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EXHIBIT 10.2
MASTER DISTRIBUTION AGREEMENT
Master Distribution Agreement (this "Agreement"), dated March 3, 1997,
between SYSCO CORPORATION and those of its operating subsidiaries and/or
divisions listed in Exhibit A (collectively, "SYSCO") and Balanced Care
Corporation ("Customer").
BACKGROUND
A. SYSCO performs purchasing, marketing, warehousing, quality control,
product research and development, transportation and distribution services for
foodservice customers.
B. Customer and/or Customer's wholly-owned subsidiaries operate the
establishments listed in Exhibit B (the "Customer Locations").
C. Customer desires to contract with SYSCO as its primary distributor for
foodservice products (i.e., supplying 80% or more of such products) to all of
its Customer Locations and SYSCO desires to perform these services.
In consideration of the mutual obligations set forth below, the
parties agrees as follows:
1. APPOINTMENT OF DISTRIBUTOR
Customer appoints SYSCO to serve as its primary distributor to the
Customer Locations of foodservice products within the product categories
described in Article 2 ("Products"). As "primary distributor", SYSCO will be
entitled to not less than 80% of Customer's purchase requirements for Products.
Customer's purchase requirements will be determined on an aggregate dollar
volume basis.
2. PRODUCTS COVERED BY THIS AGREEMENT
Products covered by this Agreement will be in the following
categories:
1. Canned & Dry 7. Seafood - Fresh & Frozen
2. Frozen Fruits, Vegetables, *8. Paper, Plastics and Disposables
Bakery Items, Etc. *9. Janitorial Supplies & Cleaning
3. Dairy Chemicals
4. Meat - Fresh & Frozen 10. Beverage
5. Fresh Fruit and Vegetables *11. Smallwares and Equipment
6. Poultry - CVP & Frozen *12. Medical Supplies
*Optional
Products will include SYSCO(R) brand, national brand and other
products as specified by Customer and stocked by SYSCO. Unless otherwise
specified, SYSCO(R) brand products will be
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utilized to insure consistency of quality and to minimize costs. A description
of SYSCO(R) brand quality levels is attached as Exhibit C.
All Products in any of the Product categories in this Section 2 will be priced
using the margin on sell set forth in Section 6.2 for that product category,
whether or not such Products are set forth in the order guides described in
Section 5.
3. SERVICE OBLIGATIONS OF SYSCO
3.1 Account Executive - SYSCO will assign an Account Executive and/or
a Customer Service Representative to service Customer's account. The Account
Executive and/or Customer Service Representative will maintain contact with
Customer Locations, on a mutually agreed basis, to review service requirements.
3.2 Purchasing Guides; Orders - SYSCO, with assistance from Customer,
will prepare purchase order guides to be used by Customer when placing orders.
Orders will be placed directly by Customer Locations ordering by item number as
specified in the purchase order guide.
3.3 Policies and Procedures - A policies and procedures guide will be
provided by SYSCO to all Customer Locations. Reasonable notice will be given to
Customer Locations when policies and procedures are changed by SYSCO. Credits,
pickups and other requests for service will be initiated by local Customer
Location personnel according to the guide.
3.4 Restocking - The delivering operating company reserves the right
to collect a restocking fee of 10% for returns due to Customer error or the
refusal to take delivery of Products ordered by Customer and/or such Customer
Locations if the delivery is made in the mutually predetermined delivery window
times on the established delivery days.
3.5 Marketing Funds - Sysco, because of the competitive nature of our
pricing and Terms of Sale, has no additional marketing monies available to fund
requests for special customer requests, sponsored events, donations, etc. other
than national conventions.
4. DELIVERY OBLIGATIONS OF SYSCO
Each SYSCO operating company will establish a delivery schedule that
is acceptable to each Customer Location within its market area and will use
reasonable, good faith efforts to make on-time deliveries.
5. DATA PROCESSING OBLIGATIONS OF SYSCO
SYSCO will provide the below listed reports:
A. Monthly Order Inventory Control Guide
B. Weekly Commodity Pricing
*C. Monthly Product Movement
*D. Quarterly Vendor Tracking
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*Mailed to Customer's corporate office.
If Customer requests customized reports in addition to those noted above, SYSCO
will use reasonable efforts to provide such reports. In order to cover the
additional expenses of providing such reports, SYSCO will establish a
reasonable charge for doing so and, if such charge is acceptable to Customer,
will prepare and furnish such reports to Customer.
Sysco will also provide, at its expense, a personal computer software
system for Customer Locations to place orders directly with the delivering
operating company through the Customer Companion system which will generate a
Customer purchase order. Customer must supply whatever personal computer
hardware is necessary to enable it to utilize such order entry software system.
