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Comprehensive Settlement Agreement

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Sectors: Manufacturing
Governing Law: New York, View New York State Laws
Effective Date: October 06, 2003
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COMPREHENSIVE SETTLEMENT AGREEMENT


THIS COMPREHENSIVE SETTLEMENT AGREEMENT (this "CSA") dated as of September 30, 2003, is by and between SAFETY-KLEEN SYSTEMS, INC. ("Safety-Kleen"), a Wisconsin corporation and a subsidiary of Safety-Kleen Corp., and SYSTEMONE TECHNOLOGIES INC. ("SystemOne"), a Florida corporation. Capitalized terms used but not defined herein shall have the respective meanings set forth in the Marketing Agreement (as defined below).


I.
RECITALS


WHEREAS, SystemOne and Safety-Kleen entered into a Second Amended and Restated Marketing and Distribution Agreement dated as of March 8, 2001, as amended by the First Amendment to the Second Amended and Restated Marketing and Distribution Agreement, dated October 31, 2001 ("October 31 Amendment"), and by Amendment No. 1, dated June 25, 2002 (collectively the "Marketing Agreement"), pursuant to which certain disputes have arisen between them; and


WHEREAS, SystemOne and Safety-Kleen have determined that it is in their mutual best interest to terminate the Marketing Agreement, to settle such disputes and to enter into full and mutual releases of all claims that each may have against the other to the extent more fully set forth herein; and


NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants, agreements and conditions hereinafter set forth and the mutual


benefits to be derived therefrom, the sufficiency and adequacy of which are hereby acknowledged, the parties agree as follows:


II.
COMMERCIAL TERMS OF SETTLEMENT


A. Notwithstanding anything to the contrary contained in the Marketing Agreement and except as set forth in subparagraphs (i) - (vi) below, the Marketing Agreement shall be terminated as set forth in this CSA, retroactive to October 1, 2003. Notwithstanding the foregoing:


(i) Irrespective of whether the Final Effective Date (as
defined in paragraph II(K), below) occurs, Safety-Kleen shall purchase
and pay for 264 Equivalent Units of Equipment (the "Remaining September
Units" which, together with Units taken in September 2003 prior to the
date hereof, will be in total 1,042 Units) by the end of September 2003
at a Standard Price of $1,537.00 per Unit which shall be paid not later
than October 30, 2003. If the Final Effective Date does not occur, then
the Deferred Price in respect of the Remaining September Units shall be
payable in accordance with the Marketing Agreement.


(ii) Section 4.3 [continuing right to sell, etc.], Section 6.2
[grant of license], and Section 6.5 [Termination License] of the
Marketing Agreement shall survive termination of the Marketing
Agreement in accordance with their respective terms so long as
Safety-Kleen is continuing to sell, lease or service Equipment
purchased (a) under the Marketing Agreement prior to the termination of
the Marketing Agreement, or (b) under Paragraph II(H), below. As
promptly as practicable, but in any event within 10 (ten) days of
execution of this CSA, SystemOne will deliver to David Coulson, Esq.,
or such other shareholder at Greenberg Traurig as may be designated by


