<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 26, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD TO .
COMMISSION FILE NUMBER
---------------------
NEBCO EVANS HOLDING COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 06-1444203
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
545 STEAMBOAT ROAD
GREENWICH, CT 06830
(Address of principal executive offices)
(203) 661-2500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part II of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting and non-voting shares of common
stock held by non-affiliates of the registrant is not applicable as there is not
a public market for such stock. All shares of the registrant's common stock are
held by one affiliate. As of March 24, 1999, there were 8,241,000 shares of
Class B Common Stock of the registrant outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, including
statements regarding the business strategy, operations, cost-saving initiatives,
economic performance, financial condition and liquidity and capital resources of
Nebco Evans Holding Company ("NEHC") or AmeriServe Food Distribution, Inc.
(which, unless the context indicates or otherwise requires, including its
predecessors, is referred to in this Annual Report on Form 10-K as "AmeriServe"
or the "Company"). Such statements are subject to various risks and
uncertainties. Actual results could differ materially from those projected in
such forward-looking statements and readers are cautioned not to place undue
reliance on the forward-looking statements which speak only as of the date
hereof. Certain factors that could cause NEHC's or the Company's actual results
to differ materially from expected, implied or historical results include the
factors set forth under "Cautionary Statements" in Item 7 of this Annual Report
on Form 10-K (this "Report"), the additional factors set forth under "Risk
Factors" in NEHC's amended Registration Statement on Form S-4 filed with the
Securities and Exchange Commissions (the "SEC") on May 1, 1998 (the "NEHC
Registration Statement") and NEHC's other filings with the SEC as well as
general economic and business and market conditions, especially in the chain
restaurant business, and increased competitive and/or customer pressure. Neither
NEHC nor the Company undertakes any obligations to update these forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence or nonoccurrence of anticipated events.
ITEM 1. BUSINESS
NEHC is a Delaware corporation and the parent company of AmeriServe, a
Delaware corporation, and Holberg Warehouse Properties, Inc., a Delaware
corporation ("HWPI"). AmeriServe accounts for substantially all of NEHC's assets
and NEHC conducts substantially all of its business through AmeriServe. HWPI's
sole operation consists of the ownership of two distribution centers occupied by
AmeriServe. AmeriServe operates in a single business segment, as described
below.
NEHC is a wholly owned subsidiary of Nebco Evans Distributors, Inc.
("NED"), which is a majority owned subsidiary (92.9%) of Holberg Industries,
Inc. ("Holberg"). Holberg is a privately held diversified service company with
subsidiaries operating within the foodservice distribution and parking services
industries in North America. Holberg was formed in 1986 to acquire and manage
foodservice distribution businesses. Holberg acquired NEBCO Distribution of
Omaha, Inc. ("NEBCO") in 1986. NEBCO acquired Evans Brothers Company ("Evans")
in January 1990 and the combined company was renamed NEBCO EVANS Distribution,
Inc. ("NEBCO EVANS"). NEBCO EVANS acquired L.L. Distribution Systems Inc. in
1990, Condon Supply Company in 1991 and AmeriServ Food Company ("AmeriServ"), a
distributor of food products and supplies to chain restaurants in such systems
as Wendy's, Dairy Queen, Burger King, KFC and Applebee's, in January 1996. In
conjunction with the AmeriServ acquisition, on January 25, 1996, NEHC was formed
as a wholly-owned subsidiary of NED and acquired all of the stock of NEBCO
EVANS. In April 1997, NEBCO EVANS, a Nebraska corporation, changed its name to
AmeriServe Food Distribution, Inc. (as such, "Nebraska AmeriServe").
AmeriServe is North America's largest systems foodservice distributor
specializing in distribution to chain restaurants. The Company is the primary
supplier to its customers of a wide variety of items, including fresh and frozen
meat and poultry, seafood, frozen foods, canned and dry goods, fresh and
pre-processed produce, beverages, dairy products, paper goods, cleaning supplies
and equipment. The Company currently serves over 30 different restaurant chains
and approximately 36,000 restaurant locations in North America. The Company has
had long-standing relationships with such leading restaurant concepts as
Applebee's, Arby's, Burger King, Chick-fil-A, Chili's, Dairy Queen, KFC, Lone
Star Steakhouse, Long John Silver's, Olive Garden,, Pizza Hut, Red Lobster,
Sonic, Subway, Taco Bell, TCBY, and TGI Friday's.
On July 11, 1997, the Company acquired (the "PFS Acquisition") the U.S. and
Canadian operations of PFS ("PFS"), a division of PepsiCo, Inc. ("PepsiCo"). PFS
distributed food products and supplies and restaurant equipment to franchised
and company-operated restaurants in the Pizza Hut, Taco Bell and KFC systems.
These systems were spun-off by PepsiCo in October 1997 and are now operating as
TRICON Global
2
<PAGE> 3
Restaurants, Inc. ("Tricon"). In addition, in connection with the PFS
Acquisition, the Company entered into a distribution agreement (the
"Distribution Agreement") whereby it became the exclusive distributor of
selected products until July 11, 2002 to the approximately 9,800 Pizza Hut, Taco
Bell and KFC restaurants in the continental United States owned by Pizza Hut,
Inc., Taco Bell Corp., Kentucky Fried Chicken Corporation and, Kentucky Fried
Chicken of California, Inc. (all subsidiaries of Tricon) and their subsidiaries
and previously serviced by PFS. As described in "Recent Customer Developments"
under Item 1 of this Report, the Distribution Agreement was modified and
extended in 1998.
In October 1997, AmeriServe also acquired PFS de Mexico, S.A. de C.V., a
regional systems foodservice distributor based in Mexico City, Mexico for
approximately $8 million.
On July 11, 1997, in connection with the PFS Acquisition, the Company
issued and sold $500 million principal amount of its 10 1/8% Senior Subordinated
Notes due 2007 (the "Senior Subordinated Notes") pursuant to an Indenture, dated
as of July 11, 1997, by and among the Company, certain of the Company's
subsidiaries (the "Subsidiary Guarantors") and State Street Bank and Trust
Company as Trustee (the "Senior Subordinated Note Indenture"). The Senior
Subordinated Notes were sold pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act of 1933, as
amended, (the "Securities Act") and applicable state securities laws. On
December 12, 1997, the Company consummated an offer to exchange the Senior
Subordinated Notes for new Senior Subordinated Notes, which are registered under
the Securities Act with terms substantially identical to the Senior Subordinated
Notes. (For further information, see Note 7 to the Consolidated Financial
Statements.)
Also on July 11, 1997, NEHC issued and sold $100.4 million in aggregate
principal amount at maturity of its 12 3/8% Senior Discount Notes due 2007 (the
"Senior Discount Notes") pursuant to an Indenture, dated as of July 11, 1997, by
and among NEHC and State Street Bank and Trust Company, as trustee. The Senior
Discount Notes were sold pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act. On December 12,
1997, NEHC consummated an offer to exchange the Senior Discount Notes for new
Senior Discount Notes, which are registered under the Securities Act, with terms
substantially identical to the Senior Discount Notes.
On October 15, 1997, AmeriServe issued and sold $350 million in aggregate
principal amount at maturity of its 8 7/8% Senior Notes due 2006 (the "Senior
Notes") pursuant to an Indenture, dated October 15, 1997, by and among the
Company, the Subsidiary Guarantors and State Street Bank and Trust Company, as
trustee (the "Senior Note Indenture"). The Senior Notes were sold pursuant to an
exemption from, or in transactions not subject to, the registration requirements
of the Securities Act. On December 12, 1997, AmeriServe consummated an offer to
exchange the Senior Notes for New Senior Notes, which are registered under the
Securities Act, with terms substantially identical to the Senior Notes.
For further information about financings by NEHC and AmeriServe in
connection with the PFS Acquisition and subsequently, see Notes 7 and 8 to the
Consolidated Financial Statements.
On December 28, 1997, Nebraska AmeriServe merged with and into AmeriServ
and The Harry H. Post Company, a wholly owned subsidiary of AmeriServe merged
with and into AmeriServ. In the mergers, AmeriServ changed its name to
AmeriServe Food Distribution, Inc. The Company effected the mergers to
rationalize its corporate organization and to reduce various compliance and
regulatory costs arising from having subsidiaries incorporated in various
jurisdictions and to move its jurisdiction of incorporation from Nebraska to
Delaware.
On March 6, 1998, NEHC consummated the offering and sale (the "Offering")
of $250 million of its 11 1/4% Senior Redeemable Exchangeable Preferred Stock
due 2008 (the "Preferred Stock") in transactions not requiring registration
under the Securities Act. Approximately $148 million of the net proceeds of the
Offering was used by NEHC to repurchase all of its 13 1/2% Senior Exchangeable
Preferred Stock due 2009 (the "Senior Preferred Stock"), 15% Junior Exchangeable
Preferred Stock due 2009 (the "Junior Preferred Stock"), and Junior
Non-Convertible Preferred Stock. NEHC expects to use the remaining net proceeds
for general corporate purposes, including contributions to the capital of
AmeriServe. Dividends on the Preferred Stock are cumulative at 11 1/4% per
annum, payable quarterly in either cash or additional shares of Preferred
3
<PAGE> 4
Stock, at NEHC's option. The Preferred Stock is redeemable, at NEHC's option, at
any time after March 1, 2003 and is exchangeable, also at NEHC's option, into
11 1/4% Subordinated Exchange Debentures due 2008, in each case, subject to
certain terms and conditions. The Senior Preferred Stock was sold pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act. On June 22, 1998, NEHC consummated an offer
to exchange all the outstanding Senior Preferred Stock due 2008 for new Senior
Preferred Stock, which are registered under the Securities Act, with terms
substantially identical to the Senior Preferred Stock.
On May 21, 1998, the Company acquired all of the outstanding stock of
ProSource, Inc. ("ProSource"). ProSource, which reported net sales of $3.9
billion for its fiscal year ended December 27, 1997, was in the foodservice
distribution business, specializing in quick service and casual dining chain
restaurants. ProSource serviced approximately 12,700 restaurants, principally in
the United States, including such chains as Burger King, Chick-fil-A, Chili's,
Long John Silver's, Olive Garden, Red Lobster, Sonic, TCBY and TGI Friday's.
Funding of the acquisition and related transactions included $125 million
provided by expansion of the Company's Accounts Receivable Program to include
ProSource accounts receivable (see Note 8) to the Consolidated Financial
Statements, a $50 million capital contribution to the Company from NEHC and cash
and cash equivalents on hand.
For further information about financings by AmeriServe in connection with
the ProSource acquisition and subsequently, see Notes 7 and 8 to the
Consolidated Financial Statements.
On December 27, 1998, ProSource Services Corporation, a wholly owned
subsidiary of ProSource, merged with and into ProSource and ProSource merged
with and into AmeriServe. The Company effected the mergers to rationalize its
corporate organization.
FOODSERVICE DISTRIBUTION INDUSTRY
The foodservice distribution business involves the purchasing, receiving,
warehousing, marketing, selecting, loading and delivery of fresh and frozen meat
and poultry, seafood, frozen foods, canned and dry goods, fresh and preprocessed
produce, beverages, dairy products, paper goods, cleaning supplies, equipment
and other supplies from manufacturers and vendors to a broad range of
enterprises, including restaurants, cafeterias, nursing homes, hospitals, other
health care facilities and schools (but generally does not include supermarkets
and other retail grocery stores). The United States foodservice distribution
industry was estimated to generate $140 billion in sales in 1998.
Within the foodservice distribution industry, there are two primary types
of distributors: broadline foodservice distributors and specialist foodservice
distributors, such as the Company. Broadline foodservice distributors service a
wide variety of customers including both independent and chain restaurants,
schools, cafeterias and hospitals. Broadline distributors may purchase and
inventory as many as 25,000 different food and food-related items. Customers
utilizing broadline foodservice distributors typically purchase inventory from
several distributors. Specialist foodservice distributors may be segregated into
three categories: product specialists, which distribute a limited number of
products (such as produce or meat); market specialists, which distribute to one
type of restaurant (such as Mexican); and systems specialists, which focus on
one type of customer (such as chain restaurants or health care facilities).
The Company operates as a systems distributor that specializes in servicing
chain restaurants. Systems specialists, such as the Company, typically purchase
and inventory between 1,100 and 5,500 different food and food-related items and
often serve as a single source of supply for their customers. Broadline
foodservice distributors generally rely on sales representatives who must call
on customers regularly. Systems distributors, however, regularly process orders
electronically without the need for a sales representative's involvement.
BUSINESS STRATEGY
The Company's strategy is to: (i) pursue profitable internal and external
growth opportunities; (ii) capitalize on its nationwide network of distribution
centers to increase customer density and regional market penetration; (iii)
continue to provide low cost, superior customer service; and (iv) maximize
operating
4
<PAGE> 5
leverage by integrating and consolidating the Company, PFS and ProSource quick
service and casual dining businesses and by pursuing selective acquisitions
within the fragmented foodservice distribution industry.
CUSTOMERS
The Company's customers are generally owners and/or franchisees of chain
restaurant concepts. The Company's customers include over 30 restaurant concepts
with approximately 36,000 restaurant locations. The corporate owner or
franchiser of the restaurant concept generally reserves the right to designate
one or more approved foodservice distributors within a geographic region, and
each franchisee is typically allowed to select its foodservice distributor from
such approved list.
Including sales to company-owned and franchised restaurants, the Company's
sales to the following restaurant concepts as an approximate percentage of total
pro forma sales (including ProSource for all of 1998 and PFS for all of 1997 but
excluding net sales to the Wendy's concept in 1998 (sales to the Wendy's concept
were discontinued during 1998) were:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Burger King................................................. 25% 5%
Taco Bell................................................... 17% 29%
Pizza Hut................................................... 16% 27%
KFC......................................................... 7% 12%
Red Lobster................................................. 7% --
Arby's...................................................... 4% 7%
Wendy's..................................................... -- 11%
</TABLE>
On a pro forma basis, assuming the inclusion of ProSource for the full
year, restaurants owned by Tricon accounted for approximately 21% of the
Company's 1998 sales. Darden Restaurants, Inc., which owns all the Red Lobster
and Olive Garden Restaurants, accounted for approximately 10% of 1998 pro forma
net sales. No other customer accounted for more than 10% of 1998 sales on either
a pro forma or reported basis.
RECENT CUSTOMER DEVELOPMENTS
Early in 1998, the Company initiated a renegotiation of its long-term
distribution agreement with Tricon, the Company's largest customer, that became
effective July 1997. In September 1998, the Company and Tricon agreed to revise
and extend the agreement from five years to seven and one-half years, with an
additional two and one-half year extension option. Including this option period,
the agreement expires July 2007. The agreement provides that the Company is the
exclusive distributor of a substantial majority of products purchased by
Tricon's U.S. company-owned restaurants, including Pizza Hut and Taco Bell
restaurants sold to franchisees. Service to Tricon company-owned restaurants in
the U.S. under the agreement represented approximately $1.7 billion in net sales
in fiscal 1998.
In April 1997, the Company began providing service to a substantial
majority of restaurants in the Arby's system under a distribution agreement that
was scheduled to expire in April 2000. In December 1998, the Company and ARCOP,
a cooperative of franchisees in the Arby's system, agreed to terminate the
existing agreement and enter into a new agreement that expires in December 2003.
While the majority of the restaurants under the agreement are serviced directly
by the Company, some are serviced by other cooperating independent distributors.
Net sales to Arby's restaurants under the agreement approximate $400 million
annually.
In addition, the Company has been very active in solidifying relationships
with other existing customers, particularly franchisees in the Burger King and
Tricon systems, through long-term contracts (largely five years). Of the
Company's Burger King customer base, about 80% is now under long-term contracts.
Long-term distribution agreements have been secured with a substantial majority
of franchisees in the Pizza Hut and Taco Bell systems.
5
<PAGE> 6
Currently, about 70% of the Company's total business is under contracts
with three or more years of remaining term.
As part of the Tricon and other new or revised distribution agreements, the
Company has moved a substantial portion of its business from pricing based on a
percentage mark-up (over cost) to a fee per case mark-up. This change results in
pricing that more closely correlates with the Company's cost structure and
insulates the Company from product cost and mix variability. Currently,
approximately 70% of the Company's business is under fee per case pricing.
In the course of revising or entering into new contracts, the Company in
cooperation with customers has identified supply chain efficiency and cost
reduction opportunities benefiting both parties. These include reduced
deliveries per week, after-hours delivery, electronic ordering and increasing
the time from order to delivery. Also, the Company provides value-added services
to customers such as consolidating purchases of low volume items to reduce the
cost of these products, and management of freight costs in transporting products
from vendors to the Company's centers, which reduces the freight component of
product costs.
During the second half of 1998, the Company discontinued service to Wendy's
company-owned and franchised restaurants as a result of a decision by Wendy's
International, Inc. to transfer its business to a competitor of the Company. Net
sales to the Wendy's concept were approximately $600 million annually, and the
discontinuance is expected to negatively impact the Company's operating profits
by approximately $15 million annually. A charge of $7.2 million was recorded in
1998 for certain costs related to the discontinuance, including equipment lease
terminations and employee severance. (See Note 3 to the Consolidated Financial
Statements.)
OPERATIONS AND DISTRIBUTION
The Company's operations generally can be categorized into three business
processes: product replenishment, product storage and order fulfillment. Product
replenishment involves the management of logistics from the vendors through the
delivery of products to the Company's distribution centers. Product storage
involves the warehousing and rotation of temperature-controlled inventory at the
distribution centers pending sale to customers. Order fulfillment involves all
activities from customer order placement and selecting and loading through
delivery from the distribution centers to the restaurant location. Supporting
these processes is the Company's nationwide network of 61 distribution centers,
its fleet of approximately 1,500 tractors and 2,100 trailers and its management
information systems. Substantially all of the Company's products are purchased,
stored and delivered in sealed cases which the Company does not open or alter.
In connection with the PFS Acquisition and ProSource Acquisition, the Company
expects to reduce the number of current distribution centers to 28, including
four redistribution, one equipment, and two international centers. In order to
accomplish this consolidation, the Company will operate its business in new and
larger facilities. (For further information, see "Business Restructuring" under
Item 7 of this Report.)
Product Replenishment
While the Company is responsible for purchasing products to be delivered to
its customers, chain restaurants typically approve the vendors and negotiate the
price for their proprietary products. The Company determines the distribution
centers that will warehouse products for each customer and the quantities in
which such products will be purchased. Order quantities for each product are
systematically determined for each distribution center, taking into account both
recent sales history and projected customer demand. The distribution centers
selected to serve a customer are based on the location of the restaurants to be
serviced.
Product Storage
The Company currently warehouses approximately 1,100 to 5,500 stock keeping
units ("SKU's") (excluding the redistribution and equipment distribution
centers) for its customers at 61 facilities located throughout the United
States, Canada and Mexico. Upon receipt of the product at the distribution
centers, the product is inspected and stored on pallets, in racks or in bulk in
the appropriate temperature-controlled environment. Products stored at the
distribution centers are generally not reserved for a specific customer.
6
<PAGE> 7
Rather, customer orders are filled from the common inventory at the relevant
distribution center. The Company's computer systems continuously monitor
inventory levels in an effort to maintain optimal levels, taking into account
required service levels, buying opportunities and capital requirements. Each
distribution center contains ambient, refrigerated (including cool docks) and
frozen space, as well as offices for operations, sales and customer service
personnel and a computer network, accessing systems at other distribution
centers and the Company's corporate support centers.
A majority of the Company's distribution centers are between 100,000 to
200,000 square feet with approximately 20% refrigerated storage space, 30%
frozen storage space and 50% dry storage area. The Company uses sophisticated
logistics programs to strategically locate new distribution centers in areas
near key highways with specific consideration given to the proximity of
customers and suppliers. The Company also employs consultants in distribution
center layout and product flow to design the distribution center with the
objective of maximizing product throughput. The Company estimates that each
distribution center can effectively service customers within a 350 mile radius,
although the Company's objective is to service customers within a 150 mile
radius.
Order Fulfillment
The Company places a significant emphasis on providing high quality service
in order fulfillment. By providing high quality service and reliability, the
Company believes it can reduce the number of reorders and redeliveries, reducing
costs for both the Company and its customers. Each restaurant places product
orders based on recent usage, estimated sales and existing restaurant
inventories. The Company uses its management information systems to continually
update routes and delivery times with each customer in order to lower
fulfillment costs. Product orders are placed with the Company one to three times
a week either through the Company's customer service representatives or through
electronic transmission using specially designed software. Many of the
restaurants served by the Company transmit product orders electronically.
Once ordered by the customer, products are picked and labeled at each
distribution center, and the products are generally placed on a pallet for the
loading of outbound trailers. Delivery routes are scheduled to both fully
utilize the trailer's load capacity and minimize the number of miles driven in
order to exploit the cost benefit of customer density.
Fleet
The Company operates a fleet of approximately 1,500 tractors and 2,100
trailers through its subsidiary, AmeriServe Transportation, Inc. The Company
leases approximately 480 tractors from Penske Truck Leasing pursuant to
full-service leases that include maintenance. The Company also leases
approximately 390 tractors from General Electric Capital Corp. which are
maintained through Penske Truck Leasing, UPS Truck Leasing and other national
maintenance providers. The Company owns approximately 540 tractors and 870
trailers which are maintained by national maintenance providers. The remaining
tractors (approximately 90) and trailers (approximately 1,230) are leased under
finance leases (which equipment is maintained by national maintenance providers)
or full-service leases (which include maintenance) from a variety of leasing
companies. Lease terms average six years for new tractors and nine years for new
trailers. Licensing and fuel tax reporting for the entire fleet is provided by
J.J. Keller & Associates, Inc.
Most of the Company's tractors contain onboard computers. The computers
assist in managing fleet operations and provide expense controls, automated
service level data collection and real-time driver feedback, thereby enhancing
the Company's service level to customers. Data from the onboard computers are
loaded into the routing software after each route in order to continually
optimize the route structure. Substantially all of the Company's trailers
contain temperature-controlled compartments, which allow the Company to
simultaneously deliver frozen food, refrigerated food and dry goods.
Management Information Systems
AmeriServe and the former PFS and ProSource businesses currently operate
with different computer systems. AmeriServe utilizes a variety of personal
computers and IBM AS/400-based software applications.
7
<PAGE> 8
PFS and ProSource also operates with a variety of applications, the core of
which are mainframe-based. Programs in use include various customized and
special-purpose applications, such as warehouse management tools, remote order
entry, automated replenishment, delivery routing, and onboard computers for
delivery trucks.
The Company is in the process of replacing its core applications with
software from J.D. Edwards in order to integrate the systems of AmeriServe, PFS
and ProSource. This conversion process is progressing and is expected to be
substantially completed by mid-1999 and will result in all of the Company's
quick service distribution centers operating with the same computer systems and
the same operating policies and practices. For certain risks related to this
project, see "Computer Systems and Year 2000 Issue" under Item 7 of this Report.
Procurement, Logistics and Redistribution
The Company procures a wide range of food, paper and cleaning products for
ultimate distribution to its chain restaurant customers. The Company also
operates two redistribution centers for the purpose of purchasing slow-moving
inventory items and consolidating these items into full truckload shipments to
the Company's distribution centers nationally, as well as to customers outside
the Company. The Company also offers redistribution services to customers
outside of the continental United States.
The Company operates a freight logistics division for the purpose of
achieving the lowest landed costs to its distribution centers through the review
of purchase orders generated at the various distribution centers. The Company
generates freight savings through leveraged purchasing, with key carriers
operating in defined traffic lanes. This division also provides logistical
services to a substantial number of customers outside of the Company on a fee
basis. Current inbound purchase orders controlled by this division exceed 6,000
truckloads monthly. Further, the Company operates a nationally registered common
carrier fleet of temperature-controlled tractor-trailer units. This division
serves as a "core-carrier" to several national food manufacturers and is an
integral part of the Company's inbound freight logistics initiative.
MARKETING AND CUSTOMER SERVICE
The Company employs national and regional marketing representatives who
service existing customers, as well as focus on developing new customers from
among other restaurant concepts. Additionally, each division president and
certain members of senior management are active in maintaining relationships
with current and potential customers. The Company compensates its sales and
marketing representatives under various compensation plans, which combine a base
pay with an incentive bonus.
The Company's customer service activities are highly customized to the
unique needs of each customer. Each customer has a dedicated account manager who
is responsible for overseeing all of a customer's needs and coordinating the
services provided to such customer. In order to manage problem resolution, the
Company tracks customer calls to ensure that appropriate action and follow-up
occur. The Company's representatives travel frequently to the customer's
restaurant or office for regularly scheduled meetings and key project reviews to
ensure close coordination between the Company and the customer.
A key component of the Company's marketing plan is the use of customized
information systems to improve customer service, and to assist the customer in
the daily operation of its business. The Company utilizes on-line order entry
inventory systems, which permit the Company to simultaneously take orders,
compare the order to previous orders, track and replenish inventory and schedule
the delivery. In addition to placing orders, certain customers may also access
their own accounts, and inventory information, and print copies of order
acknowledgments, invoices and account statements. This electronic data
interchange system provides certain customers with access to the Company's
information systems at their convenience and enables the Company to accept
orders 24 hours a day, seven days a week. The electronic data interchange not
only allows for greater efficiencies, but also produces reduced administrative
expenses and fewer ordering errors.
8
<PAGE> 9
COMPETITION
The foodservice distribution industry is highly competitive. Competitors
include other systems distribution companies focused on the chain restaurants,
captive distribution companies owned by restaurant companies and broadline
foodservice distributors.
The Company competes directly with other systems specialists that target
chain restaurant concepts. The Company's principal competitors are Sysco
Corporation's Sygma division, McLane's, Marriott Distribution Services Inc.,
Alliant Foodservice Inc., Performance Food Group, U.S. Foodservice, MBM Corp.
and PYA Monarch. The Company also competes with regional and local distributors
in the foodservice industry, principally for business from franchisee-owned
chain restaurants. National and regional chain restaurant concepts typically
receive service from one or more systems distributors. Distributors are
appointed or approved to service these concepts and/or their franchisees on
either a national or regional basis. The Company believes that distributors in
the foodservice industry compete on the basis of quality, reliability of service
and price. Because a number of the Company's customers prefer a distributor that
is able to service their restaurants on a nationwide basis, the Company believes
it is in a strong position to retain and compete for national chain restaurant
customers and concepts.
Opportunities for growth by gaining access to new chains typically occur at
the expense of a competitor and are awarded in a bid or negotiation situation,
in which large blocks of business are awarded to the most efficient distributor.
The Company believes that a key competitive advantage is continuously pursuing a
strategy of being the low-cost provider of distribution and other value-added
services within the industry.
REGULATORY MATTERS
The Company is subject to a number of federal, state and local laws,
regulations and codes, including those relating to the protection of human
health and the environment, compliance with which has required, and will
continue to require, capital and operating expenditures. The Company believes
that it is in compliance, in all material respects, with all such laws,
regulations and codes. The Company, however, is not able to predict the impact
of any changes in the requirements or mode of enforcement of these laws,
regulations and codes on its operating results.
ENVIRONMENTAL MATTERS
Under applicable environmental laws, the Company and/or HWPI may be
responsible for remediation of environmental conditions and may be subject to
associated liabilities (including liabilities resulting from lawsuits brought by
private litigants) relating to its distribution centers and the land on which
its distribution centers are situated, regardless of whether the Company and/or
HWPI leases or owns the land in question and regardless of whether such
environmental conditions were created by the Company or by a prior owner or
tenant.
NEHC believes the Company and HWPI currently conduct their respective
businesses, and in the past have conducted their respective businesses, in
substantial compliance with applicable environmental laws and regulations. In
addition, compliance with federal, state and local laws enacted for protection
of the environment has had no material effect on either the Company or HWPI.
However, there can be no assurance that environmental conditions relating to
prior, existing or future distribution centers or distribution center sites will
not have a material adverse effect on the Company or HWPI.
In connection with the PFS and ProSource Acquisitions, the Company reviewed
existing reports and retained environmental consultants to conduct an
environmental audit of their respective operations in order to identify
conditions that could have material adverse effects on the Company. The Company
has obtained final reports on the results of such audits with regard to PFS and
ProSource, which concluded that there are no environmental matters that are
likely to have a material adverse effect on the Company.
9
<PAGE> 10
EMPLOYEES
NEHC has no paid employees. As of December 26, 1998, the Company had
approximately 8,000 full-time employees, approximately 600 of whom were employed
in corporate support functions and approximately 7,400 of whom were warehouse,
transportation, sales, and administrative staff at the distribution centers. As
of such date, approximately 900 of the Company's employees were covered by 11
collective bargaining agreements. Five collective bargaining agreements covering
approximately 450 employees will expire in 1999. The Company has not experienced
any material labor disputes or work stoppages and believes that its
relationships with its employees are good.
ITEM 2. PROPERTIES
The Company leases approximately 125,000 square feet of headquarters office
space in Addison, Texas, a suburb of Dallas.
The Company currently operates 61 distribution centers located throughout
the United States, Canada and Mexico and is constructing four new distribution
centers as follows:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FEET LEASED/OWNED
-------- ----------- ------------
<S> <C> <C>
Albany, NY.................................................. 104,000 Leased
Arlington, TX(4)............................................ 105,600 Leased
Atlanta, GA(4).............................................. 157,000 Leased
Atlanta, GA(2).............................................. 230,000 Leased
Bell, CA.................................................... 91,792 Leased
Burlington, NJ.............................................. 60,880 Owned
Charlotte, NC(4)............................................ 158,500 Owned
Charlotte, NC(4)............................................ 91,771 Leased
Charlotte, NC(2)............................................ 190,000 Leased
Chester, NY................................................. 131,400 Leased
Columbus, OH................................................ 143,903 Leased
Conroe, TX(4)............................................... 33,900 Owned
Denver, CO.................................................. 165,000 Leased
Douglasville, GA(4)......................................... 60,670 Owned
Farmingdale, NY............................................. 35,000 Leased
Fort Worth, TX.............................................. 113,000 Leased
Fredericksburg, VA.......................................... 53,000 Owned
Fullerton, CA............................................... 61,740 Leased
Grand Prairie, TX(4)........................................ 32,200 Owned
Grand Rapids, MI............................................ 180,000 Owned
Greensboro, NC(4)........................................... 41,000 Owned
Gridley, IL................................................. 146,100 Owned
Gulfport, MS................................................ 63,792 Leased
Harahan, LA(4).............................................. 36,180 Leased
Hebron, KY.................................................. 124,000 Leased
Houston, TX(4).............................................. 69,800 Leased
Houston, TX(2).............................................. 150,000 Leased
Indianapolis, IN(4)......................................... 115,200 Leased
Indianapolis, IN(3)......................................... 180,100 Leased
Industry, CA................................................ 92,000 Leased
Jonesboro, GA(4)............................................ 124,076 Leased
Kansas City, MO(2).......................................... 240,000 Leased
Lemont, IL.................................................. 105,000 Leased
Lenexa, KS(4)............................................... 105,600 Leased
Lenexa, KS(4)............................................... 35,778 Leased
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FEET LEASED/OWNED
-------- ----------- ------------
<S> <C> <C>
Lenexa, KS(4)............................................... 26,172 Leased
Lewisville, TX.............................................. 105,000 Leased
Madison, WI(1).............................................. 123,000 Leased
Manassas, VA................................................ 100,337 Owned
Memphis, TN................................................. 122,500 Leased
Mexico City, MX............................................. 35,000 Owned
Milwaukee, WI............................................... 123,185 Leased
Mississauga, Ontario........................................ 53,487 Leased
Mt. Holly, NJ............................................... 126,637 Leased
Norcross, GA(4)............................................. 169,900 Owned
Norman, OK.................................................. 11,093 Leased
Norman, OK.................................................. 52,000 Owned
Novi, MI(4)................................................. 72,830 Leased
Oakwood, OH................................................. 40,540 Owned
Obetz, OH................................................... 174,000 Leased
Omaha, NE(4)(6)............................................. 105,000 Leased
Ontario, CA................................................. 201,454 Leased
Orlando, FL................................................. 269,000 Leased
Orlando, FL................................................. 143,200 Owned
Oxford, MA.................................................. 40,000 Leased
Phoenix, AZ................................................. 92,425 Leased
Plymouth, MN................................................ 104,200 Leased
Portland, OR................................................ 81,815 Leased
Portland, OR................................................ 75,000 Leased
Romulus, MI(4).............................................. 34,897 Owned
Stafford, VA................................................ 30,000 Leased
Stockton, CA................................................ 105,000 Leased
Virginia Beach, VA.......................................... 23,045 Owned
Waukesha, WI(5)............................................. 196,000 Leased
Woodridge, IL............................................... 91,021 Leased
</TABLE>
- ---------------
(1) Redistribution facilities
(2) Under construction
(3) Restaurant equipment distribution center
(4) Scheduled to close in 1999.
(5) NEHC capital lease
(6) Owned by HWPI.
In connection with the PFS and ProSource Acquisitions, the Company expects
to reduce the number of current distribution centers to 28, including four
redistribution, one equipment and two international centers. In order to
accomplish this integration and consolidation, the Company will operate its
business in new and larger facilities. NEHC believes that the Company's existing
distribution centers, together with planned modifications, expansions and new
distribution centers provide sufficient space to support the Company's expected
expansion over the next several years.
ITEM 3. LEGAL PROCEEDINGS
From time to time NEHC and/or the Company are involved in litigation
relating to claims arising out of their normal business operations. Neither NEHC
nor the Company is currently engaged in any legal
11
<PAGE> 12
proceedings that are expected, individually or in the aggregate, to have a
material adverse effect on NEHC or the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
In December 1998, NEHC, as the sole voting stockholder of AmeriServe, and
AmeriServe as the sole voting stockholder of ProSource, approved the merger
whereby ProSource was merged into AmeriServe.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the common stock of NEHC is owned by NED and there is no public
trading market for such security. In connection with the PFS Acquisition, on
July 11, 1997, NEHC issued and sold 2,400,000 shares of Senior Preferred Stock,
2,200,000 shares of Junior Preferred Stock, and warrants to purchase shares of
NEHC Class A Common Stock, with an exercise price of $0.01 per share,
representing the right to acquire an aggregate of up to 22.5% of the Common
Stock of NEHC on a fully diluted basis for aggregate consideration of $115.0
million. The Senior Preferred Stock and the Junior Preferred Stock and warrants
were sold to DLJ Merchant Banking Partners II, L.P. and certain of its
affiliates ("DLJMBII"). The offering was a private placement.
Under the indenture relating to the Senior Discount Notes and the
Certificate of Designations relating to the Preferred Stock, NEHC is restricted
from paying cash dividends on its capital stock, subject to certain exceptions.
For additional information regarding these restrictions, see the Indenture,
dated as of July 11, 1997, by and between NEHC and State Street Bank and Trust
Company, relating to the Senior Discount Notes and the Certificate of
Designations relating to the Preferred Stock, included as an amendment to NEHC's
Amended and Restated Certificate of Incorporation, each of which has been
incorporated by reference as an exhibit hereto.
Under the Third Amended and Restated Credit Agreement dated as of May 21,
1998 among the Company and various financial institutions, as amended by the
First Amendment thereto (the "Credit Agreement"), the Company is restricted from
paying cash dividends on its capital stock until January 11, 2003, except to the
extent necessary to enable NEHC to pay corporate overhead expenses. From and
after January 11, 2003, the Company may pay additional dividends of up to
$13,000,000 annually, subject to certain conditions, to enable NEHC to service
the Senior Discount Notes. The indentures relating to the Senior Notes and the
Senior Subordinated Notes also limit the Company's ability to pay cash
dividends. For additional information regarding these restrictions, see the
Credit Agreement, the Senior Note Indenture and the Senior Subordinated Note
Indenture, each of which has been incorporated by reference as an exhibit
hereto. There are currently no restrictions on the ability of the Company's
wholly owned subsidiaries, other than AmeriServe Funding, to pay cash dividends
to the Company.
12
<PAGE> 13
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS):
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------------------------
1998(a) 1997(b) 1996(c) 1995 1994
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................... $7,420,951 $3,508,332 $1,389,601 $400,017 $358,516
Gross profit................. 680,025 348,975 140,466 40,971 37,914
Operating expenses........... 716,357(d) 358,958(e) 122,430 36,695 34,488
---------- ---------- ---------- -------- --------
Operating income (loss)...... (36,332) (9,983) 18,036 4,276 3,426
Interest expense, net........ (90,824) (54,016) (16,423) (3,936) (3,294)
Loss on sale of accounts
receivable(f)............. (24,906) (6,757) -- -- --
Interest
income -- affiliates...... 1,335 632 528 749 533
Minority interest............ -- -- (2,345) -- --
---------- ---------- ---------- -------- --------
Income (loss) before income
taxes and extraordinary
loss...................... (150,727) (70,124) (204) 1,089 665
Provision for income taxes... 1,563 1,030 1,300 583 523
---------- ---------- ---------- -------- --------
Income (loss) before
extraordinary loss........ (152,290) (71,154) (1,504) 506 142
Extraordinary loss on early
extinguishment of debt.... -- 15,935 -- -- --
---------- ---------- ---------- -------- --------
Net income (loss)............ $ (152,290) $ (87,089) $ (1,504) $ 506 $ 142
========== ========== ========== ======== ========
BALANCE SHEET DATA AT END OF
YEAR:
Cash and cash equivalents.... $ 37,646 $ 231,450 $ 2,224 $ 575 $ 1,025
Total assets................. 1,935,812 1,478,790 314,946 77,503 79,218
Long-term debt, including
current portion........... 988,184 948,736 164,444 32,779 32,160
Total stockholders' equity
(deficit)................. (283,354) 44,802 18,519 10,157 17,205
</TABLE>
- ---------------
(a) Includes the effects of the acquisition of ProSource on May 21, 1998.