Computer hardware is not provided under the terms of this agreement; however,
it can be obtained through Sysco with an increase in the margin schedule.
6. PRICE
6.1. Definition of Cost - The price to Customer for all Products sold
under this Agreement (the "Sell Price") will be calculated on the basis of
Cost. "Cost" is defined as the cost of the Product as shown on the invoice to
the SYSCO operating company, plus applicable freight. The invoice used to
determine Cost will be the invoice issued to the SYSCO operating company by the
vendor or by the Sysco Merchandising Services department of SYSCO Corporation.
Cost is not reduced by cash discounts for prompt payment available to SYSCO or
SYSCO operating companies.
Applicable freight, in those cases where the invoice cost to the SYSCO
operating company is not a delivered cost, means that a reasonable freight
charge for delivering Products to the SYSCO operating companies has been added.
Freight charges may include common or contract carrier charges by the Product
vendor or a carrier, or charges billed by Alfmark, SYSCO's freight management
service. Applicable freight for any Product will not exceed the rate charged by
nationally recognized carriers operating in the same market for the same type
of freight service.
6.2. Calculation of Sell Price - The Sell Price of each Product sold
under this Agreement will equal (i) the Cost of such Product divided by (ii)
100% minus the percentage margin on sell specified below for such Product
Category, less (iii) promotional allowances reflected on invoices to SYSCO
operating companies which will be passed along as a temporary reduction in the
Sell Price for the term of the promotion.
Margin on Sell (%)
Product Category Tier I Tier II
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1. Canned & Dry 10.0% 12.0%
2. Frozen Fruits, Vegetables, Bakery Items, Etc. 10.0% 12.0%
3. Dairy 10.0% 12.0%
4. Meat - Fresh & Frozen 8.5% 10.5%
5. Fresh Fruit and Vegetables -Market- -Market-
6. Poultry - CVP & Frozen 8.5% 10.5%
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7. Seafood - Fresh & Frozen 8.5% 10.5%
8. Paper, Plastics and Disposables 15.0% 17.0%
9. Janitorial Supplies & Cleaning Chemicals 15.0% 17.0%
Exception: EcoLab -Contract- -Contract-
10. Beverage without Equipment or Service 15.% 17.0%
with Equipment and Service -Contract- -Contract-
11. Smallwares and Equipment 15.0% 17.0%
12. Medical Supplies 15.0% 17.0%
TIER I - All of the pricing outlined within the Tier I pricing structure will
be utilized for all Customer Locations serviced by the following Sysco
operating companies:
Deaktor/Sysco Food Services Company
Mid-Central/Sysco Food Services, Inc.
Sysco Food Services of Arkansas, Inc.
Sysco Food Services of Central Pennsylvania, Inc.
Sysco Food Services - Horseheads
TIER II - The Tier II pricing structure will be utilized for all Customer
Locations serviced by Baraboo-Sysco Food Services.
All of the above margin percentages outlined within the Tier I pricing
structure would be based upon each individual Balanced Care facility
maintaining a minimum average order size of $1,300 per delivery.
EXHIBIT F - CPAS
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$0-$1,499 Margins Stated
$1,500+ -.50%
$2,500+ -1.0%
$3,500+ -1.5%
For Example, a Product with a Cost of $10.00 per case, a margin on
sell of 10% and a promotional allowance of $.50 per case will have a Sell Price
calculated as follows:
calculate base price from margin $10.00 = $11.11
------
90%
less promotional allowance (.50)
------
Sell Price $10.61
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The Sell Price for each Product on an order guide described in Section
5 will be calculated at the time the order guide is prepared. Sell Prices for
all Products on the order guide will be maintained until the next order guide
is prepared and sent to the Customer Location except that (i) all produce will
be priced at the time of invoicing and (ii) the Sell Prices of all
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other Products which are market commodity products (as determined by Sysco)
will change weekly to reflect declines and advances in the cost of those market
commodities.
6.3. Substitutions - Should a substitution be necessary, the SYSCO
operating company will ship a comparable product with Customer approval at a
Sell Price calculated using the same percentage of margin as on the original
Product.
6.4. Merchandising Services - SYSCO performs value-added services for
suppliers of SYSCO(R) brand and other products over and above procurement
activities typically provided. These value-added services include national
marketing, freight management, consolidated warehousing, quality assurance and
performance-based product 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 Cost and does not diminish SYSCO's commitment to provide
competitive prices to its customers.