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Mr. Coulson (the "Escrow Agent"), a list identifying each of the
suppliers of each of the component parts for the Equipment, with
appropriate contact information ("Supplier List"). Upon the filing of a
voluntary or involuntary petition for bankruptcy relief involving
SystemOne, or the decision to stop supplying Equipment parts, by reason
of a sale, dissolution, liquidation, or otherwise, Safety-Kleen may
provide notice of such event to the Escrow Agent, and the Escrow Agent
shall deliver the Supplier List to Safety-Kleen.(iii) Subject to the
general releases set forth herein, Sections 6.1 and 10
[indemnification] of the Marketing Agreement shall survive termination
of the Marketing Agreement in accordance with their respective terms,
except that upon the Final Effective Date, SystemOne's obligations
under Section 10 shall be strictly limited to Safety-Kleen's liability
in respect of death or bodily injuries to any person, destruction or
damage to any property or contamination of or adverse effects on the
environment, arising out of or resulting from any defect in the design
and manufacture of the Equipment or replacement parts sold under the
Marketing Agreement or this CSA, and SystemOne shall have no obligation
whatsoever to indemnify, defend and hold harmless Safety-Kleen under
Section 10.1 of the Marketing Agreement for the costs of inspection,
replacement or repair, or to reimburse Safety-Kleen for its inspection,
replacement or repair expenses, as contemplated in the SystemOne
Equipment Inspection and Repair Agreement dated as of July 30, 2003
("Repair Agreement"), concerning any leaks that have occurred or occur
in the future in the solvent storage tanks in the Equipment for any
Equipment supplied by SystemOne before the Final Effective Date.


(iv) Sections 7.1 through 7.5 and 7.7 through 7.10 [warranty
matters] of the Marketing Agreement shall survive termination of the


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Marketing Agreement in accordance with their respective terms. In
addition, the October 31 Amendment shall remain in full force and
effect. Specifically, SystemOne shall continue to supply any parts for
the Equipment under and to the extent of the time period set forth in
the warranty obligations set forth in the foregoing sections of the
Marketing Agreement at no cost to Safety-Kleen; and SystemOne shall
continue to provide repair and/or replacement parts for the Equipment,
for items not covered by warranty, at Safety-Kleen's cost.


(v) Section 9 [insurance] of the Marketing Agreement shall
survive termination of the Marketing Agreement in accordance with its
terms, through December 31, 2005.


(vi) Section 16 [dispute resolution] of the Marketing
Agreement shall survive termination of the Marketing Agreement with
respect to any rights and obligations of the parties surviving such
termination in accordance with this CSA.


B. The Warrant issued pursuant to Section 15 of the Marketing Agreement is hereby cancelled as of the Final Effective Date and Safety-Kleen shall surrender such Warrant for cancellation.


C. The Non-Competition Agreements referenced in Section 17 of the Marketing Agreement are hereby terminated and shall be of no further force or effect.


D. Safety-Kleen acknowledges that any right of first offer that it might have had pursuant to Section 1.6 of the Marketing Agreement or otherwise with respect to any New Model has expired or terminated in all respects.


E. Safety-Kleen shall pay SystemOne an amount equal to $14,000,000.00 (plus interest, if applicable, as set forth in this CSA) by wire transfer to an account designated by SystemOne as follows:


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(i) $2,000,000.00, payable on Monday, October 6, 2003. If the
Final Effective Date does not occur on or before November 24, 2003,
then SystemOne may nevertheless retain such $2,000,000.00 as an
approximation of its gross profit on the manufacture and sale of
Equipment to Safety-Kleen that would otherwise be required to purchase
for the months of October, November and December, 2003 (approximately
3,120 Units) under the Marketing Agreement, and the parties will be
released from their respective obligations to manufacture and sell, and
to purchase 3,120 Units for the months of October, November and
December, 2003. Retention of such amount shall not act as a waiver of
any of the parties' claims or defenses, including any claim for
recovery of that portion of this approximation of gross profit that
would be returned to Safety-Kleen if it were to prevail in the parties'
dispute as to the Standard Price.


(ii) $1,000,000.00, payable within 11 days after the Final
Effective Date.


(iii) $7,000,000.00 (including interest, if applicable, as set
forth in subparagraph (iii)(2), below, the "$7,000,000.00 Payment"),
payable as follows:


1. If the First Amended Joint Plan of Reorganization of
Safety-Kleen Corp., and certain of its direct and
indirect subsidiaries (the "Plan of Reorganization")
becomes effective, on or before December 1, 2003, the
$7,000,000.00 Payment shall be made prior to December
31, 2003.


