Exhibit (10)(ff)
JW Letter Agreement dated 9/27/01
Bank of America Plaza
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September 27, 2001
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Senior Vice President Finance and Chief Financial Officer
Safety-Kleen Corp.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ International ("▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇") appreciates the opportunity to
present you with this engagement letter to provide Safety-Kleen Services, Inc.
("Safety-Kleen") with professional services in support of your finance,
accounting, internal audit and tax department needs.
OBJECTIVES
Safety-Kleen is operating under Chapter 11 bankruptcy provisions. The company
has recently restructured by hiring a new executive management team and is
implementing recommended business improvements across its businesses. Many of
these business improvements are directly related to the financial infrastructure
of the company with regard to needed accounting and controls processes,
establishment of improved management reporting tools, and expansion of the
internal audit function.
Among the many challenges to improve the business, the new executive team and
its partners have identified three key objectives:
1) Safety-Kleen needs to timely file 10-Ks and 10-Qs with confidence and
accuracy.
2) Safety-Kleen needs to improve its financial systems, processes and
related internal controls such that its external auditor can endorse
the controls during the annual audit.
3) Safety-Kleen requires the implementation of processes and controls
that support and deliver accurate management reporting data to support
the new business structure and executive team.
In addition, management has indicated that it has and will continue to identify
a number of accounting and tax-related areas where additional support will
likely be needed in the coming months in order to meet its business objectives.
STRATEGY SUMMARY
Our initial recommended strategy is two-fold:
1) Pursue the ultimate goal of long-term business process improvement and
controls.
2) Execute immediate improvements identified by Safety-Kleen's Accounting
Procedure and Control Initiative (ACPI) and Financial Reporting
Integrity Projects (FRIP).
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
September 27, 2001
Page 2 of 4
This mix will be obtained through the use of several teams focused upon
different initiatives across all areas of the company. Our project managers will
ensure a cohesive, consistent approach throughout the Safety-Kleen business
units. The specific timeline for implementing immediate improvements will be
defined as an initial priority.
To elaborate further, we recommend the use of a "Strategic" team focused on the
design and implementation of an end-to-end process and control environment to
deliver accurate management and financial reporting and internal controls. To
implement real change as swiftly as possible, the Strategic team will be
responsible for recommending the formation of "Tactical" teams to attack
immediate needs identified.
For the first two key company objectives outlined above, Safety-Kleen has begun
to address the deficiencies identified by the APCI and FRIP projects. These
teams have made significant progress in documenting the existing
accounting-related procedures in place throughout the company. However, to
assist in the design and implementation of improved processes and controls,
Safety-Kleen is requesting ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ to:
o Review and assess data currently collected and defined by
Safety-Kleen's APCI effort.
o Design and implement required process modifications to improve
accuracy, efficiency and offset risk.
o Design and implement required controls, monitoring, and internal audit
functions to ensure continued efficiency and risk management.
For the third key company objective outlined above, we will adapt and leverage
the work performed to date in both the FRIP and APCI projects. During our
discussions, the following concentrated areas for improvement in management
reporting were identified:
o Review of standard costing systems and methodology utilized by branch
support groups including, the machine manufacturing plant, solvent
recycling plants, and oil re-refining plants.
o Evaluate branch accounting allocation of overhead costs such as
disposal, transportation, warehousing, and corporate.
o Assess the integrity of overall data including the areas of chart of
accounts, payroll recording, intercompany accounts, and branch
expenses.
In addition, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ will make available from time-to-time, as
requested, professionals to assist with various accounting and tax-related
support needs to assist the Company in meeting its business objectives.
ENGAGEMENT TEAM
A ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ National Director will be assigned and regularly on site at
Safety-Kleen in Columbia. Also, Engagement Managers will document a weekly
status report to summarize and communicate status of each identified project to
Safety-Kleen management. The objectives of tracking and formally reporting
status are to:
o Provide a consistent technique for monitoring progress against plan.
o Identify problems/issues quickly to allow for maximum time for
corrections.
o Provide an objective rather than subjective evaluation of status. o
Provide you with timely information on a regular basis.
o Provide assistance in communicating recommendations.
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
September 27, 2001
Page 3 of 4
An agreement will be established regarding content and format of status
reporting, schedule of status meetings, and other engagement criteria.