6.5. Proprietary or Special Order Items - To offset the additional
costs associated with handling Products bearing Customers' trademarks or logos
as well as other Products purchased exclusively for Customer, an additional 2%
will be added to the margin on sell for all such proprietary items. No
participating SYSCO operating company will have an obligation to carry a
proprietary item if Customer purchases less than five cases per week of that
item from such operating company.
If SYSCO and Customer cease doing business for any reason, Customer
will purchase, or cause a third party to purchase, all remaining
proprietary/special order items in SYSCO's inventory at SYSCO's Cost plus a
reasonable transfer and warehouse handling charge not to exceed 50% of the Cost
of such proprietary/special order items. In such an event, Customer will
purchase or cause to be purchased all perishables within seven (7) days of the
termination of this Agreement and all frozen and dry proprietary/special order
items within fifteen (15) days of the termination of this Agreement.
SYSCO's policy is that all suppliers provide indemnity agreements and
insurance coverage for products purchased by SYSCO. In order to protect SYSCO
when it stocks proprietary/special order items at Customer's request and if and
only if the vendor of such items will not provide an indemnity, Customer will
defend, indemnify and hold harmless SYSCO and its employees, officers and
directors from all actions, claims and proceedings, and any judgments, damages
and expenses resulting therefrom, brought by any person or entity for injury,
illness and/or death or for damage to property in either case arising out of
the delivery, sale, resale, use or consumption of any proprietary/special order
item except to the extent such claims are caused by the negligence of SYSCO,
its agents or employees.
6.6. Increase in Sell Price for Split Cases - Due to the added costs
associated with handling less than full cases, a special handling charge of 5%
will be added to the Sell Price of all Product sold in split cases.
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6.7. Adjustment in Margins for Unanticipated Problems - If the
operating costs of SYSCO or any particular operating company are increased as a
direct result of a significant regional or national economic problem, including
but not limited to fuel cost increases and power shortages, SYSCO may with the
prior consent of Customer increase the margin on sell specified in Section 6.2
to compensate for such increased costs during the period such increases are
experienced.
6.8. National Agreements - The pricing specified in this Agreement is
based on Customer's representations concerning its service needs, including but
not limited to its anticipated purchase volumes, drop sizes, Product mix,
location of Customer Locations and number of deliveries, as well as Customer's
compliance with its payment and other obligations specified in this Agreement.
If Sysco determines after ninety (90) days from the date of this Agreement that
Customer requires service which varies materially from the levels contemplated
in Customer's representations made to Sysco in negotiating this Agreement,
Sysco reserves the right to request an increase in the margin on sell specified
in Section 6.4. If the parties are unable to agree on such an increase and
Customer's service requirements and/or contract compliance continue to vary
from that contemplated or required by this Agreement, Sysco may terminate this
Agreement on thirty (30) days written notice to Customer.
6.9. Program Review - The pricing specified in this Agreement is based
on Customer's representations concerning its service needs, including but not
limited to its anticipated purchase volumes, drop sizes, Product mix, location
of Customer Locations and number of deliveries, as well as Customer's
compliance with its payment and other obligations specified in this Agreement.
If SYSCO determines after one hundred eighty (180) days from the date of this
Agreement that Customer requires service which varies materially from the
levels contemplated in Customer's representations made to SYSCO in negotiating
this Agreement, SYSCO reserves the right to request an increase in the margin
on sell specified in Section 6.4. If the parties are unable to agree on such an
increase and Customer's service requirements and/or contract compliance
continue to vary from that contemplated or required by this Agreement, SYSCO
may terminate this Agreement on thirty (30) days written notice to Customer.
7. Credit Terms
7.1. Payment Obligation
A. Payment is due twenty-eight (28) days from the date of the
invoice (delinquent on the 29th day).
**B. Payment is due on the thirty (30) day EOM (delinquent on the
31st day). Example:
December 1996 Purchases
S M T W T F S
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
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29 30 31
January 1997
S M T W T F S
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30* 31
*Payment for December invoices is due on January 30th.
**Payment terms outlined within Section 7.1/B are only for
those Xxxxxx Care locations serviced by Mid-Central Sysco.
SYSCO may also modify, with thirty (30) days written notice, its
payment terms specified in this Section 7.1 if payments are not made when due
and/or the financial condition of the Customer materially deteriorates.
7.2. Service Charge - If invoices are not paid when due, a service
charge of one and one-half percent (1.5%) will be assessed to Customer;
provided, however, if such service charge is deemed to be in excess of the
maximum amount permitted by law, said service charge will be reduced to the
lawful maximum amount. Unpaid invoice balances and finance charges due to SYSCO
will be deducted from any credits due to Customer.
