Master Distribution Agreement between Sysco Corporation and Aramark Food and Support Services Group, Inc.
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This agreement, effective February 1, 2002, is between Sysco Corporation and Aramark Food and Support Services Group, Inc. Sysco and its affiliates will provide a full range of food service products to Aramark-managed locations, with certain Sysco companies designated as primary distributors. The agreement outlines product categories, pricing, delivery, reporting, and payment terms, as well as conditions for transitioning service locations and compliance with laws. It also includes provisions for discounts, allowances, and audit rights. The arrangement is not exclusive, and Aramark is not required to purchase minimum quantities.
EX-10.1 3 dex101.txt MASTER DISTRIBUTION AGREEMENT EXHIBIT 10.1 MASTER DISTRIBUTION AGREEMENT BETWEEN SYSCO CORPORATION AND ARAMARK FOOD AND SUPPORT SERVICES GROUP, INC. TABLE OF CONTENTS 1 SCOPE......................................................... 4 (a) Scope................................................... 4 (b) Designation of Distributors............................. 4 (c) Primary Distributor Status.............................. 5 (d) Operating Company Transitioning......................... 5 2. PRODUCT CATEGORIES............................................ 5 3. SERVICE....................................................... 7 4. DELIVERY...................................................... 9 5. REPORTING..................................................... 9 6. ORDERING PROCEDURES........................................... 10 7. TERMINATION................................................... 12 8. CALCULATION OF COST........................................... 12 (a) Cost-Based Program...................................... 12 (b) Definition of SYSCO's Cost.............................. 12 (c) Net Weight Definition................................... 14 9. PRICING AND MARGINS........................................... 14 (a) Pricing Calculations and Adjustments.................... 14 (b) Primary Distributor Pricing............................. 15 (c) Smallwares Pricing...................................... 15 (d) Contract Pricing........................................ 16 (e) * and Other Contract Pricing........................... 17 (f) Specialty Meat Items.................................... 17 (g) Food Show Participation................................. 17 10. ALLOWANCES.................................................... 18 (a) National Volume Discount ............................... 18 (b) Marketing Allowance..................................... 18 (c) SYSCO Brand Performance Allowance....................... 18 (d) Produce Incentive Allowance............................. 18 (e) Purchase Verification .................................. 19 11. ARAMARK PROPRIETARY MERCHANDISE............................... 19 12. PAYMENT TERMS................................................. 19 13. INVOICING..................................................... 20 14. AUDIT......................................................... 20 15. INSURANCE AND INDEMNITY....................................... 21 16. PROCEDURES MANUAL............................................. 23 17. MINORITY-OWNED AND WOMEN-OWNED SUPPLIERS...................... 23 18. COMPLIANCE WITH LAWS AND STANDARDS............................ 23 19. MISCELLANEOUS PROVISIONS...................................... 24 ATTACHMENTS: EXHIBIT A - Products and Margins List EXHIBIT B - Primary Distributors and Market Commodity Pricing - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 2 EXHIBIT C - Specialty Beef Items EXHIBIT D - Performance Allowance EXHIBIT E - Produce Excluded Produce Incentive Allowance EXHIBIT F - Sample ARAMARK Audit Format EXHIBIT G - Women-Owned and Minority-Owned Suppliers EXHIBIT H - Food Safety Standards EXHIBIT I - SYSCO Ground Beef Safety Standards 3 MASTER DISTRIBUTION AGREEMENT THIS MASTER DISTRIBUTION AGREEMENT (the "Agreement") is made as of February 1, 2002 (the "Effective Date") by and between ARAMARK FOOD AND SUPPORT SERVICES GROUP, INC. ("ARAMARK") and SYSCO CORPORATION ("SYSCO"). RECITALS: A. ARAMARK and SYSCO are parties to a certain Master Distribution Agreement dated January 2, 1992, as amended (the "Prior Agreement"). B. Under the Agreement, SYSCO provides distribution services to ARAMARK, its affiliates and Components (hereinafter defined). C. Based on the overall volume of purchases made by ARAMARK and its Components, and the business opportunities presented to SYSCO, ARAMARK and SYSCO have agreed to modify the terms and conditions under which distribution services are provided to the Components (hereinafter defined), as hereinafter set forth. AGREEMENT: NOW, THEREFORE, in consideration of the promises contained herein, and with intent to be legally bound, ARAMARK and SYSCO agree, effective as of the Effective Date, as follows: 1. SCOPE. (a) Scope. Under this Agreement, SYSCO and its subsidiaries and other affiliates (the "Operating Companies") will distribute a full line of food service products, including without limitation, the products listed on Exhibit A, to service locations managed by ARAMARK and its affiliates and designated by ARAMARK as participating in the SYSCO Distribution Program (the "Components"). SYSCO will cause the Operating Companies to perform in accordance with the terms and conditions of this Agreement. * (b) Designation of Distributors. - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 4 (1) The Operating Companies set forth on Exhibit B are designated as Primary Distributors (hereinafter defined) under this Agreement. The term "Primary Distributor" shall mean any Operating Company designated by ARAMARK as the primary, authorized distributor of food service products within the product categories set forth in Section 2(a) for certain Components. (2) From time to time, ARAMARK may designate additional Operating Companies as Primary Distributors, with the consent of SYSCO, which will not be unreasonably withheld. (c) Primary Distributor Status. ARAMARK will grant SYSCO and all Primary Distributors, the opportunity to supply, on a preferred (but not exclusive) basis, products in the categories in Section 2(a). As preferred distributors, SYSCO and the Primary Distributors will be the distributors designated by ARAMARK as the primary, authorized distributors of such products to the Components. With respect to service locations which come under management by ARAMARK's affiliates after the Effective Date, ARAMARK will in good faith consider designating those locations as Components under this Agreement. However, ARAMARK makes no guarantee, warranty or other commitment that all food service locations managed by ARAMARK's affiliates will purchase any products, or any minimum quantity of products from SYSCO or any Primary Distributor or other Operating Company to the exclusion of any other vendor. * (d) Operating Company Transitioning. To create more efficient geographic boundaries for the Primary Distributors and Components, and therefore improve service levels, from time to time SYSCO may request and ARAMARK may agree, to transition one or more designated Components from being serviced by one Operating Company to being serviced by another Operating Company. Such transition will be conditioned upon: (1) SYSCO's * of products purchased from the new Operating Company will not exceed SYSCO's * of products from the former Operating Company, (2) the specified products available from the new Operating Company will be the same as the specified products available from the former Operating Company, and (3) the transitioned Components will be permitted to participate fully by the new Operating Company in all food shows and similar promotions. SYSCO and ARAMARK will establish and apply a protocol for identifying Components to be transitioned and for ensuring that the conditions in (1), (2) and (3) are met at and after the transition for at least 24 months. At the time of a transition related to a transition from one Operating Company to another, or in connection with an acquisition or other transaction, ARAMARK may request, and SYSCO will in good faith consider, a * . 2. PRODUCT CATEGORIES. (a) SYSCO will cause its Operating Companies to distribute a full line of food service products under this Agreement including without limitation, SYSCO brand - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 5 products, products bearing national brands, and other products selected by ARAMARK and meeting ARAMARK's specifications, including without limitation, ARAMARK Proprietary Merchandise (defined in Section 11). The product categories are as follows: (1) Healthcare (2) Dairy (including eggs) (3) Meats (3A) Specialty Meats (4) Seafood (5) Poultry (6) Frozen (other than frozen Meats, Seafood and Poultry) (7) Canned and Dry (8) Paper & Disposables (9) Chemicals & Janitorial (10) Supplies & Equipment (11) Produce (12) Dispenser Beverages (including coffee and postmix products) EXHIBIT A identifies each product category, * Products identified with a "W" under the heading "Calc Freq" on Exhibit A are priced weekly, and are hereinafter referred to as "Market Commodity Products". Products identified with a "U" or with a "T" under such heading on Exhibit A are priced monthly, or based on the date of last receipt, respectively, in accordance with Sections 8 and 9 of this Agreement. (b) Unless otherwise specified by ARAMARK, when a specific SYSCO labeled product is purchased for a Component, only SYSCO label products bearing the brand SYSCO Classic and Reliance will be sold and delivered to such Component to ensure consistency of quality and costs; provided that an equivalent product bearing the Classic or Reliance label is stocked by the Operating Company. SYSCO will use its best efforts to cause the Operating Companies to stock Classic and Reliance. Any SYSCO label product supplied which is not SYSCO Classic or Reliance label, will be consistent with the specifications and quality of the SYSCO Classic or Reliance label. SYSCO will use its best efforts to notify ARAMARK and Components of any modification to a specification for the brand SYSCO Classic, the brand SYSCO Reliance or any other SYSCO brand. Without limiting Section 11, ARAMARK will use reasonable efforts to assist SYSCO in stabilizing and ultimately reducing, where practical, the number of SKU's associated with servicing Components. (c) ARAMARK acknowledges that SYSCO receives earned income and obtains operational advantages from the sale of SYSCO brand products to Components. SYSCO acknowledges that ARAMARK as a global food service provider in a highly - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 6 competitive marketplace, must retain discretion to select products for use at food service locations managed by ARAMARK's affiliates. Accordingly, SYSCO may at any time and from time to time, offer to provide SYSCO brand products to ARAMARK and Components. ARAMARK may, in its discretion and exercising its judgment as a global food service provider, choose to purchase SYSCO brand products which are reasonably equivalent (as determined by ARAMARK in its discretion and exercising such judgment) to other products from other vendors of ARAMARK. 