(b) Includes the effects of the acquisition of PFS effective June 11, 1997.
(c) Includes the effects of the acquisition of AmeriServ on January 25, 1996.
(d) Includes $90.1 million in restructuring and other unusual costs. See Note 3
to the Consolidated Financial Statements.
(e) Includes $52.4 million in restructuring and other unusual costs. See Note 3
to the Consolidated Financial Statements.
(f) Relates to an ongoing program to provide additional financing capacity
through sales of accounts receivable. See Note 8 to the Consolidated
Financial Statements.
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NATURE OF OPERATIONS
NEHC is the parent company of the Company and HWPI. The Company comprises
substantially all of the operations of NEHC, as HWPI's operations consist
entirely of the ownership of two warehouse facilities occupied by the Company.
The Company is a foodservice distributor specializing in distribution to chain
restaurants. The Company distributes a wide variety of food items as well as
paper goods, cleaning and other supplies and equipment. The Company operates
within a single type of business activity, with no operating segments as defined
by Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information."
The Company services approximately 36,000 restaurants, the vast majority of
which are in the United States. The Company's major customers are owners and/or
franchisees operating restaurants in the Arby's, Burger King, Chick-fil-A,
Chili's, Dairy Queen, KFC, Lone Star Steakhouse, Long John Silver's, Olive
Garden, Pizza Hut, Red Lobster, Sonic, Taco Bell, TCBY and TGI Friday's systems.
For most of these concepts, the Company services all or a substantial majority
of the U.S. restaurants in the systems. The Company also operates foodservice
distribution businesses in Canada and Mexico, which are not material to the
consolidated financial statements of the Company.
NEHC is an indirect subsidiary of Holberg, a privately held diversified
service company. In addition to NEHC, Holberg has subsidiaries operating within
the parking services industry in North America.
ACQUISITIONS
On May 21, 1998, the Company acquired ProSource for $313.5 million in cash,
which reflected $15.00 per share for all of the outstanding common stock,
repayment of existing indebtedness of ProSource of $159.5 million and direct
costs of the acquisition. ProSource, which reported net sales of $3.9 billion
for its fiscal year ended December 27, 1997, was in the foodservice distribution
business, specializing in quick service and casual dining chain restaurants.
ProSource serviced approximately 12,700 restaurants, principally in the United
States, in such chains as Burger King, Chick-fil-A, Chili's, Long John Silver's,
Olive Garden, Red Lobster, Sonic, TCBY and TGI Friday's. Funding of the
acquisition and related transactions included $125 million in proceeds from the
sale of ProSource accounts receivable (see Note 8 to the Consolidated Financial
Statements), a $50 million capital contribution to the Company from NEHC and
cash and cash equivalents on hand. The acquisition has been accounted for under
the purchase method; accordingly, 31 weeks of results for the former ProSource
operations are included in the Company's reported operating results for the year
ended December 26, 1998. The comparisons of reported operating results for
fiscal 1998 to fiscal 1997 presented below under "Results of Operations" are
significantly impacted by the acquisition of ProSource.
Effective June 11, 1997, the Company acquired the U.S. and Canadian
operations of PFS in an asset purchase transaction for $841.6 million in cash,
including direct costs. PFS posted net sales of $3.4 billion for its fiscal year
ended December 25, 1996. PFS was engaged in the distribution of food products,
supplies and equipment to approximately 17,000 company-owned and franchised
restaurants in the Pizza Hut, Taco Bell and KFC systems, which were spun-off by
PepsiCo, Inc. in October 1997 as TRICON Global Restaurants, Inc. Funding of the
acquisition was provided by long-term borrowings and sale of accounts receivable
(see Notes 7 and 8 to the Consolidated Financial Statements) and a $130 million
capital contribution to the Company from NEHC. The acquisition has been
accounted for under the purchase method; accordingly, 28 weeks of results for
the former PFS operations are included in the Company's reported operating
results for the year ended December 27, 1997. The comparisons of reported
operating results for fiscal 1998 to fiscal 1997 and fiscal 1997 to fiscal 1996
presented below under "Results of Operations" are significantly impacted by the
acquisition of PFS.
14
<PAGE> 15
BUSINESS RESTRUCTURING
In the last two years, the Company's pro forma sales have grown
significantly from $1.5 billion in 1996 to $9.1 billion in 1998 (including the
full year effect of acquisitions). This growth came largely from the
acquisitions of PFS and ProSource, both large foodservice distribution companies
with national scope specializing in the chain restaurant segment of the U.S.
foodservice industry.
These acquisitions have resulted in redundancies in the Company's warehouse
facilities, truck delivery routes and administrative and other support
functions. The Company has developed a business restructuring plan to
consolidate and integrate the acquired businesses. Actions identified in the
plan include construction of new strategically located warehouse facilities,
closures of a number of existing warehouse facilities and
expansions/reconfigurations of others, dispositions of property and equipment,
conversions of computer systems, reductions in workforce, relocation of
employees and centralization of support functions largely at the Dallas, Texas
headquarters.
Completion of the plan is expected to significantly increase operating
efficiencies through warehouse economies of scale, increased deliveries per
truck route and centralized, standardized support processes. Implementation of a
major new computer software and hardware platform (discussed below under
"Computer Systems and Year 2000 Issue") will facilitate the streamlining of
warehouse operations and support processes.
The Company will complete the plan in two phases. The first phase, which
represents a substantial majority of the restructuring actions, is the
consolidation of the quick service business. The integration of the casual
dining business, as discussed below, is the second phase. The Company estimates
cost savings from the quick service consolidation actions of approximately $100
million annually upon the anticipated completion of this phase in mid-2000. The
Company may take additional restructuring actions as the warehouse network
continues to be assessed for optimum efficiency.
The Company has recently completed the restructuring plan to include the
integration of the former ProSource casual dining operations, and the estimated
ProSource exit costs associated with both phases of the plan are reflected in
the preliminary purchase price allocation. The casual dining integration actions
will occur largely in 2000. Final estimates of cost savings from this
integration and all spending to effect it are not yet complete.
The Company is on schedule in its restructuring plan. As of March 15, 1999,
the Company has closed 17 warehouse facilities (including seven former ProSource
facilities) and transferred the business to new or existing facilities. Another
20 closures are planned for the balance of 1999. Five warehouse facilities have
been expanded and/or reconfigured, and four of the remaining five planned for
completion in 1999 are in process and on schedule. Operations have commenced at
three newly constructed state-of-the-art warehouse facilities in Orlando, FL,
Denver, CO and Memphis, TN, and four additional new warehouse facilities planned
for completion in 1999 are under construction and on schedule. As a result of
these actions, warehouse facilities that are complete with respect to
consolidation of the quick service business represent approximately 25% of quick
service net sales.
The Company will incur significant cash costs to effect the restructuring.
Approximately $119 million in cash costs have been accounted for through
restructuring charges in 1997 and 1998 and reserves recorded as part of the
purchase price allocations for PFS and ProSource. (See Notes 2 and 3 to the
Consolidated Financial Statements.) Approximately $16 million of this amount was
spent over fiscal 1998 and 1997, and about $45 million is expected to be spent
in 1999, primarily representing employee severance and lease payments related to
closed facilities. In addition, cash integration costs, which are expensed as
incurred, totaled approximately $42 million over fiscal 1998 and 1997, and about
$50 million is expected to be spent in 1999. These integration costs relate
primarily to start-up of new warehouse facilities, activities to realign and
centralize administrative and other support functions and delivery fleet
modifications.
15
<PAGE> 16
CUSTOMER ACTIVITIES
Early in 1998, the Company initiated a renegotiation of its long-term
distribution agreement with Tricon, the Company's largest customer, that became
effective July 1997. In September 1998, the Company and Tricon agreed to revise
and extend the agreement from five years to seven and one-half years, with an
additional two and one-half year extension option. Including this option period,
the agreement expires July 2007. The agreement provides that the Company is the
exclusive distributor of a substantial majority of products purchased by
Tricon's U.S. company-owned restaurants, including Pizza Hut and Taco Bell
restaurants sold to franchisees. Service to Tricon company-owned restaurants in
the U.S. under the agreement represented approximately $1.7 billion in net sales
in fiscal 1998.
In April 1997, the Company began providing service to a substantial
majority of restaurants in the Arby's system under a distribution agreement that
was scheduled to expire in April 2000. In December 1998, the Company and ARCOP,
a cooperative of franchisees in the Arby's system, agreed to terminate the
existing agreement and enter into a new agreement that expires in December 2003.
While the majority of the restaurants under the agreement are serviced directly
by the Company, some are serviced by other cooperating independent distributors.
Net sales to Arby's restaurants under the agreement approximate $400 million
annually.
In addition, the Company has been very active in solidifying relationships
with other existing customers, particularly franchisees in the Burger King and
Tricon systems, through long-term contracts (largely five years). Of the
Company's Burger King customer base, about 80% is now under long-term contracts.
Long-term distribution agreements have been secured with a substantial majority
of franchisees in the Pizza Hut and Taco Bell systems.
Currently, about 70% of the Company's total business is under contracts
with three or more years of remaining term.
As part of the Tricon and other new or revised distribution agreements, the
Company has moved a substantial portion of its business from pricing based on a
percentage mark-up (over cost) to a fee per case mark-up. This change results in
pricing that more closely correlates with the Company's cost structure and
insulates the Company from product cost and mix variability. Currently,
approximately 70% of the Company's business is under fee per case pricing.
In the course of revising or entering into new contracts, the Company in
cooperation with customers has identified supply chain efficiency and cost
reduction opportunities benefiting both parties. These include reduced
deliveries per week, after-hours delivery, electronic ordering and increasing
the time from order to delivery. Also, the Company provides value-added services
to customers such as consolidating purchases of low volume items to reduce the
cost of these products, and management of freight costs in transporting products
from vendors to the Company's centers, which reduces the freight component of
product costs.
During the second half of 1998, the Company discontinued service to Wendy's
company-owned and franchised restaurants as a result of a decision by Wendy's
International, Inc. to transfer its business to a competitor of the Company. Net
sales to the Wendy's concept were approximately $600 million annually, and the
discontinuance is expected to negatively impact the Company's operating profits
by approximately $15 million annually. A charge of $7.2 million was recorded in
1998 for certain costs related to the discontinuance, including equipment lease
terminations and employee severance. (See Note 3 to the Consolidated Financial
Statements.)
COMPUTER SYSTEMS AND YEAR 2000 ISSUE
The Company's business activity requires the processing of several thousand
transactions on a daily basis in the purchasing, transportation and warehousing
of food and supply items and sale of these items to restaurant customers. The
Company's operational and financial stability is reliant upon the orderly flow
of goods through the entire supply chain; i.e., from providers of food
commodities to food processors to the Company to customers' restaurants and
finally to consumers. This flow of goods depends on the use of computerized
systems throughout the supply chain.
16
<PAGE> 17
The Company has taken a number of steps to assess and remediate its
exposure to the Year 2000 (Y2K) computer program code problem. The Company's
findings to date include:
- As measured by lines of program code, approximately 20% of the Company's
software was not Y2K compliant. Approximately one-third of this code has
been remediated, tested and placed back into production, and the balance
will be completed by mid-1999.
- The remaining 80% of software includes applications that are currently
being replaced by a new software package platform (see discussion below)
and several previously existing software application packages that the
Company will continue to utilize. The providers of the software packages
have certified that their products are Y2K compliant. The Company will,
by mid-1999, perform procedures to verify such compliance.
- The Company has completed an assessment of its computer hardware and
determined that approximately 30% of these devices are not Y2K compliant.
Remediation of this hardware will be completed by mid-1999.
- The Company has completed its assessment of other mechanical equipment
and devices with electronic components possibly susceptible to the Y2K
issue. Risk identified has been minimal, and the majority of upgrades
and/or replacements will be completed by mid-1999.
- The Company has requested information regarding Y2K readiness from 1,600
trading partners, including product suppliers, service providers and
customers. Responses from these trading partners have been evaluated, and
critical risk situations are being assessed for remediation and/or
contingency actions in cooperation with the trading partners.
- The Company is using the services of outside experts to assist internal
resources in the identification and remediation of Y2K issues in the
various areas of exposure discussed above.
Given the environment the Company operates in, with rapid movement of high
volumes of products in cooperation with a large number of trading partners, the
risk of the Y2K issue to the Company is high and could result in a significant
adverse effect on the Company's operations. The Company believes that software
and equipment within its control are or will be timely compliant. The risk lies
principally with the Company's large base of suppliers and customers. Within
these groups there is a wide range of exposure and resources focusing on
potential Y2K issues. The Company is limited in its ability to determine with a
high degree of reliability the state of readiness of trading partners and to
influence these partners to ascertain timely compliance.
The Company has initiated a contingency planning process to deal with
possible disruptions. Contingency plans will be developed by mid-1999 using
existing business continuity plans in a collaborative effort with trading
partners.
As referred to above, the Company is in the process of replacing certain
critical applications and processes within its management information system
with a new software and hardware platform. The software package platform
includes integrated warehouse operations and financial management applications.
The new system will complement the Company's consolidation effort by providing
the flexibility to support those processes that are customer-unique, while
allowing greater standardization and centralization of common processes. The
implementation of the system is on schedule. As of March 15, 1999, the new
system is operating in 12 of the final 21 warehouse facilities planned upon
completion of the quick service network consolidation, and the remaining
facilities will be converted by the third quarter of 1999. With respect to the
former ProSource operations, the Company intends to support the quick service
business with the new system, but in the short-term will continue to utilize
applications currently supporting the casual dining business, which will be Y2K
compliant by mid-1999.
The current cash costs (excluding leased computer hardware) to implement
the new system and perform the assessment and remediation of the Y2K issue will
approximate $105 million. Approximately $50 million of this amount was spent
over fiscal 1998 and 1997, and the balance of about $55 million is expected to
be spent
17
<PAGE> 18
in 1999. The costs to purchase and develop the software for the new system is
being capitalized. The costs to roll-out the developed software, largely data
conversion and training in nature, and to perform the assessment and remediation
of the Y2K issue are expensed as incurred. The Company believes the Y2K costs
are unusual and one-time in nature and are therefore reported as a component of
"Restructuring and other unusual costs" in the Consolidated Statements of
Operations.
RESULTS OF OPERATIONS
This discussion, as well as the discussion under "Liquidity and Capital
Resources" below, should be read in conjunction with the Consolidated Financial
Statements, particularly the Consolidated Statements of Operations and the
Consolidated Statements of Cash Flows.
The following table presents certain financial information of the Company,
expressed as a percentage of net sales:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales....................................... 100.0% 100.0% 100.0%
Cost of goods sold.............................. 90.8 90.1 89.9
----- ----- -----
Gross profit.................................... 9.2 9.9 10.1
Distribution, selling and administrative
expenses...................................... 7.6 7.8 8.1
----- ----- -----
Operating income before depreciation of property
and equipment, amortization of intangible
assets and restructuring and other unusual
costs......................................... 1.6% 2.2% 2.0%
===== ===== =====
</TABLE>
Fiscal 1998 compared to Fiscal 1997
Net sales increased $3.9 billion, or 112% to $7.4 billion in 1998. The
acquisitions of ProSource in May 1998 and PFS in June 1997 accounted for $2.5
billion and $1.5 billion of the increase, respectively. The discontinuance of
the Wendy's business during the third quarter of 1998 was largely offset by the
addition of service to Arby's beginning April 1997.
Gross profit increased $331.1 million, or 95%, to $680.0 million in 1998
due primarily to the acquisitions. The gross profit percentage (margin)
decreased from 9.9% in 1997 to 9.2% in 1998 primarily reflecting the impact of
the ProSource acquisition. ProSource's casual dining business has higher product
case costs as compared to the Company's other business, resulting in a lower
gross profit margin. The Company's profitability is largely determined by the
relationship of the negotiated mark-up, or distribution fee that is added to
product cost to determine sales prices, to the cost of the Company's warehouse,
transportation and administrative activities. Therefore, a decline in the gross
profit margin does not necessarily indicate a decline in profitability in
dollars.
Distribution, selling and administrative expenses increased $288.7 million,
or 106%, to $560.7 million in 1998 due primarily to the acquisitions.
Distribution, selling and administrative expenses as a percent of net sales
decreased from 7.8% in 1997 to 7.6% in 1998. This change reflects both PFS'
lower operating expense margin and the downward effect on the operating cost
margin of the higher case sales prices in ProSource's casual dining business as
compared to the Company's other business (see gross profit discussion above),
partially offset by strategic administrative spending in 1998.
Operating income before depreciation of property and equipment,
amortization of intangible assets and restructuring and other unusual costs
increased $42.4 million, or 55%, to $119.3 million in 1998 due primarily to the
acquisitions. As a percent of net sales, this income measure declined from 2.2%
in 1997 to 1.6% in 1998. This change was driven by the lower gross profit margin
as discussed above.
18
<PAGE> 19
Depreciation of property and equipment increased $13.8 million to $31.5
million in 1998 primarily reflecting the acquisitions.
Amortization of intangible assets increased $17.2 million to $34.1 million
in 1998, reflecting the amortization of the intangible assets primarily arising
primarily from the purchase price allocations for PFS and ProSource.
Restructuring and other unusual costs in 1998 totaled $90.1 million and
included $12.7 million in restructuring (exit) costs primarily for future lease
terminations and employee severance, $16.7 million in impairment of property,
equipment and other assets, $8.6 million in financing fees, fees related to a
modification of the accounts receivable sale program and other one-time indirect
costs associated with the acquisition of ProSource and $52.1 million in expenses
consisting primarily of incremental costs incurred to integrate the acquisitions
and implement the new computer system platform. The restructuring and impairment
charges reflected actions to be taken with respect to the Company's then
existing facilities as a result of the acquisition of ProSource. (See Note 3 to
the Consolidated Financial Statements.)
Interest expense net of interest income increased $36.8 million to $90.8
million in 1998, reflecting interest on debt issued primarily to finance the
acquisitions.
Loss on sale of accounts receivable relates to an ongoing program
established by the Company to provide additional financing capacity. Under the
program, accounts receivable are sold to a consolidated, wholly owned, special
purpose, bankruptcy-remote subsidiary, which in turn sells the receivables to a
master trust. The loss on sale of accounts receivable of $24.9 million largely
represented the return to investors in certificates issued by the master trust.
(See Note 8 to the Consolidated Financial Statements). The increase of $18.1
million over 1997 reflected the July 1997 inception date as well as expansion of
the program, including the addition of ProSource accounts receivable.
Provision for income taxes represented state income taxes currently payable
and current and deferred foreign income taxes. The Company's net deferred tax
assets are offset entirely by a valuation allowance, reflecting a net operating
loss carryforward position.
Net loss of $152.3 million in 1998 compared to net loss of $87.1 million in
1997 was driven by increases in restructuring and other unusual costs, interest
expense, loss on sale of accounts receivable and amortization of intangible
assets, partially offset by the operating profits from the acquisitions.
Comparison of Results of Operations on a Pro Forma Basis
This supplementary information is provided to enhance the analysis of
results of operations. The following pro forma results represent the combined
historical results of the Company, PFS and ProSource for the periods presented
as if the acquisitions had occurred at the beginning of fiscal 1997. These pro
forma combined results do not purport to represent what the actual results would
have been if the acquisitions of PFS and ProSource had occurred at the beginning
of fiscal 1997.
<TABLE>
<CAPTION>
PRO FORMA COMBINED RESULTS
YEAR ENDED
-------------------------------------------
DECEMBER 26, DECEMBER 27,
1998 % 1997 %
------------ ----- ------------ -----
<S> <C> <C> <C> <C>
Net sales....................................... $9,081.0 100.0 $8,907.6 100.0
Cost of goods sold.............................. 8,269.6 91.1 8,093.4 90.9
-------- ----- -------- -----
Gross profit.................................... 811.4 8.9 814.2 9.1
Distribution, selling and administrative
expenses...................................... 683.6 7.5 674.1 7.6
-------- ----- -------- -----
Operating income before depreciation,
amortization and restructuring and other
unusual costs................................. $ 127.8 1.4 $ 140.1 1.6
======== ===== ======== =====
</TABLE>
Management fees to Holberg Industries, Inc. included in distribution,
selling and administrative expenses were $4.0 million in both years.
19
<PAGE> 20
The Company estimates that approximately $18.9 million and $6.4 million for
fiscal 1998 and 1997, respectively, in operating cost reductions could be
achieved within the distribution networks of the Company (pre-acquisitions) and
ProSource, even before savings from the integration of the Company, PFS and
ProSource networks. No estimates were developed for ProSource for the periods
prior to its acquisition, and no amounts were estimated for the PFS network as
it was assumed to be reasonably efficient. The results presented have not been
adjusted for such cost savings.
The pro forma net sales growth in 1998 of $173.4 million, or 1.9% over
1997, was driven by growth in case sales to existing customers and the addition
of the Lone Star Steakhouse business, partially offset by lower sales of about
$180 million from the discontinuance of the Wendy's business in the third
quarter of 1998. At the end of the year, stores served by the Company totaled
about 35,600 in 1998 compared to about 38,600 in 1997, including over 700 stores
in Canada and Mexico in both years. The decrease was driven by the
discontinuance of the Wendy's business, closures by Tricon of underperforming
restaurants and resignations by the Company of individually small inefficient
accounts, partially offset by additional units in both the casual dining and
quick serve business of the former ProSource operations.
Pro forma gross profit in 1998 decreased $2.8 million from 1997, and the
gross margin declined .2 of a point to 8.9%. This performance reflected higher
pricing by PFS during the first half of 1997 (prior to acquisition) and the
relatively faster growth of the casual dining business, which has a lower gross
profit margin (see gross profit discussion above) than the quick service
business. Gross profit in 1998 was negatively impacted by $4 million in one-time
unusual charges to cost of sales. Also, some temporary softening of gross
margins occurred in the fourth quarter of 1998 as certain supply chain
efficiency and cost reduction initiatives built into new customer contracts are
phased-in. (See discussion under "Customer Activities" above.)
Pro forma operating expenses in 1998 rose $9.5 million or 1.4% over 1997,
and as a percent of net sales decreased .1 of a point to 7.5%. This performance
reflected the impact of the net sales growth, the effect of certain unusually
low 1997 administrative expenses in the former PFS operations prior to and
immediately following the sale of the business to the Company, as well as
strategic administrative spending in 1998.
Fiscal 1997 compared to Fiscal 1996
Net sales increased $2.1 billion, or 152% to $3.5 billion in 1997. The
acquisition of PFS accounted for $1.8 billion of the increase. The remaining
sales growth was largely due to the addition of service to Arby's.
Gross profit increased $208.5 million, or 148%, to $349.0 million in 1997
due primarily to the acquisition of PFS. The gross profit margin decreased from
10.1% in 1996 to 9.9% in 1997 reflecting a customer mix shift towards business
with relatively higher product costs.
Distribution, selling and administrative expenses increased $160.0 million,
or 143%, to $272.0 million in 1997 due primarily to the acquisition of PFS.
Distribution, selling and administrative expenses as a percent of net sales
decreased from 8.1% in 1996 to 7.8% in 1997. This change reflects the impact of
PFS's lower operating expense margin, as well as leveraging of the incremental
Arby's business.
Operating income before depreciation of property and equipment,
amortization of intangible assets and restructuring and other unusual costs
increased $48.6 million, or 171%, to $77.0 million in 1997 due primarily to the
acquisition of PFS. As a percent of net sales, this income measure rose from
2.0% in 1996 to 2.2% in 1997. This change was driven by the lower distribution,
selling and administrative expense as a percent of net sales as discussed above.
Depreciation of property and equipment increased $12.1 million to $17.7
million in 1997 primarily reflecting the acquisition of PFS.
Amortization of intangible assets increased $12.0 million to $16.8 million
in 1997, reflecting the amortization of the intangible assets arising from the
allocation of the PFS purchase price.
Restructuring and other unusual costs in 1997 totaled $52.4 million and
included $13.4 million in restructuring (exit) costs primarily for future lease
terminations and employee severance, $12.4 million in impairment of property,
equipment and other assets, $13.6 million in financing fees, commitment fees
related
20
<PAGE> 21
to the accounts receivable sale program, and other one-time indirect costs
associated with the acquisition of PFS and $13.0 million in expenses consisting
primarily of incremental costs incurred to integrate the operations of PFS and
previous acquisitions. The restructuring and impairment charges reflected
actions to be taken with respect to the Company's then existing facilities as a
result of the acquisition of PFS. (See Note 3 to the Consolidated Financial
Statements.)
Interest expense net of interest income increased $37.6 million to $54.0
million in 1997, reflecting interest on additional debt primarily to finance the
acquisition of PFS.
Loss on sale of accounts receivable relates to a program established by the
Company in July 1997 to provide additional financing capacity. Under this
ongoing program, accounts receivable are sold to a consolidated, wholly owned,
special purpose, bankruptcy-remote subsidiary, which in turn sells the
receivables to a master trust. The loss on sale of accounts receivable of $6.8
million largely represented the return to investors in certificates issued by
the master trust. (See Note 8 to the Consolidated Financial Statements).
Provision for income taxes primarily represented estimated amounts
currently payable. NEHC's net deferred tax assets are offset entirely by a
valuation allowance, reflecting a net operating loss carryforward position.
Extraordinary loss of $15.9 million in 1997 resulted from early
extinguishment of debt. This charge represents the unamortized balance of
deferred financing costs associated with previous credit facilities.
Net loss of $87.1 million in 1997 compared to net loss of $1.5 million in
1996 was driven by the restructuring and other unusual costs, the extraordinary
loss on early extinguishment of debt, the loss on sale of accounts receivable,
interest expense and amortization of intangible assets, partially offset by
on-going operating profits from PFS.
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of liquidity include cash provided by operating
activities, a credit facility of up to $220 million, of which $151.2 million was
available and $39.9 million was used (through borrowings and letters of credit)
at December 26, 1998, proceeds from the accounts receivable program of up to
$485 million, of which $445 million was available and was fully used at December
26, 1998, proceeds from sales of warehouse facilities and lease financing of new
warehouse facilities, delivery fleet, material handling equipment and computer
hardware requirements.
In late March 1999, an amendment to the credit facility was completed that
allows the Company up to $30 million in letters of credit before usage of the
facility is impacted, resulting in additional current liquidity in this amount.
Also at that time, NEHC provided $25 million in a cash capital contribution to
the Company.
The Company believes that its liquidity sources will be adequate to fund
the approximately $150 million in 1999 cash needs for the restructuring actions
and computer systems initiatives (discussed above under "Business Restructuring"
and "Computer Systems and Year 2000 Issue", respectively). Cash capital
expenditures for 1999 in addition to amounts included in the computer systems
initiatives are estimated to be about $25 million.
Fiscal 1998 compared to Fiscal 1997
Net cash used for operating activities was $107.3 million in 1998 compared
to cash provided of $50.2 million in 1997. This change was led by higher
interest payments of $66.9 million, an unfavorable change related to accounts
receivable of $52.7 million due primarily to the effect on collections of the
relative timing of the 1998 and 1997 fiscal year-ends and the Christmas holiday,
increased restructuring and integration spending of about $36 million (including
$13.6 million in payments charged to restructuring reserves) and $27.5 million
in an unfavorable change in timing of accounts payable payments. These changes
were partially offset by the cash operating profits from the acquired PFS and
ProSource businesses.
Net cash used for investing activities decreased $494.0 million to $386.1
million in 1998, primarily due to the difference in the purchase prices of
ProSource and PFS. Capital expenditures increased $45.2 million to
21
<PAGE> 22
$68.5 million, reflecting the capitalization of software purchased and developed
for the new computer software platform discussed under "Computer Systems and
Year 2000 Issue" above, as well as the impact of the acquisitions.
Net cash provided by financing activities of $299.5 million in 1998
reflected issuance of senior redeemable exchangeable preferred stock, a portion
of the proceeds from which was used to redeem outstanding preferred stock. Also,
the Company received additional proceeds from its accounts receivable program in
connection with the ProSource acquisition and a restructuring of the program.
(See Note 8 to the Consolidated Financial Statements.)
SEASONALITY AND GENERAL PRICE LEVELS
Historically, the Company's operating results have reflected seasonal
variations. The Company experiences lower net sales and operating profits in the
first and fourth calendar quarters, with the effects being more pronounced in
the first quarter. Additionally, the effect of these seasonal variations is more
pronounced in regions where winter weather is generally more inclement. The
Company is in the process of adopting a 13-period fiscal calendar (see Note 1 to
the Consolidated Financial Statements). Under this calendar, the first three
quarters consist of 12 weeks and the fourth quarter consists of 16 weeks. As a
result, reported net sales and operating profits for the fourth quarter will not
necessarily decline from the second and third quarters.
Inflation has not had a significant impact on the Company's operations.
Food price deflation could adversely affect the Company's profitability as
approximately 30% of the Company's sales are at prices based on product cost
plus a percentage markup.
CAUTIONARY STATEMENTS
Restructuring Risk
As discussed above under "Business Restructuring", the Company is in the
process of implementing a comprehensive restructuring involving consolidation
and transfer of business among warehouse facilities, re-routing of truck
deliveries, consolidation and streamlining of support functions and relocation
and training of employees. The Company is investing significant cash
expenditures to effect the restructuring plan, with the expectation of
substantial cost savings upon its completion.
While the Company has made important progress, there can be no assurance
that the restructuring actions will be completed on time, that business
operations will not be disrupted during the restructuring period, that spending
will be within projected levels and that the expected cost savings will be
achieved. While management believes it has the resources to meet the objectives,
the ultimate level and timing of efficiencies to be realized are subject to the
Company's ability to manage through the complexities of the restructuring plan
and respond to unanticipated events.
Computer Systems Risk
As discussed above under "Computer Systems and Year 2000 Issue", the
Company is implementing a new computer software and hardware platform that will
allow standardization and centralization of warehouse operations and support
processes. The Company is also actively identifying and remediating Y2K code
problems in applications that will not be replaced by the new system. These
activities are occurring concurrently with the Company's restructuring actions.
While the Company has made important progress, there can be no assurance
that the system implementation and Y2K remediation efforts will be completed on
time, that business operations will not be disrupted and that spending will be
within projected levels.
Industry and Customer Risk
The Company's future results are subject to economic and competitive risks
and uncertainties in the chain restaurant and foodservice distribution
industries and in the economy, generally. The trend of
22
<PAGE> 23
consolidation in the foodservice distribution industry, as evidenced by the
Company's acquisition activity, may further intensify competitive pressures.
While the Company will take appropriate actions to retain desired business, some
loss of customers during this transition period has occurred and is a continuing
risk. In addition, the activities associated with the restructuring plan and
computer systems initiatives increase the risk of business disruption;
therefore, there can be no assurance of the Company's consistent achievement of
service level requirements set forth in customer contracts. Management believes
that completion of the restructuring plan will enhance the Company's position as
one of the most efficient distributors in its industry and, therefore, highly
competitive in pricing and customer service.
With respect to risk of customer concentration, including ProSource net
sales on a pro forma basis, approximately 21% of the Company's net sales are to
Tricon and 10% are to Darden Restaurants, Inc., which owns all the Red Lobster
and Olive Garden restaurants. The Company provides service to Tricon's U.S.
company-owned restaurants under a long-term exclusive distribution agreement
discussed above under "Customer Activity". Tricon is actively engaged in the
sale to franchisees of company-owned restaurants covered by the distribution
agreement. While the distribution agreement provides that prior to sales of
Pizza Hut and Taco Bell restaurants, such franchisees will enter into
distribution agreements on substantially similar terms, there can be no
assurance that the transition from company-owned to franchised status will not
affect the Company's results. The Company provides service to Red Lobster and
Olive Garden restaurants under exclusive distribution agreements effective June
1997 and expiring in May 2002.
Market Risk
The Company's Senior Notes and Senior Subordinated Notes and NEHC's Senior
Discount Notes carry fixed interest rates and, therefore, do not expose the
Company and NEHC to the risk of earnings or cash flow loss due to changes in
market interest rates.
The Company is exposed to market interest rates in connection with its
accounts receivable program and credit facility. As discussed above under
"Results of Operations," the loss on sale of accounts receivable as reported in
the Consolidated Statements of Operations largely represents the return to
investors in variable interest rate certificates issued by a master trust to
which the rights of ownership of a substantial majority of the Company's
accounts receivable have been transferred. At December 26, 1998, the master
trust had certificates outstanding in the amount of $445 million. At this level,
a one-point change in interest rates would impact the annual loss on sale of
accounts receivable by $4.5 million. Borrowings against the Company's credit
facility, which totaled $4 million at December 26, 1998, carry variable interest
rates. (See Notes 7 and 8 to the Consolidated Financial Statements.)
At December 26, 1998, NEHC and the Company are not engaged in other
contracts which would cause exposure to the risk of material earnings or cash
flow loss due to changes in market commodity prices, foreign currency exchange
rates or interest rates.
Risk of Leverage
NEHC and the Company are and will continue to be highly leveraged as a
result of the indebtedness incurred in connection with the acquisitions. The
Company's ability to meet interest payments, refinance the debt or ultimately
repay the debt is subject to the risks and uncertainties discussed above.
For additional factors that could cause the Company's actual results to
differ materially from expected and historical results, see the "Risk Factors"
set forth in NEHC's Senior Redeemable Exchangeable Preferred Stock Registration
Statement on Form S-4, filed with the Securities and Exchange Commission on May
1, 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item are attached to and are
hereby incorporated into this Report.
23
<PAGE> 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of March 24, 1999,
with respect to each person who is an executive officer, a significant employee,
or director of NEHC:
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
John V. Holten....................... 42 Director, Chairman and Chief Executive Officer
John R. Evans........................ 59 Director and Vice Chairman
Raymond E. Marshall.................. 49 Director, Executive Vice President and Vice
Chairman
Thomas C. Highland................... 57 Director, Executive Vice President and Vice
Chairman
Kenneth R. Lane...................... 51 Executive Vice President and Chief Operating
Officer
Diana M. Moog........................ 39 Executive Vice President and Chief Financial
Officer
Bruce Graham......................... 36 Acting Chief Information Officer
Gunnar E. Klintberg.................. 50 Director and Assistant Secretary and Member of
Compensation Committee
A. Petter /Ostberg................... 37 Vice President
John D. Gainor....................... 42 President, Purchasing and Logistics
Kurt E. Twining...................... 43 Senior Vice President, Human Resources
Kevin J. Rogan....................... 47 Senior Vice President, General Counsel and
Secretary
Stanley J. Szlauderbach.............. 50 Vice President, Investor Relations and Chief
Accounting Officer
Ginette Wooldridge................... 41 Vice President and Controller
Paul A. Garcia de Quevedo............ 45 Vice President, Treasurer and Assistant
Secretary
Nancy M. Bittner..................... 35 Vice President, Planning
Leif F. Onarheim..................... 63 Director and Member of Audit Committee
Peter T. Grauer...................... 52 Director and Member of Compensation Committee
Benoit Jamar......................... 43 Director and Member of Audit Committee
Daniel W. Crippen.................... 47 Director
David R. Parker...................... 55 Director and Vice Chairman
</TABLE>
John V. Holten. Mr. Holten has served as Chairman and Chief Executive
Officer of Holberg since its inception in 1986 and of NEHC since its inception
in 1996. Mr. Holten was Managing Director of DnC Capital Corporation, a merchant
banking firm in New York City, from 1984 to 1986. Mr. Holten has been a member
of the NEHC Board since 1996, and the AmeriServe Board since 1986.
John R. Evans. Mr. Evans became President of Evans in 1971, and was named
Chief Executive Officer of the combined company when Evans merged with NEBCO in
1990. Mr. Evans serves on the Board of Directors of each of M&I Northern Bank,
Aerial Company, Inc., and AFI Inc. Mr. Evans has been an officer of NEHC and a
member of the NEHC Board since 1996, and an officer of AmeriServe and a member
of its Board since 1990.
Raymond E. Marshall. Mr. Marshall has 28 years of foodservice distribution
experience, including 26 years with AmeriServe or its predecessors. Mr. Marshall
served as President and Chief Executive Officer of NEBCO from 1980 to 1989. Mr.
Marshall served as President of AmeriServe from 1990 to 1997. Mr. Marshall
serves on the Board of Directors of Independent Distributors of America ("IDA").
Mr. Marshall has been an officer of NEHC and a member of the NEHC Board since
1996, and a member of the AmeriServe Board since 1986.
Thomas C. Highland. Mr. Highland joined AmeriServe at the time of the
acquisition of ProSource. Most recently he served as President and Chief
Executive Officer of ProSource. Mr. Highland joined ProSource in 1992 following
four years as President of Burger King Distribution Services. Prior to ProSource
he spent twenty-five years with Warner Lambert Company, most recently as Vice
President, U. S. Distribution.