7.3. Guarantees and Applications - Customer will complete, execute and
deliver a new account form to SYSCO before this Agreement becomes binding upon
SYSCO. If required by SYSCO, Customer will submit a guarantee of Customer's
obligations under this Agreement executed by a third party mutually agreed upon
by Customer and Sysco.
7.4. Financial Information - The continuing creditworthiness of
Customer is of central importance to SYSCO. In order to enable SYSCO to monitor
Customer's financial condition, within ninety (90) days of Customer's fiscal
year end. Customer will supply annual financial statements to SYSCO consisting
of an income statement, balance sheet and statement of cash flow. SYSCO may
request such further financial information from Customer from time to time as
will reasonably enable SYSCO to accurately assess Customer's financial
condition.
8. INCENTIVE PAYMENTS TO CUSTOMER
Allowances earned by each Customer Location are based on obtaining or
qualifying for the minimum average order size specified on Exhibit F in each
calendar month, and will only be awarded if each invoice is paid within the
agreed payment terms specified in Section 7.1 of this Agreement. Allowances
will not be paid on sales of items the price of which is calculated on the
basis of Cost plus a fixed fee. Allowances also will not be paid on sales of
Products where Customer and the Product vendor have agreed on the selling price
to SYSCO. Customer allowances and minimum order size requirements are set
forth on Exhibit F.
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Customer will defend, indemnify and hold harmless SYSCO, its operating
companies their officers and employees from any suits, claims, demands, losses
or damages arising out of SYSCO's payment of the allowances specified in this
Agreement.
9. PRICE VERIFICATION
Customer will be allowed one annual price verification for purchases
made under this Agreement. SYSCO will furnish computer verification of Costs
for the Products to be price verified, subject to the following limitations:
1. Date, time and place of price verification must be mutually
agreed;
2. Fifteen (15) working days notice to SYSCO;
3. Items to be price verified should not exceed fifteen (15) line
items, and will be taken from the price list or purchasing order
guide;
4. The period for which pricing is to be verified not to begin more
than twelve (12) months prior to the date of the price
verification.
It is understood that Customer's price verification will consist of
reviewing SYSCO's computer verification of Costs.
10. TERM
The term of this Agreement will begin on March 3, 1997, and terminate
three (3) year(s) from such date. This Agreement may be terminated prior to
such date:
(a) By either party upon thirty (30) days written notice to the
other party for failure of the other party to comply with any
provision of this Agreement;
(b) By SYSCO upon written notice to Customer if Customer's financial
position deteriorates materially, determined by SYSCO in its
sole judgment; and
(c) By either party upon sixty (60) days prior written notice to the
other party.
Upon such termination, Customer agrees (i) to fully comply with its
obligations under Section 6.5 of this Agreement and (ii) to pay all invoices at
the earlier of the time they are due under Section 7.1 above or two (2) weeks
from the date of the last shipment to Customer or a Customer Location.
11. MISCELLANEOUS
11.1. Assignment - Neither party may assign this Agreement without the
prior written consent of the other party (which consent shall not unreasonably
be withheld) provided that SYSCO may utilize its operating companies to perform
as indicated in this Agreement. Subject to this limitation, this Agreement
shall be binding upon and inure to the benefit of the successors and assigns of
each of the parties.
11.2. Entire Agreement - The parties expressly acknowledge that this
Agreement contains the entire agreement of the parties with respect to the
relationship specified in this
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Agreement and supersedes any prior arrangements or understandings between the
parties with respect to such relationship.
11.3. Amendments - This Agreement may only be amended by a written
document signed by each of the parties.
11.4. Notices - Any written notice called for in this Agreement may be
given by personal delivery, first class mail, overnight delivery service for
facsimile transmission. Notices given by personal delivery will be effective on
delivery; by overnight service on the next business day; by first class mail
five business days after mailing; and by facsimile when an answer back is
received. The address of each party is set forth below.
Executed as of the date set forth at the beginning of this Agreement.
SYSCO CORPORATION
Xxxxxxx X. Xxxxx
Regional Vice President,
Multi-Unit Sales By: /s/ Xxxxxxx X. Xxxxx
__________________________
00 Xxxxxx Xxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000 Its: Regional Vice President,
Facsimile: (000) 000-0000 Multi-Unit Sales
___________________________
Copy to:
Xxxx Xxxxxxxxx
SYSCO Corporation
0000 Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
BALANCED CARE CORPORATION
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxxx, XX 00000 By: /s/ Xxxxxxx XxXxxxx
__________________________
Attention: Xxxxxxx XxXxxxx
Telephone: 000-000-0000 Its: Vice President
Facsimile: 000-000-0000 --------------------------
Copy: Director of Legal Services
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