2. If the Plan of Reorganization does not become
effective on or before December 1, 2003, the
$7,000,000.00 Payment shall be made in three


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installments of $2,000,000.00 and a final installment
of $1,000,000.00, plus interest accruing on a daily
basis at the rate of 14% per annum on the unpaid
balance from December 31, 2003. The dates of the four
installment payments shall be December 31, 2003,
January 30, 2004, February 27, 2004 and March 31,
2004. Interest shall be calculated based on the
number of days actually elapsed from December 31,
2003 until the date of payment, assuming a year of
360 days and the accrued amount of such interest
shall be payable with each such installment.
Notwithstanding anything to the contrary set forth in
this Paragraph, if the Plan of Reorganization becomes
effective after December 1, 2003 but before March 1,
2004, then Safety-Kleen shall pay to SystemOne the
unpaid portion of the $7,000,000.00 payment
(including interest from December 31, 2003) within
thirty (30) days of the effective date of the Plan of
Reorganization.


(iv) $4,000,000.00 (the "Deferred Price Payment"), payable as
follows: $1,250,000.00 on January 30, 2004, $1,250,000.00 on February
27, 2004, and $1,500,000.00 on March 31, 2004. If the effective date of
the Plan of Reorganization has not occurred on or before December 1,
2003, then Safety-Kleen immediately shall arrange for the issuance of a
$2,000,000.00 Letter of Credit to be effective December 1, 2003 for the
benefit of SystemOne with draw instructions in substantially the same
form as set forth on Exhibit A hereto. The Letter of Credit shall be
issued by a bank reasonably acceptable to SystemOne and otherwise will
be reasonably acceptable to SystemOne. SystemOne and Safety-Kleen will
provide all reasonable cooperation in agreeing with the issuing bank on
mutually acceptable letter of credit documentation. SystemOne has the
right to apply payments as to amount owing under the CSA at its sole
discretion. In the event of any draw under the Letter of Credit,
Safety-Kleen shall cause such Letter of Credit to be reissued not later


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than the date of the next scheduled payment of an installment of the
Deferred Price Payment in amount equal to the lesser of $2,000,000.00
and the remaining balance of the Deferred Price Payment.


Upon the timely payment in full of all amounts due under this CSA, the remaining Deferred Price with respect to Equipment purchased by Safety-Kleen prior to the date hereof and with respect to the Remaining September Units shall be deemed paid in full.


F. If any payment required to be made by Safety-Kleen is not timely made in accordance with this CSA, Safety-Kleen shall pay interest thereon accruing from the date such payment was due to the date of payment at the annual rate of 20%. Safety-Kleen shall reimburse and indemnify SystemOne for all costs (including, without limitation, attorneys' fees and expenses and court costs at trial and appellate levels) incurred in collecting any unpaid amount due and owing under this CSA.


G. The Repair Agreement is terminated in its entirety effective upon the Final Effective Date and shall thereafter be of no force or effect whatsoever. SystemOne will continue with its inspection and repair obligation as to any Customer Washers as to which notice has been provided to SystemOne on or before October 17, 2003, pursuant to the Repair Agreement. Safety-Kleen may retain from the $1,000,000 payment (set forth in Paragraph II(E)(ii)) as liquidated damages an amount equal to $200 for each Customer Washer that has not been timely inspected and repaired. Irrespective of whether the Final Effective Date occurs, and after execution of this CSA, Safety-Kleen shall only provide notice of Customer Washers that are leaking under normal operating conditions. If the Final Effective Date does not occur, neither party may assert as an admission by the other party that such $200 amount is an appropriate measure of damages, in connection with any dispute relating to the Marketing Agreement or the Repair Agreement.


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H. SystemOne agrees that during 2005 Safety-Kleen shall have the right, but not the obligation, to purchase up to the lesser of (x) 3000 Series 500 parts washers (or equivalent model then being manufactured by SystemOne) and (y) a number of such parts washers equal to 16.7% of the annual production capacity
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