24
<PAGE> 25
Gunnar E. Klintberg. Mr. Klintberg has served as Vice Chairman of Holberg
since its inception in 1986. Mr. Klintberg was a Managing Partner of DnC Capital
Corporation, a merchant banking firm in New York City, from 1983 to 1986. Mr.
Klintberg has been an officer of NEHC and a member of the NEHC Board since 1996,
and an officer of AmeriServe and its Board since 1986.
A. Petter /Ostberg. Mr. /Ostberg was appointed Vice President of NEHC in
1996. He joined Holberg in 1994 and was appointed as Senior Vice President and
Chief Financial Officer of Holberg in 1997. Prior to joining Holberg, Mr.
/Ostberg held various finance positions from 1990 to 1994 with New York Cruise
Lines, Inc.
Diana M. Moog. Ms. Moog was named Executive Vice President and Chief
Financial Officer in 1998. Previously, she was Senior Vice President and Chief
Financial Officer. Ms. Moog joined AmeriServe as Senior Vice President and
Treasurer at the time of its acquisition of PFS in 1997. Previously, she had
served as Vice President, Controller of PFS. Ms. Moog had held various positions
at PepsiCo, Inc. from 1989 to 1997 including Manager, Financial Reporting for
PepsiCo and Assistant Controller, Frito-Lay.
John D. Gainor. Mr. Gainor joined AmeriServe at the time of the acquisition
of ProSource. Most recently, he served as President, Logistics and
Redistribution of ProSource. Prior to joining ProSource in 1992, Mr. Gainor was
Director, Transportation and Planning for Warner Lambert Company.
Kurt E. Twining. Mr. Twining joined AmeriServe in 1997 as Senior Vice
President-Human Resources in connection with the PFS Acquisition. Mr. Twining
joined PFS in 1986 as Manager, Employee Relations. He then held positions of
Manager, Staffing and Development; Director, Employee Relations; Senior
Director, Employee Relations; Senior Director, Organization and Management
Development; and Vice President, Field Human Resources and Safety.
Kenneth R. Lane. Mr. Lane was named Executive Vice President and Chief
Operating Officer in 1998. Previously, he was Senior Vice President and Acting
Chief Operating Officer. He joined AmeriServe in 1997 as a Senior Vice President
in connection with the PFS Acquisition. The prior 24 years were spent with
PepsiCo in various positions, most recently as PFS Vice President Operations,
North, overseeing the Northern United States as well as international operations
in Mexico, Canada and Puerto Rico.
Bruce Graham. Mr. Graham was named Acting Chief Information Officer in
1998. Mr. Graham is an employee of The Feld Group, an information technology
consulting firm retained by the Company in 1998. In a previous assignment with
The Feld Group, Mr. Graham was Chief Information Officer of Oshawa, a food
retailer and distributor in Canada.
Kevin J. Rogan. Mr. Rogan was named Senior Vice President, General Counsel
and Secretary in 1999. Previously, he was Vice President, General Counsel and
Secretary. Before joining AmeriServe in 1997 he was Vice President, Legal at
McKesson Corporation. Prior to McKesson, Mr. Rogan served as legal counsel to
FoxMeyer Health Corporation, Grand Metropolitan, PLC and PepsiCo.
Stanley J. Szlauderbach. Mr. Szlauderbach was named Vice President,
Investor Relations and Chief Accounting Officer in 1998. Previously, he was Vice
President and Controller. Before joining AmeriServe, Mr. Szlauderbach spent 14
years at PepsiCo where his experience included eight years as Director,
Financial Reporting for PepsiCo and two years as Assistant Controller at Pizza
Hut.
Paul Garcia de Quevedo. Mr. Garcia joined AmeriServe at the time of the
acquisition of ProSource. Most recently he served as Vice President, Treasurer
and Secretary for ProSource. Mr. Garcia joined ProSource in 1992 and served as
Vice President, Finance and Controller during his tenure. Prior to ProSource,
Mr. Garcia was with Burger King serving in various financial capacities
including Vice President, Finance for Burger King Distribution Services.
Ginette Wooldridge. Ms. Wooldridge joined AmeriServe as Vice President and
Controller in 1998. Most recently, she served as Director of Accounting for
Frito-Lay. Prior to that, Ms. Wooldridge was Director of Corporate Audit for
PepsiCo, a position she assumed in 1992.
25
<PAGE> 26
Nancy Bittner. Ms. Bittner joined AmeriServe as Vice President, Planning in
1998. Prior to joining AmeriServe, she spent five years with Frito-Lay, most
recently as Director of Finance.
Daniel W. Crippen. Mr. Crippen has spent the last 21 years in the
foodservice distribution business beginning with The Harry H. Post Company. He
is Chairman of the Board of Directors of IDA. Mr. Crippen has been a member of
the NEHC and AmeriServe Boards since 1997.
Leif F. Onarheim. In 1996, Mr. Onarheim was elected chairman of NHO,
Norway's largest association of business and industry. From 1992 to 1997, Mr.
Onarheim served as President of Norway's largest business school and was Vice
Chairman of the Board of the Norwegian School of Management from 1980 to 1992.
Mr. Onarheim served as CEO of Nora Industries. When Nora merged with Orkla
Borregaard to form the Orkla Group in 1991, Onarheim briefly served as the new
group's Chairman. The Orkla Group is one of Scandinavia's largest branded goods
company with production facilities in the US, Germany, Poland and England. He
serves as Chairman of the Board of Directors of H. Aschehoug & Co. publishers,
Norwegian Fair, Netcom ASA and Narvesen ASA, and is a board member of Wilhelm
Wihelmsen Ltd. (shipping). He has been a director of NEHC since 1996, a director
of AmeriServe since 1986, and a director of Holberg since 1997. Mr. Onarheim has
been a member of the Audit Committee of the NEHC and AmeriServe Boards since
1998.
Peter T. Grauer. Mr. Grauer has been a Managing Director of Donaldson,
Lufkin & Jenrette Merchant Banking, Inc. since 1992. Mr. Grauer serves on the
Board of Directors of each of Doane Products Co. and Total Renal Care, Inc. Mr.
Grauer has been a member of the NEHC and AmeriServe Boards since January 1996.
Benoit Jamar. Mr. Jamar is a Managing Director in the Mergers &
Acquisitions group at Donaldson, Lufkin & Jenrette Securities Corporation
("DLJSC"). He joined DLJSC in 1989. Mr. Jamar has been a member of the NEHC and
AmeriServe Boards since 1997. Mr. Jamar has been a member of the Audit Committee
of the NEHC and AmeriServe Boards since 1998.
David R. Parker. Mr. Parker joined AmeriServe at the time of the
acquisition of ProSource. Most recently he served as Chairman of ProSource. Mr.
Parker joined ProSource in 1992. Prior to ProSource, Mr. Parker served as Senior
Executive Vice President of Ryder Systems, Inc. and President of the Vehicle
Leasing and Service Division.
The directors of NEHC are elected annually and each serves until his
successor has been elected and qualified, or until his or her death, resignation
or removal. The officers of NEHC are elected by the Board of Directors, and each
serves until his or her successor is elected and qualified, or until his or her
death, resignation or removal.
ITEM 11. EXECUTIVE COMPENSATION
NEHC has no paid employees. The following table sets forth the information
for the three most recently completed fiscal years with regard to compensation
for services rendered in all capacities to the Company by the Chief Executive
Officer and the other four most highly compensated executive officers of the
Company (collectively, the "Named Executive Officers"). Information set forth in
the table reflects compensation earned by such individuals for services with the
Company or its respective subsidiaries.
26
<PAGE> 27
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM OTHER
-------------------- COMPENSATION ANNUAL
FISCAL SALARY BONUS SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($) OPTIONS(#)(11) ($)
--------------------------- ------ -------- -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
John V. Holten................... 1998 -- -- -- --
Chairman and Chief 1997 -- -- -- --
Executive Officer 1996 -- -- -- --
Raymond E. Marshall.............. 1998 323,977 500,000 -- 265,646(5)
Executive Vice President 1997 301,375 500,000(2) -- 202,621(3)
Vice Chairman 1996 273,793 265,000(4) -- --
Kenneth R. Lane.................. 1998 266,890 266,840 45,660 --
Executive Vice President 1997 97,942(6) 196,840 -- --
Chief Operating Officer 1996 --(7) -- -- --
Diana M. Moog.................... 1998 268,942 265,370 45,660 --
Executive Vice President 1997 102,066(6) 195,370 -- --
Chief Financial Officer 1996 --(7) -- -- --
Thomas C. Highland............... 1998 287,133(8) 225,000 -- 87,305(10)
Executive Vice President 1997 --(9) -- -- --
and Vice Chairman 1996 --(9) -- -- --
</TABLE>
- ---------------
(1) The amounts shown in this column include FLEX credits, car allowance and
amounts contributed by the Company to its 401(k) plan under a contribution
matching program.
(2) This amount includes discretionary cash bonuses paid by AmeriServe for
services provided during 1997 in connection with the PFS acquisition.
(3) This amount was paid to Mr. Marshall to reimburse relocation expenses and
premiums paid by the Company on behalf of Mr. Marshall for a whole life
insurance policy and annuity to which Mr. Marshall is entitled to the cash
surrender value. This program was discontinued in 1998.
(4) This amount includes discretionary cash bonuses paid by Holberg for
services provided during 1995 in connection with the acquisition of
AmeriServ.
(5) This amount reflects forgiveness of debt by the Company for relocation
assistance and premiums on a whole life insurance policy.
(6) This amount reflects employment with the Company from July through December
1997. Mr. Lane and Ms. Moog were employed by PepsiCo, Inc. prior to July of
1997.
(7) Mr. Lane and Ms. Moog were employed by PepsiCo, Inc. in 1996.
(8) This amount reflects employment with the Company from June through December
1998. Mr. Highland was employed by ProSource, Inc. prior to June of 1998.
(9) Mr. Highland was employed by ProSource, Inc. in 1997 and 1996.
(10) This amount represents perquisites paid by the Company.
(11) This represents options to purchase Class A Common Stock, par value $0.01
per share of NEHC.
The Company pays an annual management fee to Holberg for management
services. The amount of this fee is not set or allocated with respect to any
particular employee's compensation from Holberg.
MANAGEMENT STOCK OPTION PLAN
In 1998 NEHC adopted its Management Stock Option Plan (the "Stock Option
Plan"). Employees and independent contractor consultants of NEHC and its
subsidiaries and affiliates as designated from time to time by NEHC's Board of
Directors (the "NEHC Board"), including the Company, may be granted stock
options to purchase shares of NEHC Class A Common Stock ("Options") under the
Stock Option Plan. The aggregate number of shares of NEHC Class A Common Stock
that may be issued, transferred or exercised or exercised pursuant under the
Stock Option Plan is 1,000,000 shares (subject to certain adjustments). The
Stock Option Plan is administered by NEHC's Board.
27
<PAGE> 28
The NEHC Board has the ability to determine, among other things, which
individuals will be granted Options pursuant to the Stock Option Plan, the
number of shares of NEHC Class A Common Stock that will be subject to each
Option grant and the other terms and provisions of each Option. Only
non-qualified stock options may be granted under the Stock Option Plan. The
purchase price for Options will be the fair market value of the NEHC Class A
Common Stock on the date of grant unless the NEHC Board provides otherwise at
the time of grant.
The vesting period of each Option is determined by the NEHC Board at the
time of grant; provided that, unless the NEHC Board determines otherwise at the
time of grant, each then outstanding Option shall become vested as to one-half
of its then unvested shares upon the completion of an Initial Public Offering.
An Initial Public Offering is defined as sale of NEHC common stock pursuant to a
registration under the Securities Act where at least 25% of the outstanding
common stock of NEHC becomes publicly traded or NEHC common stock with a market
value of at least $100 million becomes publicly traded or any other sale of NEHC
common stock the which NEHC Board determines qualifies as an Initial Public
Offering.
Each Option terminates the earlier of the option holder's termination of
employment for cause, 90 days after the option holder's termination of
employment for other than cause or ten years after the original grant of the
Option. NEHC retains the right to purchase shares originally acquired as a
result of Option exercise at the then determined fair market value thereof at
any time after the option holder's termination of employment and before the
earlier of the first anniversary of such termination or the date of an Initial
Public Offering. Such shares may also be purchased by the NEHC at any time
within 30 days after a sale of NEHC at the price per share established by such
sale.
The table below sets forth information concerning grants of stock options
for shares of Class A Common Stock, par value $0.01 per share, of NEHC (the
"NEHC Class A Common Stock") made to each of the Named Executive Officers during
1998. No grants of stock options occurred prior to 1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
John V. Holten................ -- -- -- -- -- --
Raymond E. Marshall........... -- -- -- -- -- --
Kenneth R. Lane............... 45,660(1) 10.4% $32.85 5/20/08 $943,299 $2,390,504
Diana M. Moog................. 45,660(2) 10.4% $32.85 5/20/08 $943,299 $2,390,504
Thomas C. Highland............ -- -- -- -- -- --
</TABLE>
- ---------------
(1) These options may be surrendered at Mr. Lane's option at any time for an
amount equal to $300,000. If Mr. Lane exercises his right to receive cash in
lieu of his options within 30 days of an Initial Public Offering, he will
receive interest on the $300,000 at the rate of 10% per annum from March 1,
1999.
(2) These options may be surrendered at Ms. Moog's option at any time for an
amount equal to $450,000. If Ms. Moog exercises her right to receive cash in
lieu of her options within 30 days of an Initial Public Offering, she will
receive interest on the $450,000 at the rate of 10% per annum from March 1,
1999.
28
<PAGE> 29
The table below sets forth information concerning each exercise of options
for NEHC Class A Common Stock during 1998 by the Named Executive Officers, the
number of exercisable and unexercisable options for NEHC Class A Common Stock
held by them and the fiscal year-end value of such exercisable and unexercisable
options.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END(#) YEAR-END($)
SHARES ----------------- -----------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
- ---- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
John V. Holten.......................... -- -- -- --
Raymond E. Marshall..................... -- -- -- --
Kenneth R. Lane......................... -- -- 0/45,660.... --
Diana M. Moog........................... -- -- 0/45,660.... --
Thomas C. Highland...................... -- -- -- --
</TABLE>
- ---------------
(1) Underlying shares of NEHC Class A Common Stock are not publicly traded and
are subject to repurchase upon termination of employment with the Company
and in other circumstances; therefore, options have not been categorized as
"in-the-money." There has been no determination of fair market value of the
NEHC Class A Common Stock since the valuation made in connection with the
original grant of these options.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In 1998 the Company established its Supplemental Executive Retirement Plan
(the "SERP"). Officers and senior management employees of the Company who are
selected by the SERP administrator are participants in the SERP until
termination of employment or termination of their participation by such
administrator. Participants currently include the Named Executive Officers.
Under the SERP, each participant is allocated at December 31 of each year
while employed by the Company, five percent (or more as determined by the SERP
administrator) of such participant's salary and regular annual performance
bonus. In addition, each participant is allocated an investment credit equal to
the participant's SERP account balance multiplied by the announced base rate of
Bank of America, N.A., accrued and compounded semi-annually during the plan
year.
A participant is 100% vested in the participant's SERP benefit after five
years of employment. A vested participant (or such participant's beneficiaries)
receives a lump sum payment of the applicable SERP amount upon retirement,
termination (other than for cause), disability (as defined in the SERP) or
death. No SERP benefit is paid to a participant who is terminated for cause or
terminates employment for any reason (other than disability) prior to the five
year vesting period.
DIRECTOR COMPENSATION
Directors of NEHC do not receive compensation for serving on NEHC's Board
of Directors or any committee thereof. Leif F. Onarheim is paid $20,000 per year
to serve as a director of the Company and is a member of the Audit Committee of
AmeriServe and NEHC. Mr. Crippen has a consulting and non-competition agreement
with the Company for which he is paid $150,000 per year. This agreement expires
on July 15, 2000. Mr. Parker has a consulting and non-competition agreement with
the Company for which he is paid $576,000 per year. This agreement expires on
January 29, 2000.
29
<PAGE> 30
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Marshall's current employment agreement with the Company provides for a
two year term, scheduled to lapse on January 1, 2001, with default annual
renewals, and an annual base salary of $350,000, subject to an annual merit
increase review, plus an annual bonus to be determined by the Compensation
Committee of the Board of Directors, plus participation in any employee benefit
plans sponsored by the Company. Mr. Marshall agrees not to disclose confidential
information for so long as such information remains competitively sensitive.
During the term of the employment agreement and for one year after its
termination, Mr. Marshall agrees not to render services to, or have any
ownership interest in, any business which is competitive with the Company. Mr.
Marshall's employment agreement does not contain any change of control
provisions.
Ms. Moog's current employment agreement with the Company provides for a
three year term, scheduled to lapse on July 11, 2000, with a default two year
renewal, and an annual base salary of $300,000, subject to an annual merit
increase review, plus an annual bonus to be determined by the Compensation
Committee of the Board of Directors, plus participation in any employee benefit
plans sponsored by the Company. Ms. Moog agrees not to disclose confidential
information for so long as such information remains competitively sensitive.
During the term of the employment agreement and for one year after its
termination, Ms. Moog agrees not to render services to, or have any ownership
interest in, any business which is competitive with the Company. Ms. Moog's
employment agreement does not contain any change of control provisions.
Mr. Lane's current employment agreement with the Company provides for a
three year term, scheduled to lapse on July 11, 2000, with a default two year
renewal, and an annual base salary of $300,000, subject to an annual merit
increase review, plus an annual bonus to be determined by the Compensation
Committee of the Board of Directors, plus participation in any employee benefit
plans sponsored by the Company. Mr. Lane agrees not to disclose confidential
information for so long as such information remains competitively sensitive.
During the term of the employment agreement and for one year after its
termination, Mr. Lane agrees not to render services to, or have any ownership
interest in, any business which is competitive with the Company. Mr. Lane's
employment agreement does not contain any change of control provisions.
Mr. Highland's current employment agreement with the Company provides for a
three year term, scheduled to lapse on July 1, 2001, with a default annual
renewal, and an annual base salary of $475,000, subject to an annual merit
increase review, plus an annual bonus to be determined by the Compensation
Committee of the Board of Directors, plus participation in any employee benefit
plans sponsored by the Company. Mr. Highland agrees not to disclose confidential
information for so long as such information remains competitively sensitive.
During the term of the employment agreement and for one year after its
termination, Mr. Highland agrees not to render services to, or have any
ownership interest in, any business which is competitive with the Company. Mr.
Highland's employment agreement does not contain any change of control
provisions.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 24, 1999,
regarding the beneficial ownership of the common stock of NEHC by (i) each
person known to NEHC to own beneficially more than 5% of any class of the common
stock of NEHC, (ii) each director of NEHC, (iii) each Named Executive Officer of
NEHC and (iv) all executive officers and directors of NEHC as a group. All
information with respect to beneficial ownership has been furnished to NEHC by
the respective stockholders of NEHC. Except
30
<PAGE> 31
as otherwise indicated in the footnotes, each beneficial owner has the sole
power to vote and to dispose of all shares held by such holder.
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP OUTSTANDING
- ---------------- ----------------------- -----------
<S> <C> <C>
NED.................................... 8,241,000 shares of Class B Common
Stock 100%(+)
Orkla ASA ("Orkla").................... (1)
DLJ Merchant Banking Partners, L.P. and
certain of its affiliates Warrants to purchase 3,910,000 shares
("DLJMB")......................... of
Class B Common Stock 30%(++)
Holberg................................ Warrants to purchase 753,300 shares of
Class B Common Stock 6%(++)
John V. Holten......................... (2)
Daniel W. Crippen...................... (3)
Peter T. Grauer........................ (4)
Benoit Jamar........................... (4)
Gunnar E. Klintberg.................... (5)
Raymond E. Marshall.................... (6)
Leif F. Onarheim....................... (7)
</TABLE>
- ---------------
(+) Computed with respect to the currently outstanding shares of Class B Common
Stock of NEHC (the "Class B Common Stock") without taking into account any
options or convertible interests of NEHC.
(++) Computed with respect to the currently outstanding shares of Class B Common
Stock of NEHC and the warrants held by DLJMB and Holberg, but without
taking into account any other options or convertible interests of NEHC. On
January 6, 1998, Holberg consummated a repurchase from DLJMB and affiliates
of (i) 49% of the Junior Preferred Stock acquired by DLJMB and affiliates
in connection with the PFS Acquisition (see Item 13. "Certain Relationships
and Related Party Transactions"), and (ii) warrants conferring the right to
acquire 753,300 shares of the Class B Common Stock.
(1) Orkla owns approximately 7% of the outstanding common stock of NED, and has
an additional interest in the common stock of NED of approximately 8%
through certain warrants to purchase such common stock. In addition, Orkla
owns approximately 34% of the outstanding common stock of Holberg (which
itself owns the balance of the common stock of NED not owned directly by
Orkla. The warrants described in this note have been computed based upon the
outstanding common shares of NED, without taking into account any options or
convertible interests of NED. Orkla also has certain contractual rights as
to NED and NEHC pursuant to an Amended and Restated Investors Agreement,
dated as of July 11, 1997, among DLJMB, NEHC, NED, Holberg, Holberg
Incorporated ("Incorporated") and Orkla.
(2) Mr. Holten owns all of the outstanding common stock of Incorporated,
corporate parent of Holberg, which entity owns approximately 66% of the
outstanding common stock of Holberg. As noted above, Holberg owns
approximately 93% of the outstanding NED common stock and has an additional
interest through certain preferred stock convertible into common stock. The
convertible interests described in this note have been computed based upon
the outstanding common shares of NED, without taking into account any
options or convertible interests of NED.
(3) Mr. Crippen owns shares of a series of convertible preferred stock of NEHC
that, if converted, would result in his ownership of approximately 1.6% of
the outstanding common stock of NEHC, taking into account the actually
outstanding shares and the warrants held by DLJMB.
(4) Messrs. Grauer and Jamar are Managing Directors of DLJSC, and may be
considered to have beneficial ownership of the interests of DLJMB in the
Company and NEHC. Messrs. Grauer and Jamar disclaim such beneficial
ownership.
(5) Mr. Klintberg is an officer and director of NED and certain of its corporate
parents, but disclaims beneficial ownership of any of the shares owned by
NED.
31
<PAGE> 32
(6) Mr. Marshall has an interest of 5% in NED through certain options that have
been granted to him by NED. Such interest has been computed based upon the
outstanding common shares of NED, without taking into account any options or
convertible interests of NED.
(7) Mr. Onarheim has an interest of less than 1% in NED through certain options
that have been granted to him by NED. Such interest has been computed based
upon the outstanding common shares of NED, without taking into account any
options or convertible interests of NED. Mr. Onarheim has also had a long
affiliation with Orkla and acts as Orkla's representative on the Board of
Directors of the Company and NEHC, but disclaims beneficial ownership of any
interests held by Orkla.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DLJMB, an affiliate of DLJSC, and certain of its affiliates beneficially
own approximately 30% (subject to adjustment as defined in agreement) of the
common stock of NEHC through warrants Mr. Grauer, a principal of DLJSC, is a
member of the Board of Directors of NEHC and the Company; Mr. Jamar, a principal
of DLJSC, is a member of the Board of Directors of NEHC and the Company. Holberg
indirectly owns a majority of the issued and outstanding capital stock of NEHC.
See "Security Ownership of Certain Beneficial Owners and Management." Subject to
the rights of holders of preferred stock, Holberg and affiliates of DLJSC
collectively have sufficient voting power to elect the entire Board of Directors
of each of NEHC, and through NEHC, the Company.
In connection with the PFS Acquisition, DLJSC received a merger advisory
fee of $4.0 million in cash from the Company upon consummation of the PFS
Acquisition and related financings. An affiliate of DLJ also received customary
fees in connection with their commitment to finance a portion of the purchase
price for PFS, in the event that the Company could not arrange alternative
financing prior to the closing.
In connection with the Credit Facility, DLJ Capital Funding, Inc., an
affiliate of DLJSC, acted as documentation agent (see Note 6 to the Consolidated
Financial Statements) for which it received certain customary fees and expenses.
DLJSC has acted as an initial purchaser in connection with each of the
offerings of the Senior Discount Notes, the Senior Subordinated Notes, the
Senior Notes and the Preferred Stock for which it received certain customary
underwriting fees and discounts.
In connection with the ProSource Acquisition, DLJSC received a merger
advisory fee of $3.25 million in cash from the Company upon consummation of the
ProSource Acquisition.
Holberg has received customary investment banking and advisory fees from
the Company and its affiliates in connection with certain prior transactions,
including a $4.0 million merger advisory fee in connection with the PFS
Acquisition. Holberg also received fees of $1.0 million in connection with the
offering of the Senior Notes.
Holberg also receives an annual management fee from the Company of $4.0
million, commencing in 1997. In addition, in connection with the ProSource
Acquisition, Holberg received a merger advisory fee of $3.25 million from the
Company, upon consummation of the ProSource acquisition.
A portion of the net proceeds of the Preferred Stock offering was used to
finance the repurchase cost of the Senior Preferred Stock and the Junior
Preferred Stock held by Holberg and certain affiliates of DLJSC and the Junior
Non-Convertible Preferred Stock held by NED.
With the January 1996 acquisition of AmeriServ, the Company acquired a
minority interest in Post Holdings Company ("Post Holdings"), a 93.6% owner of
Post. On November 25, 1996 NEHC acquired: (i) the Company's ownership interest
in Post Holdings; and (ii) Daniel W. Crippen's 50% ownership of Post Holdings.
In connection with this transaction, Mr. Crippen, the Company's and NEHC's
Executive Vice President at that date, received $4.4 million ($2.0 million cash
and $2.4 million in NEHC 8% senior convertible preferred stock) in exchange for
his 50% equity interest in Post Holdings.
32
<PAGE> 33
In connection with the PFS Acquisition: (i) the remaining 6.4% of the
capital stock outstanding of Post was acquired from the minority stockholder;
(ii) a dividend of $4.7 million was declared to eliminate the intercompany
balance between Post and NEHC; (iii) all of the capital stock of Post was
transferred to AmeriServ, then a wholly-owned subsidiary of the Company; (iv)
Post's $10.6 million of outstanding indebtedness was refinanced; and (v)
AmeriServ's investment in NEHC preferred stock of $2.5 million was cancelled.
In connection with the PFS Acquisition, NEHC contributed $130.0 million of
cash to the Company. This contribution was financed in part through NEHC's sale
of the Senior Discount Notes, Senior Preferred Stock and the Junior Preferred
Stock, as well as warrants to purchase NEHC Class B Common Stock, to affiliates
of DLJSC. On January 6, 1998, Holberg purchased from DLJ Merchant Banking
Partners II, L.P. and certain of its affiliates ("DLJMBII") warrants to purchase
753,300 shares of Class B Common Stock, which had originally been issued to
DLJMBII in connection with the PFS Acquisition in July 1997.
In addition to the equity contribution to AmeriServe, the proceeds from the
offering of the Senior Discount Notes were used to redeem the 12 1/2% Senior
Secured Notes of NEHC (the "Old NEHC Notes"), with an initial purchase amount of
$22.0 million beneficially owned by DLJMB and Old NEHC Notes, with an initial
principal amount of $8.0 million held by Orkla.
In connection with the PFS Acquisition, NEHC contributed to the Company an
aggregate principal amount of $45.0 million of outstanding non-convertible
preferred stock of the Company.
Prior to the PFS Acquisition, HWPI was owned 55% by Holberg and 45% by the
Company. In connection with the PFS Acquisition, NEHC purchased for $1.5 million
Holberg's 55% interest in HWPI. HWPI's sole operations consist of the ownership
of two distribution centers, located in Omaha, Nebraska and Waukesha, Wisconsin,
occupied by the Company.
The Company leases a warehouse and office facility in Waukesha, Wisconsin
from a partnership owned by certain former shareholders of an acquired company,
including Mr. John Evans, for approximately $810,000 per year through May 31,
2008.
The Company and Holberg also periodically engage in bi-lateral
interest-bearing loans and advances. (See Note 14 to the Consolidated Financial
Statements.)
Mr. Crippen has a consulting and non-competition agreement with the Company
for which he is paid $150,000 per year. This agreement expires on July 15, 2000.
Mr. Parker has a consulting and non-competition agreement with the Company for
which he is paid $576,000 per year. This agreement expires on January 29, 2000.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Report:
1. Financial Statements.
Report of Independent Auditors
Audited Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
33
<PAGE> 34
2. Financial statement schedule.
Schedule II -- Valuation and Qualifying Accounts
3. Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
2.1 -- Asset Purchase Agreement between PepsiCo, Inc. and Nebco
Evans Holding Company (incorporated by reference to
Exhibit 2.2 to the Registrant's Registration Statement
Form S-4 No. 333-33225 filed August 8, 1997).
2.2 -- Agreement and Plan of Merger, dated as of January 29,
1998, by and among AmeriServe Food Distribution, Inc.,
Steamboat Acquisition Corp. and ProSource, Inc.
(incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K, dated January
29, 1998).
3.1 -- Restated Certificate of Incorporation of NEHC
(incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K filed on March
27, 1998
3.2 -- By-Laws of NEHC (incorporated by reference to Exhibit 3.2
to the Registrant's Registration Statement on Form S-4,
No. 333-33223 filed August 8, 1997).
4.1 -- Indenture, dated as of October 15, 1997, by and among the
Company, the Subsidiary Guarantors and State Street Bank
and Trust Company, with respect to the Senior Notes
(incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-4 No.
333-38337 filed October 21, 1997).
4.2 -- Form of New Senior Discount Notes (incorporated by
reference to Exhibit 4.2 to the Registrant's Registration
Statement on Form S-4, No. 333-33223 filed August 8,
1997).
4.3 -- Supplemental 8 7/8% New Senior Notes Indenture, dated as
of December 23, 1997, by and among AmeriServe Food
Distribution, Inc., AmeriServ Food Company, and State
Street Bank and Trust Company, as Trustee (incorporated
by reference to Exhibit 4.2 to the Registrant's Current
Report on Form 8-K, dated December 28, 1997).
4.4 -- Indenture, dated as of July 11, 1997, by and among the
Company, the Subsidiary Guarantors and State Street Bank
and Trust Company, with respect to the new Senior
Subordinated Notes (incorporated by reference to Exhibit
4.1 of the Registrant's Registration Statement on Form
S-4 No. 333-33225 filed August 8, 1997).
4.5 -- Supplemental 10 1/8% New Senior Subordinated Notes
Indenture, dated as of December 23, 1997, by and among
AmeriServe Food Distribution, Inc., AmeriServ Food
Company, and State Street Bank and Trust Company, as
Trustee (incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K, dated December
28, 1997).
4.6 -- Purchase Agreement, by and among the Registrant, the
Subsidiary Guarantors, Donaldson, Lufkin & Jenrette
Securities Corporation and BancAmerica Securities dated
as of July 9, 1997 (incorporated by reference to Exhibit
4.4 to the Registrant's Registration Statement Form S-4
No. 333-33225 filed August 8, 1997).
4.7 -- Purchase Agreement, by and among the Registrant, the
Subsidiary Guarantors, Donaldson, Lufkin & Jenrette
Securities Corporation and BancAmerica Robertson Stephens
dated as of October 8, 1997 (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement on
Form S-4 No. 333-38337 filed October 21, 1997).
</TABLE>
34
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
4.8 -- Second Supplemental 8 7/8% New Senior Notes Indenture,
dated as of May 21, 1998, by and among AmeriServe Food
Distribution, Inc. and State Street Bank and Trust
Company (incorporated by Reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated May 21,
1998).
4.9 -- Second Supplemental 10 1/8% New Senior Subordinated Notes
Indenture, dated as of December 23, 1997, by and among
AmeriServe Food Distribution, Inc., AmeriServ Food
Company, and State Street Bank and Trust Company
(incorporated by reference to Exhibit 4.3 to the
Registrant's Current Report on Form 8-K dated May 21,
1998).
10.1 -- Registration Rights Agreement, dated as of July 11, 1997,
by and among the Registrant, the Subsidiary Guarantors
and Donaldson, Lufkin & Jenrette Securities Corporation
(incorporated by reference to Exhibit 10.1 to the
Registrant's Registration Statement on Form S-4 No.
333-33225 filed August 8, 1997).
10.2 -- Registration Rights Agreement, dated as of October 15,
1997, by and among the Registrant, the Subsidiary
Guarantors and Donaldson, Lufkin & Jenrette Securities
Corporation (incorporated by reference to Exhibit 10.1 to
the Registrant's Registration Statement on Form S-4 No.
333-38337 filed October 21, 1997).
10.3 -- Employment Agreement, dated as of December 23, 1986
between the Company and Raymond E. Marshall, as amended
by Amendment to Employment Agreement, dated as of January
1, 1995 (incorporated by reference to Exhibit 10.4 to the
Registrant's Registration Statement on Form S-4 No.
333-33225 filed August 8, 1997).
10.4 -- Employment Agreement, dated as of July 1, 1998 between
the Company and Thomas C. Highland.*
10.5 -- Employment Agreement, dated as of November 26, 1997
between the Company and Kenneth R. Lane.*
10.6 -- Employment Agreement, dated as of August 15, 1997 between
the Company and Diana M. Moog.*
10.7 -- Amended and Restated Sales and Distribution Agreement
dated as of November 1, 1998, by and among PFS, Pizza
Hut, Taco Bell, Kentucky Fried Chicken Corporation and
Kentucky Fried Chicken of California, Inc.*
10.8 -- Third Amended and Restated Credit Agreement, dated as of
May 21, 1998 among AmeriServe Food Distribution, Inc.,
Bank of America National Trust and Savings Association,
as Administrative Agent, Donaldson, Lufkin and Jenrette
Securities Corporation, as Documentation Agent, Bank of
America National Trust and Savings Association, as Letter
of Credit Issuing Lender and the Other Financial
Institutions Party Thereto, Arranged by BancAmerica
Robertson Stephens (incorporated by reference to Exhibit
10.1 to the Registrants Quarterly Report on Form 10-Q
filed November 10, 1998).
10.9 -- First Amendment to Third Amended and Restated Credit
Agreement, dated as of July 24, 1998.*
10.10 -- Amended and Restated Pooling and Servicing Agreement,
dated as of July 28, 1998 among AmeriServe Funding
Corporation, AmeriServe Food Distribution, Inc. and
Norwest Bank Minnesota, N.A.*
10.11 -- Series 1998-1 Supplement to Pooling and Servicing
Agreement, dated as of July 28, 1998 among AmeriServe
Funding Corporation, AmeriServe Food Distribution, Inc.
and Norwest Bank Minnesota, N.A.*
</TABLE>
35
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.12 -- Series 1998-3 Supplement to Pooling and Servicing
Agreement, dated as of December 18, 1998 among AmeriServe
Funding Corporation, AmeriServe Food Distribution, Inc.
and Norwest Bank Minnesota, N.A.*
10.13 -- Series 1998-4 Supplement to Pooling and Servicing
Agreement, dated as of December 18, 1998 among AmeriServe
Funding Corporation, AmeriServe Food Distribution, Inc.
and Norwest Bank Minnesota, N.A.*
10.14 -- Nebco Evans Holding Company 1998 Management Stock Option
Plan (incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-8 No.
333-53095 filed on May 20, 1998.
21 -- Subsidiaries of the Registrant.*
27.1 -- Financial Data Schedule.*
99.1 -- AmeriServe Food Distribution, Inc. Press Release dated
March 24, 1999 announcing Fourth Quarter and Full Year
1998 Operating Results.*
</TABLE>
- ---------------
* Filed herewith.
