Exhibit (10)(hh)
Rider to 2/1/01 AA Letter Agreement
re Company Process Improvements
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RIDER #1 TO THE FEBRUARY 1, 2001
ARRANGEMENT LETTER ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
Suite 3800
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Tel ▇▇▇ ▇▇▇ ▇▇▇▇
Chief Financial Officer
Safety-Kleen Corp. ▇▇▇.▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇▇▇▇:
This Rider #1, including any appendices, schedules, and/or attachments,
documents the understanding between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇▇▇") and
Safety-Kleen ("Client") with respect to certain services to be provided by
▇▇▇▇▇▇▇▇ related to program management for the Client's finance Process
Improvement Initiatives. In addition, Client has requested services to be
provided by ▇▇▇▇▇▇▇▇ in conjunction with the execution of various process
improvement projects included in the Process Improvement Initiatives and
assistance, as needed, with implementation of the recommendations (collectively
the "Services"). ▇▇▇▇▇▇▇▇ shall provide the Services pursuant to the provisions
of this Rider #1 and the Arrangement Letter dated February 1, 2001, entered into
by and between ▇▇▇▇▇▇▇▇ and Client, which is attached hereto and incorporated
herein by this reference, which, together, describe our understanding with
respect to the Services ("Agreement").
PROJECT SCOPE AND OBJECTIVES
The Client has undertaken a series of projects designed to address previously
identified material internal control weaknesses and business process improvement
opportunities ("Process Improvement Initiatives"). The objective of the Process
Improvement Initiatives is to assess the Client's core finance processes and
focus on "quick hit" (to be implemented within 3 months) improvement
recommendations and intermediate solutions (to be implemented within 3 to 6
months) to allow the Client's material internal control weaknesses to be
mitigated by May 31, 2002.
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December 5, 2001
Page 2 of 10
The Process Improvement Initiatives, which have been identified and launched to
date, address the following finance and support processes:
o Order entry and billing
o Collections and cash accounting
o Accounts receivable accounting
o Procurement-to-payment
o Payroll and benefits accounting
o Intercompany accounting
o Inventory and equipment-at-customers
o Account Analysis and close-the-books
Some of the above initiatives may be terminated and/or combined and other
initiatives may be initiated as part of the overall project. The Client will
ultimately be responsible for the approval of any changes.
The Client seeks to better manage the Process Improvement Initiatives by
organizing and managing them as a collective "program". ▇▇▇▇▇▇▇▇ has been
engaged to provide assistance in designing and administering a Program
Management Office (PMO) through which the program will be managed and
administered. In addition, ▇▇▇▇▇▇▇▇ will provide experienced resources to
perform and administer the individual process improvement initiatives included
in the overall program.
▇▇▇▇▇▇▇▇ will work jointly with resources from ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ International
(JWI), a third party consulting firm hired by the Client to perform outsourced
internal audit services and to assist with the Process Improvement Initiatives.
In executing their role as internal auditors, JWI will serve as a component of
the Client's quality assurance function by evaluating the effectiveness of any
internal control recommendations proposed during the Process Improvement
Initiatives, which are ultimately selected and implemented by the Client.
▇▇▇▇▇▇▇▇ SERVICES AND RESPONSIBILITIES
▇▇▇▇▇▇▇▇ has responsibility to recommend a design and provide appropriate
staffing for the PMO for the Process Improvement Initiatives. The PMO will be
responsible for the planning and administration of all the finance process
improvement initiatives. The services the PMO will perform include program
control for all initiatives, change management, and all required communications,
including recurring project status reports, Steering Committee meetings and
reports for the Client's senior management, Audit Committee and Board of
Directors. The PMO will track the progress of all process improvement
initiatives and work with the Client's senior management team and Steering
Committee to address the
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December 5, 2001
Page 3 of 10
timely resolution of issues, the resource allocations necessary to meet project
timelines and to develop the necessary training and implementation plans to
address material control weaknesses. However, while ▇▇▇▇▇▇▇▇ may assist in the
implementation of resulting recommendations, ▇▇▇▇▇▇▇▇ will not determine which
internal control recommendations will be implemented. The Client's management
will make those decisions.
Additionally, ▇▇▇▇▇▇▇▇ has the responsibility to administer and provide
resources to many of the process improvement initiatives. In that regard,
▇▇▇▇▇▇▇▇ will work jointly with resources from JWI in these process improvement
initiatives. Individual process improvement teams will be staffed with an
appropriate complement of skilled resources, considering ▇▇▇▇▇▇▇▇ and JWI
resources along with dedicated resources committed by the Client. These teams
will assess and document the current procedures in place at the Client, provide
recommendations for improvement, develop implementation plans for those
recommendations which are approved by the Client, and provide resources to
assist in the implementation, as necessary and requested by the Client.