PROFESSIONAL FEES
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ proposes a unique solution to provide Safety-Kleen with maximum
expertise while remaining sensitive to cost constraints. The hourly professional
fees for this engagement are as follows:
National Director(s) $175
Practice Director/Managing Director(s) $150
Engagement Manager(s) $140
Team Leader(s) $115
Information Technology Professional(s) $125
Accounting, Internal Audit and Tax Professional(s) $105
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ does not charge a premium for overtime hours worked. Note that
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ may utilize certain professionals who are paid on an hourly
basis. These professionals are required to be paid for travel time, subject to
certain legal limitations. Where compensatory travel time is incurred, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ will invoice Safety-Kleen at 50% of the normal rates outlined above.
In order to meet the reporting requirements of the Bankruptcy Court, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ is expected to incur significant administrative time in preparing invoices
and supporting documentation. We will utilize administrative personnel whenever
possible to reduce the expense associated with these tasks. Accordingly, our
charge for administrative services will be $35 per hour.
EXPENSES
Safety-Kleen will reimburse ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ for all reasonable travel and actual
out-of-pocket expenses incurred while performing the services described in this
proposal and approved by the company. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ will provide receipt
documentation as required by the Bankruptcy Court, except for the following:
travel per diems for meals, telephone expense and mileage reimbursement.
Wherever possible, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ will utilize professionals from our network
of offices across North America to minimize travel expenses in visiting branch
locations.
Safety-Kleen will reimburse ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ for all reasonable legal expenses
incurred by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ associated with ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇' retention and
compensation in Safety Kleen's bankruptcy case, including, but not limited to,
preparing retention applications and fee applications and responding to any
objections thereto.
TERMS
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ invoices and fee applications will be sent and filed monthly in
accordance with the terms of any standing orders of the Bankruptcy Court for the
District of Delaware or any orders entered by the Bankruptcy Court presiding
over Safety-Kleen's bankruptcy case (the "Court"). Payments on the invoices and
fee applications are due 30 days from the approval date by the court (subject to
any holdback requirements imposed by the Court). Once Safety-Kleen emerges from
Bankruptcy protection, all invoices are due 30 days from invoice date in the
normal course of business.
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September 27, 2001
Page 4 of 4
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ salaried professionals' standard workweek is 45 hours.
Professionals will be available to work additional hours as required to meet key
deadlines. Any activities such as vacations, holidays and training will be
communicated on a timely basis.
This engagement letter is subject to the terms and conditions of the ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ Master Service Agreement between Safety-Kleen Services, Inc. and ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ International, dated September 27, 2001 (the "MSA", see attached). This
engagement letter and the MSA are subject to approval by the Court.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇' BENEFITS
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ is a unique professional services firm that provides process
improvement, internal audit, finance/accounting, tax, and technology services.
Many of our highly seasoned professionals hold CPA, CIA, CFE, CISA and MBA
designations. Clients find we are affordable, effective, and committed toward
providing total satisfaction on every engagement. To date, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ has
completed thousands of engagements for over 1,600 major organizations.
Our unique business model leverages our strengths in designing and implementing
process improvements and controls. We currently have over 1,500 professionals in
28 offices throughout North America. We believe the following attributes make
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ a strong fit to your team:
o EXPERIENCE - Utilizing professionals with real world industry
experience, we require five years minimum experience and have an
average of over ten years.
o INDEPENDENCE - ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ is not a public accounting firm. Our
core competencies are internal audit and process improvement.
o TEAMWORK - We do not work in a vacuum. Our team-based approach
ensures that skills, knowledge and data are transferred to your
employees throughout the engagement.3
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ appreciates this opportunity to begin building a long-term,
mutually rewarding business partnership with you and Safety-Kleen.
Sincerely,
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇▇▇
Managing Director
Please indicate your acceptance by signing below.
Signature: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Title: CFO Date: 10-24-01
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▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL
MASTER SERVICE AGREEMENT
TERMS AND CONDITIONS
THIS MASTER SERVICE AGREEMENT is made and entered into this 27th day of
September, 2001 between SAFETY-KLEEN SERVICES, INC. ("CLIENT") and ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ INTERNAT1ONAL, a Delaware corporation ("▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇"). This agreement
sets forth the general terms and conditions pursuant, to which ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
will provide services to CLIENT. The specific engagement scope and pricing will
be separately documented in the Proposal(s). This agreement is subject to the
approval of the United States Bankruptcy Court for the District of Delaware.