3. SERVICE. (a) Operating Companies will provide Components with complete and timely service in all aspects of distribution services to be provided under this Agreement, including without limitation, (1) achieving the agreed-upon fill rate of each order, in the aggregate, (2) providing proper follow up of each order as required by each Component, (3) correcting untimely or incomplete deliveries and deliveries of damaged, spoiled or pilfered products and (4) preventing their recurrence. The term "fill rate" is defined as for each order, the percentage of items of products ordered by a Component which are actually delivered to such Component. The agreed upon fill rate is * . After the end of each quarter, beginning with the third quarter of ARAMARK's 2002 fiscal year, SYSCO will report to ARAMARK each Operating Company's fill rates for Components served by such Operating Company. (b) To facilitate order placement, SYSCO will cause all Operating Companies to transmit weekly and monthly price order guides (the "Order Guides") to ARAMARK. All Order Guides (1) will, for each product, contain a product description and identify the brand, pack and size, quality and grade, item code number, line item number, and price of such product, (2) will correspond with ARAMARK's Periods (hereinafter defined), and (3) will be customized and tailored to the product requirements of the ARAMARK line of business of which the Component is a part. Order Guides will be distributed weekly and monthly. Weekly Order Guides will identify prices of all Market Commodity Products. For those Components which order electronically, Operating Companies will make monthly and weekly Order Guides available electronically prior to their effective dates. For those Components which do not order electronically, Operating Companies will provide hard copy weekly Order Guides on a weekly basis, and hard copy monthly Order Guides on a monthly basis, prior to their effective dates. The term "Period" is defined as each of those 12 accounting periods, which together comprise a fiscal year of ARAMARK. In addition, each month, upon ARAMARK's request, each Operating Company will send to ARAMARK, a copy of such Operating Company's * for such month, at least * days prior to * . Further, ARAMARK shall have access to * on the application of * to that * , on an as-requested basis. Order guides and SYSCO invoices will correspond to ARAMARK's general ledger account codes. - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 7 (c) Each Operating Company will assign a salaried, non-commissioned Account Executive and a Customer Service Representative to ARAMARK's account. The SYSCO Account Executive and the SYSCO Customer Service Representative will maintain contact with the manager (or his designee) of each Component served by the Operating Company which assigned them, on a basis satisfactory to each Component manager (or his designee), to ensure complete service levels, to enter and check the accuracy of orders and to resolve service and product deficiencies. In addition, each SYSCO Account Executive will visit each Component served by such SYSCO Account Executive and meet with the manager of such Component, at least once each month, on a date and at a time satisfactory to each of them. (d) The mechanics of service, including without limitation, credits and pick-ups, will be established by the Component manager (or his designee), the assigned SYSCO Account Executive and the assigned Customer Service Representative, based on the policies and procedures manual to be prepared and supplied by SYSCO under Section 16. (e) Operating Companies will provide each Component location with at least one delivery each week. More or less frequent deliveries may be agreed upon by the Component manager (or his designee) and the Operating Company's assigned Account Executive on a Component-by-Component basis. (f) Upon request by a Component, Operating Companies will provide to that Component those products not normally carried in inventory but which are required for special events, provided that the Component gives reasonably adequate notice of its requirements. ARAMARK will use reasonable efforts to minimize or avoid returns after special events, i.e. irregular, one-time events. * will be discussed and agreed upon by ARAMARK's Vice President, North American Distribution and SYSCO's Vice President, Multi-Unit Sales, prior to any assessment or billing therefor. (g) SYSCO shall provide at its cost and expense, a SYSCO Account Executive acceptable to ARAMARK, who shall be based in the ARAMARK Tower, Philadelphia, PA or such other location as ARAMARK may designate and who shall report to ARAMARK's Vice President, Distribution. SYSCO agrees that SYSCO and such SYSCO employee may be required to execute, and if requested, shall execute, a nondisclosure agreement in form reasonably satisfactory to counsel for SYSCO and ARAMARK, to protect and avoid or limit disclosure of any trade secrets or other confidential or proprietary information of ARAMARK or information of third parties whose confidentiality has been entrusted to ARAMARK. - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 8 (h) With respect to account management, SYSCO, at a level at least as high as its Vice President, Multi-Unit Sales, will conduct inperson business reviews with ARAMARK, on a quarterly basis. Included in such meetings will be a SYSCO finance person, at a level at least as high as Corporate Controller. In addition, SYSCO will provide to ARAMARK, on a quarterly basis, reports of credits due to ARAMARK from each Operating Company, and SYSCO will make a SYSCO finance person, at a level at least as high as Corporate Controller, available to review such reports with ARAMARK, and responsible to implement follow-up actions established during such reviews with ARAMARK. (i) With respect to research and development activities, SYSCO will provide to ARAMARK the opportunity to engage in test, pilot or co-development projects with SYSCO any new marketing, merchandising and promotional concepts created by SYSCO, such as new kiosks, or new brands. SYSCO will notify ARAMARK of any such opportunity. ARAMARK may accept such opportunity by notice to SYSCO given not more than 30 days after receipt of notice from SYSCO. SYSCO and ARAMARK will then establish the parameters of the test, pilot or co-development project , and SYSCO and ARAMARK will implement such project. * If the project implementation is unreasonably delayed by ARAMARK, SYSCO may cancel the project * 4. DELIVERY. (a) Each Operating Company will establish a delivery schedule for each Component served by the Operating Company, as agreed upon by the Component manager and the Operating Company's assigned Customer Service Representative or Account Executive. The number of deliveries to each Component will be determined by the service level required, subject to Section 3(e). (b) All Operating Companies will use their best efforts to make all deliveries between the hours of 7:00 a.m. and 11:30 a.m., and 1:00 p.m. and 5:00 p.m., unless otherwise specified by the Component manager. (c) SYSCO and ARAMARK have entered into this Agreement to achieve the highest and best level of service, product delivery, and product quality, and the most efficient and consistent cost and pricing to ARAMARK. SYSCO acknowledges that ARAMARK and Components will require, in each geographic area, and from each Operating Company, different delivery schedules to provide the highest and best service levels, and the most efficient and consistent cost and pricing, to ARAMARK. SYSCO therefore acknowledges and specifically agrees that SYSCO and each Operating - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 9 Company will cooperate and agree with ARAMARK and Components as to deliveries and service on a basis mutually acceptable to ARAMARK and such Operating Company. 5. REPORTING. (a) Each Operating Company will provide the following reports to ARAMARK. (1) SYSCO will cause all Operating Companies to provide ARAMARK and Components with Order Guides, in accordance with Section 3(b). SYSCO will maintain an electronic link between SYSCO and ARAMARK's Corporate Officeso that all weekly and monthly Order Guides will be transmitted electronically to ARAMARK's Corporate Office by direct electronic link or by magnetic tape or disk mailed to ARAMARK's Corporate Office, as determined by ARAMARK. If requested, SYSCO will provide written copies of weekly and monthly order guide, and a copy of the disaster recovery plan for SYSCO and any Operating Company. (2) SYSCO will cause Operating Companies to compile ARAMARK's computerized product usage data ("Usage Data") and to provide Usage Data to ARAMARK on magnetic tape or cartridge to ARAMARK for input into ARAMARK's computer product tracking system, ARATRACK. ARAMARK will develop and maintain ARATRACK. SYSCO will provide the services of a suitably trained employee at SYSCO's corporate headquarters to coordinate development and maintenance of ARATRACK and timely provision of Usage Data to ARAMARK. Operating Companies will provide Usage Data to ARAMARK on a monthly basis. Usage Data will be mailed to ARAMARK on magnetic tape or cartridge, as determined by ARAMARK and will be in a form and content compatible with ARATRACK and otherwise in compliance with ARAMARK's written ARATRACK Specifications. Usage Data will be provided to ARAMARK no later than the second Friday following the close of each Period. ARAMARK and SYSCO will cooperate in the implementation of a reporting mechanism that will allow SYSCO to report Usage Data to ARAMARK via an FTP server or other electronic communications, in lieu of the magnetic tape or cartridge reporting media set forth above. (3) Usage Data will be provided at * cost to ARAMARK. If ARAMARK requires special customized reports, such reports will be provided by the applicable Operating Company *. (4) Upon ARAMARK's written request, SYSCO will provide * the Usage Data provided to ARAMARK and the Components, subject to the below listed conditions: The information will only be made available in one of SYSCO's standard electronic formats or utilizing EDI ANSI X.12 standards. ARAMARK shall ensure that * - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 10 6. ORDERING PROCEDURES. (a) All orders will be placed by Components, ordering by product item or line numbers shown in the Order Guides. SYSCO and each of the Operating Companies will use their best efforts to establish uniform product item code numbers and to provide to Components electronic order entry software packages or electronic order entry transmission capability for order placement. (b) Each Component will be assigned a call day and approximate call time for placing orders and will be notified of the assigned call day and time. The assigned SYSCO Customer Service Representative will call for the orders on the assigned call day at the approximate call time. (c) Each Operating Company will incorporate ARAMARK's Specified Products Program * into its written procedures (and where established, into its computer systems and procedures) for responding to orders placed by Components. * ARAMARK will from time to time notify SYSCO of those products which are preferred under ARAMARK's Specified Products Program. SYSCO will notify Operating Companies of such products. (d) Any Component may place, and the Primary Distributor serving the Component will fill, emergency orders to provide continuity of service. The Primary Distributor serving the Component placing an emergency order will fill each emergency order at a price established in the manner provided in Section 9. Flagrant abuse of emergency order procedures may be brought to the attention of ARAMARK's Regional Distribution Managers by SYSCO. (e) Substitution of Products. Except as provided in Section 6(d), no Operating Company may substitute any products for other products ordered by Components. Products which are out of stock or product substitutions made pursuant to Section 6(d) in connection with ARAMARK's Specified Products Program will be communicated to each Component, prior to delivery as follows. The Operating Company's Customer Service Representative will call those Components affected and will suggest substitute products to be shipped. Substitute products will be shipped to a Component affected only after the Component manager (or his designee) has approved the substitution. A substituted product of higher quality or grade than the product ordered will be sold at the price in effect at the time of the order for the product originally ordered, calculated pursuant to Section 9. A substitute product of lower quality than the product ordered, will be sold at the price in effect at the time of the order for that substitute product, calculated pursuant to Section 9. - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 11 (f) Shortages. SYSCO and each Primary Distributor acknowledge that the designation of a SYSCO operating company as a Primary Distributor limits the circumstances in which ARAMARK and Components will purchase from alternate suppliers. Therefore, where a Component orders from a Primary Distributor, SYSCO and the Primary Distributor will use their respective best efforts to supply such Component with its entire order if product is available in the marketplace. 