36
<PAGE> 37
NEBCO EVANS HOLDING COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Audited Consolidated Financial Statements:
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' Equity
(Deficit).............................................. F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 38
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Nebco Evans Holding Company
We have audited the accompanying consolidated balance sheets of Nebco Evans
Holding Company (NEHC) as of December 26, 1998 and December 27, 1997, and the
related consolidated statements of operations, stockholder's equity, and cash
flows for each of the three years in the period ended December 26, 1998. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
NEHC's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NEHC at
December 26, 1998 and December 27, 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 26, 1998, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
ERNST & YOUNG LLP
Dallas, Texas
March 22, 1999
F-2
<PAGE> 39
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 37,646 $ 231,450
Accounts receivable....................................... 55,402 43,625
Undivided interest in accounts receivable trust........... 208,451 154,371
Allowance for doubtful accounts........................... (23,852) (15,566)
Inventories............................................... 292,255 150,148
Prepaid expenses and other current assets................. 14,196 17,034
---------- ----------
Total current assets.............................. 584,098 581,062
Property and equipment, net............................... 235,426 142,138
Intangible assets, net.................................... 1,087,079 737,870
Other noncurrent assets................................... 29,209 17,720
---------- ----------
$1,935,812 $1,478,790
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt......................... $ 8,768 $ 5,127
Accounts payable.......................................... 700,105 345,603
Accrued liabilities....................................... 183,764 101,219
---------- ----------
Total current liabilities......................... 892,637 451,949
Long-term debt.............................................. 979,416 943,609
Other noncurrent liabilities................................ 85,006 38,430
11 1/4% Senior redeemable exchangeable preferred stock...... 262,107 --
Stockholders' equity (deficit):
8% Senior Convertible preferred stock, $.01 par value per
share; 300 shares authorized, 235 shares outstanding,
$2,350 liquidation value............................... 2,350 2,350
13 1/2% Senior exchangeable preferred stock, $.01 par
value per share; 5,000,000 shares authorized, 2,400,000
shares outstanding..................................... -- 59,186
15% Junior exchangeable preferred stock, $.01 par value
per share; 5,000,000 shares authorized, 2,200,000
shares outstanding..................................... -- 56,819
Junior nonconvertible preferred stock, $.01 par value per
share; 600 shares authorized and outstanding, $16,875
liquidation value...................................... -- 15,000
Class A voting common stock, $.01 par value per share;
30,000 shares authorized, 6,508 shares outstanding at
December 27, 1997...................................... -- --
Class B nonvoting common stock, $.01 par value per share;
20,000 shares authorized, 1,733 shares outstanding at
December 27, 1997...................................... -- --
Class A nonvoting common stock, $.01 par value per share;
1,000,000 shares authorized, none outstanding.......... -- --
Class B voting common stock, $.01 par value per share;
14,000,000 shares authorized, 8,241,000 outstanding at
December 26, 1998...................................... 82 --
Paid-in capital........................................... -- 4,889
Accumulated deficit....................................... (285,786) (93,442)
---------- ----------
Total stockholders' equity (deficit).............. (283,354) 44,802
---------- ----------
$1,935,812 $1,478,790
========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE> 40
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................... $7,420,951 $3,508,332 $1,389,601
Cost of goods sold...................................... 6,740,926 3,159,357 1,249,135
---------- ---------- ----------
Gross profit............................................ 680,025 348,975 140,466
Distribution, selling and administrative expenses....... 560,696 272,016 112,058
Depreciation of property and equipment.................. 31,500 17,663 5,523
Amortization of intangible assets....................... 34,074 16,830 4,849
Restructuring and other unusual costs................... 90,087 52,449 --
---------- ---------- ----------
Operating income (loss)................................. (36,332) (9,983) 18,036
Other income (expense):
Interest expense, net................................. (90,824) (54,016) (16,423)
Loss on sale of accounts receivable................... (24,906) (6,757) --
Interest income -- affiliates......................... 1,335 632 528
Minority interest..................................... -- -- (2,345)
---------- ---------- ----------
(114,395) (60,141) (18,240)
---------- ---------- ----------
Loss before income taxes and extraordinary loss......... (150,727) (70,124) (204)
Provision for income taxes.............................. 1,563 1,030 1,300
---------- ---------- ----------
Loss before extraordinary loss.......................... (152,290) (71,154) (1,504)
Extraordinary loss...................................... -- 15,935 --
---------- ---------- ----------
Net loss................................................ $ (152,290) $ (87,089) $ (1,504)
========== ========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE> 41
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
8%
SENIOR JUNIOR
13 1/2% PREFERRED 15% PREFERRED
SENIOR STOCK JUNIOR STOCK
PREFERRED $10,000 PREFERRED $25,000 PREFERRED COMMON PAID-IN ACCUMULATED
STOCK SERIES STOCK SERIES STOCK STOCK CAPITAL DEFICIT
--------- --------- --------- --------- --------- ------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 30,
1995...................... $ -- $ -- $ -- $ -- $ 15,000 $ 6 $ -- $ (4,849)
Formation of NEHC......... -- -- -- 15,000 (15,000) (6) 6 --
Issuance of preferred
stock................... -- 2,350 -- -- -- -- -- --
Issuance of common stock
warrants................ -- -- -- -- -- -- 7,516 --
Net loss.................. -- -- -- -- -- -- -- (1,504)
-------- ------ -------- -------- -------- --- ------- ---------
BALANCE, DECEMBER 28,
1996...................... -- 2,350 -- 15,000 -- -- 7,522 (6,353)
Issuance of preferred
stock and common stock
warrants................ 57,300 -- 55,000 -- -- -- 2,700 --
Preferred stock
dividends............... 1,785 -- 1,819 -- -- -- (3,604) --
Preferred stock
accretion............... 101 -- -- -- -- -- (101) --
Loss on transfer of
subsidiary from Holberg
to NEHC................. -- -- -- -- -- -- (1,628) --
Net loss.................. -- -- -- -- -- -- -- (87,089)
-------- ------ -------- -------- -------- --- ------- ---------
BALANCE, DECEMBER 27,
1997...................... 59,186 2,350 56,819 15,000 -- -- 4,889 (93,442)
Stock dividends on
preferred stock......... 3,666 -- 3,752 -- -- -- (4,889) (2,529)
Preferred stock
accretion............... 2,599 -- -- -- -- -- -- (2,599)
Cash dividends on
preferred stock......... -- -- -- -- -- -- -- (188)
Redemption of preferred
stock................... (65,451) -- (60,571) (15,000) -- -- -- (12,549)
Senior redeemable
exchangeable preferred
stock dividends and
accretion............... -- -- -- -- -- -- -- (22,107)
Common stock
recapitalization........ -- -- -- -- -- 82 -- (82)
Net loss.................. -- -- -- -- -- -- -- (152,290)
-------- ------ -------- -------- -------- --- ------- ---------
BALANCE, DECEMBER 26,
1998...................... $ -- $2,350 $ -- $ -- $ -- $82 $ -- $(285,786)
======== ====== ======== ======== ======== === ======= =========
<CAPTION>
TOTAL
---------
<S> <C>
BALANCE, DECEMBER 30,
1995...................... $ 10,157
Formation of NEHC......... --
Issuance of preferred
stock................... 2,350
Issuance of common stock
warrants................ 7,516
Net loss.................. (1,504)
---------
BALANCE, DECEMBER 28,
1996...................... 18,519
Issuance of preferred
stock and common stock
warrants................ 115,000
Preferred stock
dividends............... --
Preferred stock
accretion............... --
Loss on transfer of
subsidiary from Holberg
to NEHC................. (1,628)
Net loss.................. (87,089)
---------
BALANCE, DECEMBER 27,
1997...................... 44,802
Stock dividends on
preferred stock......... --
Preferred stock
accretion............... --
Cash dividends on
preferred stock......... (188)
Redemption of preferred
stock................... (153,571)
Senior redeemable
exchangeable preferred
stock dividends and
accretion............... (22,107)
Common stock
recapitalization........ --
Net loss.................. (152,290)
---------
BALANCE, DECEMBER 26,
1998...................... $(283,354)
=========
</TABLE>
See accompanying notes.
F-5
<PAGE> 42
NEBCO EVANS HOLDING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(152,290) $ (87,089) $ (1,504)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Depreciation and amortization........................... 65,574 34,493 10,372
Gain on sale of property................................ -- -- (4,652)
Interest accreted on subordinated debt.................. 7,425 5,513 4,193
Minority interest in subsidiary......................... -- -- 2,345
Impairment of property, equipment and other assets...... 17,880 12,404 --
Extraordinary loss-noncash portion...................... -- 2,156 --
Changes in assets and liabilities, net of acquisitions:
Accounts receivable and undivided interest in accounts
receivable trust.................................... (55,678) (2,981) (5,510)
Inventories........................................... 8,908 (14,090) (5,657)
Prepaid expenses and other current assets............. 13,382 (13,578) 823
Accounts payable...................................... 47,176 74,663 7,030
Accrued liabilities................................... 7,909 44,290 (7,083)
Payments charged to restructuring reserves............ (14,944) (1,382) --
Noncurrent liabilities................................ (25,252) (4,402) 1,669
Other................................................. (27,347) 182 2,125
--------- ---------- ---------
Net cash provided by (used for) operating activities...... (107,257) 50,179 4,151
--------- ---------- ---------
INVESTING ACTIVITIES
Businesses acquired, net of cash acquired................. (313,501) (851,019) (96,765)
Capital expenditures...................................... (68,534) (23,300) (12,701)
Proceeds from disposals of property and equipment......... 1,763 -- 9,699
Amounts received from affiliate........................... 13,693 20,485 11,121
Amounts paid to affiliate................................. (19,476) (23,878) (14,291)
Net increase in deposits with affiliates.................. -- (2,355) (2,480)
--------- ---------- ---------
Net cash used in investing activities..................... (386,055) (880,067) (105,417)
--------- ---------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of subordinated loans.............. -- -- 22,484
Proceeds from issuance of warrants........................ -- 2,700 7,516
Proceeds from issuance of long-term debt.................. -- 1,110,000 --
Proceeds from sale of accounts receivable................. 220,000 225,000 --
Proceeds from issuance of senior redeemable exchangeable
preferred stock......................................... 250,000 -- --
Proceeds from issuance of preferred stock................. -- 112,300 --
Redemption of preferred stock............................. (153,571) -- --
Dividends on preferred stock.............................. (188) -- --
Debt financing fees incurred.............................. (10,000) (26,325) --
Net increase (decrease) in borrowings under revolving line
of credit............................................... 4,000 (77,374) 116,708
Repayments of long-term debt.............................. (10,733) (287,187) (43,793)
--------- ---------- ---------
Net cash provided by financing activities................. 299,508 1,059,114 102,915
--------- ---------- ---------
Net increase (decrease) in cash and cash equivalents...... (193,804) 229,226 1,649
Cash and cash equivalents at beginning of year............ 231,450 2,224 575
--------- ---------- ---------
Cash and cash equivalents at end of year.................. $ 37,646 $ 231,450 $ 2,224
========= ========== =========
Supplemental cash flow information:
Cash paid during the year for:
Interest.............................................. $ 91,337 $ 24,468 $ 10,683
Income taxes, net of refunds.......................... 846 2,668 1,256
Businesses acquired:
Fair value of assets acquired......................... $ 782,736 $1,101,786 $ 210,357
Cash paid............................................. (313,501) (851,019) (96,765)
--------- ---------- ---------
Liabilities assumed................................... $ 469,235 $ 250,767 $ 113,592
========= ========== =========
Supplemental noncash investing and financing activities:
Property and equipment purchased with capital leases
(included in long-term debt).......................... $ 38,257 $ 22,029 $ 13,363
</TABLE>
See accompanying notes.
F-6
<PAGE> 43
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 26, 1998
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Nebco Evans Holding Company (NEHC) is the parent company of AmeriServe Food
Distribution, Inc. (the Company) and Holberg Warehouse Properties, Inc. (HWPI).
The Company comprises substantially all of the operations of NEHC, as HWPI's
operations consist entirely of the leasing of two warehouse facilities to the
Company. The Company is a foodservice distributor specializing in distribution
to chain restaurants. The Company distributes a wide variety of food items as
well as paper goods, cleaning and other supplies and equipment. The Company
operates within a single type of business activity, with no operating segments
as defined by Statement of Financial Accounting Standards (Statement) No. 131,
"Disclosures about Segments of an Enterprise and Related Information."
The Company services approximately 36,000 restaurants, the vast majority of
which are in the United States. The Company's major customers are owners and/or
franchisees operating restaurants in the Arby's, Burger King, Chick-fil-A,
Chili's, Dairy Queen, KFC, Lone Star Steakhouse, Long John Silver's, Olive
Garden, Pizza Hut, Red Lobster, Sonic, Taco Bell, TCBY and TGI Friday's systems.
For most of these concepts, the Company services all or a substantial majority
of the U.S. restaurants in the systems. The Company also operates foodservice
distribution businesses in Canada and Mexico, which are not material to the
consolidated financial statements of the Company.
NEHC is an indirect subsidiary of Holberg Industries, Inc. (Holberg), a
privately held diversified service company. In addition to NEHC, Holberg has
subsidiaries operating within the parking services industry in North America.
Principles of Consolidation
The consolidated financial statements include the accounts of NEHC and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Fiscal Calendar
The results for each of the fiscal years ended December 26, 1998 (fiscal
1998) December 27, 1997 (fiscal 1997) and December 28, 1996 (fiscal 1996)
reflect a 52-week period ending on the last Saturday of the calendar year. The
fixed year-end day of the Company's fiscal calendar results in a 53-week year
every five or six years.
The Company is in the process of adopting a 13-period accounting calendar
for all of its business. This change impacts the number of weeks in each fiscal
quarter but does not impact the number of weeks in the year or the year-end date
as described above. This calendar consists of 13 four-week periods, with each of
the first three quarters consisting of three periods, or 12 weeks, and the
fourth quarter consisting of four periods, or 16 weeks. As of the end of fiscal
1998, almost 50% of the business was on a 13-period calendar. The balance was on
a 12-period calendar with each quarter consisting of 13 weeks (a "4-4-5"
calendar). The conversion of the remaining business is expected to be completed
in 2000. Due to the phased nature of the conversion, the year-over-year
comparisons of quarterly results have not been and are not expected to be
materially impacted. The 13-period calendar is preferable for management
purposes because operating measures for the periods are not distorted by
differences in number of weeks per period.
Cash and Cash Equivalents
Cash equivalents represent funds temporarily invested (with original
maturities not exceeding three months) as part of managing day-to-day working
capital and/or as amounts held for general corporate purposes.
F-7
<PAGE> 44
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories, which consist of purchased goods held for sale, are stated at
the lower of cost (determined on a first-in, first-out basis) or net realizable
value. Certain inventories in the former ProSource, Inc. (ProSource) business
(see Note 2) are stated at cost determined using the weighted-average-cost
method.
Property and Equipment
Property and equipment are stated at cost, except for assets that have been
impaired. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. Amortization of leasehold improvements is
recorded over the respective lease terms or useful lives of the assets,
whichever is shorter. Amortization of leasehold improvements and assets under
capital leases is included in depreciation expense. Useful lives for
amortization and depreciation calculations are as follows:
<TABLE>
<S> <C>
Buildings and improvements.................................. 5-40 years
Delivery and automotive equipment........................... 3-9 years
Warehouse equipment......................................... 5-12 years
Furniture, fixtures and office equipment.................... 5-10 years
</TABLE>
Goodwill and Other Intangible Assets
Costs in excess of the net identifiable assets of businesses acquired are
amortized on a straight-line basis over 40 years. Assembled workforce, customer
lists and other intangible assets acquired in business acquisitions, deferred
financing costs and other intangibles are being amortized using primarily the
straight-line method over their respective estimated useful lives, which
generally range from 3 to 40 years.
Impairment of Long-Lived Assets
Property and equipment, goodwill and other intangible assets are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the sum of the expected undiscounted
cash flows is less than the carrying value of the related asset or group of
assets, a loss will be recognized for the difference between the fair value and
carrying value of the asset or group of assets. Such analyses necessarily
involve significant judgment.
Computer Software
Costs of computer software developed or obtained for internal use are
capitalized and amortized on a straight-line basis over the estimated useful
life of the software (generally 3-8 years). Business process reengineering costs
associated with implementation of new software are expensed as incurred.
Revenue Recognition
Revenue from the sale of the Company's products is recognized upon shipment
to the customer. Customer returns have historically been immaterial.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-8
<PAGE> 45
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
NEHC accounts for income taxes in accordance with Statement No. 109,
"Accounting for Income Taxes," which requires recognition of deferred tax assets
or liabilities for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, as well as net operating loss
carryforwards. Because of the Company's prior operating losses in certain of the
Company's taxable entities, a valuation allowance has been established to offset
the entire amount of the net deferred tax assets. (See Note 11)
Effective July 1997, the Company has been included in the consolidated
federal income tax return of NEHC. Prior to that date, the Company was part of
the Holberg consolidated group for income tax purposes and made tax sharing
payments to Holberg, under a tax sharing agreement, for those entities within
the Company's subgroup that had taxable income.
Reclassifications
Certain amounts previously presented in the financial statements of prior
years have been reclassified to conform to the current year presentation.
2. ACQUISITIONS
On May 21, 1998, the Company acquired ProSource, Inc. for $313.5 million in
cash, which reflected $15.00 per share for all of the outstanding common stock,
repayment of existing indebtedness of ProSource of $159.5 million and direct
costs of the acquisition. ProSource, which reported net sales of $3.9 billion
for its fiscal year ended December 27, 1997, was in the foodservice distribution
business, specializing in quick service and casual dining chain restaurants.
ProSource serviced approximately 12,700 restaurants, principally in the United
States, in such chains as Burger King, Chick-fil-A, Chili's, Long John Silver's,
Olive Garden, Red Lobster, Sonic, TCBY and TGI Friday's. Funding of the
acquisition and related transactions included $125 million in proceeds from the
sale of ProSource accounts receivable (see Note 8), a $50 million capital
contribution to the Company from NEHC and cash and cash equivalents on hand.
The acquisition has been accounted for under the purchase method;
accordingly, its results are included in the consolidated financial statements
from the date of acquisition.
Following is the preliminary ProSource purchase price allocation (the final
purchase price allocation will be based on the final determination of the fair
values of assets acquired and liabilities assumed) (in millions):
<TABLE>
<S> <C>
Accounts receivable......................................... $ 224.0
Inventories................................................. 153.6
Property and equipment...................................... 33.5
Goodwill.................................................... 272.0
Identifiable intangible assets.............................. 83.4
Other assets................................................ 16.2
Accounts payable............................................ (307.3)
Accrued and other liabilities............................... (91.0)
Restructuring reserves...................................... (70.9)
-------
$ 313.5
=======
</TABLE>
The restructuring reserves of $70.9 million were included in the
preliminary purchase price allocation above in connection with the Company's
business restructuring plan to consolidate and integrate the operations of
ProSource and the Company. The reserves consist of accruals for severance and
other employee-related costs ($34.8 million) and costs associated with the
closures of duplicative warehouse and other
F-9
<PAGE> 46
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
facilities ($36.1 million). Payments charged against the ProSource restructuring
reserves totaled $5.9 million as of December 26, 1998. See Note 3 for additional
discussion.
On July 11, 1997, the Company acquired the U.S. and Canadian operations of
PFS, a Division of PepsiCo, Inc. (PFS), in an asset purchase transaction for
$841.6 million in cash, including direct costs. PFS posted net sales of $3.4
billion for the fiscal year ended December 25, 1996. PFS was engaged in the
distribution of food products, supplies and equipment to approximately 17,000
company-owned and franchised restaurants in the Pizza Hut, Taco Bell and KFC
systems, which were spun-off by PepsiCo, Inc. in October 1997 as TRICON Global
Restaurants, Inc. (Tricon). Funding of the acquisition was provided by long-term
borrowings and sale of accounts receivable as described in Notes 7 and 8 and a
$130 million capital contribution to the Company from NEHC.
The effective date of the acquisition was June 11, 1997, the end of PFS'
second quarter. The acquisition has been accounted for under the purchase
method.
The PFS purchase price was allocated based on the estimated fair values of
identifiable intangible and tangible assets acquired and liabilities assumed at
the acquisition date, as follows (in millions):
<TABLE>
<S> <C>
Accounts receivable......................................... $ 322.3
Inventories................................................. 83.1
Property and equipment...................................... 70.7
Goodwill.................................................... 563.1
Identifiable intangible assets.............................. 36.9
Other assets................................................ 1.4
Accounts payable............................................ (168.6)
Accrued and other liabilities............................... (45.1)
Restructuring reserves...................................... (22.2)
-------
$ 841.6
=======
</TABLE>
The restructuring reserves of $22.2 million were included in the purchase
price allocation above in connection with the Company's original business
restructuring plan, which was revised after the ProSource acquisition, to
consolidate and integrate the operations of PFS and the Company. The reserves
consist of accruals for severance and other employee-related costs ($6.9
million) and costs associated with the closures of duplicative warehouse and
other facilities ($15.3 million). Payments charged against the PFS restructuring
reserves totaled $4.1 million as of December 26, 1998. There have been no
material adjustments to the reserves as of December 26, 1998. See Note 3 for
additional discussion.
The following unaudited results of operations for fiscal 1998 assume the
acquisition of ProSource occurred at the beginning of that period, and for
fiscal 1997 assume the acquisitions of both PFS and ProSource occurred at the
beginning of that period (in millions):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net sales................................................ $9,081.0 $8,907.6
Loss before extraordinary items and cumulative effect of
a change in accounting principle....................... (153.2) (55.5)
Net loss................................................. (153.2) (84.1)
</TABLE>
This information does not purport to be indicative of the results that
actually would have been obtained if the combined operations had been conducted
during the periods presented and is not intended to be a projection of future
results.
F-10
<PAGE> 47
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In October 1997, the Company acquired the stock of a food distribution
business in Mexico for approximately $8 million in cash. The business
distributed food products and supplies to company-owned and franchised
restaurants in Tricon's Pizza Hut and KFC systems. The acquisition was accounted
for under the purchase method. The operating results of the business are not
material to the consolidated results of the Company.
3. RESTRUCTURING AND OTHER UNUSUAL COSTS
Included in "Restructuring and other unusual costs" in the accompanying
consolidated statements of operations for fiscal 1998 and 1997 are the following
(in millions):
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Restructuring charges, principally exit costs for future
lease terminations and employee severance................. $12.7 $13.4
Impairment of property, equipment and other assets.......... 16.7 12.4
Financing-related fees and other one-time indirect costs
incurred in connection with the ProSource and PFS
acquisitions.............................................. 8.6 13.6
Costs incurred to integrate acquisitions, and other unusual
items..................................................... 52.1 13.0
----- -----
$90.1 $52.4
===== =====
</TABLE>
In the second quarter of 1998, the Company recorded restructuring reserves
and noncash impairment charges reflecting actions to be taken with respect to
the Company's then existing facilities as a result of the ProSource acquisition.
During the second quarter of 1998, management performed an extensive review of
the then existing and recently acquired ProSource operations with the objective
of developing a business restructuring plan for the consolidation and
integration of the organizations. The restructuring plan, which was approved by
the Company's Board of Directors in the second quarter of 1998 and represented a
revision of the plan developed at the time of the PFS acquisition in 1997,
identified a number of actions designed to improve the efficiency and
effectiveness of the combined organization's warehouse and transportation
network as well as administrative and other support functions. These actions, a
substantial majority of which will be completed by mid-2000, include
construction of new strategically located warehouse facilities, closures of a
number of existing warehouse facilities and expansions/reconfigurations of
others, dispositions of property and equipment, conversions of computer systems,
reductions in workforce, relocation of employees and centralization of support
functions largely at the Dallas, Texas headquarters.
In the third quarter of 1997, the Company recorded restructuring reserves
and noncash impairment charges associated with the Company's original business
restructuring plan, which was revised after the ProSource acquisition, to
consolidate and integrate the operations of PFS and the Company.
As of December 26, 1998, payments charged against the restructuring
reserves established in fiscal 1998 and 1997 totaled $6.3 million, and there
have been no material adjustments to the reserves.
The last category in the above table includes costs arising from
integration and consolidation actions associated with the PFS, ProSource and
previous acquisitions. These costs, which are incremental in nature and expensed
as incurred, relate primarily to start-up of new warehouse facilities,
activities to realign and centralize administrative and other support functions
and delivery fleet modifications. Also included in this category are costs to
implement a major new computer software and hardware platform as well as
remediate the Year 2000 computer program code problem in existing systems.
Included in the impairment and unusual items categories above are charges
totaling $7.2 million, largely recorded in the second quarter of 1998,
associated with the discontinuance of service to the Wendy's concept, consisting
primarily of costs related to equipment lease terminations and employee
severance. Service to Wendy's restaurants represented approximately $600 million
in annual net sales. The discontinuance, which
F-11
<PAGE> 48
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
was completed by late 1998, resulted from a decision by Wendy's International,
Inc. to transfer its business to a competitor.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
<S> <C> <C>
Land........................................................ $ 7,542 $ 3,833
Buildings and improvements.................................. 77,236 44,612
Delivery and automotive equipment........................... 97,339 86,879
Warehouse equipment......................................... 21,943 11,359
Furniture, fixtures and office equipment.................... 84,146 17,393
Construction in progress.................................... 4,520 5,538
-------- --------
292,726 169,614
Less accumulated depreciation and amortization.............. 57,300 27,476
-------- --------
$235,426 $142,138
======== ========
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
<S> <C> <C>
Goodwill, less accumulated amortization of $34,937 and
$15,849................................................... $ 913,045 $661,570
Assembled workforce, customer lists, deferred financing
costs and other intangibles, less accumulated amortization
of $22,906 and $9,861..................................... 174,034 76,300
---------- --------
$1,087,079 $737,870
========== ========
</TABLE>
6. SENIOR REDEEMABLE EXCHANGEABLE PREFERRED STOCK
On March 6, 1998, NEHC received proceeds of $250 million upon issuance of
2,500,000 shares of 11 1/4% Senior Redeemable Exchangeable Preferred Stock
(Preferred Stock) due 2008, with a liquidation preference of $100 per share, in
transactions not requiring registration under the Securities Act of 1933, as
amended. Approximately $154 million of proceeds from the issuance were used to
repurchase all NEHC's outstanding 13 1/2% senior exchangeable preferred stock,
15% junior exchangeable preferred stock, and junior nonconvertible preferred
stock. Dividends on the Preferred Stock are payable quarterly in cash or in
additional shares of Preferred Stock, at NEHC's option. The Preferred Stock is
exchangeable into 11 1/4% Subordinated Exchange Debentures due 2008, at NEHC's
option, subject to certain conditions, on any scheduled dividend payment date.
On June 22, 1998, NEHC completed an offer to exchange all the outstanding
Preferred Stock with new stock with substantially identical terms that is
registered under the Securities Act of 1933, as amended.
F-12
<PAGE> 49
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
<S> <C> <C>
8 7/8% Senior Notes due 2006................................ $350,000 $350,000
10 1/8% Senior Subordinated Notes due 2007.................. 500,000 500,000
12 3/8% Senior Discount Notes due 2007...................... 65,624 58,200
Borrowings under credit facility............................ 4,000 --
Other notes payable......................................... 3,766 3,493
-------- --------
923,390 911,693
Capital lease obligations (see Note 15)..................... 64,794 37,043
-------- --------
988,184 948,736
Less current portion (capital lease obligations only)....... 8,768 5,127
-------- --------
$979,416 $943,609
======== ========
</TABLE>
In connection with the PFS acquisition, on July 11, 1997, the Company
issued $500 million principal amount of 10 1/8% Senior Subordinated Notes due
July 15, 2007 in a private placement not requiring registration under the
Securities Act of 1933, as amended, and entered into a new credit agreement
providing for term loans totaling $205 million and a revolving credit facility
of up to $150 million. A portion of the proceeds was used to repay all
outstanding borrowings of $133.8 million (including accrued interest) under a
previous credit agreement. On October 15, 1997, the Company issued $350 million
principal amount of 8 7/8% Senior Notes due October 15, 2006 in a private
placement not requiring registration under the Securities Act of 1933, as
amended, and used a portion of the proceeds to repay the $205 million principal
amount of term loans and related accrued interest.
Also on July 11, 1997, NEHC received $55 million in proceeds upon issuance,
in a private placement not requiring registration under the Securities Act of
1933, as amended, of $100,387,000 principal amount of 12 3/8% Senior Discount
Notes due July 15, 2007. A portion of the proceeds was used to redeem
subordinated notes with a principal amount of $33.4 million (including accretion
of interest) issued in January 1996.
In connection with the early extinguishment of debt on July 11 and October
15, 1997, NEHC recorded an extraordinary loss of $15.9 million, which
represented the unamortized balance of deferred financing costs and unaccreted
interest associated with the early extinguishment of debt by both the Company
and NEHC. Because of NEHC's net operating loss carryforward position, the charge
was recorded without tax benefit.
Effective December 12, 1997, the Company and NEHC completed offers to
exchange all the outstanding Senior Subordinated Notes due 2007, the Senior
Notes due 2006 and the Senior Discount Notes due 2007 with new notes with
substantially identical terms that are registered under the Securities Act of
1933, as amended.
Interest on the Senior Subordinated Notes and the Senior Notes
(collectively, the Notes) is payable semiannually. The Notes are fully,
unconditionally, jointly and severally guaranteed by the Company's operating
subsidiaries. The Notes contain covenants that limit the Company from incurring
additional indebtedness and issuing preferred stock, restrict dividend payments,
limit transactions with affiliates and certain other transactions. The Senior
Subordinated Notes are subordinated to all existing and future senior
indebtedness of the Company but rank equally in right of payment with any future
senior subordinated indebtedness of the Company.
Interest on the Senior Discount Notes is accreted to the principal amount
until 2002, at which time interest is payable semiannually. The notes rank
equally to all existing and future senior indebtedness of
F-13
<PAGE> 50
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NEHC but rank senior to all subordinated indebtedness of NEHC. The notes are
effectively subordinated to all indebtedness of the Company.
In May 1998, the Company entered into an amended credit agreement with a
group of financial institutions that provides for a credit facility, expiring in
2003, of up to $220 million. The amended credit facility replaces the previous
$150 million revolving credit facility. Interest rates on borrowings under the
facility are indexed to certain key variable rates. Availability under the
facility is based on levels of the Company's inventories of food and paper
products and supplies. Restrictive covenants under the agreement include minimum
interest coverage and maximum leverage. The Company is in compliance with the
covenants as of December 26, 1998. A commitment fee of up to .50% per annum is
payable on the unused portion of the facility. The availability under the credit
facility at December 26, 1998 was $151.2 million, against which borrowings were
$4.0 million (at an 8.5% interest rate) and outstanding letters of credit
totaled $35.9 million. Day-to-day cash flows can result in significant
fluctuations in the amount of borrowings under the facility. In late March 1999,
an amendment to the credit facility was completed that allows the Company up to
$30 million in letters of credit before usage of the facility is impacted,
resulting in additional current liquidity in this amount.
8. ACCOUNTS RECEIVABLE PROGRAM
In July 1997, the Company entered into an Accounts Receivable Program (the
Program), which initially provided $225 million in proceeds to partially fund
the acquisition of PFS. Under the Program, the Company established a
consolidated, wholly owned subsidiary, AmeriServe Funding Corporation (Funding),
which is a special purpose, bankruptcy-remote entity that acquires, on a daily
basis, a substantial majority of the trade accounts receivable generated by the
Company and its subsidiaries. The purchases by Funding are financed through the
sale of the receivables to AmeriServe Master Trust (the Trust) and the issuance
of a series of investor certificates by the Trust.
During 1998, the Company received additional proceeds of $220 million
primarily as a result of the addition of ProSource trade accounts receivable (in
May) and the completion of a restructuring of the Program and implementation of
additional reporting requirements (in July).
Transactions completed in December 1998 were designed primarily to
refinance a substantial portion of the bank-funded Trust certificates that
supported the proceeds previously received by the Company. The transactions,
which also resulted in additional financing capacity under the Program, included
a $280 million Rule 144A private placement of a three-year asset backed security
and the establishment of a bank-funded, three-year variable funding certificate
of up to $100 million.
After these transactions, the Program provides up to $485 million in
capacity, depending on accounts receivable levels. Because of the linkage to
accounts receivable levels, the availability at December 26, 1998 was $445
million, all of which the Company had received in proceeds as of that date. The
proceeds reflected $653 million of accounts receivable sold less Funding's
undivided interest in the assets of the Trust of $208 million.
In accordance with the provisions of Statement No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
the transactions have been recorded as a sale of receivables to a qualified
special purpose entity. The ongoing cost associated with the Program, which
largely represents the return to investors in the Trust certificates, is
reported in the accompanying consolidated statements of operations as "Loss on
sale of accounts receivable." The weighted average of the variable interest
rates on the Trust certificates was 6.40% and 6.94% at December 26, 1998 and
December 27, 1997, respectively.
F-14
<PAGE> 51
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The accompanying consolidated balance sheets reflect an allowance for
doubtful accounts that relates largely to the accounts receivable representing
the undivided interest in the Trust. The Company's accounts receivable generally
are unsecured.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the accompanying consolidated balance
sheets for cash and cash equivalents, accounts receivable, investment in
accounts receivable trust, accounts payable and accrued liabilities approximate
fair value because of their short-term maturities. The carrying amounts and fair
values of long-term debt at December 26, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
8 7/8% Senior Notes......................................... $350,000 $322,000
10 1/8% Senior Subordinated Notes........................... 500,000 435,000
12 3/8% Senior Discount Notes............................... 65,624 48,192
11 1/4% Senior Redeemable Exchangeable Preferred Stock...... 262,107 141,538
</TABLE>
Related party financial instruments are recorded at cost.
10. GUARANTOR SUBSIDIARIES
The Company's operating subsidiaries fully, unconditionally, jointly and
severally guarantee the Senior Subordinated Notes and the Senior Notes discussed
in Note 7.
The guarantor subsidiaries are direct or indirect wholly owned subsidiaries
of the Company. The Company and the guarantor subsidiaries conduct substantially
all of the operations of the Company and its subsidiaries on a consolidated
basis. Financial statements of the guarantor subsidiaries are not separately
presented because, in the opinion of management, such financial statements are
not material to investors.
The only significant subsidiary of the Company that is not a guarantor
subsidiary is Funding, which is a wholly owned, special purpose,
bankruptcy-remote subsidiary. Funding has no operating revenues or expenses, and
its only asset is an undivided interest in an accounts receivable trust (the
Trust -- see Note 8). Funding's interest in the Trust is junior to the claims of
the holders of certificates issued by the Trust. Accordingly, as creditors of
the Company, the claims of the holders of the Senior Subordinated Notes and
Senior Notes against the accounts receivable held in the Trust are similarly
junior to the claims of holders of the certificates issued by the Trust.
On the first day of fiscal 1999, ProSource and its subsidiaries were merged
into the Company. Accordingly, the following summarized combined financial
information (in accordance with Rule 1-02(bb) of Regulation S-X) at December 26,
1998 and for the year then ended is for the guarantor subsidiaries of the
Company remaining after the merger (in thousands):
<TABLE>
<S> <C>
Current assets.............................................. $ 35,084
Current liabilities......................................... 15,981
Noncurrent assets........................................... 51,544
Noncurrent liabilities...................................... 21,256
Net sales................................................... $199,088
Operating income............................................ 5,373
Net income.................................................. 5,141
</TABLE>
F-15
<PAGE> 52
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal..................................... $ -- $ 515 $1,100
State....................................... 834 299 200
Foreign..................................... 173 95 --
------ ------ ------
1,007 909 1,300
Deferred (foreign in 1998 and 1997)........... 556 121 --
------ ------ ------
$1,563 $1,030 $1,300
====== ====== ======
</TABLE>
The provision for income taxes differs from the amount computed by applying
the federal statutory rate of 34% to loss before income taxes and extraordinary
loss, as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Benefit at statutory rate....................... $(51,244) $(23,842) $ (69)
State income taxes, net of federal tax
benefit....................................... 550 197 129
Foreign income taxes............................ 729 143 --
Nondeductible goodwill.......................... 2,892 891 758
Increase in valuation allowance................. 47,735 23,571 --
Other........................................... 901 70 482
-------- -------- ------
Provision for income taxes...................... $ 1,563 $ 1,030 $1,300
======== ======== ======
</TABLE>
F-16
<PAGE> 53
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of NEHC's deferred income tax assets and liabilities are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Bad debt reserves........................................ $ 9,140 $ 9,987
Inventory reserves....................................... 13,121 4,669
Property and equipment................................... 12,663 4,758
Accrued liabilities...................................... 24,107 4,222
Restructuring reserves................................... 62,289 21,124
Acquisition costs........................................ 5,087 7,682
Net operating loss carryforward.......................... 119,184 39,558
Original issue discount.................................. 4,576 1,767
Other.................................................... 1,499 --
--------- --------
Total deferred tax assets........................ 251,666 93,767
Less valuation allowance................................. (196,997) (49,787)
--------- --------
Total deferred tax assets, net................... 54,669 43,980
========= ========
Deferred tax liabilities:
Intangibles.............................................. 53,399 43,980
Other.................................................... 1,270 --
--------- --------
Total deferred tax liabilities................... 54,669 43,980
--------- --------
Deferred tax assets net of deferred tax
liabilities.................................... $ -- $ --
========= ========
</TABLE>
As of December 26, 1998, giving effect to the merger into the Company of
ProSource and its subsidiaries, NEHC has net operating loss carryforwards of
approximately $310 million. The net operating loss carryforwards will expire
between 2004 and 2019. Because of uncertainty as to whether full benefit will be
realized from the use of such losses and other deferred tax assets, a valuation
reserve has been provided to offset the net deferred tax asset. As of the date
of its acquisition by the Company, ProSource had tax benefits associated with
net operating losses and other deferred items (the Acquired Tax Attributes) of
$37 million that were entirely offset by a valuation reserve. The acquired
ProSource net operating losses of $76 million are subject to limitation under
section 382 of the Internal Revenue Code. Under that section, after a change of
control, the amount of such net operating loss carryforwards that may be used
annually during the permitted carryover period is limited. Goodwill will be
reduced to the extent of any tax benefit realized from the Acquired Tax
Attributes.
12. EMPLOYEE BENEFIT PLANS
The Company and its subsidiaries have sponsored 401(k) retirement savings
plans covering substantially all employees. The Company has matched the
contributions of participating employees in accordance with the provisions of
the plans. Substantially all of the then existing plans were merged into a
single plan in August 1997.
Under this merged plan, eligible employees may contribute up to 18% of
eligible compensation, subject to limits imposed by law. The Company matches 50%
of the first 4% of compensation contributed by employees and 25% of additional
amounts contributed up to 6%. The Company will make additional contributions for
eligible employees of 0.8% to 2.0% of eligible compensation, depending on years
of service. Company contributions have certain vesting schedules, with all such
contributions vesting after 5 years of service. The Company may also elect to
make a discretionary contribution that would be allocated to employees based on
a predetermined formula.