DELIVERABLES
The design and establishment of the PMO will result in the production of some
deliverables including the following:
o PMO organization structure - including roles and responsibilities for
▇▇▇▇▇▇▇▇, JWI and Client resources.
o Program Management repository - likely a Lotus Notes-based database for use
by the PMO and all of the Process Improvement Initiative teams for
communication of status, issues, deliverables, etc.
Other PMO deliverables will arise primarily from the day-to-day operation of the
PMO. Examples of deliverables include:
o Program status reports
o Stakeholder assessment and related program communication strategy
o Steering committee program, senior management, Audit Committee and Board of
Directors summary reports
▇▇▇▇▇▇▇▇ shall retain all right, title and interest in and to: (i) the
Deliverables, including but not limited to all patent, copyright, trademark and
other intellectual property rights therein; and (ii) all methodologies,
processes, techniques, ideas, concepts, trade secrets and know-how embodied in
the Deliverables or that ▇▇▇▇▇▇▇▇ may develop or supply in connection with this
Agreement (the "▇▇▇▇▇▇▇▇ Knowledge"). Subject to the confidentiality
restrictions contained below, ▇▇▇▇▇▇▇▇ may use the Deliverables and the ▇▇▇▇▇▇▇▇
Knowledge for any purpose.
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December 5, 2001
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The deliverables arising from the individual process improvement initiatives
will vary depending on the specific scope and duration of the individual process
improvement initiatives. Examples of deliverables for individual process
improvement initiatives will include:
o Project work plans
o Project status reports
o Issues lists requiring Client management decisions
o Recommendations for improvements, including:
o Quick Hit recommendations (implementable within 3 months)
o Intermediate solution recommendations (implementable in 3-6 months)
o High-level implementation and training plans
ACCEPTANCE
All major deliverables will be reviewed and approved by Client senior management
and the Program Steering Committee.
Client shall accept Deliverables which (i) conform to the requirements of this
Rider #1 or (ii) where applicable, successfully complete the acceptance test
plan described in this Rider #1. Client will promptly give ▇▇▇▇▇▇▇▇ notification
of any non-conformance of the Deliverables with such requirements
("Non-conformance"), and ▇▇▇▇▇▇▇▇ shall have a reasonable period of time, based
on the severity and complexity of the Non-conformance, to correct the
Non-conformance. If Client uses the Deliverable before acceptance, fails to
promptly notify ▇▇▇▇▇▇▇▇ of any Non-conformance, or unreasonably delays the
beginning of acceptance testing, then the Deliverable shall be considered
accepted by the Client.
Client Responsibilities and Project Assumptions
1. Client Responsibilities
In connection with ▇▇▇▇▇▇▇▇'▇ provision of the Services, Client will
perform the tasks, furnish the personnel, provide the resources, or
undertake the responsibilities specified below ("Client Responsibilities").
o Provide access to appropriate personnel throughout the project
o Provide access to data required to support the successful completion
of these process improvement initiatives
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December 5, 2001
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o Provide the appropriate information technology resources (people,
hardware, software, Notes / network access, etc.) necessary to set up
the PMO repository and to allow all process improvement initiative
team members access to the repository
o Provide ▇▇▇▇▇▇▇▇ with sufficient workspace (including work areas to
enable entire process improvement initiative teams to work in the same
place) and other resources to support our ability to competently work
with the Client team
o Designate a senior management sponsor who will make all management
decisions with respect to this engagement.
o Designate an "owner" for each team who will serve as the key contact
point for the team in terms of content regarding the team's area of
focus and who will also arrange for access to data, resources, and
other assistance for their team.
o Provide necessary personnel to serve as part of the various teams as
needed and as directed by the Client's team owner and/or senior
management sponsor.
To the extent that the Services or ▇▇▇▇▇▇▇▇'▇ deliverables include the
design or implementation of hardware or software systems, Client's
management shall be responsible for making all management decisions,
including but not limited to, decisions concerning systems to be evaluated
and selected; the design of such systems; controls and system procedures to
be implemented; scope and timetable of system implementation; and testing,
training, and conversion plans. To the extent that ▇▇▇▇▇▇▇▇'▇ deliverables
include surveys, analyses, reports, evaluations, recommendations or other
management consulting services, Client's management shall be responsible
for all implementation decisions and for any future action with respect to
the matters addressed in the deliverables. In conjunction with Client
acceptance, Client's management will evaluate the adequacy and results of
the design and implementation of ▇▇▇▇▇▇▇▇'▇ deliverables.
