EX-10.1 Equipment Inspection and Repair Agreement



 



EXHIBIT 10.1


SYSTEMONE EQUIPMENT INSPECTION AND REPAIR AGREEMENT


     This Agreement (this “Agreement”), effective this 30th day of July, 2003,
is by and between Safety-Kleen Systems, Inc. (“Safety-Kleen”) with offices at
5400 Legacy Dr., Cluster II, Building 3, Plano, TX 75024 and SystemOne
Technologies Inc. (“SystemOne”) with offices at 8305 N.W. 27th Street, Suite
107, Miami, FL 33122.


     Safety-Kleen and SystemOne entered into a Second Amended and Restated
Marketing and Distribution Agreement (the “Marketing Agreement”) as of March 8,
2001. On June 27, 2003, Safety-Kleen sent a letter to SystemOne that in
general, among other things, notified SystemOne it considered the Model 250
Recycling Parts Washers (the “Washers”), including the approximately 6,000
Washers in Safety-Kleen’s inventory, to contain defects and, pursuant to
Section 4.2(b)(iii) of the Marketing Agreement, requested SystemOne to cure the
alleged defects. The Marketing Agreement provides, in general, that a material
breach, if one occurs, shall be cured within twenty (20) business days or, if
it cannot be cured within twenty (20) business days, then the breaching party
must “pursue with due diligence the prompt curing of same.”


     This Agreement documents the agreed procedures for inspection and Repair
(as defined below) of Washers, starting with the date of this Agreement and
concluding no later than as set forth below. This Agreement does not
constitute an admission or concession by SystemOne as to the existence or
non-existence of a material breach of the Marketing Agreement or of defective
Washers; nor a waiver by Safety-Kleen or SystemOne of its rights under the
Marketing Agreement or by Safety-Kleen of any rights, remedies and damages
under its June 27, 2003 letter or otherwise (all of which are expressly
reserved); nor an accord and satisfaction.


1. PURPOSE:


     A.     SystemOne shall inspect and repair, which repair may include, at
SystemOne’s option, upgrade or replacement (“Repair”), of (i) factory
defects in Washers and (ii) leaking solvent storage tanks (irrespective
of whether such are factory defects) in (x) all Washers in Safety-Kleen’s
current inventory at all Safety-Kleen Branches, Distribution Centers
(DC’s) and the Safety-Kleen storage facility in Macon, GA, and (y) any
Washers of Safety-Kleen customers (1) described in Schedule I attached
hereto, or (2) which report or have reported such leaks to Safety-Kleen,
at such customers’ respective locations; all expenses related to the
inspections and Repairs, including but not limited to transportation,
labor, replacement parts, etc., shall be at SystemOne’s sole expense.


     B.     The inspection process will include a comprehensive functionality
review and, in particular, extensive inspection of and when necessary
Repair of the solvent storage tanks in Washers, all as more fully
described below.


2. INSPECTION PROCEDURES BY SYSTEMONE:


     A.     For Inventory Washers, unwrap and visually inspect for in-transit
damage


     B.     Fill holding tank above the float level with Safety-Kleen
Premium Solvent


     C.     Perform a “full run” 4 minute cycle test

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	 	     1. Connect to appropriate power source and remove back panel.




		
	 	     2. Fill wash basin with approximately 1-2 gallons of solvent.




		
	 	     3. Recycle equipment.




		
	 	     4. When vacuum stabilizes, check all connections for potential
solvent and vacuum leaks.




		
	 	     5. Complete an equipment inspection report detailing results of
inspection. Such inspection report shall be provided promptly to
Safety-Kleen; no Safety-Kleen employee of any Branch, DC or storage
facility shall be requested to sign such inspection report or any other
document waiving (or resulting in the waiver of ) Safety-Kleen’s rights
or releasing (or resulting in the release of) SystemOne.




		
	 	     6. Drain solvent on all units ready to ship leaving 1-2 gallons in
distillation tank.




		
	 	     7. Repackage units that pass inspection and return to Customer,
Branch, or DC or storage inventory.




		
	 	     8. Order any components or supplies needed to Repair all defects.




		
	 	     9. (i) Factory defects and (ii) leaking solvent storage tanks
(irrespective of whether such are factory defects) will be Repaired, and
corrective work completed, as promptly as possible, but not later than
the time periods set forth below in Section 3 following initial
inspection with steps B and C repeated to verify that such Repair
resolved the problem identified during initial inspection.