7. TERMINATION. (a) Upon 60 days' prior written notice to SYSCO, ARAMARK may terminate any Operating Company's designation as a Primary Distributor in one or more market areas, as to one or more Components, or any combination thereof. If, however, ARAMARK desires to so terminate any Operating Company's designation as a Primary Distributor as a result of the expiration or termination of any contract pursuant to which an affiliate of ARAMARK manages an Component, ARAMARK will not be obligated to provide 60 days' prior written notice and ARAMARK will provide only such prior written notice as ARAMARK determines to be practical under the circumstances. SYSCO will notify the terminated Operating Company of its termination, the scope of its termination and the termination date. ARAMARK will order and the terminated Operating Company will deliver to one or more locations designated by ARAMARK all ARAMARK Proprietary Merchandise on hand in inventory within 30 days after the termination date. (b) Either party may terminate this Agreement upon 180 days' prior written notice to the other party. The term of this Agreement will commence as of February 1, 2002 and shall continue in effect until January 31, 2006, unless sooner terminated. 8. CALCULATION OF COST. (a) Cost-based Program. Except as otherwise provided in Section 9(e), all prices to ARAMARK for products, including without limitation, substitute products and products not listed in a Order Guide, will be calculated on SYSCO's cost (hereinafter defined), plus a defined margin based on product category, major description, intermediate description and minor description on Exhibit A. No changes may be made to Exhibit A without ARAMARK's prior written consent. In addition, the parties acknowledge that where a contract client of ARAMARK or its affiliates competitively bids such client's purchasing program directly, SYSCO may bid at such costing and pricing as SYSCO in its sole discretion, chooses. Should SYSCO be awarded any such bid, the purchases made pursuant to the bid shall not be included in the total purchases upon which SYSCO is obligated to pay ARAMARK the National Volume Discount, Marketing, Produce Incentive and SYSCO Brand Performance allowances under Section 10 and any other allowance agreed upon by the parties. SYSCO acknowledges that ARAMARK and its affiliates, under their respective operating agreements with contract clients, are responsible for the purchasing of food, beverages and other supplies. * - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 12 (b) Definition of SYSCO's Cost. The term "SYSCO's cost" is defined as the Vendor's Last Invoice Price, plus * freight charged (including freight charged by SYSCO Logistics or any entity which assumes the internal freight function), if not included in the Vendor's Last Invoice Price, less all off-invoice vendor allowances, discounts and off-invoice promotions for the period of the promotion, excluding cash discounts, breakage allowances and spoilage allowances. (1) The term "Vendor's Last Invoice Price" is defined as, for each product received, the invoice price shown on the last invoice for such product issued by the product vendor prior to the date on which a Operating Company calculates SYSCO's cost and establishes the price of such product. * Where ARAMARK establishes contract pricing for a product as described in Section 9(d) and 9(e), (whether FOB plant or delivered to SYSCO's dock), the Vendor's Last Invoice Price, for purposes of calculating SYSCO's cost and the sell price of such product, will be * For the avoidance of doubt, ARAMARK contract pricing will include contracts where ARAMARK's vendor has agreed to supply products to ARAMARK through ARAMARK's designated distributor at the vendor's truckload quantity price * (2) * (3) * (4) Cash discounts, actual and imputed, breakage allowances, spoilage allowances and the cost recovery and earned income referenced in Section 8(b)(6) will be excluded from the calculation of SYSCO's cost of a product. Operating Companies will not increase the cost of any product by an imputed cash discount, if the vendor does not offer a cash discount. Operating Companies will not decrease SYSCO's cost of any product by the amount of any actual cash discount made available by the vendor to the Operating Company, except as provided in Section 9(d)(5). * (5) Allowances (including bid and nonprofit allowances) granted by manufacturers to be passed along to ARAMARK and its Components will be passed along as a reduction to * , prior to * . (6) SYSCO and Operating Companies perform value-added services for suppliers of SYSCO brand and other products over and above procurement activities typically provided. These value-added services include regional and national marketing, freight management, consolidated warehousing, quality assurance and performance-based - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 13 marketing. SYSCO may recover the costs of providing these services and may also be compensated for these services and considers this compensation to be earned income. Receipt of such cost recovery or earned income does not affect product cost. (c) Net Weight Definition. With respect to the calculation of SYSCO's cost of * products, the term "net weight" means the gross weight of a case, the packaging and the * product in the case, less the weight of the case and the packaging. The net weight, as defined in this sub-Section, will be used, with respect to * products, for all purposes, including calculation of * . For the avoidance of doubt, the * of all products will be calculated on the net weight set forth on the * or * most recent * . 9. PRICING AND MARGINS. (a) Pricing Calculations and Adjustments. (1) SYSCO will cause each Operating Company to calculate SYSCO's cost and to establish prices for all products sold to ARAMARK and its Components (other than Market Commodity Products) prior to the commencement of each Period. SYSCO will cause Operating Companies to sell all products (other than Market Commodity Products) ordered by ARAMARK during such period at such prices. Prior to expiration of each Period, SYSCO and each Operating Company will establish prices of all products (other than Market Commodity Products), which will be in effect for the next following Period and which will reflect increases or decreases in the Vendor's Last Invoice Price for such Products. (2) SYSCO will cause each Operating Company to calculate SYSCO's cost of, and to price, Market Commodity Products on the date associated with such Operating Company, as set forth on Exhibit B and such prices will remain in effect for the time period set forth on Exhibit B. Pricing for fresh produce and fresh fish will be adjusted * , with pricing based on SYSCO's cost for the last receiving the day before the price becomes effective. * (b) Primary Distributor Pricing. Except as provided in Section 9(e), all prices to ARAMARK from Primary Distributors will be SYSCO's cost, plus a defined margin based on product category, * . No changes will be made to Exhibit A without the prior consent of ARAMARK. Unless otherwise specifically noted on Exhibit A, the margin of each product on Exhibit A is a * such that the price of such product will equal * Notwithstanding anything in this Agreement to the contrary, the * for frozen pizza delivered to * , and for plastic, fiber and composite disposable trays delivered * , will be * , and * , respectively. (1) * procedure. Every quarter during the term, SYSCO will provide to ARAMARK with a * report patterned on Exhibit A, showing where all - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 14 products distributed by SYSCO and its Operating Companies have been classified for purposes of calculating SYSCO's cost and sell prices, by product category, * Such report will be "blacklined" against Exhibit A, for convenience of reference. * (c) Smallwares Pricing. SYSCO will provide Components with kitchen, cooking, storage and handling equipment and tabletop items and smallwares ("Smallwares"). SYSCO will deliver Smallwares to Components, at SYSCO's option, from Operating Companies, direct from the manufacturer or from SYSCO's Central Warehouse. (1) From Operating Companies. All prices for Smallwares shipped from Operating Companies to Components will be at SYSCO's cost, plus a * . (A) Any Smallwares orders in excess of $ * (but less than $ * ) will be at SYSCO's cost, plus a * . (B) Any Smallwares orders in excess of $ * will be at SYSCO's cost, plus an * . (2) From Manufacturers (Drop Ship). All prices for Smallwares, light equipment, capital equipment and other products drop shipped from a manufacturer's factory or distribution facility to Components will equal SYSCO's cost, plus a * . All prices for protein products drop shipped will equal SYSCO's cost, plus a $ * . Freight costs will be included in SYSCO's cost * (3) From Central Warehouse. All prices for Smallwares shipped to Components from SYSCO's Central Warehouse on behalf of the Operating Company will be at SYSCO's cost for such Operating Company, plus a * . Freight will be charged only on orders under $ * . All products other than Smallwares, shipped from SYSCO's Central Warehouse, will be at SYSCO's Cost for the Operating Company, plus an * . Freight will be charged only on orders under $ *. (d) CONTRACT PRICING. (1) Coffee. Operating Companies will obtain ARAMARK's premium blend coffee for ARAMARK's manual and vending operations through deliveries from ARAMARK approved roasters. Operating Companies will deliver ARAMARK's premium blend coffee to Components at the prices invoiced to the Operating Companies by ARAMARK approved roasters, plus * - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 15 SYSCO and each Operating Company will not add any surcharge, fee, or other amount to the price of ARAMARK premium blend coffee charged to any Component. * (2) Chemicals. Operating Companies will deliver chemical products to Components at the prices for those products established under ARAMARK's contract with the manufacturer(s) of such products. (3) Disposables. Operating Companies will deliver disposable products, such as those sold by * and other manufacturers, to Components at the prices for those products established in ARAMARK's contract with vendors, * plus the margin set forth on Exhibit A. (4) Paper Products. Operating Companies will deliver paper products, such as those sold by * and other manufacturers, to Components at the prices established in ARAMARK's contract with vendors, plus the margin set forth on Exhibit A. (5) * (post-mix syrup). SYSCO will cause Operating Companies to distribute * post-mix syrup at the * contract price as stipulated by the * Program; provided that each Operating Company will reduce SYSCO's cost for syrup by the amount of the cash discount received by the Operating Company from * (e) * and other Contract Pricing. From time to time ARAMARK may choose to enter into * and contract pricing agreements with manufacturers. ARAMARK will notify SYSCO of the relevant terms of those agreements. SYSCO will cause Operating Companies to perform this Agreement in a manner consistent with such agreements. ARAMARK will endeavor to give SYSCO 30 days advance notice of the implementation of such agreements and changes thereto. (1) FRESH SHELLED EGGS. (A) * (B) The margin for * pasteurized eggs, or other * pasteurized eggs, provided under contract between * or other manufacturer and ARAMARK, will be an * . (f) Specialty Meat Items. Where a Component orders specialty meat products through an Operating Company, the price of such products will be SYSCO's cost, plus a * . The * for specialty meat products are set forth below . The * will be added, in lieu of any other * , including without limitation, those * set forth in Exhibit A. For the avoidance of doubt, specialty meat is defined as the products listed on Exhibit C. Effective at signing of this Agreement, the * for specialty meat shall be: - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 16 * per pound * per pound ------------ ----------- $ * to * $ * $ * to * $ * $ * to * $ * $ * to * $ * $ * or more $ * All billings for specialty meat products will be made by the Operating Companies, unless and until ARAMARK and SYSCO * . (g) Food Show Participation. SYSCO will allow Component Frontline Managers to place orders at its Operating Companies' food shows, * so long as the Frontline Managers attend such food shows. 