1. Location. Services will be performed at sites established by CLIENT unless
otherwise agreed to in the Proposal(s).
2. Rights of Title. All reports, workpapers, programs, manuals, discs, tapes,
listings and any other material prepared solely under this Agreement by
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇' employees shall belong exclusively to CLIENT and CLIENT shall
have the right to obtain from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and/or JEFFERSON WELL' employees,
and to hold in CLIENT's name all copyrights, trademark registrations, patents or
whatever protection CLIENT may deem appropnate to the subject matter. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ agrees to give CLIENT reasonable assistance, at CLIENT's expense, required
to protect the rights defined in this paragraph. All reports, workpapers,
programs, manuals, discs, tapes, listings and any other material prepared solely
under this Agreement by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇' employees is intended solely for the
use of CLIENT's internal management and is not intended to be and should not be
used by any other parties without the prior written consent of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
which consent shall not be unreasonably withheld.
3. Termination. Unless otherwise provided for in the Proposal(s), either party
may terminate this Agreement for any reason at any time. Upon termination,
CLIENT shall pay ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇' final invoice for all amounts due under the
terms of section 4 below.
4. Payment. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ shall be paid at the billable rates set forth in
each Proposal(s). ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇' employees' daily working hours shall be the
same as worked by CLIENT's employees, unless otherwise directed and/or approved
by CLIENT.
(a) While CLIENT remains in bankruptcy, payment shall be made in
accordance with any orders governing compensation of professionals or
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ in CLIENT's bankruptcy case.
(b) Upon such time as CLIENT emerges from bankruptcy protection, payment
shall be made within 30 days from invoice date in the normal course of
business. If payment is not received with 30 days from the invoice
date in the normal course of business, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ reserves the
right, in addition to any other rights it may have, to suspend the
services until such payment is made in full.
5. Taxes. CLIENT shall be responsible for payment of all taxes (excluding
payroll and income taxes), if any, levied upon the services provided under this
Agreement.
6. Insurance. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ agrees to maintain the following insurance for its
employees.
(a) Worker's compensation insurance covering all ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
employees;
(b) Employer's liability insurance;
(c) Comprehensive automobile liability insurance for combined bodily
injury and property damage;
(d) Comprehensive general liability insurance for combined bodily injury
and property damage; and
(e) Professional liability insurance.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ agrees to provide CLIENT with certificates of insurance
upon request.
7. Independent Contractor Relationship. The parties understand and agree that
the personnel assigned by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ to CLIENT under this Agreement are
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇' employees or agents. Under no circumstances are such personnel
to be considered CLIENT employees or agents. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ shall perform its
obligations under this Agreement as an independent contractor and not as an
agent or joint venture partner of CLIENT. No individual providing services
pursuant to this agreement shall be entitled to benefits provided to client
employees, including but not limited to, compensation, insurance and
unemployment insurance.
8. Mutual Indemnification. To the fullest extent permitted by applicable law,
each party will indemnify, defend and hold the other harmless for any and all
actual and alleged claims, damages, liabilities, losses and expenses, including,
but not limited to reasonable attorney's fees, arising out of, resulting from or
in connection with that other party's (i) intentional and willful acts or
omissions in connection with this Agreement, (ii) gross negligence in connection
with this Agreement or (iii) breach of this Agreement. This Article 8 is subject
to the provisions of Article 10 of this Agreement. This Article 8 shall
survive termination of this Agreement.
9. Warranty. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ warrants that the services will be performed in a
workmanlike and professional manner by individuals who have skill and experience
commensurate with the requirements of the services. Other than those contained
in this section, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ makes no other representations or warranties
with respect to the services.
10. Limitation of Liability. CLIENT understands and agrees that ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
will not be liable for any punitive, incidental, consequential or indirect
damages. CLIENT agrees that ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇' liability for any damages, if any,
including any liability to CLIENT pursuant to Article 8. shall not exceed two
times those charges paid to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ by CLIENT pursuant to any individual
proposal for the services rendered by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ that gave rise to the
liability. This Article 10 shall survive termination of this Agreement.