3. RESPONSIBILITIES:


     A.     SystemOne



		
	 	     a. Washers at Customer locations, Safety-Kleen
Branches, and Pomona DC




		
	 	     1. SystemOne’s Regional Service Managers and factory
technicians will inspect and evaluate (a) all (100%) Washers in
Safety-Kleen’s inventory at Safety-Kleen Branches, and the Safety-Kleen Distribution Center in Pomona, CA (“Pomona DC”), and (b) any
leaking storage tanks in Washers of Safety-Kleen Customers
described in Schedule I or of Customers who report or have reported
such leaks at such Customer’s respective locations and Repair all
(i) factory defects and (ii) leaking solvent storage tanks
(irrespective of whether such are factory defects) in such Washers.



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	 	     2. All Customer Washers identified in Schedule I shall be
inspected and Repaired within 21 days after the date of this
Agreement. Safety-Kleen shall provide to SystemOne a list of any
additional Customer Washers as to which reports of solvent storage
tank leaks have been provided to Safety-Kleen on August 1, 2003,
and all such Washers shall be inspected and Repaired on or before
August 22, 2003. Thereafter, Safety-Kleen shall provide to
SystemOne a list of any additional Customer Washers as to which
reports of solvent storage tank leaks have been provided to
Safety-Kleen on Friday of each subsequent week, commencing August
8, 2003, and any such Washers shall be inspected and Repaired
within 14 days after the date of receipt by SystemOne of written
notification of such Washers and their locations. All Washers at
Safety-Kleen Branches or the Pomona DC shall be inspected within 30
days after the date of this Agreement. Safety-Kleen shall use its
best efforts to ensure that all information provided to SystemOne
in such lists is accurate and complete.




		
	 	     3. Based on the process and procedures set forth in this
Agreement, the Regional Service Managers will determine the parts
to be replaced and will place the order for those items with
SystemOne-Miami. SystemOne represents to Safety-Kleen that there
are sufficient parts in inventory at SystemOne-Miami, or otherwise
available to SystemOne in a timely fashion, for it to perform its
obligations under this Agreement.




		
	 	     4. SystemOne-Miami will at its sole discretion expedite
shipment of any required parts ordered by the Regional Service
Managers directly to the appropriate Safety-Kleen Customer, Branch,
and Pomona DC site.




		
	 	     5. SystemOne will provide the manpower, equipment, lighting,
materials and electrical generators, as needed, to complete the
inspection and Repair at the Customer, Branch, and Pomona DC sites
in accordance with this Agreement. SystemOne will utilize
Safety-Kleen Premium Solvent supplied by Safety-Kleen at no cost to
SystemOne, unless a spill or test procedure makes it impractical to
return significant quantities of solvent to storage. To the extent
that Safety-Kleen cannot, as reasonably determined by Safety-Kleen,
provide material handling equipment (e.g. forklifts) as set forth
below, SystemOne shall at its expense provide such equipment.




		
	 	     6. SystemOne will install the required replacement parts or
materials needed to Repair any factory defect or leaking solvent
storage tank found.




		
	 	     7. After completion of the inspection and where necessary
Repair of a Washer, the SystemOne Regional Service Manager will
certify the Washer as having been inspected and/or Repaired and
then will notify Mark Wekesser of Safety-Kleen and Jon Clawson of
SystemOne that the process has been completed.



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	 	     8. Replaced parts will be appropriately tagged, packaged and
returned by the Regional Service Managers at SystemOne’s sole
expense directly to SystemOne-Miami for further inspection and
evaluation.




		
	 	     9. If any Repair on a Customer Washer will result or results
in a Customer being unable to use its Washer for more than eight
(8) hours during the Repair period set forth in this Agreement,
then SystemOne shall provide at its sole cost a temporary Washer
for Customer’s use. The temporary Washer shall at no time be sold
to Safety-Kleen as a new Washer.




		
	 	     b. Washers at Safety-Kleen DCs (excluding Pomona
DC), and Macon storage site




		
	 	     1. On or before July 31, 2003, SystemOne will ship 1-2
truckloads of fully-tested, new Washers to Safety-Kleen DCs
(excluding the Pomona DC), plus the Macon, GA storage site, in
accordance with Safety-Kleen’s shipping instructions (comprising
approximately 1040 Washers in total), and transport not less than
an equal number of Washers from Safety-Kleen’s inventory at such
DCs and Macon site, to SystemOne’s factory in Miami.