10. Allowances. Based on the overall volume of purchases made by ARAMARK and its Components, and the business opportunities presented to SYSCO, SYSCO will provide to ARAMARK the following allowances: (a) National Volume Discount. Effective February 1, 2002, SYSCO will pay to ARAMARK a * national volume discount allowance (the "National Volume Allowance") on any and all purchases by Components, unless otherwise agreed in writing. * SYSCO will pay the National Volume, Marketing, and Produce Incentive Allowances earned by ARAMARK based on ARAMARK's purchases in a Period by the * . In addition to these allowances, and the Performance Allowance, SYSCO will pay to ARAMARK a * prompt payment allowance on all ARAMARK purchases in accordance with Section 12. (b) Marketing Allowance. Effective February 1, 2002, SYSCO will pay to ARAMARK a national marketing allowance (the "Marketing Allowance") on any and all purchases by Components. For the 12 months beginning February 1, 2002, the amount of the allowance will be * of total purchases. SYSCO and ARAMARK will review the amount of such allowance at the end of each 12 month period during the term, with the first such review occurring at or before February 1, 2003, and SYSCO and ARAMARK may agree to adjust such allowance, effective for the following 12 month period. In no event will such allowance exceed * of total purchases. Adjustments to the allowance may be based on criteria such as the drop size, frequency of drops and delivery costs experienced by SYSCO, and the value to SYSCO of being able to market itself to other customers and potential customers, as the preferred distributor of ARAMARK and the Components. - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 17 (c) SYSCO Brand Performance Allowance. Effective February 1, 2002 and continuing thereafter during the term of this Agreement, SYSCO shall pay to ARAMARK a Performance Allowance (the "Performance Allowance"), under and subject to the terms and conditions of Exhibit D. SYSCO guarantees that the SYSCO brand version of a product previously supplied to ARAMARK by any such manufacturer with the manufacturer's brand or other brand shall be packed by such manufacturer. (d) Produce Incentive Allowance. Effective February 1, 2002, SYSCO will pay ARAMARK a produce incentive volume allowance (the "Produce Incentive Allowance") at the rate of * on all product, in Category 11, other than the products listed on Exhibit F, purchased by ARAMARK and its Components. All items in Category 11, set forth in Section 2(a), will be deemed produce, except for prepared salads, salsa, tortillas, juice, drinks, cheese and spreads, soups, donuts, cake and candy. At the end of each Period, SYSCO will provide ARAMARK with a report on * purchases, and the * of such purchases into * purchases. (e) Purchase Verification. Calculation and payment of the allowances earned in this Section for a Period (or any other period of time) shall be based on ARATRACK data; provided, however, that if ARAMARK's accounts payable data show purchases in excess of the purchases shown on ARATRACK data, for any Period (or other period of time), SYSCO will calculate and pay the allowances described in this Section on that incremental volume of purchases, as well as the volume shown on ARATRACK data for such Period (or other period of time). For the avoidance of doubt, purchases from Specialty Companies, through an Operating Company or any other affiliate of SYSCO, shall be included for purposes of calculating the Allowances. 11. ARAMARK PROPRIETARY MERCHANDISE. (a) When requested by ARAMARK, Operating Companies selected by ARAMARK will stock ARAMARK Proprietary Merchandise, merchandise bearing a national or regional brand and private label merchandise, provided that (1) the manufacturer of such ARAMARK Proprietary Merchandise or other merchandise has delivered to ARAMARK a warranty and indemnity agreement providing protections customarily obtained by ARAMARK, which are extended to SYSCO, and (2) there is a minimum movement of * cases per week for each Operating Company selected by ARAMARK to stock such items. There will be a * day grace period to reach the average movement of * cases per week, commencing on the date SYSCO notifies ARAMARK that * cases of the item are in stock at each Operating Company selected by ARAMARK. Where ARAMARK agrees to transition distribution business from one Operating Company to another, SYSCO will waive the * case movement requirement for the stocking of ARAMARK's Specified Products or other merchandise, other than ARAMARK Proprietary Merchandise, for a period of * from the date of such transition. - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 18 (b) ARAMARK Proprietary Merchandise that has been discontinued by ARAMARK will be the responsibility of ARAMARK to deplete from inventories of Operating Companies within * days. ARAMARK will be responsible to deplete perishable items within * days. (c) The term "ARAMARK Proprietary Merchandise" is defined as only those products purchased at the direction of ARAMARK exclusively for ARAMARK lines of business, manufactured and packaged with the ARAMARK logo or other mark proprietary to ARAMARK. 12. PAYMENT TERMS. ARAMARK will pay invoices under this Agreement within 45 days after the date of invoice. SYSCO will pay ARAMARK a prompt payment allowance of * on all purchases paid within * days after the date of invoice; provided that for any Period, at least * of the total dollar amount of invoices from SYSCO and the Primary Distributors are paid within * days after the invoice date (the " * Test"). If for any Period, the * Test is not met, SYSCO will pay the prompt payment allowance only for those invoices which were paid within * days after their dates. SYSCO will pay ARAMARK the prompt payment allowance earned in each Period * . The payment terms in this Section will apply to any arrangement where SYSCO has bid to provide distribution services to a third party, as described in Section 8(a). 13. INVOICING. (a) Each Operating Company invoice will be addressed to ARAMARK Services, Inc. in care of the component's name and address, and will include the correct Component number and the Operating Company's supplier number (as designated by ARAMARK) for payment. (b) Monthly price changes for all products (other than Market Commodity Products) in the product categories listed in Section 2(a) will become effective with the commencement of each Period. Weekly price changes for Market Commodity Products will become effective on the days, and will remain in effect for the periods, identified in Exhibit B. (c) SYSCO will cause Operating Companies to design and use weekly and monthly Order Guides to conform to Components' inventory format. Operating Companies will prepare and supply Components with weekly and monthly Order Guides conforming to the Components' inventory format, and complying with Section 3. Operating Companies will identify on each invoice subtotals of products purchased comporting to ARAMARK's accounting format, which upon request, will be provided to SYSCO for distribution to Operating Companies. - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 19 14. AUDIT. (a) Upon 15 business days' prior written notice to SYSCO and a Operating Company, ARAMARK may conduct an audit (including verification of such Operating Company's cost and prices) of any or all Operating Companies, as more fully provided in this Section. ARAMARK's notice to SYSCO will state: (1) The Operating Company or companies subject to the audit. (2) The date, time and place of audit. (3) The dates of the pricing periods to be audited. (4) The items to be audited (including without limitation, appropriate computer screens). (b) ARAMARK will audit * for a period not to exceed * months prior to the date the audit commences (collectively, the "Audit Documents"). Items to be audited will not exceed * line items, whether or not listed items in SYSCO's Order Guides. (c) At the time of the audit, ARAMARK will have access to the Audit Documents for all items being audited. * (d) In addition to the Audit Documents, SYSCO will make available * prior to the date on which SYSCO's cost and the price of a product is established. SYSCO will also make available * for the dates and pricing periods for which prices established by SYSCO or any Operating Company are to be audited. * (e) SYSCO also agrees that, upon notification of an audit, each Operating Company which is the subject of the audit will utilize ARAMARK's format if requested to do so. An example of ARAMARK's format is attached as Exhibit F. If, on the second audit, (1) such Operating Company does not utilize ARAMARK's audit format and procedures or does not provide reports or other documents requested by ARAMARK, or (2) * ARAMARK reserves the right to re-audit, at its discretion, where audit results are unsatisfactory. In that event, ARAMARK may review invoices and freight bills issued an additional * prior to the audit period if such documentation is available. Furthermore, ARAMARK may review additional line items and additional materials, which will be provided by SYSCO upon ARAMARK's request. * - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 20 15. INSURANCE AND INDEMNITY. (a) SYSCO and each Operating Company will obtain and continue in force, during the term of this Agreement, at their own expense, the following insurance coverage: (1) Workers' Compensation Insurance and Occupational Disease Insurance as required by the laws of the state or states wherein the work is to be performed. (2) Employer's Liability Insurance, with limits of at least $100,000 each claim. (3) Comprehensive Automobile Liability Insurance with limits on Bodily Injury Liability of $100,000 each person, $1,000,000 each accident and Property Damage Liability of $500,000 each accident, $500,000 aggregate. (4) Comprehensive General Liability Insurance, including Operations, Product Liability and Contractual Liability coverage, with limits on Bodily Injury and Personal Injury Liability of $1,000,000 each occurrence, $2,000,000 aggregate and Property Damage Liability of $500,000 each occurrence, $500,000 aggregate. (b) SYSCO and each Operating Company will purchase, obtain and maintain insurance policies providing the above-required coverage from qualified insurance companies rated by A. M. Best Company, Inc. (or any successor rating agency similarly recognized by the insurance industry) (the "Rating Agency") in one of the three highest categories of the Rating Agency. Each insurance policy will name ARAMARK, ARAMARK Corporation and their subsidiaries as additional insured, will not contain any cross-liability exclusions and will not be cancelled or materially changed without thirty (30) days' prior written notice to ARAMARK. Such insurance may be provided in the form of blanket policies covering SYSCO and all of its operating divisions and subsidiaries, including without limitation, Operating Companies. Within 30 days after the date hereof, SYSCO and each Operating Company will obtain and deliver to ARAMARK certificates of insurance evidencing the coverage required above. If any insurer from which SYSCO or a Operating Company obtains the above-required insurance coverage ceases to be rated in one of the three highest categories of the Rating Agency, SYSCO or the Operating Company, as the case may be, will obtain, at the time of renewal of such policy or policies, coverage from another qualified insurance company rated in one of such categories, and within thirty 30 days after obtaining such replacement coverage, will deliver to ARAMARK certificates of insurance evidencing the replacement coverage. (c) SYSCO will defend, indemnify and hold ARAMARK harmless from all costs, liabilities or other obligations arising out of (1) the performance of this Agreement by SYSCO or any Operating Company, or (2) any product supplied under this Agreement by SYSCO or any Operating Company, except to the extent such costs, liabilities or other obligations are caused by the negligence or willful misconduct of ARAMARK, ARAMARK Services, Inc., or their respective agents or employees or the agents or employees of entities or persons owning or controlling Components. 