F-17
<PAGE> 54
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has not merged the ProSource retirement savings plan into its
existing plan. The ProSource plan has similar attributes but differing specific
terms as compared to the existing plan. The Company is reviewing alternatives
with respect to the possible merger of the two plans.
Company contributions expensed under the plans approximated $6,598,000,
$961,000 and $515,000 in fiscal 1998, 1997 and 1996, respectively.
In 1998, the Company adopted a deferred compensation benefit program for
eligible employees that allows participants to defer receipt of portions of
their annual salary and incentive compensation. Amounts deferred are credited
with earnings based on a key interest rate, which are expensed as accrued.
Obligations under this program totaled $1.1 million at December 26, 1998.
13. STOCK OPTION PLAN
In May 1998, NEHC adopted the 1998 Management Stock Option Plan (the Plan).
The Plan authorizes the issuance of up to one million shares of new Class A
common stock of NEHC through exercise of non-qualified stock options granted
primarily to key management employees of the Company. The shares offered have
been registered under The Securities Act of 1933, as amended, through a
Registration Statement on Form S-8 dated May 18, 1998.
Under The Plan, the Compensation Committee of the Board of Directors may
from time to time grant options, to be exercised within 10 years of the grant
date, at a price generally not less than the fair market value of the shares, as
determined by an independent appraisal firm.
On May 20, 1998, 438,410 options at an exercise price of $32.85 per share
were granted under the Plan. The per share price was based on an estimation by
an independent appraisal firm of the Company's value as of the end of 1997. The
options granted vest and become exercisable in two equal installments upon each
of the third and fourth anniversaries of the grant date; however, in the event
of an Initial Public Offering (IPO), as defined in the Plan, half of the then
outstanding and unvested options would become vested. A total of 27,540 options
have been forfeited as of December 26, 1998.
NEHC has elected to follow Accounting Principles Board Opinion No. 25 (APB
25) and related Interpretations in accounting for stock options. Under APB 25,
because the exercise price of the options granted is the estimated fair market
value of the underlying shares on the date of grant, no compensation expense has
been recognized.
Disclosures under Statement No. 123, "Accounting for Stock-Based
Compensation," require a calculation of the pro forma compensation cost
associated with the options had a fair value method been used to value the
options at the date of grant. Using the "minimum value" method as defined by
Statement No. 123, compensation expense associated with the option grant would
have been approximately $1.2 million annually over the four-year vesting period.
The key quantitative assumptions used in the calculation, which assumes no IPO,
are as follows:
<TABLE>
<S> <C>
Risk-free interest rate..................................... 5.82%
Expected life............................................... 7 years
Expected dividend yield..................................... 0%
</TABLE>
Because option valuation methods require highly subjective assumptions, NEHC
believes that the calculation does not necessarily provide a reliable single
measure of the fair value of the options granted.
F-18
<PAGE> 55
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. RELATED-PARTY TRANSACTIONS
NEHC and the Company have interest-bearing amounts due from Holberg
totaling $13,981,000 and $8,066,000 at December 26, 1998 and December 27, 1997,
respectively, resulting primarily from cash advances to Holberg. The Company
also holds a note receivable from Holberg dated December 1995 in the amount of
$3,516,000. The note bears interest at 5% and is due January 2007. These related
party receivables are included in other noncurrent assets in the accompanying
consolidated balance sheets.
Prior to 1996, the Company participated in a self-insured casualty
(including workers' compensation and auto liability) and group health risk
program with an affiliate of Holberg. In connection with the insurance program,
the Company has deposits with an affiliate for insurance collateral purposes of
$4,835,000 at December 26, 1998 and December 27, 1997. This amount is included
in other noncurrent assets in the accompanying consolidated balance sheets.
In fiscal 1998 and 1997, distribution, selling and administrative expenses
include $4,000,000 in management fees to Holberg.
Interest income from Holberg and an affiliate of approximately $1,335,000,
$632,000 and $528,000 in fiscal 1998, 1997 and 1996, respectively, represents
interest on the amounts due from Holberg, including the note receivable, and
interest on the insurance deposits with an affiliate.
15. LEASE COMMITMENTS
NEHC has noncancelable commitments under both capital and long-term
operating leases, primarily for office and warehouse facilities and
transportation and office equipment. Many leases provide for rent escalations,
purchase and renewal options, contingent rentals based on miles driven and
payment of executory costs. Rent expense was approximately $51,176,000,
$17,902,000 and $15,384,000 (including contingent rentals) in fiscal 1998, 1997
and 1996, respectively.
Property and equipment include the following amounts under capital leases
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 28,
1998 1997
------------ ------------
<S> <C> <C>
Land........................................................ $ 692 $ 692
Buildings and improvements.................................. 14,122 6,891
Delivery and automotive equipment........................... 37,551 28,778
Warehouse equipment......................................... 5,595 2,227
Furniture, fixtures and office equipment.................... 16,603 3,312
------- -------
74,563 41,900
Less accumulated amortization............................... 13,258 6,456
------- -------
Property and equipment under capital leases, net............ $61,305 $35,444
======= =======
</TABLE>
F-19
<PAGE> 56
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a schedule of aggregate future minimum lease payments
(excluding contingent rentals) required under terms of the aforementioned leases
at December 26, 1998 (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR ENDING LEASES LEASES
- ------------------ ------- ---------
<S> <C> <C>
1999........................................................ $16,558 $ 49,917
2000........................................................ 15,555 46,688
2001........................................................ 13,578 41,058
2002........................................................ 9,347 34,302
2003........................................................ 7,151 28,601
Thereafter.................................................. 37,452 136,148
------- --------
Total....................................................... 99,641 $336,714
========
Less amount representing interest........................... 34,847
-------
Present value of net minimum lease commitments.............. $64,794
=======
</TABLE>
16. CONCENTRATION OF CREDIT RISK
On a pro forma basis, as defined below, Tricon accounted for approximately
21% of the Company's 1998 net sales. Darden Restaurants, Inc., which owns all
the Red Lobster and Olive Garden restaurants, accounted for approximately 10% of
1998 pro forma net sales.
In connection with the PFS acquisition, the Company was assigned and
assumed a distribution agreement between PFS and the Pizza Hut, Taco Bell and
KFC businesses now comprising Tricon. The agreement provides that the Company is
the exclusive distributor of a substantial majority of food and supply products
purchased by Tricon's U.S. company-owned restaurants. In September 1998, Tricon
and the Company agreed to revise and extend the term of the agreement to seven
and one-half years from five years, with an additional two and one-half year
extension option. Including this option period, the agreement expires July 2007.
The Company provides service to Red Lobster and Olive Garden restaurants
under exclusive distribution agreements effective June 1997 and expiring in May
2002.
The table below presents the Company's net sales to major restaurant
concept served, including both company-owned and franchised units, as an
approximate percentage of the Company's total pro forma net sales. The pro forma
data for fiscal 1998 reflects inclusion of ProSource's net sales for the full
year, but exclusion of net sales to the Wendy's concept. The pro forma data for
fiscal 1997 reflects inclusion of PFS' net sales for the full year.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Burger King................................................. 25% 5%
Taco Bell................................................... 17% 29%
Pizza Hut................................................... 16% 27%
KFC......................................................... 7% 12%
Red Lobster................................................. 7% --
Arby's...................................................... 4% 7%
Wendy's..................................................... -- 11%
</TABLE>
17. STOCKHOLDER'S EQUITY
On May 20, 1998, NEHC's Board of Directors approved the following
recapitalization actions:
(a) Fourteen million shares of new Class B voting common stock, par
value $.01 per share, were authorized.
F-20
<PAGE> 57
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(b) Each of the outstanding shares of Class A voting common stock
(6,508 shares) and Class B nonvoting common stock (1,733 shares) was
converted to 1,000 shares of new Class B voting common stock, resulting in
8,241,000 outstanding shares of the new Class B common stock. The
previously authorized 30,000 shares of Class A voting common stock and
20,000 shares of Class B nonvoting common stock were canceled.
(c) One million shares of new Class A nonvoting common stock, par
value $.01 per share, were authorized in connection with the adoption of
the 1998 Management Stock Option Plan (the Plan -- see Note 13). The Class
A common stock would become voting in the event of an initial Public
Offering (as defined in the Plan).
The previously outstanding 13 1/2% senior exchangeable preferred stock, 15%
junior exchangeable preferred stock and junior nonconvertible preferred stock
were redeemed in March 1998 upon the issuance of 11 1/4% senior redeemable
exchangeable preferred stock (see Note 6).
Accumulated preferred stock dividends in arrears were $1,875,000 at
December 27, 1997. There were no preferred stock dividends in arrears at
December 26, 1998.
Warrants to purchase up to an aggregate 4,663,000 shares of the new Class B
voting common stock were outstanding at December 26, 1998, of which 1,759,000
expire in 2006 and the remainder expire in 2009.
18. CONDENSED UNCONSOLIDATED FINANCIAL STATEMENTS
Provided below are the condensed unconsolidated financial statements of
NEHC (parent company only).
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
<S> <C> <C>
Condensed balance sheets:
Cash and cash equivalents................................. $ 32,979 $ 320
Due from affiliate........................................ 11,897 5,046
Investment in subsidiaries................................ 226,500 176,500
Other assets.............................................. 300 --
-------- --------
$271,676 $181,866
======== ========
Accounts payable and accrued liabilities.................. $ 373 $ 188
Due to affiliate.......................................... 1,081 --
Subordinated loans........................................ 65,625 58,199
Senior redeemable exchangeable preferred stock............ 262,107 --
Stockholders' equity (deficit)............................ (57,510) 123,479
-------- --------
$271,676 $181,866
======== ========
Condensed statements of income (loss):
Selling, general and administrative expenses.............. $ 20 $ 177
Interest expense, net..................................... 4,881 5,821
Income taxes.............................................. 222 --
Extraordinary loss........................................ -- 6,562
-------- --------
$ (5,123) $(12,560)
======== ========
</TABLE>
F-21
<PAGE> 58
NEBCO EVANS HOLDING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 26, DECEMBER 27,
1998 1997
------------ ------------
<S> <C> <C>
Condensed statements of cash flows:
Net cash provided by (used in) operating activities....... $ 2,188 $(11,007)
-------- --------
Investing activities:
Business acquired, net of cash acquired................ -- (1,500)
Investment in subsidiary............................... (50,000) (130,000)
Due from affiliates.................................... (5,769) --
-------- --------
Net cash used in investing activities..................... (55,769) (131,500)
-------- --------
Financing activities:
Proceeds from issuance of preferred stock and
warrants.............................................. 250,000 115,000
Financing fees incurred................................ (10,000) --
Redemption of preferred stock.......................... (153,760) --
Proceeds from issuance of long-term debt............... -- 55,000
Repayment of debt...................................... -- (27,173)
-------- --------
Net cash provided by financing activities................... 86,240 142,827
-------- --------
Net increase in cash and cash equivalents................... 32,659 320
Cash and cash equivalents at beginning of year.............. 320 --
-------- --------
Cash and cash equivalents at end of year.................... $ 32,979 $ 320
======== ========
</TABLE>
19. CONTINGENCIES
NEHC is subject to various claims and contingencies related to lawsuits,
taxes, environmental and other matters arising out of the normal course of
business. Management believes that the ultimate liability, if any, in excess of
amounts already recognized arising from such claims or contingencies is not
likely to have a material adverse effect on NEHC's annual results of operations
or financial condition.
F-22
<PAGE> 59
NEBCO EVANS HOLDING COMPANY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-----------------------------------------------------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER ACQUISITIONS AT END
OF YEAR EXPENSES ACCOUNTS BALANCE DEDUCTIONS(1) OF YEAR
---------- ---------- ---------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 28, 1996:
Allowance for doubtful
accounts................... $ 1,170 $1,306 -- $ 3,385 $ (525) $ 5,336
Year ended December 27, 1997:
Allowance for doubtful
accounts................... $ 5,336 $2,019 -- $10,032 $(1,821) $15,566
Year ended December 26, 1998:
Allowance for doubtful
accounts................... $15,566 $4,746 -- $ 7,541 $(4,001) $23,852
</TABLE>
- ---------------
(1) Represents uncollectible accounts written off, net of recoveries.
<PAGE> 60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NEBCO EVANS HOLDING COMPANY
(Registrant)
By: /s/ JOHN V. HOLTEN
----------------------------------
John V. Holten
Chairman and Chief Executive
Officer
Date: March 25, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- --------------
<C> <S> <C>
/s/ JOHN V. HOLTEN Director, Chairman and Chief March 25, 1999
- ----------------------------------------------------- Executive Officer
John V. Holten
/s/ DIANA M. MOOG Executive Vice President and March 25, 1999
- ----------------------------------------------------- Chief Financial Officer
Diana M. Moog
/s/ STANLEY J. SZLAUDERBACH Vice President and Chief March 25, 1999
- ----------------------------------------------------- Accounting Officer
Stanley J. Szlauderbach
/s/ JOHN R. EVANS Director and Vice Chairman March 25, 1999
- -----------------------------------------------------
John R. Evans
/s/ RAYMOND E. MARSHALL Director, Executive Vice March 25, 1999
- ----------------------------------------------------- President and Vice Chairman
Raymond E. Marshall
/s/ DAVID R. PARKER Director and Vice Chairman March 25, 1999
- -----------------------------------------------------
David R. Parker
/s/ THOMAS C. HIGHLAND Director, Executive Vice March 25, 1999
- ----------------------------------------------------- President and Vice Chairman
Thomas C. Highland
/s/ GUNNAR E. KLINTBERG Director and Assistant March 25, 1999
- ----------------------------------------------------- Secretary
Gunnar E. Klintberg
/s/ LEIF F. ONARHEIM Director March 25, 1999
- -----------------------------------------------------
Leif F. Onarheim
/s/ PETER T. GRAUER Director March 25, 1999
- -----------------------------------------------------
Peter T. Grauer
/s/ BENOIT JAMAR Director March 25, 1999
- -----------------------------------------------------
Benoit Jamar
/s/ DANIEL W. CRIPPEN Director March 25, 1999
- -----------------------------------------------------
Daniel W. Crippen
</TABLE>
<PAGE> 61
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
2.1 -- Asset Purchase Agreement between PepsiCo, Inc. and Nebco
Evans Holding Company (incorporated by reference to
Exhibit 2.2 to the Registrant's Registration Statement
Form S-4 No. 333-33225 filed August 8, 1997).
2.2 -- Agreement and Plan of Merger, dated as of January 29,
1998, by and among AmeriServe Food Distribution, Inc.,
Steamboat Acquisition Corp. and ProSource, Inc.
(incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K, dated January
29, 1998).
3.1 -- Restated Certificate of Incorporation of NEHC
(incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K filed on March
27, 1998
3.2 -- By-Laws of NEHC (incorporated by reference to Exhibit 3.2
to the Registrant's Registration Statement on Form S-4,
No. 333-33223 filed August 8, 1997).
4.1 -- Indenture, dated as of October 15, 1997, by and among the
Company, the Subsidiary Guarantors and State Street Bank
and Trust Company, with respect to the Senior Notes
(incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-4 No.
333-38337 filed October 21, 1997).
4.2 -- Form of New Senior Discount Notes (incorporated by
reference to Exhibit 4.2 to the Registrant's Registration
Statement on Form S-4, No. 333-33223 filed August 8,
1997).
4.3 -- Supplemental 8 7/8% New Senior Notes Indenture, dated as
of December 23, 1997, by and among AmeriServe Food
Distribution, Inc., AmeriServ Food Company, and State
Street Bank and Trust Company, as Trustee (incorporated
by reference to Exhibit 4.2 to the Registrant's Current
Report on Form 8-K, dated December 28, 1997).
4.4 -- Indenture, dated as of July 11, 1997, by and among the
Company, the Subsidiary Guarantors and State Street Bank
and Trust Company, with respect to the new Senior
Subordinated Notes (incorporated by reference to Exhibit
4.1 of the Registrant's Registration Statement on Form
S-4 No. 333-33225 filed August 8, 1997).
4.5 -- Supplemental 10 1/8% New Senior Subordinated Notes
Indenture, dated as of December 23, 1997, by and among
AmeriServe Food Distribution, Inc., AmeriServ Food
Company, and State Street Bank and Trust Company, as
Trustee (incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K, dated December
28, 1997).
4.6 -- Purchase Agreement, by and among the Registrant, the
Subsidiary Guarantors, Donaldson, Lufkin & Jenrette
Securities Corporation and BancAmerica Securities dated
as of July 9, 1997 (incorporated by reference to Exhibit
4.4 to the Registrant's Registration Statement Form S-4
No. 333-33225 filed August 8, 1997).
4.7 -- Purchase Agreement, by and among the Registrant, the
Subsidiary Guarantors, Donaldson, Lufkin & Jenrette
Securities Corporation and BancAmerica Robertson Stephens
dated as of October 8, 1997 (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement on
Form S-4 No. 333-38337 filed October 21, 1997).
4.8 -- Second Supplemental 8 7/8% New Senior Notes Indenture,
dated as of May 21, 1998, by and among AmeriServe Food
Distribution, Inc. and State Street Bank and Trust
Company (incorporated by Reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated May 21,
1998).
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
4.9 -- Second Supplemental 10 1/8% New Senior Subordinated Notes
Indenture, dated as of December 23, 1997, by and among
AmeriServe Food Distribution, Inc., AmeriServ Food
Company, and State Street Bank and Trust Company
(incorporated by reference to Exhibit 4.3 to the
Registrant's Current Report on Form 8-K dated May 21,
1998).
10.1 -- Registration Rights Agreement, dated as of July 11, 1997,
by and among the Registrant, the Subsidiary Guarantors
and Donaldson, Lufkin & Jenrette Securities Corporation
(incorporated by reference to Exhibit 10.1 to the
Registrant's Registration Statement on Form S-4 No.
333-33225 filed August 8, 1997).
10.2 -- Registration Rights Agreement, dated as of October 15,
1997, by and among the Registrant, the Subsidiary
Guarantors and Donaldson, Lufkin & Jenrette Securities
Corporation (incorporated by reference to Exhibit 10.1 to
the Registrant's Registration Statement on Form S-4 No.
333-38337 filed October 21, 1997).
10.3 -- Employment Agreement, dated as of December 23, 1986
between the Company and Raymond E. Marshall, as amended
by Amendment to Employment Agreement, dated as of January
1, 1995 (incorporated by reference to Exhibit 10.4 to the
Registrant's Registration Statement on Form S-4 No.
333-33225 filed August 8, 1997).
10.4 -- Employment Agreement, dated as of July 1, 1998 between
the Company and Thomas C. Highland.*
10.5 -- Employment Agreement, dated as of November 26, 1997
between the Company and Kenneth R. Lane.*
10.6 -- Employment Agreement, dated as of August 15, 1997 between
the Company and Diana M. Moog.*
10.7 -- Amended and Restated Sales and Distribution Agreement
dated as of November 1, 1998, by and among PFS, Pizza
Hut, Taco Bell, Kentucky Fried Chicken Corporation and
Kentucky Fried Chicken of California, Inc.*
10.8 -- Third Amended and Restated Credit Agreement, dated as of
May 21, 1998 among AmeriServe Food Distribution, Inc.,
Bank of America National Trust and Savings Association,
as Administrative Agent, Donaldson, Lufkin and Jenrette
Securities Corporation, as Documentation Agent, Bank of
America National Trust and Savings Association, as Letter
of Credit Issuing Lender and the Other Financial
Institutions Party Thereto, Arranged by BancAmerica
Robertson Stephens (incorporated by reference to Exhibit
10.1 to the Registrants Quarterly Report on Form 10-Q
filed November 10, 1998).
10.9 -- First Amendment to Third Amended and Restated Credit
Agreement, dated as of July 24, 1998.*
10.10 -- Amended and Restated Pooling and Servicing Agreement,
dated as of July 28, 1998 among AmeriServe Funding
Corporation, AmeriServe Food Distribution, Inc. and
Norwest Bank Minnesota, N.A.*
10.11 -- Series 1998-1 Supplement to Pooling and Servicing
Agreement, dated as of July 28, 1998 among AmeriServe
Funding Corporation, AmeriServe Food Distribution, Inc.
and Norwest Bank Minnesota, N.A.*
10.12 -- Series 1998-3 Supplement to Pooling and Servicing
Agreement, dated as of December 18, 1998 among AmeriServe
Funding Corporation, AmeriServe Food Distribution, Inc.
and Norwest Bank Minnesota, N.A.*
10.13 -- Series 1998-4 Supplement to Pooling and Servicing
Agreement, dated as of December 18, 1998 among AmeriServe
Funding Corporation, AmeriServe Food Distribution, Inc.
and Norwest Bank Minnesota, N.A.*
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
10.14 -- Nebco Evans Holding Company 1998 Management Stock Option
Plan (incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-8 No.
333-53095 filed on May 20, 1998.
21 -- Subsidiaries of the Registrant.*
27.1 -- Financial Data Schedule.*
99.1 -- AmeriServe Food Distribution, Inc. Press Release dated
March 24, 1999 announcing Fourth Quarter and Full Year
1998 Operating Results.*
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), dated as of July 1, 1998,
by and between AmeriServe Food Distribution, Inc., a Delaware corporation (the
"Company"), and Thomas C. Highland (the "Employee").
RECITALS
WHEREAS, ProSource Services Corporation and the Employee are
parties to an Amended and Restated Employment Agreement, dated as of November
15, 1996 (the "Prior Agreement"); and
WHEREAS, pursuant to that certain Agreement and Plan of
Merger dated as of January 29, 1998, by and among AmeriServe Food Distribution,
Inc., Steamboat Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of AmeriServe, and ProSource, Inc., a Delaware corporation
("ProSource"), the operations of ProSource and the Company will be combined;
and
WHEREAS, the parties hereto desire to enter into this
Agreement to set forth the terms and conditions for the employment relationship
of the Employee with the Company and to replace and supersede the Prior
Agreement.
NOW, THEREFORE, the parties agree as follows:
1. EFFECTIVENESS AND EMPLOYMENT. The Company shall employ the
Employee and the Employee shall be employed by the Company as of the date of
this Agreement (the "Commencement Date").
2. TERM. The term of this Agreement and the employment of the
Employee hereunder shall commence as of the Commencement Date, continue until
July 1, 2001, and automatically shall be extended for additional one-year
periods commencing on July 1, 2001, unless terminated (a) by the Company or the
Employee effective as of July 1, 2001 or any subsequent anniversary thereof,
upon the giving of written notice of such party's intention to terminate on or
before April 1 of the year in which such employment is to terminate, or (b) as
provided in Section 5.
3. POSITIONS AND DUTIES; PLACE OF PERFORMANCE.
(a) POSITIONS AND DUTIES. The Employee shall be employed as
Executive Vice President - Chain Management and Vice Chairman of the Company
and shall have the duties, responsibilities and authority as may from time to
time be assigned to him by the Company's Board of Directors (the "Board")
and/or the Chief Executive Officer of the Company that are consistent with and
normally associated with such position and, without additional compensation,
shall serve as a member of the Board. The Employee shall devote substantially
all of his business time, effort, and energies exclusively to the business of
the Company and its subsidiaries, and shall not serve as an active principal or
a director or officer of any other company or entity without the prior written
consent of the Board, except that the Employee may serve, without such consent,
as a director or officer of any company on the board of which he is currently
serving and of any trade association, civic, educational or charitable
organization unless the Board determines that such service interferes with the
performance of the Employee's duties hereunder.
<PAGE> 2
(b) PLACE OF PERFORMANCE. Except for required travel on the
Company's business, the Employee shall be based in the Miami, Florida
metropolitan area until July 1, 2001 and, thereafter, in a location as shall be
mutually agreed upon between the parties.
4. COMPENSATION AND BENEFITS.
(a) BASE SALARY. Effective as of the Commencement Date,
the Company shall pay the Employee a base salary at the rate of no less than
$475,000 per year (the "Base Salary"), payable in accordance with the Company's
normal payroll practices for senior executives. The Board shall review the Base
Salary annually; the Employee shall be entitled to such increases in his Base
Salary as may be determined from time to time by the Board or pursuant to its
delegation. If the Base Salary is increased, the new salary shall thereafter
constitute the "Base Salary" for purposes of this Agreement.
(b) BONUSES. In addition to Base Salary, the Employee may
receive a cash bonus. The bonus shall be determined by the Board or the
appropriate committee thereof, in its sole discretion.
(c) OTHER BENEFIT PLANS AND FRINGE BENEFITS. The Employee
shall be eligible to (i) participate in the Nebco Evans Holding Company 1998
Management Stock Option Plan and the 1998 AmeriServe SERP, (ii) participate in
the employee benefit plans maintained by ProSource that the Employee currently
participates in until such plans are integrated with the Company's plans, and,
after such integration during the employment term, the Employee shall
participate in the Company's employee benefit plans for its senior management
executives, (iii) except as expressly provided herein, receive all fringe
benefits for which his status and level of employment qualify him in accordance
with the Company's usual plans, policies, and arrangements, and (iv) be
reimbursed for up to $7,500 for actual expenses incurred for, among other
things, financial consulting and tax planning and preparation services and
legal advice. Notwithstanding anything to the contrary contained herein, in no
event shall the Employee be entitled to receive duplicate benefits under this
Agreement or any plan or program of ProSource or the Company.
(d) VACATION. The Employee shall be entitled to four weeks
of paid vacation annually. The Employee shall determine, in his reasonable
discretion, the timing of such vacation.
(e) AUTOMOBILE. During the term of his employment, the
Company shall pay to the Employee on a monthly basis an amount equal to $1,750
to cover the monthly cost of an automobile of his choice and related expenses,
including insurance on, maintenance of, and fuel for, the automobile.
(f) INITIATION FEES/CLUB DUES. The Employee shall be
eligible to join a country club in the Miami Area and be reimbursed his
initiation fee and monthly dues during
-2-
<PAGE> 3
the term of employment. In the event the Employee is relocated, the Company
agrees to review the benefits provided by this Section 4(f) with the Employee
and to consider in good faith any change hereto that may be required to
preserve the economic purposes of this Agreement.
(g) OFFICE. During the term, the Employee shall be
provided with office space, secretarial and other staff support, and
communication equipment substantially similar to those currently made available
to the Employee.
(h) EXPENSES. The Company will promptly reimburse the
Employee for all business expenses incurred by him in connection with the
performance of his duties to the Company and its subsidiaries.
(i) RELOCATION POLICY. If the Employee is requested to
relocate his principal residence for the Company's benefit and the Employee
agrees to relocate, the Employee shall be reimbursed for all expenses in
accordance with the Company's relocation policy as in effect from time to time.
5. TERMINATION.
(a) COMPENSATION AND BENEFITS. Except as otherwise
provided in this Section 5 or Section 7, upon termination of the Employee's
employment hereunder, his right to compensation hereunder shall cease except
that the Employee shall be entitled to receive his Base Salary and benefits up
to the Date of Termination (as defined in Section 5(e)) or for the period
required by law.
(b) DEATH AND DISABILITY. The Employee's employment
hereunder shall terminate upon his death and may be terminated by the Company
due to the Employee's Disability or by the Employee for Good Reason. For
purposes of this Agreement, "Disability" shall mean the determination by a
qualified physician that the Employee is physically or mentally incapacitated
and has been unable for a period of six consecutive months, or for shorter
periods aggregating six months in any period of 12 consecutive months, to
perform the duties for which he was responsible immediately before the onset of
his incapacity, followed by his failure to return to performance of his duties
with the Company within thirty (30) days after written Notice of Termination
due to Disability is given to him. To assist the physician in making such a
determination, the Employee shall, as reasonably requested by the physician,
(i) make himself available for medical examinations, without cost to the
Employee, by such physician chosen by the Board and approved by the Employee,
whose approval shall not unreasonably be withheld, and (ii) grant for purposes
of this Agreement such physician access to all relevant medical information
concerning him, arrange to furnish copies of medical records to such physician,
and use his best efforts to cause his own physicians to be available to discuss
his health with such physician. The determination of the physician chosen in
accordance with the preceding sentence shall be made in writing to the Company
and the Employee and be final and binding on the Company and the Employee for
purposes of this Agreement.
-3-
<PAGE> 4
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Employee's
employment hereunder may be terminated by the Company for Cause. For purposes
of this Agreement, the term "Cause" shall mean (i) the Employee's conviction of
a crime involving actual dishonesty against the Company or any of its
affiliates, (ii) gross negligence or gross misconduct by the Employee against
the Company or another employee, or in carrying out his duties and
responsibilities, or (iii) a breach of the provisions of Section 6(a) or (b)
hereof that is harmful to the Company or any of its affiliates. In any case
described in this Section 5(c), the Board shall give the Employee written
notice, in accordance with Section 5(e), that the Company intends to terminate
his employment for Cause (the "Preliminary Cause Notice"). The Preliminary
Cause Notice shall specify the particular act or acts or failure to act that is
or are the basis for the decision to so terminate the Employee's employment for
Cause. The Board shall give the Employee, together with counsel, an opportunity
to meet with the Board to defend such act or acts or failure to act within 30
calendar days of the Employee's receipt of such notice and to correct such act
or failure to act within 30 business days following such meeting. If the
Employee fails to correct such act or failure to act within the 30 business
days following the meeting, the Employee's employment by the Company shall be
terminated under this Section 5(c) for Cause as of the Date of Termination.
(d) COMPENSATION UPON TERMINATION WITHOUT CAUSE OR FOR
DISABILITY.
(i) On or Prior to July 1, 2001. If the Company terminates
the Employee's employment hereunder on or before July 1, 2001 other than for
Cause (excluding non-renewal of this Agreement in accordance with Section 2
hereof) or for the Employee's Disability (in accordance with Section 5(b)
hereof):
(A) In addition to the amounts paid to the Employee
pursuant to Section 5(a) and a cash bonus in an amount equal to the
pro rata portion of the actual incentive payment that the Employee
would have received for the year in which the Date of Termination
occurs but for such termination, in lieu of any further salary
payments to the Employee for any period subsequent to the Date of
Termination, the Company shall pay to the Employee the greater of (1)
the amount equal to the Employee's annual Base Salary in effect as of
the Date of Termination for the period equal to the number of months
(and portions thereof) from the Date of Termination until July 1, 2001
(the "Remaining Term"), or (2) the amount equal to the product of (x)
1.5 and (y) 18 months' Base Salary. For purposes of this Section
5(d)(i), the "Continuation Period" shall be the Remaining Term or the
18 month period referred to in clause 2, as applicable. Except as
provided in Section 7, the applicable amount described in this
Paragraph (A) shall be paid in substantially equal monthly payments
during the Continuation Period, except that the Company may determine,
in its sole discretion, to pay such amount (or any portion remaining
during such period if periodic payments have commenced) in a single
lump sum in cash or, if so requested by the Employee, in two lump
sums.
(B) For the Continuation Period, the Company shall
continue to provide the Employee (and his eligible dependents, if any)
with (1) group health and life insurance benefits and long-term
disability insurance coverage (or the economic equivalent thereof)
-4-
<PAGE> 5
at the level in effect on the Date of Termination, (2) the perquisite
allowance referred to in Section 4(c) (iv), and (3) the benefits
referred to in Sections 4(e) and 4(f); provided that if the Employee
is employed by another employer during the Continuation Period such
benefits and insurance coverage shall cease on the date of employment
by an employer other than the Company, and further provided that, at
the expiration of the Continuation Period, the Employee (and his
eligible dependents, if any) shall be entitled to the full period of
coverage provided him under Section 4980B of the Internal Revenue Code
of 1986, as amended, unless other employment has been obtained.
(C) The Company shall reimburse the Employee for actual
costs incurred in seeking reemployment, including costs of
outplacement services up to a maximum of $25,000.
(ii) After July 1, 2001. If the Company terminates the
Employee's employment hereunder after July 1, 2001 other than for Cause
(including non-renewal of this Agreement in accordance with Section 2 hereof)
or for the Employee's Disability (in accordance with Section 5(b) hereof), in
addition to the amounts paid to the Employee pursuant to Section 5(a), in lieu
of any further salary payments to the Employee subsequent to the Date of
Termination, the Company shall continue to pay the Employee that year's
prorated bonus and his Base Salary and to provide the benefits described in
Section 5(d)(i)(B) above for the 15-month period following the Date of
Termination.
(e) NOTICE OF TERMINATION; DATE OF TERMINATION. Any
termination of the Employee's employment, other than by reason of his death,
shall be communicated by the terminating party by a written notice of
termination (the "Notice of Termination"). The Notice of Termination shall (i)
indicate the specific termination provision in this Agreement upon which the
termination is based, (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated, and (iii) specify the Date of
Termination. For purposes of this Agreement, "Date of Termination" shall mean
(i) if the Employee's employment is terminated by his death, the date of his
death, and (ii) in all other cases, the later of the date of actual receipt of
the Notice of Termination and the date specified in such notice. The Date of
Termination shall not occur prior to the completion of the cure period
described in Section 5(c) if termination is for Cause.
(f) During any period in which the Employee is receiving
payments from the Company following the Employee's termination of employment,
the Employee will be available from time to time as may be reasonably requested
by the Company to provide consulting services to the Company.
6. COVENANTS
(a) CONFIDENTIALITY. The Employee acknowledges that he has
acquired and will acquire confidential information respecting the business of
the Company. Accordingly, the Employee agrees that he will not willfully
disclose, at any time (during the employment term or thereafter), any such
confidential information to any unauthorized third party without the consent of
the Company as authorized by the Board. For this purpose, information shall
-5-
<PAGE> 6
be considered confidential only if such information is proprietary to the
Company and has not been made publicly available prior to its disclosure by the
Employee.
(b) COMPETITIVE ACTIVITY. (i) If the Employee's employment
hereunder is terminated, the Employee shall not, without the written consent of
the Board, during (A) the Continuation Period (in the case of a termination
entitling the Employee to severance under Section 5(d)(i)), (B) the fifteen
month period following the Date of Termination (in the case of a termination
entitling the Employee to severance under Section 5(d)(ii)) or (C) the eighteen
month period following the Date of Termination (in the case of all other
terminations of employment), directly, individually or as an employee, agent,
partner, shareholder, consultant or in any other capacity, participate in,
engage in or have a financial interest or management position or other interest
in any business operation or any enterprise that engages in the business(es) of
the Company or any of the affiliated companies or operating companies of the
Company, which is in direct competition with the Company or its affiliates,
including, without limitation, a purchasing cooperative of the Company or its
affiliated companies that engages in the food service distribution business or
fast food vending (whether retail or wholesale) business. The ownership of an
interest constituting not more than 5% of the outstanding debt or equity in a
corporation the shares of which are traded on a recognized stock exchange or
trade in the over-the-counter market, even though that corporation may be a
competitor of the Company or any of its subsidiaries, shall not be deemed
financial participation in a competitor or from being employed by any person or
entity where the services performed by the Employee are not in furtherance of
such person or entity's competition with the Company.
(ii) The Employee shall not, without the written consent
of the Board, during the employment term and for eighteen months following the
Date of Termination, directly or indirectly, either for his own benefit or for
the benefit of any other person, solicit to take away, or take away any
customers doing business with the Company on the Date of Termination or who
were being solicited to become customers as of the Date of Termination or
recruit, induce, or encourage any employee of the Company or any affiliate of
the Company to terminate such employee's employment with the Company or such
affiliate, except that nothing herein shall prohibit the Employee from giving a
reference or a recommendation to any third party with respect to any such
employee.
(c) REMEDY FOR BREACH AND MODIFICATION. The Employee
acknowledges that the confidentiality and competitive activities provisions of
this Section 6 are reasonable and necessary for the protection of the Company
and that the Company will be irrevocably damaged if such provisions are not
specifically enforced. Accordingly, the Employee agrees that, in addition to
any other relief or remedies available to the Company, the Company shall be
entitled to seek and obtain an appropriate injunction or other equitable remedy
from a court with proper jurisdiction for the purposes of restraining the
Employee from any actual or threatened breach of such provisions, and no bond
or security will be required in connection therewith. If any provision of this
Section 6 is deemed invalid or unenforceable, such provision shall be deemed
modified and limited to the extent necessary to make it valid and enforceable.
(d) Any termination of the Employee's employment or of
this Agreement shall have no effect on the continuing operation of this Section
6.
-6-
<PAGE> 7
SECTION 280G PAYMENTS. If the aggregate present value of the Employee's
payments under this Agreement, and any plan, program, or arrangement maintained
by the Company constitutes an "excess parachute payment" (within the meaning of
Section 280G(b) (1) of the Internal Revenue Code of 1986, as amended (the
"Code")) and the excise tax on such payment would cause the net parachute
payments (after taking into account federal, state and local income and excise
taxes) to which the Employee otherwise would be entitled to be less than what
the Employee would have netted (after taking into account federal, state and
local income taxes) had the present value of his total parachute payments
equaled $1.00 less than three times his "base amount" (within the meaning of
Code Section 280G(b)(3)(A)), the Employee's total "parachute payments" (within
the meaning of Code Section 280G(b)(2)(A)) shall be reduced (by the minimum
possible amount) so that their aggregate present value equals $1.00 less than
three times such base amount. For purposes of this calculation, it shall be
assumed that the Employee's tax rate will be the maximum marginal federal,
state and local income tax rate on earned income, with such maximum federal
rate to be computed with regard to Code Section 1(g), if applicable. If the
Employee and the Company are unable to agree as to the amount of the reduction
described above, if any, the Employee shall select a law firm or accounting
firm from among those regularly consulted (during the twelve-month period
immediately prior to the change in control that resulted in the
characterization of the payments as parachute payments) by the Company
regarding federal income tax or employee benefit matters and such law firm or
accounting firm shall determine the amount of such reduction and such
determination shall be final and binding upon the Employee and the Company.
