out at such location(s) as Kmart
may designate and shall comply with reasonable site modifications as
requested by Kmart;
i) Choice of Law. The formation, construction and performance of this
agreement shall be construed in accordance with the laws of the State of
Michigan, and Contractor agrees to exercise any right or remedy hereunder
in the State of Michigan courts of Oakland County, Michigan or the United
States District Court in Detroit, Michigan;
j) This Agreement shall be the entire agreement between Kmart and the
Contractor with regard to the subject matter hereof. This Agreement shall
supersede all prior understandings, agreements, contracts or arrangements
between the parties. Any provisions of Contractor's proposals, contracts,
invoices, billing statements, acknowledgment forms or any other documents
which are not consistent with the provisions of the Agreement and this
Addendum shall be of no force or effect.
"Duties.
a) Kmart agrees to furnish to Contractor, as available, all records which
Kmart determines are necessary to perform a full service audit, including
hard copy, microfilm, microfiche and electronic records, invoices, and
other documentation, including buyers files. Contractor shall determine
whether payments made on behalf of Kmart to vendors exceeded amounts that
were properly invoiced to Kmart. Contractor shall refer all suspected
overpayment/under-deduction claims to Kmart. All claims against vendors
for reimbursement of or credits for excess payments shall be processed by
Kmart as set forth in paragraph (b) above.
b) Contractor shall follow the audit time table (Audit Schedule) to be
established by Kmart at Kmart's sole discretion. Kmart agrees that its
self audit program shall be completed for the time periods released for
Contractor review per the Audit Schedule, with the exception that the
Statement Audit shall require additional review with Kmart to avoid
duplicate deductions for various potentially deferred Kmart deductions.
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Fees:
The sole and exclusive fee arrangement between Contractor and Kmart for any and
all services of any type performed by Contractor is as follows:
Contractor's fee for these services shall be [*] percent ([*]%) of
recovered moneys up to $[*], [*] percent ([*]%) of recovered moneys
from $[*] to $[*] and [*] percent ([*]%) of recovered moneys in excess
of $[*]. Contractors fee shall be invoiced monthly and shall be
calculated on claims collected less paybacks and adjustments. Payment
terms for fee billings are thirty (30) days from the date of Kmart's
receipt of invoice. This fee shall remain fixed for the full duration
of this Agreement including any extensions or renewals thereto unless
the parties mutually agree in writing to another fee. Contractor shall
not be entitled to a fee based on deductions until such deduction is
collected by Kmart or invoices identified by Contractor which are
actually deferred deductions to be later processed by Kmart. The fee
for Contractor's services hereunder is contingent and is only due to
the extent that Contractor identifies and prepares deduction vouchers
which are deducted from the applicable vendor account. If for any
reason a deduction, claim or invoice, as applicable, is later reversed,
charged back to or be paid back by Kmart, Contractor shall immediately
refund to Kmart, or at Kmart's option, Kmart shall deduct from amounts
due Contractor, any fee Contractor has received in connection with such
deduction, claim or invoice, upon receipt of Kmart's notice thereof.
Contractor will in all events be entitled to the fees set forth above
with respect to all monies collected (or credits received) following
the termination of this Agreement with respect to Contractor's efforts
while this Agreement is in effect.
Reserves:
As a protection against claim reversals, all invoices must reflect a 20% reserve
holdback of claims balance to be invoiced. These amounts shall be released
subsequent to the completion of the audit year involved pending a review period
(not to exceed 3 months) for any vendor chargebacks for invalid claims."
2.) The following paragraphs are also added to the Agreement:
"Contractor agrees not to disclose to any third party any information whatsoever
acquired in the process in examining documents and records under this Agreement
or otherwise acquired in the performance of this Agreement except with the prior
written consent of Kmart which may be withheld for any reason."
"Kmart's trademarks, trade names, service marks, label designs, product
identifications, art work and other symbols and devices associated with Kmart
(the "Kmart Marks") are and shall remain Kmart's property. Contractor
acknowledges Kmart's ownership and exclusive right to use the Kmart Marks.
Contractor shall not use the Kmart Marks in any way, shape, manner or form,
except as provided in the Agreement."
* Confidential treatment requested.
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"During the term of this Agreement only, Contractor is authorized to use the
forms furnished by Customer (the "Kmart Forms") for the specific purpose of this
Agreement and for no other purpose, whatsoever. Upon termination of this
Agreement, Contractor shall immediately return all copies of and halt all use of
the Kmart Forms. Contractor shall not permit any Kmart Forms to be used except
by Contractor's own employees for the specific purpose of this Agreement."
"Contractor acknowledges and agrees that serious and irreparable harm may be
inflicted on Kmart by any unauthorized use of the Kmart Marks or Kmart Forms,
and acknowledges that such injury cannot be compensated by payment of money
damages alone. Contractor, therefore, consents to immediate entry of a
restraining order of injunction in any court of competent jurisdiction to
prohibit and halt any unauthorized use of the Kmart Marks and/or Kmart Forms by
Contractor or any use by Contractor which is not in accordance with the terms of
this Agreement."
"Contractor understands and agrees that: (1) Kmart may, within its sole and
absolute discretion, choose not to pursue any claim, deduction, chargeback or
invoice submitted and/or suggested by Contractor, and shall not owe anything to
Contractor as a result thereof; and (2) Kmart may use any number of other
parties to perform secondary audits following the completion by Contractor of
its primary audit, without giving rise to any claim or obligation to
Contractor."
"Contractor agrees that any and all information in any form that is provided to
Contractor or any Contractor representative by Kmart as part of this Agreement
is provided and received in confidence, and Contractor shall at all times
preserve and protect the confidentiality of such information, and of any other
proprietary or non-public information of or relating to Kmart or its related
companies of which Contractor or any Contractor representative becomes aware or
acquires during the performance of this Agreement. Contractor also agrees that
it shall take all necessary steps to ensure that such confidential information
shall not be, except as required by law, disclosed to, or used by any person,
association or entity, except Contractor's own employees, and then only to the
extent necessary to perform this Agreement; provided, however, that Contractor
may use any information obtained in connection with performing its audit to
update Contractor's databases, including its National Deal Pricing Information
Database. Further, Contractor and Kmart each agree to keep the financial terms
of this Agreement strictly confidential. The confidentiality and non-disclosure
obligations contained herein shall survive and continue after termination of
this Agreement or any related Agreements the parties may execute, and shall bind
Contractor's and Kmart's legal representatives, successors and assigns."
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This Addendum is in addition to the Agreement and shall not alter or amend the
Agreement except to add the additional services set forth herein (the
"Additional Services"). All of the terms and conditions of the Agreement except
sections 11 and 12 are incorporated into and shall apply to this Addendum to
Services Agreement.
Agreed to this 28 day of January, 1997
Kmart Corporation Contractor
The Profit Recovery Group International, Inc.
By: /s/ By: /s/
---------------------------- -----------------------------------------
Title: V.P. Controller Title: Executive Vice President
------------------------- --------------------------------------
Attest Attest
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