21 16. PROCEDURES MANUAL. Promptly after the execution hereof, and thereafter, on every other anniversary of February 1, 2002 during the Term (the first being February 1, 2004), SYSCO will prepare and supply each Component, and each Operating Company, at no cost to ARAMARK or any ARAMARK component, with a detailed policies and procedures manual consistent with this Agreement and identifying and explaining all procedures, delivery schedules, credit memos, etc. Such procedures manual will be prepared by SYSCO based upon the existing manual used by SYSCO and ARAMARK, with such changes as SYSCO deems necessary and appropriate to make such manual consistent with SYSCO's "SUS" initiative (a/k/a "SYSCO Uniform Systems"), and will be subject to ARAMARK's approval. 17. MINORITY-OWNED AND WOMEN-OWNED SUPPLIERS. It is the policy of both ARAMARK and SYSCO to encourage the interest of minority and women-owned businesses. SYSCO represents and warrants that to the best of SYSCO's knowledge, set forth on Exhibit G attached hereto is a true, correct and complete list of minority-owned and women-owned suppliers from which SYSCO operating companies are purchasing on the date hereof, compiled based on information from SYSCO's suppliers. If requested, SYSCO will provide ARAMARK, at no cost to ARAMARK, information regarding the purchases of the minority-owned or women-owned suppliers' products by Components by Operating Company. SYSCO will notify ARAMARK on a quarterly basis of additions or deletions to Exhibit G attached hereto. 18. COMPLIANCE WITH LAWS AND STANDARDS. (a) In performing this Agreement, SYSCO shall comply, and shall cause the Operating Companies to comply, with all Federal, State and local laws, regulations, rules, ordinances, orders and other legal requirements ("Laws"), including without limitation, the Federal Consumer Products Safety Act, the Fair Labor Standards Act, the Hazardous Substance Act, the Occupational Safety and Health Act of 1970, as amended, and all Federal or State environmental Laws. SYSCO shall also comply, and shall cause the Operating Companies to comply, with ARAMARK's food safety standards set forth on Exhibit H, as applicable to each Operating Company. SYSCO shall cause its suppliers of SYSCO branded products (including the Specialty Companies) to adhere to such standards, as are applicable to such suppliers of such products. Such standards may be revised at any time and from time to time by ARAMARK, and unless otherwise agreed, shall be effective upon receipt thereof by SYSCO. (b) Food safety is of paramount important to ARAMARK and SYSCO and the ultimate consumer. To that end, SYSCO had developed stringent standards for the production and packaging of ground beef (the "SYSCO Ground Beef Safety Standards"), a copy of which is attached hereto as Exhibit I. In order to adequately protect SYSCO, ARAMARK and the Components from potential food safety issues 22 relating to the production of ground beef and the ultimate consumer, SYSCO shall not be obligated to utilize any supplier of ground beef which does not meet the SYSCO Ground Beef Safety Standards, whether or not the ground beef supplied by such supplier has been designated by ARAMARK as ARAMARK Proprietary Merchandise or a special order product. 19. MISCELLANEOUS PROVISIONS. (a) SYSCO represents and warrants that it has full right, power and authority to enter into this Agreement and to perform, and to cause each Operating Company to perform, all of the terms and conditions of this Agreement on its or their respective parts to be performed. (b) ARAMARK represents and warrants that it has full right, power and authority to enter into this Agreement and to perform all of the terms and conditions of this Agreement on its part to be performed. (c) Any information supplied by either party to this Agreement to the other party, including without limitation, client information and purchasing specifications will be considered confidential and will not be disclosed to any third party and will not be used by either party to this Agreement for any reason other than to fulfill the terms of this Agreement. Any party required by law or legal process to disclose any of such confidential information will notify the other as far in advance of such required disclosure as is reasonably feasible. SYSCO will disclose this Agreement to Operating Companies, each of whom will agree in writing to perform its terms and conditions, including without limitation, this provision on confidentiality. SYSCO will provide ARAMARK with an executed original of each such agreement within 30 days after the date of this Agreement. (d) This Agreement will not apply to any purchases made by or on behalf of any ARAMARK components from any Operating Companies, including without limitation, any Components which are federal, state or local governmental agencies or instrumentalities, if in the written opinion of counsel to SYSCO or counsel to ARAMARK, the application of this Agreement would violate any federal, state or local law or regulation. In that event, for those Components and Operating Companies, this Agreement will apply and be enforceable to the maximum extent permitted by such law or regulation, as determined by counsel to SYSCO and counsel to ARAMARK. For all other Components and Operating Companies, this Agreement will remain in full force and effect. (e) All notices required or permitted to be given under this Agreement by ARAMARK to SYSCO, or by SYSCO or any Operating Company to ARAMARK, will be in writing signed by the notifying party and will be either hand delivered, or deposited in the U. S. certified or registered mail, postage prepaid, return receipt requested addressed as follows: To ARAMARK: To SYSCO: 23
or to such other addresses as the parties may direct notice given as herein provided. All notices given by SYSCO or any Operating Company to any Component will be in writing, and will be signed and given in the manner provided above, to the Component's address, ATTN: Manager, with a copy to ARAMARK. Notices may be transmitted electronically if followed by a confirming written notice given as provided above. Notices will be deemed given when hand delivered, or when received as evidenced by the return receipt or the date notice is first refused if that be the case. (f) No waiver of any breach or default of this Agreement will constitute a waiver of any other or further breach or default hereof. This Agreement will be governed by the law of Pennsylvania, without regard to its choice or conflicts of law rules. The parties hereby waive any objection that venue in Philadelphia, Pennsylvania is improper or inconvenient. (g) This Agreement constitutes the entire understanding and agreement of the parties with respect to its subject matter, supersedes all prior or contemporaneous agreements, writings and other undertakings between on the one hand, SYSCO and its subsidiary or affiliated companies, including without limitation, the Operating Companies, and on the other hand, ARAMARK and its lines of business and their components. All Exhibits attached hereto are incorporated herein by reference. This Agreement may not be amended, altered or otherwise modified except in a writing signed by SYSCO and ARAMARK. 24 In Witness Whereof, the undersigned duly authorized officers of SYSCO and ARAMARK have hereunto set their hands and seals on the date first above written. SYSCO CORPORATION ARAMARK FOOD AND SUPPORT SERVICES GROUP, INC. By: /s/ Thomas E. Lankford By: /s/ Anthony C. Basilio, Jr. ---------------------------- ------------------------------ Name: Thomas E. Lankford Name: Anthony C. Basilio, Jr. Title: Executive Vice President and Title: Vice President President of Food Service Operations, North America 25 EXHIBIT A PRODUCTS AND MARGINS LIST (All margins listed are * unless otherwise specifically noted) (Fees are amounts added to SYSCO's cost to equal price) - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment. 26 SYSCO MDA PRICE CALCULATION DEFINITION
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
**Exception: put all shredded Mozzarella on bid rule at * per pound weekly. ***All IQF TYSON chicken should be set on bid rule to protect against varying net weights **** Coffee Fee varies for Vending * U=Monthly(&ARABASE) W=Weekly T=Time of Sale * Material omitted and separately filed with the Commission under an application for confidential treatment. EXHIBIT B PRIMARY DISTRIBUTORS and MARKET COMMODITY PRICING
EXHIBIT C SPECIALTY BEEF ITEMS
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment.
* Material omitted and separately filed with the Commission under an application for confidential treatment. EXHIBIT D -- PERFORMANCE ALLOWANCE As set forth in Section 10(c), SYSCO will pay the Performance Allowance to ARAMARK, based on purchases of SYSCO brand products. "SYSCO brand products" are all products bearing trademarks or tradenames which are owned by SYSCO Corporation or which are exclusively available in the foodservice industry to SYSCO. The trademarks and tradenames owned or exclusively available to SYSCO as of February 1, 2002 are set forth on the following page. SYSCO may at any time and from time to time, modify the listing set forth on the following page, as new trademarks and tradenames are developed, and as existing trademarks and tradenames are discontinued. Calculation and Payment: * Payment: SYSCO will pay a * Performance Allowance to ARAMARK based on purchases of SYSCO brand Products, on a quarterly basis within the first month after the end of each quarter, in an amount equal to * of total purchases of SYSCO brand Products. Payment in excess of * Payment: After the end of each ARAMARK fiscal year, total purchases of SYSCO brand Products, and total purchases of all products from SYSCO will be calculated. If total purchases of SYSCO brand Products are * or more of ARAMARK's total purchases of Products from SYSCO or if total SYSCO brand Products purchases are greater than or equal to $ * , then SYSCO shall pay to ARAMARK, in addition to the * Performance Allowance, an amount equal to the amount calculated pursuant to the following table, less the amount of the * Performance Allowance paid for the ARAMARK fiscal year just ended: SYSCO brand Products SYSCO brand Products Amount purchases (as % of total purchases (dollar (% of total SYSCO brand purchases from SYSCO) amount) Products purchases) *% or $* *% *% or $* *% *% or $* *% *% or $* *% *% or $* *% *% or $* *% *% or $* *% *% or $* *% *% or $* *% *% or $* *% *% or $* *% - ---------- * Material omitted and separately filed with the Commission under an application for confidential treatment SYSCO CORPORATION BRANDS BEING TRACKED AS SYSCO