7. INDEMNIFICATION. The Company shall indemnify, defend, and
hold the Employee harmless, to the maximum extent permitted by law, from any
and all claims, litigation, or suits arising out of the activities of the
Employee reasonably taken in the performance of his duties hereunder, including
all reasonable expenses and professional fees that may relate thereto. The
Company shall obtain a directors and officers liability insurance policy
covering the Employee in a sufficient amount to provide such indemnification if
such coverage is available on commercially reasonable terms and shall maintain
such policy during the employment term (and for so long thereafter as is
practicable in the circumstances taking into account the availability of such
insurance). If a policy cannot be obtained or upon the lapse of such policy, to
the fullest extent permitted by law, the Company will retain counsel to defend
the Employee or will advance legal fees and expenses to the Employee for
counsel select by the Employee in connection with any litigation or proceeding
relating to his service to or for the Company and its affiliates. The Company's
indemnification obligations shall cover the Employee's activities consulting
for the Company and shall survive the expiration of this Agreement.
8. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
agreements made and to be performed in that State.
(b) NOTICE. Any notice, consent, request or other
communication made or given in connection with this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
registered or certified mail, return receipt requested, to those listed below
at their following respective addresses or at such other address as each may
specify by notice to the others:
-7-
<PAGE> 8
To the Employee, to his attention at:
7120 Lago Drive West
Coral Gables, Florida 33134
Telephone: (305) 667-6740
Telecopy: (305) 669-0671
To the Company:
AmeriServe Food Distribution, Inc.
14841 Dallas Parkway
Dallas, Texas 75240-2100
Attention: General Counsel
Telephone: (972) 338-7000
Telecopy: (972) 338-6815
With copies (in the case of notice to the
Employee) to:
Joel I. Greenberg, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telephone: (212) 836-8201
Telecopy: (212) 836-8689
(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement shall
supersede any and all existing agreements and understandings between the
Employee and the Company or any of its affiliates and between the Employee and
ProSource, Inc. or any of its affiliates relating to the terms of the
Employee's employment, including without limitation, the Prior Agreement. This
Agreement may not be amended except by a written agreement signed by both
parties.
(d) WAIVER. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(e) ASSIGNMENT. Except as otherwise provided in this
Section 9(e), this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, representatives, successors and
assigns. This Agreement shall not be assignable by the Employee and shall be
assignable by the Company only to any corporation or other entity resulting
from the reorganization, merger, or consolidation of the Company with any other
corporation or entity or any corporation or entity to or with which the
Company's business or substantially all of its business or assets may be sold,
exchanged, or transferred, and it must be so assigned by the Company to, and
accepted as binding upon it by, such other corporation or entity in connection
with any such reorganization, merger, consolidation, sale, exchange, or
transfer (the provisions of this sentence also being applicable to any
successive such transaction).
-8-
<PAGE> 9
(f) HEADINGS. Section headings are used herein for
convenience of reference only and shall not affect the meaning of any provision
of this Agreement.
(g) RULES OF CONSTRUCTION. Whenever the context so
requires, the use of the masculine gender shall be deemed to include the
feminine and vice versa, and the use of the singular shall be deemed to include
the plural and vice versa.
(h) ATTORNEY'S FEES. The Company shall reimburse the
Employee, to the extent permitted by law, for the reasonable attorney's fees
and expenses which the Employee may reasonably incur as a result of any contest
by the Employee in enforcing his rights under this Agreement, provided that the
Employee is the prevailing party. The Company shall promptly reimburse the
Employee for all amounts due under this Paragraph.
(i) NO MITIGATION, REDUCTION OR OFFSET. The Employee shall
not be required to mitigate the amount of any severance or termination payment
provided for in this Agreement by seeking other employment or otherwise. Except
as expressly provided in Section 5(d)(i)(B) and provided that the Employee
complies with Section 6 hereof during all relevant time periods, the amount of
any payment of benefit provided for in this Agreement shall not be reduced by
any compensation earned by the Employee as the result of employment by another
employer or by any compensation or benefits paid by the Company or any other
employer. No payments to the Employee under this Agreement may be subject to
any manner of offset or setoff or shall be reduced by any amounts the Employee
may owe to the Company or its subsidiaries or by any claims that the Company
may have against the Employee.
(j) All payments provided under this Agreement, other than
payments made pursuant to a plan which provides otherwise, shall be paid in
cash or cash equivalents and shall be the responsibility of the Company and its
Parent.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the day and year first above written.
By and on behalf of
AMERISERVE FOOD DISTRIBUTION, INC.
By: /s/GUNNAR KLINTBERG
------------------------------------
Name: Gunnar Klintberg
Title: Vice President
THOMAS C. HIGHLAND
/s/THOMAS C. HIGHLAND
---------------------------------------
-10-
<PAGE> 1
EMPLOYMENT AGREEMENT
AGREEMENT by and between Ameriserve Food Distribution, Inc., a
Nebraska corporation (the "Company"), and Kenneth R. Lane (the "Executive"),
dated as of the 26th day of November, 1997.
WHEREAS, prior to July 11, 1997, the Executive was employed by the PFS
Division of Pepsico, Inc. ("Old PFS"); and
WHEREAS, pursuant to that certain Asset Purchase Agreement, dated as of
May 23, 1997 between Pepsico, Inc. and Nebco Evans Holding Company ("Nebco"),
and effective as of July 11, 1997 (the "Effective Date"), all of the assets of
Old PFS, were sold to Nebco, and Old PFS, together with a division of the
Company, became AmeriServe/PFS ("AmeriServe/PFS"); and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interest of the Company and its shareholders
to employ the Executive as the Senior Vice President, Operations of
AmeriServe/PFS, and the Executive desires to serve the Company in that capacity;
and
WHEREAS, the Company desires to employ the Executive and the Executive
desires to work for the Company.
<PAGE> 2
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. The Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement, for the period beginning on the Effective Date and ending on the
third anniversary thereof (the "Employment Period"), provided, however, that
commencing on the date two years after the Effective Date and on each annual
anniversary of such date (each annual anniversary thereof shall hereinafter be
referred to as the "Renewal Date"), unless previously terminated, the
Employment Period shall be automatically extended so as to terminate two years
from the Renewal Date, so that there is always between one and two years
remaining in the Employment Period, unless 90 days prior to the Renewal Date the
Company or the Executive shall terminate this Agreement by giving notice to the
other party that the Employment Period shall not be so extended (a "Notice of
Nonrenewal"). Notwithstanding any such termination, Section 6 of this Agreement
shall remain in full force and effect.
2. Position and Duties. During the Employment Period, the Executive
shall serve as Senior Vice President, Operations of AmeriServe/PFS, reporting to
the President of PFS
-2-
<PAGE> 3
Foodservice Distribution Group, with such duties and responsibilities as are
currently associated with such position. During the Employment Period, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive shall devote full attention and time during normal
business hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive under this
Agreement, use the Executive's reasonable best efforts to carry out such
responsibilities faithfully and efficiently. The Executive shall not, during the
term of this Agreement, engage in any other business activities that will
interfere with the Executive's employment pursuant to this Agreement. During the
Employment Period, the Executive's services shall be performed primarily at the
Company's offices in Dallas, Texas.
3. Compensation. (a) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") of
$194,000, payable in accordance with the normal payroll practices for executives
as in effect from time to time. Such Annual Base Salary shall be subject to
review annually in accordance with the review policies and practices for
executives as in effect at the time of any such review.
-3-
<PAGE> 4
(b) Bonus. For the 1997 calendar year, the Executive shall receive a
cash bonus on a basis consistent with the terms of the annual bonus plan
maintained by Old PFS, as in effect immediately prior to the Effective Date,
which shall be payable on March 1, 1998. The Executive shall also be eligible to
receive an additional bonus with respect to the period from the Effective Date
to December 31, 1997, pursuant to the terms of an interim bonus plan to be
established by the Company as soon as reasonably practicable. For each
subsequent calendar year ending during the Employment Period, the Executive
shall be eligible to receive an annual bonus, based upon the terms and
conditions of a new annual bonus program to be established by the Company. For
calendar years after 1997, any such annual bonus program shall provide that the
Executive's target bonus ("Target Annual Bonus") will be 50% of the Annual Base
Salary.
(c) Phantom Equity Plan. The Company expects to adopt, effective on or
about January 1, 1998, an equity incentive plan or program (the "Equity Plan")
for certain of its key executives. The Executive shall be entitled to
participate in the Equity Plan from and after the effective date thereof, in
accordance with the terms and conditions of such plan. Without limiting the
generality of the foregoing, upon the implementation of the Equity Plan, the
Executive shall be entitled to elect, on or before July 1, 1998, either (i) to
receive an award under such Equity Plan or (ii) to receive a cash bonus
-4-
<PAGE> 5
("Alternative Bonus") equal to the Executive's Annual Base Salary. The
Alternative Bonus shall be payable on March 31, 1999, provided, that the
Executive is still employed by the Company as of such payment date and that the
Executive has forfeited or waived all rights to compensation and benefits under
the Equity Plan.
(d) Supplemental Plan. The Company intends to adopt a supplemental
executive retirement or savings plan (the "Supplemental Plan") for certain key
executives, which is expected to be implemented as soon as reasonably
practicable. The Executive shall be entitled to participate in the Supplemental
Plan from and after the effective date thereof, on terms and conditions
substantially similar to peer executives.
(e) Deferred Compensation Program. The Company intends to adopt a
deferred compensation program (the "Deferred Compensation Program") for certain
of its key executives, which is expected to be implemented as soon as reasonably
practicable. The Executive shall be entitled to participate in the Deferred
Compensation Program from and after the effective date thereof, on terms and
conditions substantially similar to those applicable to peer executives.
-5-
<PAGE> 6
(f) Other Benefits. In addition to the foregoing, during the Employment
Period: (i) the Executive shall be entitled to participate in savings,
retirement, and fringe benefit plans, practices, policies and programs of the
Company as in effect from time to time, on the same terms and conditions as
those applicable to peer executives; (ii) the Executive shall be entitled to
four weeks of annual vacation, to be taken in accordance with the vacation
policy as in effect from time to time; (iii) the Executive shall be entitled to
participate in an automobile program on terms and conditions similar to the
automobile program of Old PFS, as in effect immediately prior to the Effective
Date; (iv) the Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in, and shall receive all benefits under
medical, dental, disability and other welfare benefit plans, practices, policies
and programs provided by the Company, as in effect from time to time, on the
same terms and conditions as those applicable to peer executives.
(g) For purposes of this Section 3, the Executive's peers shall be
those other executives employed by Ameriserve/PFS at level 17 or such other
peer group as shall be reasonably determined by the Company.
-6-
<PAGE> 7
4. Termination of Employment. (a) Death or Disability. In the event of
the Executive's death during the Employment Period, the Executive's employment
with the Company shall terminate automatically. The Company, in its discretion,
shall have the right to terminate the Executive's employment because of the
Executive's Disability during the Employment Period. "Disability" means that (i)
the Executive has been unable, for a period of 180 consecutive days, or for
periods aggregating 180 business days in any period of twelve months, to perform
the Executive's duties under this Agreement, as a result of physical or mental
illness or injury, and (ii) a physician selected by the Company or its insurers
has determined that the Executive's incapacity is total and permanent. A
termination of the Executive's employment by the Company for Disability shall be
communicated to the Executive by written notice, and shall be effective on the
30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), unless the Executive returns to full-time performance of the
Executive's duties before the Disability Effective Date.
(b) By the Company. In addition to termination for Disability, the
Company may terminate the Executive's employment during the Employment Period
for Cause or without Cause. "Cause" means:
(i) the continued and willful or deliberate failure of the Executive
substantially to perform the Executive's
-7-
<PAGE> 8
duties under this Agreement (other than as a result of physical or mental
illness or injury), or
(ii) illegal conduct or gross misconduct by the Executive, in either
case that is willful and results in material damage to the business or
reputation of the Company.
Upon the occurrence of events constituting Cause as defined in subsection (i) of
this paragraph (b), the Company shall give the Executive advance notice of any
such termination for Cause and shall provide the Executive with a reasonable
opportunity to cure.
(c) Voluntarily by the Executive. The Executive may terminate his
employment by giving written notice thereof to the Company.
(d) Date of Termination. The "Date of Termination" means the date of
the Executive's death, the Disability Effective Date, the date on which the
termination of the Executive's employment by the Company for Cause as set forth
in notice from the Company is effective, or the date on which the Executive
gives the Company notice of a termination of employment, as the case may be.
5. Obligations of the Company upon Termination. (a) By the Company
Other Than for Cause, Death or Disability: If, during the Employment Period, the
Company terminates the
-8-
<PAGE> 9
Executive's employment, other than for Cause, death or Disability, but
excluding any termination of employment at the end of the Employment Period
(whether or not as a result of a Notice of Nonrenewal by the Company), the
Company shall, for the remainder of the Employment Period as in effect
immediately before the Date of Termination, continue to pay the Executive the
Annual Base Salary and Annual Bonus(es) through the end of the then-current
Employment Period, as and when such amounts would be paid in accordance with
Sections 3(a) and (b) above; provided, that the amount of each of the Annual
Bonus(es) so paid shall equal the Target Annual Bonus. The Company shall also
continue to provide for the same period welfare benefits to the Executive and/or
the Executive's family, at least as favorable as those that would have been
provided to them under clause (f) (iv) of Section 3 of this Agreement if the
Executive's employment had continued until the end of the Employment Period;
provided, that during any period when the Executive is eligible to receive such
benefits under another employer-provided plan, the benefits provided by the
Company under this Section 5(a) may be made secondary to those provided under
such other plan. Notwithstanding anything contained herein to the contrary, if
during the Noncompetition Period (as defined in Section 6(b) hereof), the
Executive becomes associated with a Competitive Activity (within the meaning of
Section 6(b)
-9-
<PAGE> 10
hereof), the Company's obligation to continue to pay the Executive the Annual
Base Salary and Annual Bonus (es) and to provide welfare benefits (whether
primary or secondary) for the remainder of the then-current Employment Period
shall immediately cease, and, in full satisfaction of the Company's obligations
hereunder, the Company shall pay the Executive a lump-sum amount equal to the
product of (i) 50% and (ii) the sum of the Annual Base Salary and Annual
Bonus(es) otherwise payable to the Executive for the period of time from the
date the Executive first became associated with a Competitive Activity until the
end of the then-current Employment Period. For purposes hereof, the Executive
shall have an affirmative obligation to inform the Company immediately of his
anticipated or actual association with a Competitive Activity, and any failure
to do so will constitute a breach of this Agreement, thereby discharging the
Company from any further obligations to the Executive under this Agreement. The
payments provided pursuant to this Section 5(a) are intended as liquidated
damages for a termination of the Executive's employment by the Company other
than for Cause or Disability and shall be the sole and exclusive remedy
therefor.
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, the Company shall make, within
30 days after the Date of Termination, a lump-sum cash payment to the
Executive's
-10-
<PAGE> 11
estate equal to the sum of (i) the Executive's Annual Base Salary through the
end of the calendar month in which death occurs, (ii) any earned and unpaid
annual bonus amounts for any calendar year ended prior to the Date of
Termination, (iii) any accrued but unpaid vacation pay and (iv) any other vested
benefits to which the Executive is entitled, in each case to the extent not yet
paid.
(c) Disability. In the event the Executive's employment is terminated
by reason of the Executive's Disability during the Employment Period in
accordance with Section 4(a) hereof, the Company shall pay to the Executive or
the Executive's legal representative, as applicable, (i) the Executive's Annual
Base Salary for the duration of the Employment Period in effect on the Date of
Termination, provided that any such payments made to the Executive shall be
reduced by the sum of the amounts, if any, payable to the Executive under any
disability benefit plans of the Company or under the Social Security disability
insurance program, (ii) any earned and unpaid bonus amounts for any calendar
year ended prior to the Date of Termination and (iii) any other vested benefits
to which the Executive is entitled, in each case to the extent not yet paid.
(d) Cause; Voluntary Termination. If the Executive's employment is
terminated by the Company for Cause or the
-11-
<PAGE> 12
Executive voluntarily terminates his employment during the Employment Period,
the Company shall pay the Executive (i) the Annual Base Salary through the Date
of Termination and (ii) any other vested benefits to which the Executive is
entitled, in each case to the extent not yet paid, and the Company shall have no
further obligations under this Agreement.
6. Confidential Information; Noncompetition. (a) The Executive shall
hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies and their respective businesses that the Executive
obtains or obtained during the Executive's employment by the Company or any of
its affiliated companies and their respective businesses (including, but not
limited to, Old PFS) and that is not public knowledge (other than as a result of
the Executive's violation of this paragraph (a) of Section 6) ("Confidential
Information"). The Executive shall not communicate, divulge or disseminate
Confidential Information at any time during or after the Executive's employment
with the Company, except with the prior written consent of the Company or as
otherwise required by law or legal process.
(b) During the Noncompetition Period (as defined below), the Executive
shall not, without the prior written consent of the Chief Executive Officer of
the Company, engage in
-12-
<PAGE> 13
or become associated with a Competitive Activity. For purposes of this paragraph
(b) of Section 6: (i) the "Noncompetition Period" means the period during which
the Executive is employed by the Company and the one-year period following the
termination of the Executive's employment by the Company for Cause or
voluntarily by the Executive; (ii) a "Competitive Activity" means any business
or other endeavor that engages in limited menu or casual dining distribution
services, which is a direct competitor of the Company or any of its affiliated
companies and their respective businesses; and (iii) the Executive shall be
considered to have become "associated with a Competitive Activity" if he becomes
directly or indirectly involved as an owner, employee, officer, director,
independent contractor, agent, partner, advisor, or in any other capacity
calling for the rendition of the Executive's personal services, with any
individual, partnership, corporation or other organization that is engaged in a
Competitive Activity. Notwithstanding the foregoing, the Executive may make and
retain investments during the Noncompetition Period in not more than five
percent of the equity of any entity engaged in a Competitive Activity, if such
equity is listed on a national securities exchange or regularly traded in an
over-the-counter market.
7. Successors. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise
-13-
<PAGE> 14
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
8. Miscellaneous. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Nebraska without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
-14-
<PAGE> 15
(b) All notices and other communications under this Agreement shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Kenneth R. Lane
2804 Covey Place
Plano, Texas 75093
If to the Company:
Ameriserve Food Distribution, Inc.
14841 Dallas Parkway
Dallas, Texas 75240-2100
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 8. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
-15-
<PAGE> 16
(d) Notwithstanding any other provision of this Agreement, the Company
may withhold from amounts payable under this Agreement all federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement, whether written or oral, between them concerning
the subject matter hereof, including, but not limited to, the Summary of Terms
of Employment Agreement.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
-16-
<PAGE> 17
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ KENNETH R. LANE
----------------------------------------
Kenneth R. Lane
AMERISERVE FOOD DISTRIBUTION, INC.
/s/ GUNNAR KLINTBERG
-----------------------------------------
By: Gunnar Klintberg
Title: Vice President
-17-
<PAGE> 1
EMPLOYMENT AGREEMENT
AGREEMENT by and between Ameriserve Food Distribution, Inc., a
Nebraska corporation (the "Company"), and Diana Morris-Moog (the "Executive"),
dated as of the 15th day of August, 1997.
WHEREAS, prior to July 11, 1997, the Executive was employed by the PFS
Division of Pepsico, Inc. ("Old PFS"); and
WHEREAS, pursuant to that certain Asset Purchase Agreement, dated as of
May 23, 1997 between Pepsico, Inc. and Nebco Evans Holding Company ("Nebco"),
and effective as of July 11, 1997 (the "Effective Date"), all of the assets of
Old PFS, were sold to Nebco, and Old PFS, together with a division of the
Company, became AmeriServe/PFS ("AmeriServe/PFS"); and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interest of the Company and its shareholders
to employ the Executive as the Senior vice President-Finance and Treasurer of
AmeriServe/PFS, and the Executive desires to serve the Company in that capacity;
and
WHEREAS, the Company desires to employ the Executive and the Executive
desires to work for the Company.
<PAGE> 2
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. The Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement, for the period beginning on the Effective Date and ending on the
third anniversary thereof (the "Employment Period"), provided, however, that
commencing on the date two years after the Effective Date and on each annual
anniversary of such date (each annual anniversary thereof shall hereinafter be
referred to as the "Renewal Date"), unless previously terminated, the
Employment Period shall be automatically extended so as to terminate two years
from the Renewal Date, so that there is always between one and two years
remaining in the Employment Period, unless 90 days prior to the Renewal Date the
Company or the Executive shall terminate this Agreement by giving notice to the
other party that the Employment Period shall not be so extended (a "Notice of
Nonrenewal"). Notwithstanding any such termination, Section 6 of this Agreement
shall remain in full force and effect.
2. Position and Duties. During the Employment Period, the Executive
shall serve as Senior Vice President-Finance and Treasurer of AmeriServe/PFS,
with the duties and responsibilities customarily associated with such position.
During the Employment Period, and excluding any periods of vacation and sick
leave to which the Executive is entitled, the
-2-
<PAGE> 3
Executive shall devote full attention and time during normal business hours to
the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive under this Agreement,
use the Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. The Executive shall not, during the term of this
Agreement, engage in any other business activities that will interfere with the
Executive's employment pursuant to this Agreement. During the Employment Period,
the Executive's services shall be performed primarily at the Company's offices
in Dallas, Texas.
3. Compensation. (a) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") of
$200,000, payable in accordance with the normal payroll practices for executives
as in effect from time to time. Such Annual Base Salary shall be subject to
review annually in accordance with the review policies and practices for
executives as in effect at the time of any such review.
(b) Bonus. For the 1997 calendar year, the Executive shall receive a
cash bonus on a basis consistent with the terms of the annual bonus plan
maintained by Old PFS, as in effect immediately prior to the Effective Date,
which shall be payable on March 1, 1998. The Executive shall also be eligible
-3-
<PAGE> 4
to receive an additional bonus with respect to the period from the Effective
Date to December 31, 1997, pursuant to the terms of an interim bonus plan to be
established by the Company as soon as reasonably practicable. For each
subsequent calendar year ending during the Employment Period, the Executive
shall be eligible to receive an annual bonus, based upon the terms and
conditions of a new annual bonus program to be established by the Company. For
calendar years after 1997, any such annual bonus program shall provide that the
Executive's target bonus ("Target Annual Bonus") will be 50% of the Annual Base
Salary, subject to adjustment upon a change in the Executive's level as set
forth in paragraph (g) of this Section 3.
(c) Phantom Equity Plan. The Company expects to adopt, effective on or
about January 1, 1998, an equity incentive plan or program (the "Equity Plan")
for certain of its key executives. The Executive shall be entitled to
participate in the Equity Plan from and after the effective date thereof, in
accordance with the terms and conditions of such plan. Without limiting the
generality of the foregoing, upon the implementation of the Equity Plan, the
Executive shall be entitled to elect, on or before July 1, 1998, either (i) to
receive an award under such Equity Plan or (ii) to receive a cash bonus
("Alternative Bonus") equal to one and one-half (1-1/2) times the Executive's
Annual Base Salary. The Alternative Bonus
-4-
<PAGE> 5
shall be payable on March 31, 1999, provided, that the Executive is still
employed by the Company as of such payment date and that the Executive has
forfeited or waived all rights to compensation and benefits under the Equity
Plan.
(d) Supplemental Plan. The Company intends to adopt a supplemental
executive retirement or savings plan (the "Supplemental Plan") for certain key
executives, which is expected to be implemented as soon as reasonably
practicable. The Executive shall be entitled to participate in the Supplemental
Plan from and after the effective date thereof, on terms and conditions
substantially similar to peer executives.
(e) Deferred Compensation Program. The Company intends to adopt a
deferred compensation program (the "Deferred Compensation Program") for certain
of its key executives, which is expected to be implemented as soon as reasonably
practicable. The Executive shall be entitled to participate in the Deferred
Compensation Program from and after the effective date thereof, on terms and
conditions substantially similar to those applicable to peer executives.
(f) Other Benefits. In addition to the foregoing, during the Employment
Period: (i) the Executive shall be entitled to participate in savings,
retirement, and fringe benefit plans, practices, policies and programs of the
Company as in effect from time to time, on the same terms and conditions
-5-
<PAGE> 6
as those applicable to peer executives; (ii) the Executive shall be entitled to
three weeks of annual vacation, to be taken in accordance with the vacation
policy as in effect from time to time; (iii) the Executive shall be entitled to
participate in an automobile program on terms and conditions similar to the
automobile program of Old PFS, as in effect immediately prior to the Effective
Date; (iv) the Company shall pay a membership fee and the annual dues for the
Executive's club membership on terms and conditions to be established by the
Company for the club membership policy; and (v) the Executive and/or the
Executive's family, as the case may be, shall be eligible for participation in,
and shall receive all benefits under medical, dental, disability and other
welfare benefit plans, practices, policies and programs provided by the Company,
as in effect from time to time, on the same terms and conditions as those
applicable to peer executives.
(g) For purposes of this Section 3, the Executive's peers shall be
those other executives employed by Ameriserve/PFS at level 18 or such other
peer group as shall be reasonably determined by the Company.
4. Termination of Employment. (a) Death or Disability. In the event
of the Executive's death during the Employment Period, the Executive's
employment with the Company shall terminate automatically. The Company, in its
discretion,
-6-
<PAGE> 7
shall have the right to terminate the Executive's employment because of the
Executive's Disability during the Employment Period. "Disability" means that (i)
the Executive has been unable, for a period of 180 consecutive days, or for
periods aggregating 180 business days in any period of twelve months, to perform
the Executive's duties under this Agreement, as a result of physical or mental
illness or injury, and (ii) a physician selected by the Company or its insurers
has determined that the Executive's incapacity is total and permanent. A
termination of the Executive's employment by the Company for Disability shall be
communicated to the Executive by written notice, and shall be effective on the
30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), unless the Executive returns to full-time performance of the
Executive's duties before the Disability Effective Date.
(b) By the Company. In addition to termination for Disability, the
Company may terminate the Executive's employment during the Employment Period
for Cause or without Cause. "Cause" means:
(i) the continued and willful or deliberate failure of the Executive
substantially to perform the Executive's duties under this Agreement (other
than as a result of physical or mental illness or injury), or
(ii) illegal conduct or gross misconduct by the Executive, in either
case that is willful and results in material damage to the business or
reputation of the Company.
-7-
<PAGE> 8
Upon the occurrence of events constituting Cause as defined in subsection (i) of
this paragraph (b), the Company shall give the Executive advance notice of any
such termination for Cause and shall provide the Executive with a reasonable
opportunity to cure.
(c) Voluntarily by the Executive. The Executive may terminate his
employment by giving written notice thereof to the Company.
(d) Date of Termination. The "Date of Termination" means the date of
the Executive's death, the Disability Effective Date, the date on which the
termination of the Executive's employment by the Company for Cause as set forth
in notice from the Company is effective, or the date on which the Executive
gives the Company notice of a termination of employment, as the case may be.
5. Obligations of the Company upon Termination. (a) By the Company
Other Than for Cause, Death or Disability: If, during the Employment Period, the
Company terminates the Executive's employment, other than for Cause, death or
Disability, but excluding any termination of employment at the end of the
Employment Period (whether or not as a result of a Notice of Nonrenewal by the
Company), the Company shall, for the remainder of the Employment Period as in
effect immediately before the Date of Termination, continue to pay the Executive
-8-
<PAGE> 9
the Annual Base Salary and Annual Bonus(es) through the end of the then-current
Employment Period, as and when such amounts would be paid in accordance with
Sections 3(a) and (b) above; provided, that the amount of each of the Annual
Bonus(es) so paid shall equal the Target Annual Bonus. The Company shall also
continue to provide for the same period welfare benefits to the Executive and/or
the Executive's family, at least as favorable as those that would have been
provided to them under clause (f) (v) of Section 3 of this Agreement if the
Executive's employment had continued until the end of the Employment Period;
provided, that during any period when the Executive is eligible to receive such
benefits under another employer/provided plan, the benefits provided by the
Company under this Section 5(a) may be made secondary to those provided under
such other plan. The payments provided pursuant to this Section 5(a) are
intended as liquidated damages for a termination of the Executive's employment
by the Company other than for Cause or Disability and shall be the sole and
exclusive remedy therefor.
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, the Company shall make, within
30 days after the Date of Termination, a lump-sum cash payment to the
Executive's estate equal to the sum of (i) the Executive's Annual Base Salary
through the end of the calendar month in which death or
-9-
<PAGE> 10
Disability occurs, (ii) any earned and unpaid annual bonus amounts for any
calendar year ended prior to the Date of Termination, (iii) any accrued but
unpaid vacation pay and (iv) any other vested benefits to which the Executive is
entitled, in each case to the extent not yet paid.
(c) Disability. In the event the Executive's employment is terminated
by reason of the Executive's Disability during the Employment Period in
accordance with Section 4 (a) hereof, the Company shall pay to the Executive or
the Executive's legal representative, as applicable, (i) the Executive's Annual
Base Salary for the duration of the Employment Period in effect on the Date of
Termination, provided that any such payments made to the Executive shall be
reduced by the sum of the amounts, if any, payable to the Executive under any
disability benefit plans of the Company or under the Social Security disability
insurance program, (ii) any earned and unpaid bonus amounts for any calendar
year ended prior to the Date of Termination and (iii) any other vested benefits
to which the Executive is entitled, in each case to the extent not yet paid.
(d) Cause; Voluntary Termination. If the Executive's employment is
terminated by the Company for Cause or the Executive voluntarily terminates his
employment during the Employment Period, the Company shall pay the Executive (i)
the Annual Base Salary through the Date of Termination and (ii) any
-10-
<PAGE> 11
other vested benefits to which the Executive is entitled, in each case to the
extent not yet paid, and the Company shall have no further obligations under
this Agreement.
6. Confidential Information; Noncompetition. (a) The Executive shall
hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliated companies and their respective businesses that the Executive
obtains or obtained during the Executive's employment by the Company or any of
its affiliated companies and their respective businesses (including, but not
limited to, Old PFS) and that is not public knowledge (other than as a result of
the Executive's violation of this paragraph (a) of Section 6) ("Confidential
Information"). The Executive shall not communicate, divulge or disseminate
Confidential Information at any time during or after the Executive's employment
with the Company, except with the prior written consent of the Company or as
otherwise required by law or legal process.
(b) During the Noncompetition Period (as defined below), the Executive
shall not, without the prior written consent of the Chief Executive Officer of
the Company, engage in or become associated with a Competitive Activity. For
purposes of this paragraph (b) of Section 6: (i) the "Noncompetition Period"
means the period during which the Executive is employed
-11-
<PAGE> 12
by the Company and the one-year period following the termination of the
Executive's employment for any reason; (ii) a "Competitive Activity" means any
business or other endeavor that engages in limited menu or casual dining
distribution services, which is a direct competitor of the Company or any of its
affiliated companies and their respective businesses; and (iii) the Executive
shall be considered to have become "associated with a Competitive Activity" if
he becomes directly or indirectly involved as an owner, employee, officer,
director, independent contractor, agent, partner, advisor, or in any other
capacity calling for the rendition of the Executive's personal services, with
any individual, partnership, corporation or other organization that is engaged
in a Competitive Activity. Notwithstanding the foregoing, the Executive may make
and retain investments during the Employment Period in not more than five
percent of the equity of any entity engaged in a Competitive Activity, if such
equity is listed on a national securities exchange or regularly traded in an
over-the-counter market.
7. Successors. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
-12-
<PAGE> 13
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
8. Miscellaneous. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Nebraska without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
-13-
<PAGE> 14
(b) All notices and other communications under this Agreement shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Diana Morris-Moog
1304 Lakewood Drive
McKinney, TX 75070
If to the Company:
Ameriserve Food Distribution, Inc.
14841 Dallas Parkway
Dallas, Texas 75240-2100
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 8. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
-14-
<PAGE> 15
(d) Notwithstanding any other provision of this Agreement, the Company
may withhold from amounts payable under this Agreement all federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement, whether written or oral, between them concerning
the subject matter hereof, including, but not limited to, the Summary of Terms
of Employment Agreement.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
-15-
<PAGE> 16
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ DIANA MORRIS-MOOG
----------------------------------------
Diana Morris-Moog
AMERISERVE FOOD DISTRIBUTION, INC.
/s/ GUNNAR KLINTBERG
-----------------------------------------
By: Gunnar Klintberg
Title: Vice President
-16-
<PAGE> 1
AMENDED AND RESTATED
SALES AND DISTRIBUTION AGREEMENT
This Sales and Distribution Agreement ("Agreement") dated as of the
1st day of November, 1998 (the "Effective Date"), by and among AmeriServe Food
Distribution, Inc., a Delaware corporation (the "Seller"), Tricon Global
Restaurants, Inc., a North Carolina corporation ("Tricon"), Pizza Hut, Inc., a
Delaware corporation ("Pizza Hut"), Taco Bell Corp., a California corporation
("Taco Bell"), Kentucky Fried Chicken Corporation, a Delaware corporation, and
Kentucky Fried Chicken of California, Inc., a Delaware corporation (Kentucky
Fried Chicken Corporation and Kentucky Fried Chicken of California, Inc. are
together referred to herein as "KFC"); (Tricon, Pizza Hut, Taco Bell and KFC
are collectively referred to herein as the "Buyer").
WHEREAS, Seller is an approved distributor of all proprietary and
non-proprietary food, supplies, equipment, smallwares, uniforms, beverages,
promotional items and point of purchase materials sold to Pizza Hut, Taco Bell
and KFC company owned and franchised (including licensed) restaurants; and
WHEREAS, the Buyer desires to appoint Seller, and Seller desires to
act, as the exclusive distributor of certain proprietary and non proprietary
food and packaging products as described in Section 2(b) herein sold to the
company owned Pizza Hut, Taco Bell and KFC restaurants of the Buyer within the
continental United States, (not including certain restaurants subject to a
sales contract or letter of intent as described below), all on the terms and
conditions set forth herein;
WHEREAS, Buyer and Seller are parties to a Sales and Distribution
Agreement dated May 6, 1997 (the "Original Agreement");
WHEREAS, Buyer and Seller desire to amend and restate the Original
Agreement with this Agreement as of the Effective Date;
NOW, THEREFORE, the parties hereto agree as follows:
1. Appointment as Approved Distributor of all Company Owned and Franchised
Restaurants.
(a) Buyer hereby appoints Seller as an approved distributor during the
term of this Agreement of the Restaurant Products (defined below) sold to all
Pizza Hut, Taco Bell and KFC restaurants, whether franchised or owned by Buyer
or its subsidiaries or affiliates, in the United States (including Hawaii and
Alaska), Canada and the countries where Seller currently exports Restaurant
Products from its distribution centers in the United States, which countries
are listed in Exhibit A attached hereto (the "Export Countries"). Seller
understands that the appointment contained in this Section 1 is not exclusive
and that Seller shall only have the exclusive distribution rights for the
Page 1 of 44 December 18, 1998
<PAGE> 2
restaurants and products described in Section 2 below. In addition, Seller
understands that nothing in this Agreement shall be construed as an approval by
Buyer of Seller as a purchasing organization or purchasing agent with respect
to any of the restaurants described in the first sentence of this Section 1,
and that such approval must be separately requested by Seller and may be
granted by Buyer, in its sole discretion, from time to time.
(b) For purposes of this Agreement, the term "Restaurant Products"
shall mean all of the proprietary and non-proprietary food, equipment, office
supplies, non-office supplies (cleaning chemicals, trash can liners, etc.),
packaging products (including, without limitation, all paper products),
smallwares (pans, brooms, cutting knives, salt and pepper shakers, etc.),
uniforms, beverages, promotional items (as defined in Exhibit D hereto) and
point of purchase materials (table tents, door hangers, etc.) currently or in
the future approved by the respective Buyer for purchase by any Pizza Hut, Taco
Bell or KFC company owned or franchised restaurants. For purposes of clarity,
smallwares, as generally known, are reusable items with small dollar values
such as the ones described above which are used in the operation of the
business and (i) expensed under the Buyer's accounting practices in place on
the Effective Date when they are for replacements and (ii) capitalized under
the Buyer's accounting practices in place on the Effective Date when they are
purchased as part of a new restaurant opening or a major rollout of a new
Restaurant Product. The key smallwares categories are as follows: (A) Utensils
(spoodles, spatulas, tongs, cooking knives/forks/spoons, wire whips, etc.); (B)
Food prep and storage (pans, separators, containers and lids, bowls, squeeze
bottles, etc.); (C) Tabletop Items (stainless cutlery, glassware, plates, cruet
sets, tablecloths, etc.); (D) Parts (can opener blades, slicer blades, fryer
gaskets, etc.); and (E) Janitorial & cleaning reusables (mops, buckets,
brushes, garbage cans, spray bottles, urinal screens, etc.). In contrast,
equipment items are always capitalized under the Buyer's current accounting
practice (whether as a new or replacement item) and food and supplies are
always expensed.