		
	 	     2. SystemOne will inspect all such Washers and Repair all (i)
factory defects and (ii) leaking solvent storage tanks
(irrespective of whether such are factory defects) in such Washers,
at the SystemOne factory, and then transport the Washers back to a
DC or the Macon site, as specified by Safety-Kleen. SystemOne will
then pick up another truckload of Washers which have not yet been
inspected and Repaired in accordance with this Agreement from the
DCs and the Macon site, transport them to the SystemOne factory for
inspection and Repair, as appropriate, and subsequent return to the
specified location, and continue the process until all Washers in
Safety-Kleen’s inventory as of the date hereof (approximately 6000)
have been inspected and Repaired.




		
	 	     3. All such Washers (approximately 6000) shall be inspected
and Repaired within 45 days after the date of this Agreement, with
no less than 2000 Washers completed within 15 days, and no less
than 4000 Washers completed within 30 days.




		
	 	     c. Other




		
	 	     1. SystemOne-Miami will generate and maintain a separate data
base by serial number and original Customer, Branch, DC or storage
location to track and monitor future reported defects on all units
inspected as well as units certified as ready to use, which
information SystemOne shall provide to Safety-Kleen upon request.




		
	 	     2. SystemOne is to provide proof of adequate insurance,
consisting of at least $5 million dollars of both general liability
and workers’ compensation insurance prior to entering work premises
of Safety-Kleen.



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	 	     3. SystemOne will provide notice as far in advance as
reasonably possible, but not less than one (1) business day in
advance, of any inspection/Repair at a Branch or Customer location,
in order to enable Safety-Kleen to have appropriate personnel
present. Any delay requested by Safety-Kleen in writing, or
confirmed by the parties in writing shall be added to the time
periods for SystemOne’s performance of this Agreement. SystemOne
has initiated ongoing inspection/Repairs at the SystemOne factory,
and will provide reasonable cooperation in allowing Safety-Kleen
personnel to be present for such inspection/Repairs at the
SystemOne factory. The failure of Safety-Kleen to provide such
personnel shall not prevent SystemOne from performing such
inspection and Repair work.




		
	 	     4. SystemOne will provide a report to Ed Zielinski of
Safety-Kleen on Monday of each week, for all activity during the
past week identifying: the serial number and location of each
Washer inspected and/or Repaired, the nature of the problem, if any
identified, the nature of the Repair, and the date of such actions.




		
	 	     5. SystemOne will pay, within 30 days after receiving a
statement from Safety-Kleen, any actual out-of-pocket costs
(consisting of labor involved in loading and unloading Washers)
incurred by Safety-Kleen at SystemOne’s request, in connection with
this inspection and Repair program. Safety-Kleen shall provide to
SystemOne such supporting data for any such expenses as SystemOne
may reasonably request. Except as set forth in the last paragraph
of Section 3B of this Agreement, Safety-Kleen reserves the right,
pursuant to Section 10 of the Marketing Agreement or otherwise to
seek reimbursement and damages for Safety-Kleen’s labor costs, and
SystemOne reserves the right to challenge such costs.




		
	 	     6. SystemOne agrees to hold Safety-Kleen harmless from any
damage and liability associated with any Repair work other than
damage or liability caused by Safety-Kleen’s sole negligence or
willful misconduct. Nothing in this paragraph or Agreement shall
limit SystemOne’s obligations under the Marketing Agreement.




		
	 	     7. Notwithstanding anything else in this Agreement to the
contrary, no Washer replaced and Repaired by SystemOne shall later
be sold to Safety-Kleen as a new Washer under the Marketing
Agreement.



     B.     Safety-Kleen



		
	 	     1. Provide single point of contact for coordination of the
inspection and Repair activities set forth in this Agreement at each
Branch site and, as required hereby, at each Customer location, and the
delivery and/or exchange of all Washers in Safety-Kleen’s inventory at
its DCs and the Macon site.



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	 	     2. To the extent available, as reasonably determined by
Safety-Kleen, provide available space for inspection and temporary
holding for arrival and installation of parts for Repairs, at Branch
sites. If such space is not available due to usage or size limitations
as reasonably determined by Safety-Kleen, and additional space must be
obtained (trailer, etc.), then SystemOne shall be responsible for all out
of pocket costs associated with such additional space. It is understood
that, notwithstanding the foregoing, Safety-Kleen shall not be required
to provide available space if doing so, as reasonably determined by
Safety-Kleen, shall disrupt its operations or result in additional costs
to Safety-Kleen.