EXHIBIT E PRODUCE EXCLUDED FROM PRODUCE INCENTIVE ALLOWANCE Those products in SYSCO's Category 11 which are drinks, juices, prepared salads, tortillas, cheese spreads, soup, donuts, cake and candy. The payment in excess of * payment will be due within 60 days after the end of each ARAMARK fiscal year during the term of this Agreement. SYSCO reserves the right to adjust the dollar amounts in the table above should ARAMARK make an acquistion of an operation with more than $ * annualized purchases from SYSCO. ARAMARK Fiscal Year 2002 Calculation: The parties agree that payments of the Performance Allowance for ARAMARK's 2002 fiscal year only, will be calculated as follows: (1) At the end of ARAMARK's 2002 fiscal year, the applicable SYSCO Performance Allowance rate under the Prior Agreement will be identified. That rate shall be multiplied against total SYSCO brand Products purchases made during the period October 1,2002 through January 31,2002. (2) At the same time, the applicable Performance Allowance rate under this Agreement will be identified. That rate shall be multiplied against total SYSCO brand Products purchases made from February 1,2002 through the end of ARAMARK's 2002 fiscal year. The amounts calculated pursuant to (1) and (2) shall be added, If the sum of such amounts exceeds the * payment made by SYSCO to ARAMARK for ARAMARK's 2002 fiscal year, SYSCO will pay the excess to ARAMARK within 30 days after the end of such year. - ---------- * Material omitted and seperately filed with the Commission under an application for confidential treatment EXHIBIT F SAMPLE ARAMARK AUDIT FORMAT Item No.___________ Item Code Number ________________________________ Description/Pack/Size: ________________________________ Vendor Name: ________________________________ Invoice # and Date: ________________________________ Price Charged to ARAMARK (From Order Guide) (A): $____________ Invoice Cost: $____________ Plus: Freight * : $____________ Less: Allowances: $____________ Net Receiving (Invoice) Cost: $____________ Plus: Mark-up (in dollars/cents): $____________ Plus: Storage & Handling (attach contract) $____________ Plus: Outbound Freight to Component $____________ Equals: Calculated Selling Price (B) $____________ Difference between A & B * $____________ NOTES: - ---------- * Material omitted and seperately filed with the Commission under an application for confidential treatment EXHIBIT G WOMEN-OWNED AND MINORITY-OWNED SUPPLIERS Name of Certification Address and Tel. & Fax. Certifying Agency / Supplier (Check one): Nos. Agencies - -------------------------------------------------------------------------------- MBE WBE DBE - -------------------------------------------------------------------------------- EXHIBIT H FOOD SAFETY STANDARDS (CURRENT, SUBJECT TO REVISION) FOOD SAFETY AND SANITATION STANDARDS FOR SUPPLIERS TO ARAMARK FOOD AND SUPPORT SERVICES GROUP, INC. ("ARAMARK") A. All Suppliers must establish and administer the following programs: 1. An operating Hazard Analysis Critical Control Point Program ("HACCP"), under which the Supplier shall: . identify all hazards associated with products; . determine all Critical Control Points required to control identified hazards; . establish standards for all Critical Control Points; . establish procedures to monitor each Critical Control Point; . establish corrective actions to be taken when there is a deviation; and . establish verification procedures to determine that the HACCP system is working effectively, including a record keeping system for each Critical Control Point. 2. A documented and actionable Pest Control Program that incorporates integrated pest management practices to assure the facility is free of insects and rodents. 3. A documented Cleaning and Sanitation program. 4. A documented Product Safety and Recall Program that can track specific production lots of products and destinations, and incoming raw materials and finished products, ensuring appropriate "track-ability." Mock recalls shall be conducted every 6 months to assess the effectiveness of such Program. 5. A documented Listeria Environmental Program, for suppliers manufacturing and providing to ARAMARK ready-to-eat products. 6. A documented E Coli 0157H7 Program for raw ground beef products, for suppliers manufacturing and providing to ARAMARK raw ground beef products. 7. To the extent Supplier supplies meat products, or products containing meat, Supplier specifically represents, warrants and covenants that Supplier, and its vendors, are in compliance with Title 21 C.F.R. Section. 589.2000 (eff. August 4, 1997), prohibiting the feeding of ruminant meat and bone meal to ruminants, as now or hereafter amended or supplemented. B. Compliance with these standards shall be monitored in 3 ways: 1. Annually, each Supplier shall certify in writing to ARAMARK that the Supplier is in compliance. 2. All Suppliers shall be subject to inspection by ARAMARK's Quality Assurance Manager or his designee, up to 2 times annually. ARAMARK shall bear the travel, lodging and meals expenses of its employees conducting inspections. Inspections shall include evaluating good manufacturing practices ("GMP's") and reviewing the Programs listed above. A minimum score of 85% is required for each inspection. If a score is below 85%, a re-inspection shall be done within approximately 30 days, to verify correction of deficiencies. A score of less than 85% on reinspection may lead to de-certification of the Supplier. Suppliers shall bear all reasonable inspection costs, e.g. travel, lodging and meals of the ARAMARK Quality Assurance Manager. 3. Suppliers shall undergo inspections by independent nationally- recognized inspection services, at least annually. Such inspections shall include evaluating GMP's and the Programs listed above. ARAMARK recommends Silliker Laboratories, American Institute of Baking and American Sanitation Institute as independent inspection services for use by Suppliers. Suppliers are free, however, to use other nationally-recognized inspection services. Suppliers shall bear all costs for these inspections. If requested, Suppliers shall provide ARAMARK with access to records and results of these inspections. C. PRODUCT RECALLS 1. All ARAMARK manufacturers and distributors must have a documented product safety and recall program that can track specific lots of products and destinations. Mock recalls shall be conducted every six months to assess the effectiveness of such program. For manufacturers, the program shall include both incoming raw materials and finished products. 2. The following ARAMARK personnel must be notified when a recall occurs: Joe Arrasmith - Senior Purchasing Manager - ***@*** Frank Leonardo - Quality Assurance Manager - ***@*** Jim Spatola - Vice President, North American Distribution - ***@*** John Orobono - Senior Vice President, Supply Chain Management - ***@*** Notification shall be made by fax at ###-###-#### and ###-###-#### and email as indicated above, within 24 hours. Notice by fax and email shall be effective only upon confirmation of receipt from ARAMARK. 3. All ARAMARK components that have received recalled product must be notified within 24 hours, by fax or telephone. The recall notice must identify the product, and shall include all lot or code numbers, product disposition information, and such other information as may be required by law or regulation or which is customarily included in recall notices. All recall information must be to the attention of the component manager. EXHIBIT I SYSCO GROUND BEEF SAFETY STANDARDS A. SYSCO CORPORATION [LOGO OF SYSCO CORPORATION] Ground Beef & Veal Requirements . . . . . . . . . . . . Requirements for Authorized SYSCO Brand/MUA/Packer Label Suppliers 1.Calendar Year 2002 a.1390 Enclave Parkway Houston, Texas 77077-2099 In SYSCO's Fiscal Year 1999,SYSCO introduced a program requiring ALL SYSCO Brand,MUA and packer Labeled suppliers of fresh and frozen ground beef and veal products to comply with critical plant and product safety requirements. SYSCO Quality Assurance, with the support of the SMS Beef Department and SYSCO Operating Companies embarked on a significant change to the Quality Control and Process Control requirements for SYSCO/MUA/Packer Label suppliers of ground beef and veal products. The product and process requirements were revised to improve our company's ability to ensure Food Safety, and to achieve a greater level of consistency between products and suppliers of this important product category. These changes mandate that all suppliers of ground beef and veal products comply with the SYSCO Ground Beef & Veal Requirements. Each calender year SYSCO Corporate personnel will monitor the status of all ground beef and veal suppliers to ensure compliance to these established standards. Therefore, SYSCO is requesting that you and complete and forward to SYSCO Corporate the Ground Beef Supplier Compliance Sheet/Release Form CY 2002 (refer to last page of document). Please read the Form carefully and select Option A or B. Select Option A if you were an Approved Supplier for CY 2001 and your companies HACCP, Recall/Withdrawal Policy, Metal Detection, Bone Separation/Elimination System(s) and E.coli 0187:H7 Programs have not changed since submittal of information for CY 2001. If you are a new supplier or if information submitted in CY 2001 has changed please complete Option B and provide copies of validation to assure compliance to the five essential elements as detailed in the following pages. Please forward this correspondence to SYSCO Corporate Quality Assurance Department no later than January 31, 2002. This information is required in order to remain approved or become approved as a SYSCO Brand/ MUA/ Packer Label Supplier of Ground Beef and Veal items for the CY Year 2002. The five essential elements of the SYSCO Corporation Ground Beef & Veal Prerequisite Program for all Authorized SYSCO Brand/MUA/Packer Label Suppliers of ground beef and veal products include: . Documented and implemented HACCP program. . Metal Prevention Program. . Bone Chip/Connective Tissue Elimination System. . Documented Recall Policy. . E. coli 0157:H7 testing program for ALL raw ground beef and veal products. This sampling program does not include multi-ingredient products that contain beef, as well as other livestock or poultry ingredients (e.g., sausage that contains both fresh beef and pork). It is our intent to utilize raw material testing to improve the quality and access plant HACCP Programs. No sampling program (except 100% testing) can eliminate the risk of pathogen presence. Therefore, these procedures are to be used to verify the effectiveness of the supplier's processes and HACCP Program(s). Through the use of pathogen intervention methods during processing and microbial sampling programs, we can evaluate the acceptability of a ground meat product. Any establishment identified as not complying with SYSCO's Ground Beef and Veal Requirements will result in immediate suspension of production of a SYSCO Brand Supplier or immediate removal as an authorized P/L or MUA Supplier for distribution through a SYSCO Operating Company. Note: SYSCO Brand suppliers must conform to SYSCO Brand specifications and requirements as detailed in the SYSCO Ground Beef Manual. This program has been established to ensure that all ground beef products distributed through the SYSCO Network are manufactured under stringent quality standards. As the industry's leader in foodservice marketing and distribution, we will constantly strive to provide safe and wholesome products to our valued customers. SYSCO CORPORATION GROUND BEEF AND VEAL PREREQUISITE PROGRAMS i) SYSCO AUTHORIZED SYSCO BRAND/MUA/PACKER LABEL SUPPLIERS METAL DETECTION REQUIREMENTS All production must be conveyed through a working metal detector prior to release for sale to check finished products for metal hazards. Supplier must provide verification of a working metal detector through submission of photographs and metal detector test verification displaying accurate calibration. Examples of a Metal Detector Settings Sheet, Metal Contamination Daily Log Sheet, and Calibration Check Sheet are attached and may be replicated. BONE SEPARATION/ELIMINATION SYSTEMS AND REWORK REQUIREMENTS All products will be manufactured with grinders equipped with functional bone chip and connective tissue elimination systems. Supplier must provide verification of a working bone separation and elimination system through submission of photographs of processing equipment. The use of rework in SYSCO products will be limited to maximum 3%. A bone chip/cartilage eliminator will be utilized in the final grinding process (with the exception of coarse grind products). The exudate from the bone chip/cartilage remover will not be added back to the finished product unless further reduced in particle size through a 1/16" plate. The rework percentage will comply with applicable USDA requirements and will be documented in a rework usage log to ensure trace-ability of rework to original raw materials. Supplier will provide copy of rework usage documentation to SYSCO (on the attached form or an approved replica). Rework generated during the normal production process may be added back into the