(c) All suppliers and specifications for all Pizza Hut, Taco Bell and
KFC Restaurant Products purchased by Seller must be approved in advance in
writing by Pizza Hut, Taco Bell and KFC, respectively. Seller hereby
acknowledges that it shall have no role in the process of approving any
supplier or the specifications for the Restaurant Products. As described in
Section 7 below, the Buyer's Supply Chain Management division or other
equivalent or designated purchasing function, (referred to collectively as
"SCM") and any person designated in writing by SCM (together with SCM, an "SCM
Party") as having the right, whether as agent or independent contractor for, or
assignee, of, SCM, to exercise the rights of SCM or an SCM Party under this
Agreement, shall negotiate the price and other purchase terms of all Restaurant
Products sold by Seller to the Exclusive Restaurants (defined below). Buyer
shall provide at least thirty (30) days prior written notice to Seller of the
designation of an SCM Party and shall not permit there to be any overlap among
SCM Parties for responsibility for the purchase of any Restaurant Product.
Seller agrees that it shall not purchase Restaurant Products under agreements
negotiated by an SCM Party for any customers other than Pizza Hut, Taco Bell or
KFC restaurants without the prior written approval of such SCM Party. Any
breach of the preceding sentence by Seller shall constitute a material breach
of this Agreement.
Page 2 of 44 December 18, 1998
<PAGE> 3
(d) As described in this Section 1, during the term of this Agreement
(including as extended solely for non-exclusive distributor status pursuant to
Section 9), Seller is an approved distributor of Restaurant Products for all
Pizza Hut, Taco Bell and KFC restaurants throughout the United States, Canada
and the Export Countries. All sections of this Agreement after this Section 1
shall, however, only describe the relationship between Buyer and Seller with
respect to certain Pizza Hut, Taco Bell and KFC restaurants within the 48
contiguous States of the United States of America (the "Continental United
States"). To the extent that Seller sells Restaurant Products to Pizza Hut,
Taco Bell or KFC restaurants outside of the Continental United States, Buyer
and Seller shall separately agree on the terms of their relationship for these
restaurants.
2. Appointment as Exclusive Distributor of Company Owned Restaurants.
(a) Buyer hereby appoints Seller as the exclusive distributor during
the term of this Agreement of the "Exclusive Restaurant Products" (defined
below) purchased by (i) the Pizza Hut, Taco Bell and KFC restaurants
(traditional and nontraditional units) within the Continental United States
which are owned by Buyer or any of its Subsidiaries (defined below) on the
Effective Date, except for Restaurants Under Definitive Contract or Letter of
Intent (defined below) or (ii) any additional Pizza Hut, Taco Bell or KFC
restaurants (traditional and nontraditional) within the Continental United
States which are acquired or built by Buyer or its Subsidiaries during the
Initial Term or any Extension Term of this Agreement (the "Exclusive
Restaurants"). The term "Restaurants Under Definitive Contract or Letter of
Intent" shall mean any Pizza Hut, Taco Bell or KFC restaurants owned by Buyer
which the Buyer has agreed to sell pursuant to a definitive agreement or Letter
of Intent signed by the parties thereto prior to the Effective Date, provided,
however, that until any restaurant included in the transactions the subject of
such definitive agreement or letter of intent is sold, it shall remain an
Exclusive Restaurant, and if it is not sold pursuant to such definitive
agreement or letter of intent, it shall remain an Exclusive Restaurant. A list
of "Restaurants Under Definitive Contract or Letter of Intent" is attached
hereto as Exhibit B. During the term of this Agreement, Buyer and its
Subsidiaries shall purchase, and Seller agrees to sell, 100 percent of the
Exclusive Restaurant Products required by the Exclusive Restaurants, except
incidental purchases in emergency situations and as otherwise provided herein.
The Buyer agrees that during the term of this Agreement no supplier or
distributor other than Seller shall sell the Exclusive Restaurant Products to
the Exclusive Restaurants; provided, however, that if Seller for any reason
fails to deliver any Exclusive Restaurant products on a scheduled delivery date
which was ordered within the time required for ordering as described in
subsection 5(c) hereof, the Exclusive Restaurant shall be permitted to purchase
such Exclusive Restaurant Products from another source or sources to meet its
requirements (but only for such order and not for any future orders), and no
such purchase shall be construed as a breach of Buyer's obligations or require
additional compensation to Seller. The term Exclusive Restaurants shall include
all types of nontraditional restaurants including kiosks, carts, delivery units
and restaurants in hotels,
Page 3 of 44 December 18, 1998
<PAGE> 4
schools, airports, hospitals, or in joint consumer outlets, including
supermarkets, convenience stores, gas stations or similar arrangements, but it
shall not include any restaurants owned, acquired or built by Buyer which are
not Pizza Hut, Taco Bell or KFC restaurants.
For purposes of this Agreement, the term "Concept" shall mean each of
the Buyer's KFC, Pizza Hut and Taco Bell restaurant businesses, and the term
"Concepts" shall mean such businesses in the aggregate. To the extent the Buyer
owns, acquires or builds any restaurant concept(s) other than the Concepts,
they will only be considered Exclusive Restaurants under this Agreement if the
Buyer and Seller specifically agree in writing to include them under this
Agreement.
(b) For purposes of this Agreement, the term "Exclusive Restaurant
Products" shall mean all proprietary and non-proprietary food (including fresh
produce but excluding fresh chicken, as defined by FDA regulations), packaging
products (including, without limitation, all paper products), national soft
drinks and promotional items (as defined in Exhibit D hereto) currently or in
the future approved by the respective Buyer for purchase by any Exclusive
Restaurant. Smallwares and non-office supplies (which include, but are not
limited to, cleaning chemicals and trash can liners) will become an Exclusive
Restaurant Product, provided that Buyer and Seller, negotiating in good faith,
agree on a comprehensive operations and pricing arrangement. Until that time,
smallwares and non-office supplies will be priced and serviced under current
arrangements as set forth in Exhibit C. Fresh chicken, equipment, uniforms,
smallwares (except as set forth above), office supplies, non-office supplies
(except as set forth above) and point of purchase materials shall not be within
the definition of Exclusive Restaurant Products. National soft drinks will not
be included in the definition of Exclusive Restaurant Products to the extent
that the distribution thereof by Seller could, in the reasonable judgment of
Buyer, be expected to subject the Buyer to contractual restrictions that could
operate to limit the ability of the Buyer to offer certain brands of national
soft drinks to its customers. Buyer will use reasonable efforts to negotiate
the removal of such contractual restrictions. New Exclusive Restaurant Products
which are being tested can be distributed by a company other than Seller in one
test market for up to 90 days. As a result, Seller shall be an approved
distributor as described in Section 1 above (but not an exclusive distributor)
of all such nonexclusive Restaurant Products which are excluded from the
definition of Exclusive Restaurant Products. The above definition of Exclusive
Restaurant Products may be changed only by written agreement of Buyer and
Seller.
(c) Buyer and Seller agree to reasonably cooperate to work towards a
generic product procurement program for generic items (e.g., trash can liners,
toilet paper, cleaning materials, etc.) with Seller acting as the supplier of
these products and which would result in price reductions of at least 1 percent
below current levels. The program is subject to Buyer's final approval and the
generic products to be included within such program shall be agreed to in
writing in advance from time to time by the parties hereto. Buyer retains all
rights to grant and revoke the approval of all specifications and
qualifications of such generic products thereof and Seller agrees not to
disclose any
Page 4 of 44 December 18, 1998
<PAGE> 5
proposed changes or modifications of such specifications or qualifications to
existing suppliers prior to the Buyer's written approval thereof. It is
understood that the intent of such product program would be to permit volume
purchases from vendors and, as such, generic product negotiations with vendors
would from time to time include negotiations in respect of Buyer's needs for
such products and the concurrent needs of other customers of Seller for such
products. Seller agrees that for any specific generic product for which Seller
is designated as the sole supplier to the Exclusive Restaurants, Buyer will be
charged no more on a per item basis for such product (meeting substantially
similar specifications) than Seller charges any other customer therefor.
(d) For purposes of this Agreement, the term "Subsidiaries" shall mean
the companies, partnerships or other entities in which the Buyer owns at least
a majority of the total equity interests. For purposes of convenience only, the
numerous Subsidiaries of the Buyer who own the Exclusive Restaurants are not
signing this Agreement. The Buyer hereby unconditionally guarantees the full
performance of the obligations of its Subsidiaries who own the Exclusive
Restaurants during the term of this Agreement and the fact that such
Subsidiaries are not signing this Agreement shall not affect in any way the
rights or obligations of the Buyer or Seller under this Agreement.
(e) A list of the Exclusive Restaurants on the Effective Date will be
provided by the Buyer to Seller on or about the Effective Date, which list will
be the initial list of the Exclusive Restaurants. If during the Initial Term or
any Extension Term of this Agreement the Buyer or any of its Subsidiaries
acquires or builds any additional Pizza Hut, Taco Bell or KFC restaurants, the
Buyer shall so notify Seller and such additional restaurants shall be added to
the list of Exclusive Restaurants and become subject to the terms of this
Agreement for the remaining period of the Initial Term or any Extension Term of
this Agreement. If the Buyer or any of its Subsidiaries sell, or enters into a
definitive agreement to sell, any Pizza Hut or Taco Bell Exclusive Restaurants
prior to December 31, 1999, and the buyer of such Exclusive Restaurants is,
immediately prior to the sale, a Pizza Hut or Taco Bell franchisee, and is
among the buyers that acquire the initial two hundred Pizza Hut Exclusive
Restaurants, in the case of a Pizza Hut franchisee, or the initial two hundred
Taco Bell Exclusive Restaurants, in the case of a Taco Bell franchisee, sold by
the Buyer in the period following the Effective Date (excluding Restaurants
under Definitive Contract or Letter of Intent), the buyer of such Exclusive
Restaurants shall be required prior to such sale to enter into a Sales and
Distribution Agreement with Seller with respect to such purchased Exclusive
Restaurants either, at the election of such buyer, in the form attached hereto
as Exhibit G-1(B) (having a term the same as the Original Agreement plus a six
(6) month extension) or Exhibit G-2 (having a term the same as this Agreement).
The buyer of "Restaurants Under Definitive Contract or Letter of Intent"
(excluding KFC restaurants) shall be required prior to such sale to enter into
a Sales and Distribution Agreement with Seller with respect to such restaurants
either, at the election of such buyer, in the form attached hereto as Exhibit
G-1(A) (having a term the same as the Original Agreement) or Exhibit G-2
(having a term the same as this Agreement). If the Buyer or any of its
Subsidiaries sell, or enters into a definitive agreement to sell, any Pizza Hut
or Taco Bell Exclusive Restaurant during the Initial Term of this Agreement, to
a buyer not covered by either of
Page 5 of 44 December 18, 1998
<PAGE> 6
the two immediately preceding sentences, the buyer of such Exclusive Restaurant
shall be required prior to such sale, to enter into a Sale and Distribution
Agreement with the Seller in the form attached hereto as Exhibit G-2. Once such
buyer enters into such a Sales and Distribution Agreement with Seller with
respect to such purchased Exclusive Restaurants, the Buyer shall have no
further obligations under this Agreement with respect to such purchased
Exclusive Restaurants and the Buyer shall not guarantee in any way the payment
or other obligations of such buyer to Seller. If the buyer of such Exclusive
Restaurant already owns other franchised Pizza Hut or Taco Bell restaurants,
such other restaurants owned by such buyer shall not be required to become
Exclusive Restaurants subject to the terms of the applicable Sales and
Distribution Agreement. The requirement that refranchised Pizza Hut and Taco
Bell Exclusive Restaurants must continue to be Exclusive Restaurants under this
Agreement shall not apply to KFC Exclusive Restaurants sold by Buyer or its
Subsidiaries during the term of this Agreement. If a KFC Exclusive Restaurant
is sold by the Buyer or its Subsidiaries during the term of this Agreement and
becomes a franchised KFC restaurant, the terms of this Agreement shall not
apply to said KFC restaurant which will be removed from the list of Exclusive
Restaurants.
3. Prices for Exclusive Restaurant Products.
(a) The prices to be paid by the Exclusive Restaurants for the
Exclusive Restaurant Products purchased from Seller during the term of this
Agreement shall be equal to (x) the "Landed Cost" (defined below) of the
Exclusive Restaurant Products plus a mark-up described in Exhibit D attached
hereto plus (y) the costs of SCM allocated to the Exclusive Restaurant Products
and charged to Seller as described in Section 7 below. The mark-ups listed on
Exhibit D become effective on January 1, 1999. Until that date, the Landed
Cost, mark-ups, freight and other pricing provisions will be those provided for
under the Original Agreement. Buyer will give Seller 60 days prior written
notice of any changes in the amount of or manner of the SCM fee. As described
in Exhibit D, the mark-up will be different for the different restaurant
chains, Pizza Hut, Taco Bell and KFC. The mark-up applicable to Exclusive
Restaurant Products that are used in common by each Concept in a "2n1" or "3n1"
Exclusive Restaurant shall be the markup specified for the Concept under which
such "2n1" or "3n1" Exclusive Restaurant is operated and numbered by the Buyer.
The mark-up applicable to Exclusive Restaurant Products that are proprietary to
a Concept shall be that Concept's specified mark-up.
(b) As used in this Agreement, the term "Landed Cost" for Exclusive
Restaurant Products shall mean F.O.B. vendor's dock price for the Exclusive
Restaurant Products, plus standard freight from the F.O.B. point to Seller's
distribution center dock. All weight and quantity discounts, promotional
allowances, rebates and special discounts reasonably allocable to the Exclusive
Restaurants, will be deducted in computing the Landed Cost. Seller shall retain
all prompt pay discounts which will not be factored into the calculation of
Landed Cost. Buyer will not knowingly permit any SCM Party to negotiate away
any standard vendor prompt pay discounts. Seller and its subsidiaries perform
value-added services for suppliers in addition to the procurement activities
typically provided. These value-added services include regional and national
marketing,
Page 6 of 44 December 18, 1998
<PAGE> 7
administrative services, quality assurance and performance based product
marketing. Seller and its subsidiaries may recover from such supplier the costs
of providing these services and may also be compensated by such supplier for
these services and consider this compensation to be earned income, provided
that receipt of such cost recovery or earned income will not affect Landed
Cost. Seller will disclose to Buyer on a semi-annual basis the dollar amount of
"earned income" received by Seller from vendors on a product category basis.
Neither Buyer nor any SCM Party shall have any restrictions on receiving
supplier "earned income" or other supplier incentives such as rebates and
discounts. Subject to Buyer's prior written approval, Landed Cost may also
include reasonable freight and handling costs associated with inventory
transfers between Seller's distribution centers in cases where vendor minimum
or full truck load order quantities cannot reasonably be met, said costs to be
reflected in the Landed Cost of the receiving Seller distribution center.
Seller will not charge for transfers of inventory that are required to be made
by Seller to correct inventory shortages caused by Seller's inventory
management mistakes. As indicated in Exhibit E attached hereto, Seller and
Buyer will jointly develop a process to manage such approvals.
For purposes of determining Landed Cost, Seller shall price
its inventory of Restaurant Products on a last in, first out (LIFO) basis where
all product will be sold at current market value, whether that value is higher
or lower than actual inventory value. For items priced in four-week periods,
current market value is defined as the purchase order cost if there is an
outstanding purchase order with a delivery date into Seller's distribution
center prior to the 10th day of the period for the period which pricing is
being determined, or in the absence of such a purchase order, the current
Landed Cost of that item. Buyer or the SCM Party will require vendors to give 4
weeks notice prior to a price change in a period priced Restaurant Product. For
weekly priced items (certain commodities, such as cheese, produce and other
products specified in a written notice from Buyer to Seller), current market
value is the current Landed Cost at the time pricing is determined (not to
exceed three (3) days prior to the beginning of the weekly period). Buyer or
the SCM Party will require vendors to give at least three (3) days notice prior
to a price change in a weekly priced Restaurant Product to the extent
consistent with agreements between Buyer and vendors in effect on the Effective
Date, or any renewal or extension of said agreements.
(c) Freight Management Rules. The Freight Management Rules attached
hereto as Exhibit E (the "Freight Management Rules") shall establish the
standards of performance that shall be required to be adhered to. The freight
rates and other information necessary for establishing the pricing under the
Freight Management Rules shall be redetermined annually to be effective January
1, 1999 and each anniversary thereof. Freight standards will be based on
shipment sizes that approximate current product mix.
(d) Case Size and Weight Changes and New Restaurant Products. The case
mark-ups provided for in this Agreement were based upon the actual calculations
of average weight per case of Exclusive Restaurant Products delivered in 1997
(the "Weight to Case Ratio"), and average case size of Exclusive Restaurant
Products delivered in 1997 (the "Cube to Case Ratio"), each as set forth in
Exhibit D hereto. The per case
Page 7 of 44 December 18, 1998
<PAGE> 8
markup of case-priced Exclusive Restaurant Products (not the percentage markup)
will be equitably adjusted for any material change (as defined below) in the
Weight to Case Ratio or the Cube to Case Ratio, or for any new product, where
either party determines in good faith that such change or new product is
detrimental to its financial position under the terms of this Agreement,
including, without limitation, a material change in product mix (e.g., an
increase in frozen Restaurant Products). For case-priced Exclusive Restaurant
Products, a material change shall be defined as 10 percent change in either the
Weight to Case Ratio or the Cube to Case Ratio for all products on a Concept by
Concept basis. Buyer shall not, and shall cause a SCM Party not to, request a
supplier to increase the weight or case size unless there is a reasonable
business purpose other than lowering the distribution fees paid to Seller. The
parties agree to review these changes for each Buyer's Concept on a quarterly
basis. For all other products, parties will negotiate changes in good faith.
Should Buyer decide to add or modify any Restaurant Products in a manner which
fundamentally alters the storage and/or delivery requirements outside of the
current methods (e.g., ice cream, bulk oil, commissary pizza dough, high
security promotional items and game pieces), the parties shall work together in
good faith to develop, on mutually acceptable terms, alternative storage and/or
delivery methods which meet Buyer's distribution requirements. For this
purpose, mutually acceptable terms shall include prices and rates which are
market competitive with respect to the alternative storage or delivery methods
developed by the parties. If Buyer, in its reasonable judgment, determines that
mutually acceptable terms have not been agreed to within a reasonable amount of
time, Buyer may, after requesting written bid(s) for storage and delivery
methods that meet its requirements, enter into an agreement for the
distribution of the applicable Exclusive Restaurant Product with any person(s)
providing such a bid(s); provided that Seller shall have the right of first
refusal with respect to the terms of any such bid(s), for a period of 30
business days after its receipt of the terms of such bid(s).
(e) The parties will agree on the specific method of billing the
Exclusive Restaurants (e.g., electronic billing, faxed invoice or other format)
and whenever possible electronic billing will be used. From time to time during
the term of this Agreement, Buyer shall have the right to review all financial
and business records of Seller which are reasonably requested by Buyer to
determine the Landed Costs of the Exclusive Restaurant Products sold to the
Exclusive Restaurants. Within 90 days after the end of each calendar year,
Seller shall provide to the Buyer a calculation by a major independent
international public accounting firm, agreed upon by Seller and Buyer, of the
Landed Costs of all Exclusive Restaurant Products sold to each of the
respective Pizza Hut, Taco Bell and KFC Exclusive Restaurants during that
calendar year. Seller or Buyer, as the case may be, will then promptly make an
adjusting payment in respect of any overcharges or undercharges. Seller shall
make available to the independent accounting firm all financial records
necessary to make such calculation. The costs of the independent accounting
firm shall be shared equally by the Buyer and Seller (50 percent by each).
(f) The prices described in the paragraphs above shall apply only to
the Exclusive Restaurant Products. For all Restaurant Products which are not
included within the definition of Exclusive Restaurant Products (e.g., fresh
chicken, equipment,
Page 8 of 44 December 18, 1998
<PAGE> 9
office supplies, uniforms, smallwares (except as provided in Section 2(b)
above), non-office supplies (except as provided in Section 2(b) above) and
point of purchase materials), the prices will be negotiated from time to time
by Seller and Buyer.
(g) Notwithstanding the foregoing, the parties agree that the prices
of the Restaurant Products which are food, paper products and similar
restaurant supplies purchased by all Pizza Hut franchised restaurants within
the Continental United States (not including the Exclusive Restaurants) will
continue until the expiration of the term of the Original Agreement (July 11,
2002) to be subject to the 2.5 percent net pre-tax profit margin limit set
forth in clause D(ii) of Section 8.3 of the standard Pizza Hut Franchise
Agreement, a copy of which is attached hereto as Exhibit F. Seller agrees to
maintain during the Initial Term of this Agreement the rebate program for this
2.5 percent net pre-tax profit margin limit for Pizza Hut restaurants in a
manner to be agreed upon by Buyer and Seller, including a basis for allocating
costs and providing to Pizza Hut franchisees the audit of all allocated costs
and rebate payments provided for under Section 8.3 of the standard Pizza Hut
Franchise Agreement. Seller will be relieved of this profit limitation if any
distributor servicing Pizza Hut franchisees is not subject to the same profit
limitations.
4. Payment Terms for the Restaurant Products.
(a) The Buyer shall pay to Seller the purchase price for the
Restaurant Products delivered to and accepted by the Buyer within 30 calendar
days after the date of invoice (which invoice will be the same day as
delivery). No interest shall be charged to the Buyer with respect to payments
made on or before the due date. Seller agrees that all credits for product on
which Seller has received telephonic or other notice that such product was
invoiced but not received on the scheduled delivery date or product picked up
for return (RMA) will be processed within 24 hours of the applicable driver's
return to the distribution center, provided that the data transmittal for all
weekend and holiday returns is processed before the evening of the following
business day.
(b) If any amounts due to Seller are not paid in accordance with the
payment terms when due as described in subsection 4(a) above, a service charge
shall be added to the sums due, which charge shall be equal to the lesser of
(i) an interest charge determined by applying to the delinquent balance an
interest rate equal to the prime rate of interest of Citibank N.A. (as
published from time to time) plus 2 percent per annum or (ii) the amount
determined by applying the maximum rate permitted to be charged under
applicable state law.
5. Deliveries and Orders of the Restaurant Products excluding Equipment
and Non Fleet Smallwares.
(a) The provisions of this Section 5 describe the mechanics and
procedures for ordering and delivering all of the Restaurant Products
distributed and sold by Seller to the Exclusive Restaurants except for the new
and replacement equipment and furnishings which Seller sells to the Exclusive
Restaurants through its equipment business and certain
Page 9 of 44 December 18, 1998
<PAGE> 10
smallware items which are not delivered through the Seller's distribution
centers (the "Non Fleet Smallwares"). The Restaurant Products, excluding
equipment and furnishings and the Non Fleet Smallwares, is hereinafter referred
to as the "Covered Products." The specific mechanics and procedures for
ordering and delivering of equipment and furnishings is not described in this
Agreement and will be subject to the agreement of Seller and the Exclusive
Restaurants from time to time. The specific mechanics and procedures for
ordering and delivering of Non Fleet Smallwares are set forth in Exhibit C
hereto.
(b) Deliveries of the Covered Products shall be made twice a week to
the Exclusive Restaurants. If the Buyer desires to have more than two
deliveries per week for any particular Exclusive Restaurants, the Buyer will be
required to pay an additional charge to Seller in an amount to be negotiated
and agreed upon by Seller and Buyer. Seller will offer to Buyer a discount off
the purchase price of the Covered Products (in an amount determined by Seller)
if an Exclusive Restaurant agrees to reduce the number of its scheduled
deliveries per week. Seller may deliver the ordered Covered Products to the
Exclusive Restaurant at any time during which the Exclusive Restaurant is open
for business except for the black out periods described in Exhibit H attached
hereto, or such other black out periods which are previously agreed upon in
writing by Seller and the regional managers of the Exclusive Restaurants.
Before the beginning of each black out period, Seller's drivers must complete
their deliveries and be out of the Exclusive Restaurant and failure to do so
will not be considered as an on time delivery. Seller agrees to start
deliveries within one hour (before or after) of the expected delivery time that
Seller notifies an Exclusive Restaurant. As examples: (i) if the expected
delivery time is 9:00am and Seller's driver starts the delivery between 8:00am
and 10:00am, the delivery will be on time but (ii) if the expected delivery
time is 11:00am for a Taco Bell restaurant and Seller's driver starts the
delivery at 11:00am but does not complete the delivery by 11:30am, the delivery
will not be on time. Seller will notify the Exclusive Restaurants of the
expected delivery time no later than the day preceding the date of delivery. If
the delivery cannot be started within such two hour period (one hour before and
one hour after the scheduled delivery time), Seller will notify the Exclusive
Restaurant in advance but the delivery will still be made the same day. The
regional managers of the Exclusive Restaurants may waive in writing the black
out period delivery prohibition and accept delivery during the black out
period. Seller will be allowed to deliver the Covered Products when the
Exclusive Restaurant is closed (so called "key" deliveries) only with the prior
written approval of an authorized representative of the Buyer (or other
appropriate level employee of the Exclusive Restaurants as designated by the
Buyer). If Seller's driver sets off an alarm at a key delivery (other than
because the Exclusive Restaurant did not provide the correct alarm code) and
there are charges incurred by the Exclusive Restaurant as a result of such
alarm, Seller will reimburse the Exclusive Restaurant for such charges.
Delivery days and times will be scheduled so as to cause as little interruption
to the operation of the Exclusive Restaurants as is practical under the
circumstances.
(c) Orders by the Buyer for the Covered Products must be made to
Seller no later than 5:00pm on the day which is two days prior to the scheduled
delivery date;
Page 10 of 44 December 18, 1998
<PAGE> 11
provided, however, that for Exclusive Restaurants which are not close to a
distribution center of Seller (not within one day normal driving time from the
nearest Seller's distribution center), Seller may require that these orders be
made no later than 5:00pm on the day which is three days prior to the scheduled
delivery date. If there are any exceptional cases where Seller wishes to
receive orders four days prior to the scheduled delivery date, they must be
approved in writing by the local manager of the affected Exclusive Restaurant.
Seller agrees to continue to maintain the "Sourcelink" electronic ordering
system (or equivalent up to date electronic ordering system) which currently
allows the Exclusive Restaurants to make electronic orders for the Covered
Products. If the Sourcelink orders are not received within two hours before the
5:00pm order deadline, Seller will call the restaurant before the order
deadline in order to try to receive the order. If the distribution center of
Seller is still unable to receive an order from an Exclusive Restaurant prior
to the 5:00pm order deadline, Seller shall automatically order for the
Exclusive Restaurant for the exact same order it received for the same day of
the previous week (excluding smallwares) and the Exclusive Restaurant will be
required to accept such delivery when made. To the extent the Exclusive
Restaurant is late in ordering or changes its order after the 5:00pm order
deadline, Seller is not required to accept such late or changed order. If
Seller decides to accept such late or changed order, Seller may charge the
Buyer a special delivery charge to be negotiated by Seller and Buyer. Seller
agrees that its Sourcelink computer software and hardware (or such other
electronic ordering software and hardware used by Seller which is at least
functionally equivalent to Sourcelink) will be free from errors or "bugs"
related to the Year 2000 issue on or before September 30, 1999. Seller shall
prepare a back-up plan for making orders should such software suffer errors or
"bugs" related to the Year 2000 issue and will make reasonable efforts to
correct any such errors or "bugs" it may suffer.
(d) Deliveries shall be to such location on the Exclusive Restaurant
premises as the Exclusive Restaurants shall reasonably direct. Covered Products
shall be deemed delivered when actually placed in the storage areas of the
Exclusive Restaurant (including the temperature controlled compartments in the
case of the frozen or refrigerated Covered Products) by Seller's drivers, as
reasonably directed by employees of the Exclusive Restaurant. Seller's drivers
will not be required to stock shelves or rotate the Covered Products. The
Exclusive Restaurants will be responsible to keep the back door and aisle free
of debris for Seller's drivers to deliver the Covered Products to the storage
areas. To the extent practicable, deliveries by Seller shall have unloading
priority over all other vendors. The Exclusive Restaurants shall assign and
make available an employee or employees to accept delivery, subject to the
terms of paragraph (f) below, of Covered Products, and to sign the invoice
documenting receipt of the ordered Covered Products (to the extent received and
not damaged).
(e) Seller will only deliver the Covered Products specified by the
Buyer and shall not substitute products for the Covered Products; provided,
however, that the delivery on an infrequent basis of the Covered Products in a
different size than ordered shall not be considered a substitute if the total
quantity of the Covered Products is the amount ordered (e.g., delivery of two
12 ounce jars instead of four 6 ounce jars). Seller agrees to comply with all
quality assurance programs and guidelines consistently required
Page 11 of 44 December 18, 1998
<PAGE> 12
by the Buyer for other similarly situated distributors of Restaurant Products
in the United States from time to time during the term of this Agreement to
ensure that the quality of the Covered Products is maintained while the
Restaurant Product is being stored, handed and transported by Seller. If Tricon
quality assurances programs and guidelines are materially modified after the
date of the Original Agreement, Buyer agrees to discuss in good faith the
reasonableness of such change with Seller. The current quality assurance
programs and guidelines of each of Pizza Hut, Taco Bell and KFC have been
provided to Seller prior to the date hereof.
(f) If ordered Covered Products are not delivered by Seller on the
scheduled delivery date (including key deliveries), or are delivered damaged or
not meeting the required specification, at the request of the Exclusive
Restaurant, Seller will make a special delivery to redeliver the Covered
Products as quickly as possible. In addition, Seller shall take back all
Covered Products which are damaged or out of specification and give a credit to
the Exclusive Restaurant for the purchase price charged by Seller to the
Exclusive Restaurant for that product. If the Covered Products were out of
specification or the damages were internal and not visible to Seller upon
receiving delivery of the Covered Products from the vendor, the vendor shall be
responsible to Seller for all costs relating to making such special deliveries
and to take back damaged or out of specification Covered Products. The Buyer
and Seller each agree to use their respective best efforts to collect such
costs from the vendors.
(g) If the Buyer decides to return any nonperishable Covered Products
ordered by Buyer and delivered to it within specification, not damaged and on
the scheduled delivery date, Seller shall, within 30 days after such return,
charge the Buyer for taking back such Covered Product an amount equal to 15
percent of the invoice price of such Covered Product (as a restocking fee).
(h) Title and risk of loss for the Covered Products purchased by the
Exclusive Restaurants from Seller shall pass to the Exclusive Restaurants upon
delivery by Seller inside the Exclusive Restaurant. In the event that any
Covered Products are delivered and subsequently returned or rejected by an
Exclusive Restaurant, title and risk of loss shall revert to Seller upon the
physical transfer of possession of the Covered Products back to Seller at the
time such Covered Products are picked up by Seller from Buyer's Exclusive
Restaurant.
(i) Buyer acknowledges and agrees that Seller has full discretion to
direct all deliveries from any distribution center which Seller operates, and
to make such changes to the routing process as Seller, in its sole discretion,
determines appropriate; provided, however, that Seller shall notify the
affected Pizza Hut, Taco Bell and KFC restaurants of any changes in its routes.
In addition, the Buyer acknowledges and agrees that Seller's fleet may not be
solely dedicated to the distribution of Covered Products to Pizza Hut, Taco
Bell and KFC restaurants. As a result, Seller's fleet which distribute the
Covered Products to Pizza Hut, Taco Bell and KFC restaurants may also carry
other products for delivery to other customers (including competing customers)
on the same routes so long as they do not in any way damage, contaminate or
adversely affect the quality of the
Page 12 of 44 December 18, 1998
<PAGE> 13
Covered Products during the delivery or adversely affect deliveries to the
Exclusive Restaurants.
(j) Management of the inventory levels in the distribution centers of
Seller will be the responsibility of Seller except that Seller agrees that it
will not buy any Covered Products which Seller expects to keep in inventory for
more than 60 days without the consent of the Buyer. Seller agrees to provide to
the extent practicable weekly information to the Buyer by distribution center
of its inventory levels of all Restaurant Products purchased through Seller.
Seller shall not be required to buy promotional items or new or test market
Covered Products until it first receives a firm commitment from the Buyer and,
in the case of such promotional items, or new or test market Covered Products
which are for sale to franchised Pizza Hut, Taco Bell and KFC restaurants,
until it first receives a firm commitment from such franchisees to purchase
such promotional items or new or test market Covered Products. If any
promotional items or any other Covered Products which are unique to the Buyer's
operations are purchased by Seller based on the Buyer's projections and such
Covered Products remain in Seller's inventory for more than 90 days after
Buyer's projected need, Seller may charge the Buyer a storage and handling
charge equal to 1 percent of the Landed Cost of such Covered Products per month
until Covered Products are delivered to the Buyer. Each month during the term
of this Agreement the Buyer and Seller shall meet to review the amount of
promotional items or other unique Covered Products which have remained in
inventory for more than 90 days after Customer's projected need and use their
respective best efforts to agree on a schedule for delivery of such excess
inventory to the Exclusive restaurants as quickly as possible and in any event
not more than an additional 90 days after such initial 90 day period. At the
end of such additional 90 day period, Seller may require the Buyer to either
order such excess inventory or direct Seller to dispose of such excess
inventory at the Buyer's cost. Unless either (i) a Covered Product is
discontinued by the Buyer or (ii) the Buyer approves an AIP (authorization for
inventory purchase) for Covered Products ordered by franchised Pizza Hut, Taco
Bell or KFC restaurants, the Buyer shall not be responsible to Seller for any
storage charges or purchase commitments of any franchised Pizza Hut, Taco Bell
or KFC restaurants. Buyer agrees that that it will cause vendors of Promotional
Items to make available to Seller payment terms at least as favorable as terms
available to any other distributor with similar credit ratings and histories of
Promotional Items to the Concepts. The payment terms on Promotional items will
not be considered in calculating the "Weighted Average Payment Term" as defined
in Section 7(a) of this Agreement.
(k) In the event the Buyer decides to recall any Restaurant Product,
Seller agrees to assist the Buyer, to the extent reasonably requested by the
Buyer, in its recall efforts, including, without limitation, promptly assisting
the Buyer in determining exactly which Pizza Hut, Taco Bell or KFC restaurants
may need to be notified of a product recall. Unless such recall was needed as a
result of any action or omission to act by Seller, the Buyer (or the vendor at
the Buyer's direction) shall reimburse Seller for all additional costs incurred
by Seller (e.g. labor, fuel, etc.) in such recall efforts to the extent such
recall was requested by the Buyer.
Page 13 of 44 December 18, 1998
<PAGE> 14
(l) Seller warrants that all Covered Products to be distributed by it
to Pizza Hut, Taco Bell or KFC restaurants shall be inspected, handled, stored,
shipped and sold by Seller in strict compliance with all applicable (i) federal
and state laws (ii) rules and regulations of all governmental agencies having
jurisdiction and (iii) municipal ordinances. Upon its receipt of any citation
issued by any governmental or regulatory authority which might result in the
interruption in Seller's distribution service to any Pizza Hut, Taco Bell or
KFC restaurant customers, Seller, shall promptly notify such customers who may
be affected.
(m) Seller agrees to use its best efforts to take and respond to
emergency calls from the Exclusive Restaurants for delivery of Covered
Products. Seller and the Exclusive Restaurants will agree upon the additional
charges to be paid to Seller for special deliveries needed to respond to such
emergency calls.
6. Minimum Service Levels.
(a) Seller agrees to maintain during the term of this Agreement on a
total basis for all Exclusive Restaurants serviced by Seller, each of the
following monthly service levels:
(i) The actual number of Perfect Orders (defined below) of the
Covered Products which are delivered to the Exclusive
Restaurants during each month as a percentage of the total
number of deliveries of the Covered Products ordered shall
not be less than 85 percent; and
(ii) The number of deliveries of the Covered Products during any
month which are on time (within one hour before or after the
scheduled delivery time as described in Section 5(b) above)
shall not be less than 80 percent.
The above service levels shall be measured on a total basis for all
distribution centers of Seller together (not separately for each individual
distribution center). Key deliveries will be factored into the measurement of
on time deliveries described in (ii) above.
If Seller fails to achieve either of such service levels during any
three months of any calendar year during the term of this Agreement (commencing
in 1999), this failure shall constitute a material breach of this Agreement
entitling the Buyer to terminate this Agreement upon notice to Seller as
described in Section 10 below. Seller will provide Buyer with monthly service
level reports using data collected from each Exclusive Restaurant in a
systematic manner (including the store manager or regional manager signoff on
delivery documentation) that is a data input in an electronically produced
service level report.
Page 14 of 44 December 18, 1998
<PAGE> 15
(b) Seller agrees to maintain during the term of this Agreement, for
the Exclusive Restaurants serviced by each distribution center of Seller, the
following monthly service level:
The actual number of Perfect Orders of the Exclusive Restaurant
Products which are delivered to the Exclusive Restaurants from that
distribution center during each month as a percentage of the total
number of deliveries of the Exclusive Restaurant Products ordered
shall not be less than 75 percent.