		
	 	     3. Provide material handling equipment for movement of equipment
within each Branch, DC and the Macon site to the extent available without
disrupting Safety-Kleen’s day to day operations or resulting in
additional costs to Safety-Kleen, as reasonably determined by
Safety-Kleen, and provide, at no cost to SystemOne, Safety-Kleen Premium
Solvent (or to sell at Safety-Kleen’s cost any solvent necessary to
replace significant lost quantities of solvent), required for testing.




		
	 	     4. Safety-Kleen will segregate completed Washers from other
inventories and ship to Branches and/or Customers only Washers inspected
or Repaired or newly produced Washers delivered to Safety-Kleen on or
after July 28, 2003.




		
	 	     5. Safety-Kleen will bear all costs associated with having
representatives present at any inspection and Repair of Washers.



4. MISCELLANEOUS:


     A.     This Agreement and the Marketing Agreement constitute the full
understanding of the parties and all prior agreements, negotiations,
dealings and understandings, whether written or oral, regarding the
subject matter hereof are superseded by this Agreement.


     B.     This Agreement may be amended only by a written agreement executed by
the parties hereto.


     C.     No waiver by either party with respect to any breach or default or of
any right or remedy and no course of dealing or performance shall be
deemed to constitute a continuing waiver of any other breach or default
or of any other right or remedy, unless such waiver be expressed in
writing signed by the party to be bound.


     D.     Section headings as to the contents of particular sections are for
convenience only and are in no way to be construed as part of this
Agreement or as a limitation of the scope of the particular sections to
which they refer.


     E. In the event any term or provision of this Agreement, or any portion
hereof, or any application of any term or provision shall be invalid or
unenforceable, the remainder of this Agreement or any other application
of such term or provision shall not be affected thereby.


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     F.     All rights conferred by this Agreement shall be binding upon, inure to
the benefit of, and be enforceable against the respective permitted
successors and assigns of the parties.


     G.     All notices, requests, approvals and other communications required or
permitted under this Agreement shall be in writing and shall be given in
accordance with the notice provisions set forth in Section 13.7 of the
Marketing Agreement.


     H.     This Agreement may be executed in identical duplicate copies. The
parties agree to execute at least two identical original copies of this
Agreement. Each identical counterpart shall be deemed an original, but
all of which together shall constitute one and the same instrument.


     I.     Section 13.9 of the Marketing Agreement shall be deemed to apply to
all Confidential Information (as defined in the Marketing Agreement)
provided pursuant to or in connection with this Agreement.


     J.     Notwithstanding anything contained herein to the contrary, neither
party will be liable in any way as a result of delay in the fulfillment
of any term of this Agreement, when such delay is due to an act of God,
act or request of governmental authority, war, riot, any voluntary or
involuntary shutdown or curtailment of or interference with, its
facilities, incident to any labor controversy or failure of any customary
source of supplies which may directly or indirectly affect the
obligations arising hereunder for such (a “Permitted Delay”), nor shall
any such Permitted Delay constitute a basis to terminate this Agreement;
however, a party’s failure to fulfill its obligations after a Permitted
Delay no longer exists shall constitute a breach of this Agreement. This
clause shall not apply to payment obligations set forth in this
Agreement.


     K.     If the parties should have a material dispute arising out of or
relating to this Agreement then it shall be resolved pursuant to the
applicable provisions of the Marketing Agreement; nothing in this
Agreement shall preclude Safety-Kleen from arguing that a material breach
of this Agreement constitutes a material breach of the Marketing
Agreement or a failure to cure with due diligence pursuant to Section
4.2(b)(iii) of the Marketing Agreement, or from exercising all of its
rights under the Marketing Agreement, at law or in equity.


     L.     This Agreement shall inure to the benefit of the parties and their
successors and assigns.


     M.     Section 18 of the Marketing Agreement shall apply to this Agreement.


     N.     This Agreement shall terminate automatically upon the termination of
the Marketing Agreement, provided that this Section 4 shall survive any
such termination.


     O. The parties agree to provide all reasonable mutual cooperation in
order to accomplish the purposes of this Agreement.


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     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized representatives as of the date first above
written.



	 	 	 
	SystemOne Technologies, Inc.	 	
Safety-Kleen Systems Inc.
	 	 	 
	 	 	 
	By: /s/ Paul Mansur	 	
By: /s/ Mark Phariss
	
	 	


	Paul Mansur

Chief Executive Officer	 	
Mark Phariss

Assistant General Counsel




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