11. Confidential Information. Each party agrees that during and after the term
of this Agreement it will keep secret and will not, without the prior written
consent of the other, use or disclose to any third party any confidential or
proprietary information relating to the business of the other party or that
party's customers learned by such party or disclosed to such party in connection
with this Agreement. The restrictions of this section 11 shall not apply to any
information which (i) is or becomes generally available to the public other than
as a result of a breach of this section 11 by the receiving party, (ii) was
available to the receiving party on a nonconfidential basis prior to its
disclosure under this Agreement or (iii) becomes available to the receiving
party on a nonconfidential basis from a third party which was not itself bound
by a confidentiality obligation and was free to disclose the information. This
Article 11. shall survive termination of this agreement.
12. Entire Agreement. This Agreement and the Proposal(s) referred to, as well as
any written amendments, shall constitute the entire Agreement between the
parties and supersedes all previous communications, representations,
understandings, concurrent or subsequent purchase orders, and agreements,
whether oral or written, between the parties or any officer or representative of
the parties, CLIENT has not relied upon any representations other than those set
forth in this Agreement.
13. Amendments. No amendments or other variation to this Agreement shall be
effective unless it is in writing, is signed by an authorized person on behalf
of each party, and is approved by the court in CLIENT's bankruptcy case.
14. Governing Law. The laws of the State of South Carolina shall govern this
Agreement. Both parties consent to the jurisdiction of the courts in the state
of South Carolina. No action arising out of this Agreement, regardless of the
form, may be brought by either party more than one year after the cause of
action has occurred.
15. Controversy/Arbitration. Controversies and claims arising out of or
relating to this Agreement shall be resolved as follows:
(a) Controversies or Claims Arising During the Bankruptcy Case. Any
controversy or claim that is pursued or arises during the Bankruptcy
Case and that arises out of or relates to this Agreement, or the
breach of the same shall be settled through consultation and
negotiation in good faith and a spirit of mutual cooperztion. However,
if those attempts fail, any controversy or claim that is pursued or
arises during the Bankruptcy Case and that arises out of or relates to
this Agreement, or breach of the same shall be heard by the bankruptcy
court presiding over CLIENT's bankruptcy case.
(b) Claims Arising After CLIENT's Emergence from Bankruptcy. Any
controversy or claim arising out of or relating to this Agreement, or
the breach of the same, arising after CLIENTs emergence from
bankruptcy, shall be settled through consultation and negotiation in
good faith and a spirit of mutual cooperation. However, if those
attempts fail, the parties agree that any misunderstandings or
disputes arising from this Agreement shall be decided by arbitration
which shall be conducted upon request by either party, in Milwaukee,
Wisconsin, before three (3) arbitrators (unless both parties agree on
one (1) arbitrator designated by the American Arbitration Association
(the "AAA"), in accordance with the terms of the Commercial
Arbitration Rules of the AAA, and, to the maximum extent applicable,
the United States Arbitration Act (Title 9 of the United States
Code), or if such Act is not applicable, any substantially equivalent
state law. Each party shall be responsible for its own costs related
to arbitration and shall bear half the cost of the Arbitrator(s).
Notwithstanding anything herein to the contrary, either party may
proceed to a court of competent junsdiction to obtain injunctive
relief at anytime.
16. Severability. If any provision of this Agreement is determined to be
unenforceable or invalid, the remaining provisions of this Agreement shall
remain in full force and effect.
17. Force Majeure. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and CLIENT shall not be liable for any
failure to perform or delay in performance of its obligations under this
Agreement, resulting from the elements, acts of God or any other cause beyond
the reasonable control of the party failing to perform.
18. Notices. Any notices required under this Agreement shall be in writing.
Notices shall be delivered in person or sent by overnight courier or facsimile
addressed to the addresses in the Proposal(s). Notice shall be effective when
sent by overnight courier or facsimile or upon delivery if delivered in person.
19. Successors and Assigns. This Agreement may be assigned by either of the
Parties upon written consent of the non-assigning party, which consent shall not
be unreasonably withheld. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective heirs, successors and assigns.
20. Waiver. No waiver by either party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to be
performed by that other party shall be deemed a waiver of a prior or subsequent
breach of any similar or dissimilar provisions or conditions of this Agreement.
For ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇.
Name ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇.
Its Managing Director - Charlotte
For CLIENT
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its Senior Vice President and Chief Financial Officer