product flow, provided all rework is documented on batch sheets and is traceable to original raw materials. Rework will be limited to maximum 3% per batch based on finished weight. HOLDOVER rework from previous day's production will NOT be permitted. RAW MATERIAL TESTING REQUIREMENTS SYSCO has categorized raw materials into two distinct categories as follows: (1) INTEGRATED SUPPLIERS: SYSCO recognizes that integrated suppliers (slaughter, fab, ground beef production in one USDA establishment) have taken significant action to reduce pathogen contamination through use of intervention methods in the slaughter area of the plant. Therefore, SYSCO will require one of the two testing programs for integrated suppliers, they are as follows: A) UTILIZE IN-HOUSE TRIMMINGS ONLY: . E.coli 0157:H7 testing on carcasses at a rate of one carcass per day as well as E. coli 0157:H7 testing on combos or pallets of raw materials at a rate of one combo per shift. SYSCO will require that integrated suppliers provide documented results, sampling and testing procedures upon request. B) UTILIZE IN-HOUSE TRIMMINGS AND OUTSIDE RAW MATERIALS: . E.coli 0157:H7 testing can be performed on carcasses fabricated exclusively for in-house trimmings at a rate of one carcass per day as well as E. coli 0157:H7 testing on combos or pallets of raw materials at a rate of one combo per shift. (Refer to sampling and testing protocols below). SYSCO will require that integrated suppliers provide documented results, sampling and testing procedures upon request. . If the outside raw material supplier is an Approved SYSCO Brand Supplier, the facility may perform carcass testing for E. coli 0157:H7 at a rate of 1 test per every 300 carcasses per day in lieu of combo and /or pallet sampling. The facility must provide a copy of the results or a certificate that states "A program is established for the purposes of testing carcasses used in the manufacturing of these trimmings. Carcass sampling protocol will be at a rate of 1 test per 300 carcasses per day for E.coli 0157:H7". . E. coli 0157:H7 testing must be performed on combos or pallets of ALL raw materials purchased from NON-APPROVED SYSCO Suppliers. All suppliers must forward documentation on each USDA approved pathogen reduction activity performed at your slaughter plant to reinforce your company's commitment to reduce, prevent, or eliminate pathogenic organisms such as E. coli 0157:H7. Examples of these activities include, but are not limited to steam pasteurization, steam vacuums, organic/hot water rinses. Please include copies of test results, method of sampling, frequency of sampling, testing procedure, critical limits, and corrective action during non-conformance. If you choose as a supplier to not provide documentation describing these intervention steps, then SYSCO will mandate testing of all raw materials used in the ground beef products for the presence E.coli 0157:H7, prior to their use in your formulations. (2) NON-INTEGRATED SUPPLIERS: All non-integrated suppliers marketing ground beef products to SYSCO will be required to test ALL raw materials for E. coli 0157:H7 prior to usage in ground beef formulations. Non-integrated suppliers purchasing raw materials from outside slaughter facilities are required to test raw materials by one or more of the following programs: a) If the outside raw material supplier is an Approved SYSCO Brand Supplier, the facility can perform carcass testing for E. coli 0157:H7 at a rate of 1 test per every 300 carcasses per day. The facility must provide a copy of the results or a certificate that states "A program is established for the purposes of testing carcasses used in the manufacturing of these trimmings. Carcass sampling protocol will be at a rate of 1 test per 300 carcasses for E.coli 0157:H7". OR b) Raw materials can be tested prior to shipment, prior to receipt, or upon receipt. The sampling protocol for the raw materials is as follows: SAMPLING PROTOCOL OF TRIMMINGS: IMPORTED RAW MATERIALS: (1) Raw materials must be tested according to standards established by the Australian Meat Council as written in the "Testing For E.coli 0157:H7 In Beef For Manufacturing: Proposed Sampling and Testing Procedure For Use in Australia", prior to shipment to the plant. This protocol states that: a) The minimum number of cartons sampled per lot (those cartons of manufacturing beef products packed on a given packing line between suitable clean-ups) will normally be five. The sampling frequency must be equivalent to at least 5 cartons per 700 (roughly equivalent to a container load) cartons. b) Pack Dates and/or lot numbers must be identified on product and test results. c) Test results must be mailed or faxed prior to shipping. (2) Corrective action: If product tests presumptive positive, product must be held pending confirmation test. If results are presumptive positive, do not use raw materials in SYSCO Corporation Brand products. Necessary steps must be taken to insure raw materials are isolated pending confirmation. DO NOT use any confirmed positive raw materials in raw ground products. RAW MATERIALS TESTED PRIOR TO RECEIPT: (1) Raw materials must be tested prior to delivery to the plant. (2) Combos: separate into a maximum of 5-2000 lb. Lots. Cartons/Boxes: a minimum of 5% of cartons of the lot must be sampled. Pack Dates and/or lot numbers must be identified on product and test results. (3) Test results must be faxed to the plant prior to receipt. (4) Corrective action: If product tests presumptive positive, product must be held pending confirmation test. If results are presumptive positive, do not use raw materials in SYSCO Corporation Brand products. Necessary steps must be taken to insure raw materials are isolated pending confirmation. DO NOT use any confirmed positive raw materials in raw ground products. Raw Materials Tested At Plant Prior to Use: (1) Raw materials must be tested prior to delivery to the plant. (2) Combos: separate into a maximum of 5-2000 lb. Lots. Cartons/Boxes: a minimum of 5% of cartons of the lot must be sampled. Pack Dates and/or lot numbers must be identified on product and test results. (3) Test results must be faxed to the plant prior to receipt. (4) Corrective action: If product tests presumptive positive, product must be held pending confirmation test. If results are presumptive positive, do not use raw materials in SYSCO Corporation Brand products. Necessary steps must be taken to insure raw materials are isolated pending confirmation. DO NOT use any confirmed positive raw materials in raw ground products. TESTING PROTOCOL: .. Testing programs can be accomplished at the local USDA inspected facility, at an independent laboratory, or by the supplier prior to delivery to the plant. .. Testing methods for E.coli 0157:H7 must be performed through the use of AOAC traditional or rapid (BioControl, Neogen, Organon Teknika, etc.) methodology, .. Presumptive positive tests must be confirmed through the use of an AOAC/USDA Approved Method. .. Results must be maintained on file for review or may be completed by your supplier with a certificate of analysis submitted with each load. .. A copy of the analysis results must be provided to SYSCO Corporation upon request. DOCUMENTED HACCP PROGRAM All producers of ground meat products for SYSCO Operating Companies must comply with the implementation of HACCP as mandated by USDA in the Final Rule on Pathogen Reduction and Hazard Analysis and Critical Control Point Systems. SYSCO encourages suppliers of products such as ground beef that are by definition "potentially hazardous" to implement HACCP in advance of the time frame legislated by USDA in the final ruling. If the HACCP document is complete the supplier must document the CCP's and provide confirmation of monitoring and verification steps, and provide a copy of the HACCP flow charts, which identify the CCP's. If the final HACCP document has not been finalized, the supplier must complete a basic hazard analysis and identify the CCP's for chemical, biological and physical hazards inherent to ground meat products. The supplier must establish monitoring programs to reduce, prevent, or eliminate those hazards in finished product, and identify corrective action plans when deviations occur. The documented CCP's must be provided to SYSCO to affirm the hazard analysis. PRODUCT WITHDRAWAL/RECALL PROGRAM In the event of a recall SYSCO and/or its Operating Companies must be contacted immediately. An annual mock recall is recommended. Acceptable results for a mock recall are 100% of the product located within two hours. A Withdrawal/Recall Program, which meets SYSCO's Basic Format, must be in place for all Branded or Packer label suppliers. The Basic Format Requirements for Recall Policies are included on the attached document entitled Recall Policy - Basic Format Recommendations. RANDOM VERIFICATION OF FOOD SAFETY INITIATIVES Throughout the year SYSCO Quality Assurance will be randomly select Approved Suppliers of SYSCO Brand and Authorized P/L or MUA suppliers to submit product documentation verifying compliance to the five key elements. This will include but is not limited to: batch sheets identifying raw materials utilized, documented E.coli 0157:H7 test results for those raw materials identified on the batch sheets, completed metal detector calibration sheets for that days production, documented Verification of CCP Compliance, and rework documentation. METAL DETECTOR TEST PROCEDURES CALIBRATION AND VERIFICATION OF CALIBRATION: Ferrous, non-Ferrous, and Stainless Steel standards will be utilized to calibrate and verify calibration of metal detection equipment. The minimum acceptable sensitivity levels for the three types of metal will be 3.0 mm Ferrous, 3.5 mm non-Ferrous, and 5.0 mm Stainless Steel. AFFIRMATIVE DOCUMENTATION: Operation of a metal detector must be verified at least once every two hours. Any time a line goes down, the metal detector must be checked upon line start-up. Any time a product change occurs on the line, the metal detector must be checked upon line start-up. Standardized metal spheres should be used to determine the detector's capabilities. This practice eliminates the orientation effect on other shapes. A metal detector log (example attached) should be kept and it should posses the following: . Time oriented data . Documented verification that the system rejected the test standards effectively . Corrective action taken relative to the equipment, if testing indicates inadequate operation. . An inspector's signature Proper documentation systems include a Metal Contamination Daily Log. Any time a metal particle is found, it should be kept for future reference, if the source is known, it should be recorded. If not, an investigation should be initiated, and the results of this investigation should be documented. PROPERLY FUNCTIONING AUTOMATIC REJECT SYSTEM: Automatic rejection systems are necessary to effectively and reliably reject contamination. Manual/Operator-centered reject systems are high risk, and rely entirely on the efficiency of the line operator. DETECTOR CALIBRATED TO PRESCRIBED SENSITIVITY: Standardized metal spheres should be used to determine the detector's capabilities. SYSCO requires that the detector be set up to detect a ferrous sphere, a non-ferrous sphere, and a stainless steel sphere. ACTION PLAN IN PLACE WHEN TEST FAILS: When a failure to detect is noted during routine testing, all production since the previous testing should be considered suspect. All suspect product should be rescreened once the metal detector is recalibrated. METAL DETECTOR CALIBRATION CHECK SHEET LINE IDENTIFICATION: ___________________________________________________ DATE: ____________________________ TEST STANDARD: Ferrous_________________ Non-Ferrous________________ _____Stainless_________________