Notwithstanding the scope of ▇▇▇▇▇▇▇▇'▇ services or deliverables hereunder,
Client acknowledges that it remains Client's responsibility to devise and
maintain a system of internal accounting controls in compliance with
Section 13(b)(2) of the U.S. Securities Exchange Act of 1934, which Section
provides that such controls be sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary (a)
to permit preparation of financial statements in conformity with generally
accepted accounting principles or any other criteria applicable to such
statements, and (b) to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences. In addition, Client
represents and warrants to ▇▇▇▇▇▇▇▇ that Client's management will, upon
execution, provide a copy of this Rider #1 to the Audit Committee. Client
will determine the adequacy of its internal accounting controls and
financial reporting systems without relying on
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December 5, 2001
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▇▇▇▇▇▇▇▇'▇ services or deliverables as the primary basis for making such
determination. Finally, Client acknowledges to ▇▇▇▇▇▇▇▇ that it is Client's
responsibility to make such disclosures with respect to this engagement
that are required by applicable laws and regulations.
Client acknowledges that: (i) ▇▇▇▇▇▇▇▇ and Client may correspond or convey
documentation via Internet e-mail unless Client expressly requests
otherwise, (ii) neither party has control over the performance,
reliability, availability, or security of Internet e-mail, and (iii)
▇▇▇▇▇▇▇▇ shall not be liable for any loss, damage, expense, harm or
inconvenience resulting from the loss, delay, interception, corruption, or
alteration of any Internet e-mail due to any reason beyond ▇▇▇▇▇▇▇▇'▇
reasonable control.
2. Project Assumptions
The Services, fees and delivery schedule for this engagement are based upon
the following assumptions, representations or information supplied by
Client ("Assumptions").
o The quality of any analysis, documentation, or other work contributed
by or produced by any of the non-▇▇▇▇▇▇▇▇ parties contracted by Client
to play a role in the PMO and/or Process Improvement Initiatives
(e.g., JWI personnel, independent contractors, etc.) will meet the
quality expectations of ▇▇▇▇▇▇▇▇ and the quality and timeliness
required by the Client via their needs and timelines.
o Information required for the completion of this work that is requested
from, agreed to by the Client and prepared / supplied by the Client
will meet the requirements of the project timelines and will be of a
sufficient quality and reliability level as to not delay the project
(for re-work, excessive validation, interpretation, etc.)
o Data extracts needed from Client's systems will be supplied by Client
or outside contractors (▇▇▇▇▇▇▇▇ or others) will be allowed and
enabled to supply it.
▇▇▇▇▇▇▇▇'▇ delivery of the Services and the fees charged are dependent on (i)
the Client's timely and effective completion of the Client Responsibilities,
(ii) the accuracy and completeness of the Project Assumptions, and (iii) timely
decisions and approvals by Client's management. Client shall be responsible for
any delays, additional costs, or other liabilities caused by or associated with
any deficiencies in the Client Responsibilities and Project Assumptions.
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December 5, 2001
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Project Approach and Staffing
1. Project Approach
Program Management Office - The key tasks performed by the PMO will include
the following:
o Develop a structure for all Process Improvements Initiatives,
including project scope, approach, timeline, resources, budgets, etc.
o Mobilize process improvement teams comprised of Client, ▇▇▇▇▇▇▇▇, JWI,
and other resources.
o Develop stakeholder analyses and related change enablement strategies
and plans (e.g., communication strategy, skills enhancement plans,
organization analysis and design, etc.)
o Review project deliverables and prepare summary program/project
summary reports for senior management, the Steering Committee, Audit
Committee and Board of Directors.
o Ongoing review of status and progress of all process improvement
initiatives focusing on timeline adherence, milestone achievements,
issue resolution, budget tracking, and risk management and mitigation.
Process Improvement Initiatives - The key tasks and typical approach
employed by each Process Improvement team is as follows:
o Develop detailed project plans for all assigned process improvement
initiatives and related sub-projects, including project scope,
approach, timeline, resources, budgets, etc.
o Review existing processes and previously identified material control
weaknesses and work with Client management to develop quick hit
recommendations and intermediate solutions to mitigate material
control weaknesses.
o Develop plans by which to implement recommendations.
o Assist with implementation of recommendations selected by Client and
as requested by Client.
o Prepare recurring project status reports and summarize issues
requiring Client management decisions.
The project will begin immediately. We estimate that the project duration
will be approximately six to nine months.
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December 5, 2001
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2. Staffing
The leadership and advisory team for the PMO and Process Improvement
Initiatives will be structured and ▇▇▇▇▇▇▇▇ resources assigned as shown in
the charts separately provided to Client on December 5, 2001. ▇▇▇▇▇▇▇▇
Process Improvement Initiative management leads and supporting resources
were determined based upon Client's initial prioritization of Process
Improvement Initiatives.
▇▇▇▇▇▇▇▇ will assign other competent and appropriately experienced
personnel to the PMO, advisory, and initiative teams as required by the
project plans and as requested by the Client.
Other PMO resources will be determined after assessing the overall scope of
the Process Improvement Initiatives and the availability of appropriate
Client, JWI, and other resources.
MUTUAL RESPONSIBILITIES
With respect to this Agreement and any information supplied in connection with
this Agreement and designated by the disclosing party as confidential, the
recipient agrees to: (i) protect the confidential information in a reasonable
and appropriate manner or in accordance with applicable professional standards;
(ii) use confidential information only to perform its obligations under this
Agreement; and (iii) reproduce confidential information only as required to
perform its obligations under this Agreement. This section shall not apply to
information which is (i) publicly known, (ii) already known to the recipient;
(iii) disclosed to a third party without restriction; (iv) independently
developed; or (v) disclosed pursuant to legal requirement or order. Subject to
the foregoing, ▇▇▇▇▇▇▇▇ may disclose Client's confidential information to its
subcontractors and affiliates.
Neither party shall use the other party's name, trademarks, service marks,
logos, trade names and/or branding without such party's prior written consent.
Notwithstanding anything herein to the contrary, ▇▇▇▇▇▇▇▇ may reference or list
Client's name and/or a general description of the Services/project. Client also
agrees that upon reasonable prior notice from ▇▇▇▇▇▇▇▇, Client will be willing
to provide a reference for ▇▇▇▇▇▇▇▇ (e.g. in the form of analyst telephone
calls, client telephone calls, presentations, and the like).
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December 5, 2001
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FEES & Expenses
▇▇▇▇▇▇▇▇'▇ fees for the scope of Services described in this Rider #1 will be
based upon actual time and materials at the rates included in the February 1,
2001 Arrangement Letter issued by the Bankruptcy Court and are estimated to be
in the range of $10 million to $15 million, plus actual out of pocket expenses.
Client shall pay ▇▇▇▇▇▇▇▇ the professional fees and the related expenses in
accordance with Rider #1. Upon a request for a revision in the scope of the
Services under this Rider #1, ▇▇▇▇▇▇▇▇ shall submit a proposal describing the
impact of such revisions in scope on the fees and expenses.
This fee is based on Client fulfilling the Client Responsibilities and
Assumptions described in this Rider #1.
The payment schedule will be as ordered by the Bankruptcy Court.
REVISION OF SCOPE
In the event either party seeks additions, deletions, or modifications to the
scope or nature of the Services described in this Rider #1, ▇▇▇▇▇▇▇▇ shall
prepare an additional rider to the February 1, 2001, Arrangement Letter
outlining such additions, deletions or modifications to the scope or nature of
the Services and provide such rider to Client for its review. ▇▇▇▇▇▇▇▇ shall
have no obligation to begin performing any such scope change until such rider
has been signed by both parties.
MISCELLANEOUS
If any term or provision of this Agreement is determined to be illegal or
unenforceable, such term or provision shall be deemed stricken, and all other
terms and provisions shall remain in full force and effect.
This Agreement may not be assigned or otherwise transferred without the prior
express written consent of the other party. ▇▇▇▇▇▇▇▇ may assign this Agreement
to an affiliate of its international organization or use subcontractors to
provide Services.
No term of this Agreement shall be deemed waived, and no breach of this
Agreement excused, unless the waiver or consent is in writing signed by the
party granting such waiver or consent.
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December 5, 2001
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Notwithstanding the completion of the Services or termination of this Agreement,
the parties shall continue to be bound by those provisions of this Agreement
which by their nature survive such completion or termination.
We appreciate the opportunity to be of service to you and look forward to
working with you on this challenging project. You can be assured that it will
receive our close attention. Please indicate your agreement to these
arrangements by signing and returning to ▇▇▇▇▇▇▇▇ the enclosed copy of this
Agreement.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
/s/ ▇▇▇ ▇▇▇▇▇▇
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Acknowledged and accepted:
Safety-Kleen Corp.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Title: CFO
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Date: 1-8-2002
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