HOLDOVER REWORK NOT PERMITTED IN PRODUCT FORMULATED FOR SALE TO SYSCO RECALL/WITHDRAWAL POLICY BASIC FORMAT RECOMMENDATIONS STATEMENT OF DEFINITIONS: Product Recall - A product recall is a voluntary action by the firm that marketed the product or an action requested by a regulatory agency. An actual recall is removing from marketing and distribution channels those products which are adulterated or mis-branded to the extent such products are subject to seizure under current policy and guidelines of the United States Department of Agriculture (USDA) or the federal Food and Drug Administration (FDA). Product recall is an efficient and effective means of removing sizable quantities of products from the marketplace. The alternative to product recall is seizure or other legal action by regulatory agencies. Market Withdrawal - This is a situation where no violation is involved or the violation is minor and product is not subject to seizure under current FDA or USDA policy and guidelines. Stock Recovery- This is a situation where none of the product has left the direct control of the manufacturer or primary distributor. This type of action would be a product recall or market withdrawal if the product were in distribution channels. Effectiveness Checks - Contact verifications made based on regulatory agency direction to assure that the recall has been effectuated. An alphabetic letter represents the extent to which these verifications are made. CLASSIFICATIONS OF PRODUCT RECALL: Class I Recall - This is an emergency situation involving the removal from marketing and distribution channels those products that, because of a deficiency, pose an immediate or long-term serious threat to health or life. An example of such a product is a food product containing botulinum toxin. In a Class I Recall, top priority must be given to the complete and immediate removal of the recalled products from all levels in the distribution chain all the way down to the consumer level. Class II Recall - This is a priority situation in which a product may cause temporary or medically reversible adverse health consequences and where the probability of serious adverse health consequences is remote. An example of such a product is a food product containing Salmonella enteritis. In a Class II Recall, products must be removed from all levels in the distribution chain. Class III Recall - This is a routine situation in which adverse health consequences of a product deficiency are highly improbable or non-existent. Products are recalled because of adulteration or misbranding not involving a health hazard. Examples of Class III Recalls are situations involving improperly labeled products or products with filth contamination. In a Class II Recall, products must be removed from the wholesale levels of the distribution chain. FDA and the USDA generally require that the product be recalled to wholesale level. RECALL ACTION TEAM List of Names - Provide names of individuals who will be a part of the Recall Action Team, Along with business and home telephone numbers. For each individual an alternate should be designated to act on his/her behalf in case of absence. Representation from various aspects of the company should be included, such as Production, Quality Assurance/Control, Logistics/Warehousing Operations, Marketing/Sales, Accounting and Legal. DETAIL OF INDIVIDUAL TEAM MEMBER RESPONSIBILITIES - The role(s) and responsibilities of each team member should be clearly defined. List the functions of each team member and to whom they are accountable. PRODUCT COMPLAINT FORM/FILE: The company should maintain a complaint log and record all information received for each complaint. The complaint form should include customer name, product code/description, product code date, detailed explanation of problem, and action taken to correct problem. INITIATION OF RECALL/EXTERNAL NOTIFICATION OF REGULATORY AGENCY: Any manufacturer that initiates a recall for a Food Safety related reason should notify the appropriate regulatory agency having jurisdiction with information including: . Reason for Recall: Foreign material, foodborne illness, contamination, etc. . Recalled production information, such as name, code marks or lot numbers, plant number/name, date of production, etc. . The amount of product involved, broken down as follows: . Total quantity of recalled product originally in company's possession. . Total quantity distributed at the time of recall . Total quantity remaining in the company's possession . Areas of distribution of the recalled product: by area, cities, states, country if exported, along with the retailers' and wholesalers' names and addresses. . Information on any other product which could be affected by the same hazard. INTERNAL NOTIFICATION AND INSTRUCTIONS: Recall policies should provide detailed instructions for plant/company employees to follow in the event of a Product Recall. PREPARATION OF PUBLIC NOTICE: To avoid damaging publicity the Recalling Firm should take precaution in preparing public notice. Accurate, timely communication with regulatory agencies is important; contact with the agency and release of information to the press should be made only when solid facts are available. The Recall Policy must provide a description of the type of public notice and who will be responsible to speak to the media if necessary. CONFIRMATION LETTER TO CUSTOMERS: The Recall Policy should include a template example of correspondence that will be sent to wholesale and/or retail customers in the event of a Product Recall. The letter should include customer name, address, description of problem, quantity if known, specific instructions for handling product, and explanation of product credit and/or replacement. The letter should provide a means for the recipient to report to recalling firm whether it has any of the product, i.e., by phone contact, fax, or a mail in card. PRODUCT RECOVERY AND DISPOSITION: Transportation of suspect product to the Recalling Firm's designated location must be handled in an expedient manner. An accurate inventory of returned goods must be kept. Records of product picked up from customers must be accurate. Upon receipt, product should be segregated, and retested if appropriate. Product must be held until a final disposition is reached. TERMINATION OF RECALL: The point at which satisfactory disposition of the recalled product has been made and the information required for the summary of the recall is complete. The summary of the recall would include confirmation of the corrective measures taken by the recalling form to eliminate from its manufacturing and distribution processes those conditions or practices which created the recall. FLOW CHART OF RECALL PROCESS (RECOMMENDED, BUT NOT REQUIRED): GROUND BEEF SUPPLIER COMPLIANCE CHECK SHEET/RELEASE FORM CY 2002 [ ] SYSCO BRAND [ ] PACKER LABEL [ ] NATIONAL ACCOUNT SUPPLIER (Check All That Apply) Supplier Name: __________________________ EST#: _________________________ Address: __________________________ Phone: _________________________ _____________________________ FAX: _________________________ Contact: __________________________ Title: _____________________ Select appropriate Option (A or B) and provide information as requested. 1) Option A: Previously Authorized Supplier (All information on file at Sysco Corporate) [ ] Yes [ ] NO 1. HACCP, Recall/Withdrawal Policy, Metal Detection,Bone Separation/Elimination, and E.coli 0157:H7 Programs have not changed. Please maintain on file all information submitted in CY 2001. 2) Option B: (Please complete if information has changed since CY 2001 or if not previously approved) a) Documented HACCP Program as per USDA/FSIS Guidelines [ ] Yes [ ] NO 2. Flow Chart identifying CCP's (Copy of product flow chart with CCP's identified attached). b) Documented Recall/Withdrawal Policy [ ] Yes [ ] NO 1. Written Recall Policy and Recall Action Team (Copy Attached ) c) Metal Detection/Physical Hazard Protection Program [ ] Yes [ ] NO 1. Metal Detection systems on ALL lines used to produce ground meats. (Pictures Attached) [ ] Yes [ ] NO 2. Written and Documented Program including appropiate corrective actions when test fails for metal prevention. (Metal prevention program and completed documentation attached) d) Bone Separation/Elimination System(s) Program [ ] Yes [ ] NO 1. Written Program for Bone Elimination Systems including action plan when test fails. (Pictures Attached) [ ] Yes [ ] NO 2. Written and Documentation of routine inspections of Bone Elimination system on all final grinders. (Documentation Attached) e) E. coli 0157:H7 Testing Program (Check all that apply with supportive documentation) [ ] Yes [ ] NO 1. Integrated supplier utilizing in-house trimmings ONLY and testing carcasses at a rate of 1/day and testing combos/pallets at a rate of 1/shift. (Program and Documentation Attached) [ ] Yes [ ] NO 2. Written program including documented verification of Carcass testing at a rate of 1/300 for E. coli 0157:H7 at the slaughter facility (Program Attached) [ ] Yes [ ] NO 3. Written program including documented verification of raw material testing for E. coli 0157:H7 prior to delivery with raw materials on HOLD pending laboratory analysis. (Program Attached) [ ] Yes [ ] NO 4. Written program including documented verification of raw material testing for E. coli 0157:H7 upon receipt with raw materials on HOLD pending laboratory analysis. (Program Attached) NOTE: We grant SYSCO Corporate the authority to request copies of documentation to verify compliance to requirements. II. --------------------------------- ------------------- Authorized Signature: Date: PLEASE RETURN TO SYSCO QUALITY ASSURANCE NO LATER THAN JANUARY 31, 2002 III. IV . FOR SYSCO USE ONLY: ------------------------ ---------------- Reviewed and Approved By Date August 8, 2002 [Supplier] [Est_] [Sal] [FirstName] [LastName] [Title] [Address1] [City], [State] [PostalCode] Dear [Sal] [LastName]: Over the past three years, SYSCO Corporation has required that ALL SYSCO Brand, Packer Label (P/L) and Multi-Unit or National Account (MUA) Suppliers of Ground Beef and Veal items comply with five critical food safety requirements. Attached is a copy of the SYSCO CY 2002 Ground Beef and Veal Requirements for Authorized SYSCO Brand, Packer Label and/or MUA Suppliers. SYSCO Operating Companies will only purchase products from suppliers that fully comply with these Food Safety Requirements. In order to assist our Operating Companies in managing their Authorized SYSCO Brand, Packer Label and/or MUA Suppliers, SYSCO Quality Assurance will make available to all SYSCO Operating Companies a listing of all the SYSCO Brand Approved and Authorized Packer Label and MUA Suppliers for the CY 2002. In order to accomplish this task, we are sending to all previously Authorized SYSCO Brand, Packer Label and/or MUA Suppliers approved for CY 2001 a copy of the SYSCO CY 2002 Ground Beef and Veal Requirements. SYSCO Quality Assurance is requesting that you complete the attached Ground Beef Supplier Compliance Check Sheet/Release Form for CY 2002 to verify that your company meets the CY 2002 Ground Beef and Veal Requirements. We are requesting that this information be forwarded to SYSCO Quality Assurance no later January 31, 2002. SYSCO Quality Assurance will be corresponding with its Corporate Managed Multi Unit Account Customers to provide a complete listing of the authorized Packer Label and/or MUA Suppliers and seek their support for these important food safety initiatives. Our customers have been supportive of these initiatives the past three years and it is our desire to inform them of suppliers that are pro-active with SYSCO in establishing Food Safety Monitoring Procedures to reduce the risk of food-borne illness. An Approved SYSCO Brand Supplier identified as not complying with SYSCO's Ground Beef and Veal Requirements will result in suspension of production and a Packer Label or MUA Supplier not complying with SYSCO's Ground Beef and Veal Requirements will result in removal as an authorized supplier for distribution through a SYSCO Operating Company as of February 1, 2002. If you have any questions or concerns, please contact Diane Deitzel @ 281 ###-###-#### or via Email @ ***@*** or Mitch Gilgour @ 281 ###-###-#### via Email @ ***@***. Sincerely, A. Craig Watson Craig Watson Assistant Vice President, Quality Assurance ddd Attachments C: D. Abbey, L. Accardi, G. Covellis, D. Deitzel, J. Eilers, M.Gilgour, K. Hendee, S. Krull, D. Martin, M. McAllister, D. Robertson, R. Schnieders, R.Serrano, D. Smallwood, R.Thurber, J. Worral