The above service level shall be measured separately for each
distribution center of Seller which delivers to the Exclusive Restaurants.
If Seller fails to achieve the above service level during any three
months of any calendar year during the term of this Agreement (commencing in
1999), the Buyer shall have the right upon notice to Seller given at any time
during the ninety (90) day period after the end of the third month in which it
has failed to meet such service level to remove the Exclusive Restaurants which
were serviced by such distribution center from the list of Exclusive
Restaurants. As a result, if the Buyer gives such notice, Seller will lose the
exclusive right under this Agreement to deliver the Exclusive Restaurant
Products to the Exclusive Restaurants which were customers of such
underperforming distribution center.
(c) The term "Perfect Order" shall mean a delivery where 100 percent
of the cases of the delivered Exclusive Restaurant Products are (i) exactly the
items ordered by the Exclusive Restaurant, (ii) not damaged and (iii) within
specification; provided, however, that any order which fails to be a "Perfect
Order" because (x) a vendor was not able to supply a Covered Product which is
part of the order, or (y) a Covered Product which is part of the order is not
shipped to Seller in a timely manner and the Buyer is responsible for arranging
or directing the manner of freight of such Covered Product to Seller, shall be
disregarded for purposes of this paragraph (c).
Within two (2) weeks of the end of each month Seller shall notify
Buyer of its service levels described in paragraphs (a) and (b) above for the
month and, at the request of the Buyer, Seller shall make available to the
Buyer all of its records which support its determination of the service levels
and such other records reasonably requested by the Buyer. By September 30,
1999, the service level data will be subdivided and totaled for the Exclusive
Restaurants owned by Buyer, the franchisee-owned Exclusive Restaurants and
franchisee owned non-Exclusive Restaurants which buy through SCM.
7. Supply Chain Management.
(a) Seller and SCM intend that their relationship will be based on a
spirit of cooperation where they will support each other whenever possible.
During the term of this Agreement, SCM or another SCM Party will negotiate with
the vendors all price and other purchase terms for all Restaurant Products
which are distributed and sold by Seller to any Exclusive Restaurants at such
prices described in Section 3 above. The
Page 15 of 44 December 18, 1998
<PAGE> 16
commitment by Seller to exclusively buy under terms and agreements negotiated
by an SCM Party all Restaurant Products sold to the Exclusive Restaurants is
subject to the exception that if Seller is able to buy such Restaurant Products
for the Exclusive Restaurants on terms more favorable to the Exclusive
Restaurants than those negotiated by an SCM Party, Seller will notify the Buyer
of such better terms and offer Buyer the opportunity to buy such Restaurant
Products on such better terms negotiated by Seller. Any SCM Party shall have
the right to allocate among two or more vendors the total purchases of the
Restaurant Products purchased under terms and agreements negotiated by such SCM
Party. In addition, each SCM Party shall have the right to determine which
vendors will supply the Restaurant Products purchased under terms and
agreements negotiated by such SCM Party to each of the respective distribution
centers of Seller. Buyer agrees that the "Weighted Average Payment Term"
(defined below) for the Restaurant Products purchased during any calendar
quarter by Seller and negotiated through any SCM Party will be no less than 15
calendar days. For purposes of this Agreement, the term "Weighted Average
Payment Term" shall mean the average number of days after invoice which the
suppliers of the Restaurant Products purchased through each SCM Party (taken
together) require for payment by Seller, weighted by the dollar volumes for the
different items of the Restaurant Products and the different required terms for
payment. Notwithstanding the foregoing, SCM (and with the written consent of
SCM, any other SCM Party) may negotiate payment terms for Restaurant Products
purchased by Seller for sale to the Exclusive Restaurants owned by the Buyer
(not franchised Exclusive Restaurants) which result in a Weighted Average
Payment Term for such Restaurant Products below 15 calendar days so long as
there is an equivalent reduction in the receivable payment terms for such
Exclusive Restaurants to fully compensate Seller for paying earlier than a
Weighted Average Payment Term of 15 days. As described in Section 3(b) above,
Seller shall be entitled to receive all early pay discounts and such discounts
shall not reduce the amount of the Landed Costs. Any SCM Party shall have the
right to negotiate early pay discounts which Seller will receive so long as the
Weighted Average Payment Term, after taking into account such discounts, is not
less than 15 calendar days as described above. Buyer agrees and shall cause
such SCM Party to agree that Seller shall have the right to receive standard
vendor prompt pay discounts. In addition, any SCM Party may negotiate payment
terms which include an interest charge for late payments by Seller to the
supplier equal to the lesser of: (i) the prime rate of interest of Citibank,
N.A. (as published from time to time) plus 2 percent per annum or (ii) the
maximum rate permitted to be charged under applicable state law.
(b) Except as described below, all inbound freight of the Restaurant
Products to the distribution centers of Seller, including the selection of the
carriers and the negotiation of the freight charges, will be managed by and
incurred by Seller as part of its distribution services provided under this
Agreement (without any additional fee to Buyer). The parties agree to comply
with the Freight Management Rules attached hereto as Exhibit E.
(c) SCM fee will continue to be charged by AmeriServe in such amount
and in such manner as directed by Tricon. Tricon will give AmeriServe 60 days
prior notice of any changes in the SCM fee.
Page 16 of 44 December 18, 1998
<PAGE> 17
(d) Seller shall promptly submit to Buyer accurate and complete
monthly reports on such forms as Buyer shall from time to time prescribe
showing (i) the identity of each Exclusive Restaurant to which Seller has sold
Products; (ii) the identity and quantity of Restaurant Products sold by Seller
to the Exclusive Restaurants; and (iii) the net price (exclusive of permissible
prompt pay discounts) paid by the Distributor (or if not conveniently available
the net price paid to Seller by each Exclusive Restaurant) as the form of such
reports and reporting requirements shall be revised in any Distributor
Participation Agreement to which Seller and any SCM Party are a party. Seller
shall be obligated, during the term of this Agreement, to deliver the invoice
information detailed by components (Landed Cost, Seller's mark-up and any other
invoice information provided by Seller), for each distribution center and
separately for Exclusive Restaurants owned and not owned by Buyer.
(e) Seller shall keep and preserve adequate records to support all
information provided by Seller to Buyer pursuant to this paragraph for a
commercially reasonable period of time (at least one year).
8. Continuation of Equipment Business.
Although the equipment products of Seller are not part of the Covered
Products sold to the Exclusive Restaurants, Seller currently plans to maintain
the equipment business and to make the equipment products available for
purchase by the Pizza Hut, Taco Bell and KFC restaurant customers of Seller.
Seller agrees to provide to the Buyer and its other Pizza Hut, Taco Bell and
KFC franchised restaurant customers at least six months prior notice before
either (i) any significant reduction by Seller in the distribution services it
offers for equipment products or (ii) Seller sells the equipment business.
Buyer will continue to purchase 80 percent of its equipment needs for the
Exclusive Restaurants owned by Buyer until November 1, 1999 at prices mutually
agreed to in writing by the parties from time to time.
9. Term.
This Agreement is for a term beginning on the Effective Date and
ending on January 11, 2005 (the "Initial Term"). This Agreement may be extended
until July 11, 2007 upon one year's prior written notice by either party (the
"Extension Term"). If Buyer opts to extend the Initial Term, contract rates, as
adjusted by CPI adjustments, shall continue to apply. If Seller but not Buyer
opts to extend the Initial Term, Buyer and Seller will negotiate in good faith
contract rates for the Extension Term. If parties cannot agree on rates, Buyer
may put the business out for competitive bid, but Seller will have right of
first refusal to maintain the business on same terms as those of the lowest
bona fide bid(s) obtained by Buyer. In the alternative, Seller will retain the
business for the Extension Term, at the contract rates, as adjusted by CPI
adjustments, if the Seller's actual average composite landed restaurant price
for the Exclusive Restaurant Products for the Pizza Hut, Taco Bell and KFC
Exclusive Restaurants owned by Buyer during the last year of the Initial Term
is within __ of the average composite landed restaurant price
Page 17 of 44 December 18, 1998
<PAGE> 18
for the Exclusive Restaurant Products for the Pizza Hut, Taco Bell and KFC
Exclusive Restaurants owned by Buyer offered by third parties in connection
with bona fide market basket bid(s) obtained by Buyer for the business. In the
event Seller opts to extend but the business hereunder is placed elsewhere,
Seller shall remain an approved distributor as provided in Section 1 through
July 11, 2007.
10. Termination.
This Agreement may be terminated prior to the end of the Initial Term
or Extension Term hereof, without affecting the rights or obligations of either
party with respect to the Restaurant Products already delivered by Seller, as
follows:
(a) In the event that the other party breaches any material term of
this Agreement, and such breach shall remain unremedied for a period of thirty
calendar days after written notice of such breach from the non-breaching party,
the non-breaching party may terminate this Agreement upon written notice to the
breaching party; provided that this Agreement may not be terminated by Buyer
for breach of Section 6 above, except as provided in Section 10(b) below.
(b) If Seller is in material breach of this Agreement for failure to
maintain either of the service levels described in Section 6(a) hereof for any
three months of any calendar year during the Initial Term or Extension Term
(commencing in 1999), the Buyer may terminate this Agreement upon written
notice to Seller at any time during the 90 day period after the end of the
third month in which it failed to meet such service level.
(c) In the event that either party (i) makes an assignment for the
benefit of its creditors, (ii) has a petition initiating a proceeding under
applicable bankruptcy laws filed against it and such petition is not set aside
within 60 days after such filing, (iii) files any voluntary petition for
bankruptcy, liquidation or dissolution or has a receiver, trustee or custodian
appointed for all or part of its assets, or (iv) seeks to make an adjustment
settlement or extension of its debt with its creditors generally, the other
party may terminate this Agreement upon written notice to such party.
11. Insurance.
Each party shall obtain and maintain comprehensive general liability
insurance (including product liability) in amounts equal to at least Ten
Million Dollars ($10,000,000.00) combined single limit for death, personal
injury, and property damage, and worker's compensation insurance as required by
law. Each party shall file with the other certificates evidencing such
insurance and shall promptly pay all premiums on said policies as and when the
same become due. In addition, said policies shall contain a provision requiring
thirty days prior written notice to the other of any proposed cancellation or
termination of insurance. The insurance requirements set forth above are
Page 18 of 44 December 18, 1998
<PAGE> 19
minimum coverage requirements and are not to be construed in any way as a
limitation of liability under this Agreement.
12. Trademarks.
(a) Neither the Buyer nor Seller shall acquire any right or interest
in the trademarks or trade names of the other party pursuant to this Agreement.
Except as specifically set forth herein, neither the Buyer nor Seller shall use
the name of the other or any part of any trademark or trade name of the other
party without the express written permission of such other party.
(b) Seller may continue to display the Pizza Hut, Taco Bell and KFC
trademarks on its delivery fleet in the same manner as such trademarks are
currently displayed. Any change in the way such trademarks are displayed on
Seller's delivery fleet shall require the prior written approval of the Buyer.
Buyer may, in its discretion, either (i) require Seller, at Buyer's cost
(unless Seller is refurbishing its fleet pursuant to a normal maintenance
schedule), to change the way the Pizza Hut, Taco Bell, and KFC trademarks are
displayed on the fleet of Seller in order to update the logos for any changes
in the way such trademarks are generally displayed by Seller or (ii) require
Seller to remove such trademarks form its fleet at any time, at Buyer's cost.
Seller further agrees that, without Buyer's prior written consent, Seller's
delivery trucks which display the Pizza Hut, Taco Bell and KFC trademarks will
not be used for any deliveries to any customers of Seller other than Pizza Hut,
Taco Bell and KFC restaurants. Seller shall not be required, however, to
continue to display the Pizza Hut, Taco Bell and KFC trademarks on its delivery
fleet and shall be free, in its discretion, to remove such trademarks at any
time. Seller agrees that its delivery fleet which deliver the Restaurant
Products to any Pizza Hut, Taco Bell or KFC restaurants (the Exclusive
Restaurants or any franchised Pizza Hut, Taco Bell or KFC restaurants) shall
not display the trademarks of any other restaurants of any other restaurant
customer of Seller.
13. Confidentiality by Seller.
(a) Seller acknowledges the Buyer's need to maintain the
confidentiality of certain proprietary information disclosed by the Buyer to
Seller. All information communicated by Buyer to Seller which contains vendor
pricing information negotiated by any SCM Party, marketing and restaurant data,
new product information, promotional activities or other information
specifically relating to the Buyer's business shall be kept confidential and
not used or disclosed by Seller to any third party; provided, however, that the
foregoing restriction shall not apply to the Landed Cost information which
Seller is required to provide to the independent international public
accounting firm as described in subsection 3(c) hereof (but only to the extent
so provided). Such confidential information shall not include information (i)
which becomes generally known to the public through no disclosure by Seller,
(ii) which Seller can show was known by it prior to disclosure to it by Buyer,
or (iii) which is required by law to be disclosed. Seller shall inform its
employees of the confidential nature of all information provided by Buyer which
is confidential pursuant to the terms of this Section 13 and
Page 19 of 44 December 18, 1998
<PAGE> 20
Seller shall be fully responsible for any breach by its employees of the terms
of this Section 13.
(b) Each party hereto agrees to keep the terms of this Agreement
confidential and not disclose them to any third party without the prior written
consent of the other parties hereto, except to the extent such disclosure is
required by law.
14. Indemnity.
(a) Seller shall indemnify and hold Buyer, as well as Buyer's parents,
subsidiaries, affiliates, successors and assigns, and each of their respective
officers, directors, and employees, harmless from and against any and all loss,
liability, claims, demands or suits (including, without limitation, reasonable
attorneys' fees and expenses) which arise out of:
(i) the breach of any of the representations, warranties or
agreements made by Seller in this Agreement (including, without
limitation, damages caused by any violations by law by Seller or
recalls caused by Seller); or
(ii) the warehousing, delivery, storage, handling or
transporting of any Restaurant Products while under the care, custody,
or control of Seller.
(b) The Buyer shall indemnify Seller, as well as Seller's parents,
subsidiaries, affiliates, successors and assigns, and each of their respective
officers, directors, and employees, harmless from and against any and all loss,
liability, claims, demands or suits (including, without limitation, reasonable
attorneys' fees and expenses) which arise out of:
(i) the breach of any of the representations, warranties or
agreements made by Buyer in this Agreement; or
(ii) the operations or business of Buyer (including, without
limitation, SCM) and the Exclusive Restaurants.
15. No Franchise or Agency.
Nothing in this Agreement shall be deemed to make either party the
agent or representative of the other party for any purpose whatsoever. Nothing
provided in this Agreement shall be deemed to grant either party any right or
authority to assume, create or expand any obligation or responsibility, express
or implied, on behalf of or in the name of the other party, or to bind the
other party in any manner or matter whatsoever. Neither party to this Agreement
shall have any authority to employ any person as agent or employee for or on
behalf of the other party to this Agreement for any purpose. It is the express
intention of the parties that each party hold the other party harmless from and
against any and all claims, liability and expense arising out of any
unauthorized act of its respective employees and agents.
Page 20 of 44 December 18, 1998
<PAGE> 21
16. General Provisions.
(a) Appointment of Executive Officers of Buyer. During the term of
this Agreement, Tricon, Pizza Hut, Taco Bell and KFC shall notify Seller in
writing of the names of the executive officers who shall have the authority to
bind all four companies, Tricon, Pizza Hut, Taco Bell and KFC and act on behalf
of Buyer, in connection with any matter relating to this Agreement, including,
without limitation, amending the terms of this Agreement as described in
Section 16(e) below.
(b) Dispute Resolution. Each of Buyer and Seller shall appoint one or
more employees who will meet with each other on a regular basis to review the
performance by each party pursuant to the terms of this Agreement. The Buyer
and Seller shall each appoint an executive officer to meet for the purpose of
resolving any claim, dispute and/or controversy arising out of or relating to
the performance of this Agreement. If the dispute is not resolved by
negotiation within thirty (30) days, the parties shall endeavor to settle the
dispute by mediation under the then current Center for Public Resources ("CPR")
Model Procedure for Mediation of Business Disputes. The neutral third party
will be selected from the CPR panel of neutrals, with the assistance of CPR,
unless the parties agree otherwise. In the event that the parties are
unsuccessful in resolving the dispute via mediation, the parties agree promptly
to resolve any such claim, dispute and/or controversy through binding
confidential arbitration conducted in Louisville, Kentucky, in accordance with
the then current rules of the American Arbitration Association ("AAA"). The
parties irrevocably consent to such jurisdiction for purposes of the
arbitration, and judgment may be entered thereon in any state or federal court
in the same manner as if the parties were residents of the state or federal
district in which said judgment is sought to be entered. The arbitrator shall
not make any award or decision that is not consistent with applicable law. In
any action between the parties, the prevailing party in such action shall
recover its costs and expenses, including reasonable attorneys' fees, from the
non-prevailing party. All applicable statutes of limitations and defenses based
upon the passage of time shall be tolled while the requirements of this Section
16(b) are being followed.
(c) Access to Distribution Centers. During the terms of this Agreement
the Buyer shall have the right to inspect at any time during the term of this
Agreement the distribution centers, all delivery trucks and any other facility
of Seller which carry the Restaurant Products.
(d) Assignment. This Agreement shall be binding upon all the parties
hereto and upon all of their respective heirs, successors and permitted
assigns. This Agreement shall not, however, be assignable or transferable, in
whole or in part, by any party except upon the express prior written consent of
all of the other parties. Any attempt to assign or otherwise transfer this
Agreement or any rights or obligations hereunder in violation of the foregoing
shall be void.
Page 21 of 44 December 18, 1998
<PAGE> 22
(e) Amendments. This Agreement shall not be amended except in writing
signed by all parties hereto.
(f) Notices. All notices, demands, consents or other communications
required or permitted hereunder shall be in writing and personally delivered or
sent by overnight air courier, addressed as follows: if to the Buyer to each of
(i) Pizza Hut, Inc., 14841 Dallas Parkway, Dallas, Texas, 75240, Attn:
President; (ii) Taco Bell Corp., 17901 Von Karman, Irving, California, 92714,
Attn: President; (iii) KFC, 1441 Gardiner Lane, Louisville, Kentucky, 40214,
Attn: President; and (iv) Tricon Global Restaurants, Inc., 1441 Gardiner Lane,
Louisville, Kentucky, 40213, Attn: General Counsel; and if to Seller,
AmeriServe Food Distribution, Inc. 15305 Dallas Parkway, Suite 1600, P.O. Box
9016, Addison, Texas, 75001-9016, Attn: President, or to such other address as
may hereafter be furnished in writing to the other party in the manner
described above. Any notice, demand, consent or communication given hereunder
in the manner described above shall be deemed to have been effected and
received as of the date hand delivered or as of the date received if sent by
overnight air courier.
(g) Force Majeure. No party shall be responsible for delays or
defaults under this Agreement if such delay or default is occasioned by war,
strikes, fire, an act of God or other causes beyond such party's control.
(h) Waiver. No provision, requirement, or breach of this Agreement may
be waived by any party except in writing. If any party fails to enforce any
right or remedy available under this Agreement, that failure shall not be
construed as a waiver of any right or remedy with respect to any other breach
or failure by the other parties. If Seller fails to maintain the service levels
described in Section 6 hereof during any three months of any calendar year
during the term of this Agreement (commencing in 1999) and Buyer does not
exercise its right to terminate this Agreement as described in Section 10(b)
hereof or remove the Exclusive Restaurants by notice as provided in Section
6(b) within 90 days after the third such month, the Buyer shall waive any right
to terminate this Agreement or remove the Exclusive Restaurants by notice as
provided in Section 6(b) with respect to the low service levels during such
three months but shall not waive any right to terminate this Agreement as a
result of low service levels during any months after such three months.
(i) Captions. The captions used herein are inserted only as a matter
of convenience and for reference and in no way define, limit, or describe the
scope or the intent of any section or paragraph hereof.
(j) Governing Law and Forum. This Agreement shall in all respects be
construed in accordance with and governed by the substantive laws of the State
of Kentucky without giving effect to the conflicts of laws principles thereof.
(k) Severability. If any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision
Page 22 of 44 December 18, 1998
<PAGE> 23
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
(l) Other Documents. The terms, conditions and provisions of any
invoice, billing statement, confirmation or other similar document relating to
the services rendered in connection with this Agreement shall be subject and
subordinate to the terms, provisions and conditions of this Agreement and, in
the event of a conflict between the terms, conditions and provisions of any
such document and of this Agreement, the terms, conditions and provisions of
this Agreement shall govern.
(m) Survival of Obligations. The obligations of any party under this
Agreement, which by their nature would continue beyond expiration or
termination of this Agreement including, without limitation, indemnification by
such party as provided in Section 14 hereof, shall survive the expiration or
termination of this Agreement.
17. The Unified Coop
The KFC National Purchasing Cooperative, Inc., organizations
representing KFC, Taco Bell and Pizza Hut franchisees, and Buyer are working
together to establish a purchasing program through a newly organized Unified
Purchasing Coop, LLC (the "Unified Coop") to purchase goods and equipment,
including Restaurant Products and Exclusive Restaurant Products, for
Buyer-owned and operated and franchisee-owned and operated restaurants,
including Exclusive Restaurants. If the Unified Coop purchasing program is
established, Buyer will designate the Unified Coop as an SCM Party and Buyer
will appoint and designate the Unified Coop, on an exclusive basis, to
administer purchasing programs on behalf of restaurant operators for all
restaurants located in the United States, including Exclusive Restaurants.
Seller has participated in the negotiation of a form of Distributor
Participation Agreement between Seller and the Unified Coop and, upon
designation by Buyer of the Unified Coop as an SCM Party, Seller will promptly
enter into a Distributor Participation Agreement with the Unified Coop in
substantially the same form attached as Exhibit J. Consistent with the
provisions of Paragraph 13(b) of this Agreement, Buyer and Seller each consent
to the disclosure of the terms of this Agreement and any information provided
for in this Agreement to the Unified Coop. Buyer and Seller each agree that the
designation of the Unified Coop as an SCM Party is not in violation of the
assignment provisions contained in Paragraph 16(d) of this Agreement. "The
Service Fee," as defined in Paragraph 4 of the Distributor Participation
Agreement will replace "the costs of SCM allocated to the Exclusive Restaurant
Products" referred to in clause (y) in Section 3(a) of this Agreement.
Page 23 of 44 December 18, 1998
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first set forth above.
TRICON GLOBAL RESTAURANTS, INC.
By:
----------------------------------------
Name:
--------------------------------------
Its:
---------------------------------------
PIZZA HUT, INC.
By:
----------------------------------------
Name:
--------------------------------------
Its:
---------------------------------------
TACO BELL CORP.
By:
----------------------------------------
Name:
--------------------------------------
Its:
---------------------------------------
KENTUCKY FRIED CHICKEN CORPORATION
By:
----------------------------------------
Name:
--------------------------------------
Its:
---------------------------------------
KENTUCKY FRIED CHICKEN OF CALIFORNIA, INC.
By:
----------------------------------------
Name:
--------------------------------------
Its:
---------------------------------------
AMERISERVE FOOD DISTRIBUTION, INC.
By:
----------------------------------------
Name:
--------------------------------------
Its:
---------------------------------------
Page 24 of 44 December 18, 1998
<PAGE> 25
EXHIBIT A
EXPORT COUNTRIES
<TABLE>
<S> <C>
Antigua Japan
Argentina Korea
Aruba Kuwait
Australia Lebanon
Bahamas Martinique
Barbados Mexico
Belgium Netherlands
Bonaire N.A. Nicaragua S.A.
Brazil Pakistan
Canada Panama
Chile Paraguay
China Peru
Columbia Philippines
Costa Rica Poland
Curacao N.A. Puerto Rico
Cyprus Qatar
Dominican Republic Russia
Ecuador Saipan
Egypt Saudi Arabia
El Salvador Singapore
France South Africa
Germany (GDR) South Korea
Grand Cayman Spain
Grenada Sweden
Guam Taiwan
Guatemala Thailand
Honduras Trinidad
Hong Kong Turkey
Iceland Turks & Caicos
India United Arab emirates
Israel United Kingdom
Jamaica Uruguay
</TABLE>
Page 25 of 44 December 18, 1998
<PAGE> 26
EXHIBIT B
LIST OF "RESTAURANTS UNDER DEFINITIVE CONTRACT
OR LETTER OF INTENT"
Page 26 of 44 December 18, 1998
<PAGE> 27
EXHIBIT C
CURRENT SMALLWARES PRICING AND SERVICING
Servicing
AmeriServe currently services the Tricon Concepts in roughly the following
proportions:
<TABLE>
<CAPTION>
F&S DC's Equip DC FSS
<S> <C> <C> <C>
Pizza Hut
Taco Bell
KFC
</TABLE>
These ranges include forms and office supplies.
Pricing
Smallwares pricing falls within the following mark-up ranges:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Pizza Hut
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Taco Bell
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
KFC
- -------------------------------------------------------------------------------
Page 27 of 44 December 18, 1998
<PAGE> 28
EXHIBIT D
SELLER'S CASE CHARGE/PERCENTAGE MARK-UP
Subject to the terms of Section 3 of this Agreement and in exchange
for the Exclusive Restaurant Products, Buyer shall pay to Seller sums in
accordance with the guidelines detailed herein:
A. The prices for the Exclusive Restaurant Products (including
fresh produce but excluding softdrinks and Promotional Items
(as defined below)) shall be the Landed Cost plus the SCM
costs or service fee, as applicable, described in Section
3(a) plus the per case charge indicated below:
Pizza Hut
Taco Bell
KFC
B. The new prices are effective January 1, 1999. Prior to
January 1, 1999, the Landed Cost, mark-ups, freight and other
pricing provisions will be the same as in the Original
Agreement.
C. The parties have agreed to negotiate a comprehensive pricing
and servicing arrangement for Smallwares. Until such
negotiations are complete, Smallwares shall be priced and
serviced under current arrangements as set forth on Exhibit C
to this Agreement.
D. National soft drinks shall be priced at levels currently
existing pursuant to existing contracts between beverage
providers and Buyer. If and when Seller assumes
responsibility for delivering national soft drinks to Buyer,
Buyer will allow Seller to receive standard distribution fees
paid by any national soft drinks provider.
E. Promotional Items -
For purposes of this Agreement, the term "Promotional Items"
includes both Stock Promotional Items and Limited Promotional
Items, where:
(1) "Stock Promotional Items" are consumable,
non-food items of various themes and design such as
kids' meals, crayons, balloons, birthday kits and
kids' table covers that are used for promotional
purposes and are held in inventory at all times, and
(2) "Limited Time Promotional Items" are consumable,
non-food items such as basketballs, cup-toppers and
Major League
Page 28 of 44 December 18, 1998
<PAGE> 29
glassware that are offered for a limited time, are
self-liquidating and are offered for promotional
purposes.
Paper products (including paper cups and packaging materials)
that are normally Exclusive Restaurant Products that are
modified through graphics or other changes for promotional
purposes shall be considered to be Exclusive Restaurant
Products (and shall not be considered Promotional Items),
even when the introduction of such products is for a limited
time; provided, however, that any such product will be
considered to be a Promotional Item if the vendor case price
for such product is not within 20 percent of the standard
vendor case price of the item which it replaces.
Plastic cups that are normally Exclusive Restaurant Products
that are modified through graphics or other changes for
promotional purposes shall be considered to be Exclusive
Restaurant Products (and shall not be considered Promotional
Items); provided that (i) such plastic cups are self
liquidating, (ii) there are not multiple SKU's for such
plastic cups at the same time, (iii) such plastic cups are
generally available on a systemwide basis for the applicable
Concept, (iv) date-sensitive delivery of such cups to any
Exclusive Restaurant(s) is not required by Buyer, (i.e.
start/stop sell dates), (v) redeemable game pieces are not
added to the products, and (vi) normal restaurant ordering
practices apply to the ordering of these products (no auto
shipments).
All other items not described in the previous two paragraphs
which are normally Exclusive Restaurant Products that are
modified through graphics or other changes for promotional
purposes shall be considered to be Promotional Items.
F. Buyer and Seller shall negotiate mark-ups for Restaurant
Products that are not Exclusive Restaurant Products
(equipment, uniforms, and point of purchase items) from time
to time in good faith as provided in this Agreement.
G. By approximately September 30, 1999, as provided in this
Agreement all mark-ups and case charges will be applied
consistently across all distribution centers and all
Exclusive Restaurant Products (i.e. flat pricing) unless
specifically otherwise agreed to by Buyer.
H. Buyer and Seller agree that the per case mark-up shall depend
upon the Dropsize. The "Average Dropsize Per Delivery" means,
for any period, the number of cases of Covered Products
ordered for regularly scheduled deliveries divided by the
number of regularly scheduled deliveries for such period.
Cases that are ordered but not delivered because (i) the
vendor is out of stock, or (ii) the cases ordered are not
shipped to Seller in a timely
Page 29 of 44 December 18, 1998
<PAGE> 30
manner and the Buyer is responsible for arranging or directing
the manner of freight of such order to Seller, will not be
considered in calculating the "Average Dropsize Per Delivery."
The pricing adjustment shall be as follows:
Average Drop Size Per Case
Per Delivery Reduction/(Surcharge)
The Drop Size will be calculated on an
Exclusive Restaurant Basis each calendar quarter on
an average basis (not a per drop basis) and shall be
applied during the following quarter. Exclusive
Restaurants that are "2nl" or "3nl" units shall be
treated as one unit for purposes of Drop Size
Adjustments.
I. The per case mark-up (not the percentage mark-up) referred to
in Section A herein shall increase on January 1 of each year
(commencing on January 1, 2001) based upon the amount by
which the.
J. As referred to in Section 3(d) of the Agreement, the actual
1997 ratios are as follows:
<TABLE>
<CAPTION>
CUBE-TO-CASE WEIGHT-TO-CASE
CONCEPT RATIO RATIO
<S> <C> <C> <C>
Pizza Hut
Taco Bell
KFC
</TABLE>
Page 30 of 44 December 18, 1998
<PAGE> 31
EXHIBIT F
TEXT OF NET PRE-TAX PROFIT
MARGIN LIMIT FROM PIZZA HUT
FRANCHISE AGREEMENT AS REFERRED TO
IN SECTION 3(G)
8.3. Product Rebate.
A. For the purpose of this Section 8.3, the term "Company" includes
any business entity controlling, controlled by, or under common control with,
PHI.
B. Franchisee may purchase from Company, upon such terms as Company
may offer, such items as Company may offer for sale to Franchisee.
C. Within 4 months after the end of each fiscal year of Company,
Company will determine its rate of gross profit and its rate of net pre-tax
profit attributable to sales by Company to all its Pizza Hut franchisees of
only food, paper products, and similar restaurant supplies (but not of any
other items, including without limitation, nonfood items manufactured by
Company and other items such as furnishings, interior and exterior decor items,
and equipment) for the fiscal year.
In making this determination the sales, gross profit, and net pre-tax profit
for all entities will be combined (without considering accounting eliminations)
into one financial statement and Company's cost will be reduced by any cash
discounts that Company received from its vendors.
D. If:
i) the rate or gross profit as determined by Company exceeds
14%, or
ii) the rate of net pre-tax profit as determined by Company
exceeds 2.5%,
then in either event Company will, within 30 days thereafter pay to any Pizza
Hut franchisees entitled thereto, in the manner provided in paragraph E below,
an amount equal to the excess as determined under either i) or ii) above,
whichever is greater; provided, however, that the aggregate payment called for
herein shall in no event exceed an amount equal to Company's net pre-tax profit
attributable to sales of food, paper products. and similar restaurant supplies
by Company to all its Pizza Hut:
franchisees for said fiscal year.
E. Company will pay to each Pizza Hut franchisee its share of the
amount determined payable by Company under paragraphs C and D above, in the
form of a cash payment or a credit, at the option of the franchisee, pursuant
to procedures established by Company. The share of each Pizza Hut franchisee
will be in an amount which bears the same relationship to the total amount
determined to be payable by Company under paragraphs C and D above as such
franchisee's gross purchases from Company of food, paper products, and similar
restaurant supplies bear to gross purchases of such items,
Page 38 of 44 December 18, 1998
<PAGE> 32
from Company by all franchisees; the parties expressly agree that such share
shall be determined without regard to any other factors, including without
limitation, product mix variations, delivery and service charges, regional price
variations, or other price variations.
Page 39 of 44 December 18, 1998
<PAGE> 33
EXHIBIT G-1(A)
FORM OF SALES AND DISTRIBUTION AGREEMENT
(FOR REFRANCHISED PH AND TB STORES WHERE
LETTER OF INTENT OR DEFINITIVE AGREEMENT TO PURCHASE
WAS IN PLACE ON OCTOBER 1, 1998)
Page 40 of 44 December 18, 1998
<PAGE> 34
EXHIBIT G-1(B)
FORM OF SALES AND DISTRIBUTION AGREEMENT
(FOR GRANDFATHERED PH AND TB STORES)
Page 41 of 44 December 18, 1998
<PAGE> 35
EXHIBIT G-2
FORM OF SALES AND DISTRIBUTION AGREEMENT
(FOR REFRANCHISED PH AND TB STORES WHERE NO
LETTER OF INTENT OR DEFINITIVE AGREEMENT TO PURCHASE
WAS IN PLACE ON OCTOBER 1, 1998)
Page 42 of 44 December 18, 1998
<PAGE> 36
EXHIBIT H
BLACK OUT PERIODS
Exclusive Restaurants Black Out Periods
KFC Restaurants 11:30am to 1:00pm and 5:30pm to 7:00pm - All Days
Pizza Hut Restaurants 11:30am to 1:00pm - Monday to Friday
5:30pm to 7:30pm - Friday and Saturday
Taco Bell Restaurants 11:30am to 1:00pm and 5:30pm to 7:00pm - All Days
Page 43 of 44 December 18, 1998
<PAGE> 37
EXHIBIT J
FORM OF DISTRIBUTOR
PARTICIPATION AGREEMENT REFERRED
TO IN SECTION 17
Page 44 of 44 December 18, 1998
<PAGE> 1
FIRST AMENDMENT TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of July 24, 1998 (this "Amendment"), amends the Third Amended and
Restated Credit Agreement, dated as of May 21, 1998 (the "Credit Agreement"),
among AMERISERVE FOOD DISTRIBUTION, INC., a Delaware corporation (the
"Company"), the various financial institutions parties thereto (collectively,
the "Lenders"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
letter of credit issuing lender, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as administrative agent (the "Administrative Agent") and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, as documentation agent
(together with the Administrative Agent, the "Agents"). Terms defined in the
Credit Agreement are, unless otherwise defined herein or the context otherwise
requires, used herein as defined therein.
WHEREAS, the parties hereto have entered into the Credit Agreement,
which provides for the Lenders to extend certain credit facilities to the
Company from time to time; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
certain respects as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION I AMENDMENTS. Effective as of July 24, 1998, Section 2.15 of
the Credit Agreement shall be amended to state in its entirety as follows:
"2.15 Increase in Commitments. The Company may, from time to
time on any Business Day on or before August 31, 1998, with the
written consent of the Administrative Agent, increase the Commitments
by delivering a written request at least three Business Days prior to
the desired effective date of such increase (the "Commitment Increase")
identifying additional Lender(s) (or additional Commitments for
existing Lenders) and the amount of its commitment (or additional
amount of its Commitment); provided, however, that any increase of the
Commitments shall not cause the aggregate Commitments to exceed
$225,000,000. The effective date of the Commitment Increase shall be
agreed upon by the Company and the Administrative Agent. Upon the
effectiveness thereof, the Lenders' Percentages shall be adjusted. If
any Lender shall incur any cost or expense with respect to the
Commitment Increase, including any loss
<PAGE> 2
or expense arising from the liquidation or reemployment of funds
obtained by it to maintain any Offshore Rate Loans or from fees to
terminate the deposits from which such funds were obtained, the
Company will upon notice from such Lender reimburse such Lender
therefor."
SECTION 2 CONDITIONS PRECEDENT. This Amendment shall become effective
when each of the conditions precedent set forth in this Section 2 shall have
been satisfied and notice thereof shall have been given by the Administrative
Agent to the Company and the Lenders.
SECTION 2.1 Receipt of Documents. The Administrative Agent shall have
received all of the following documents duly executed, dated the date hereof or
such other date as shall be acceptable to the Administrative Agent, and in form
and substance satisfactory to the Administrative Agent:
(a) Amendment. This Amendment, duly executed by the Company,
the Agents and the Required Lenders.
(b) Consents. Copies, certified by the secretary or an
assistant secretary of the Company, of all documents evidencing any
necessary corporate action, consents and governmental approvals (if
any) with respect to this Amendment and the other documents described
herein.
(c) Secretary's Certificate. A certificate of the secretary
or an assistant secretary of the Company, as to (i) resolutions of the
Board of Directors of the Company then in full force and effect
authorizing the execution, delivery and performance of this Amendment
and each other document described herein, and (ii) the incumbency and
signatures of those officers of the Company authorized to act with
respect to this Amendment and each other document described herein.
(d) Guarantors Consents. The consents of the Guarantors in
the form attached hereto.
SECTION 2.2 Compliance with Warranties, No Default. etc. Both before
and after giving effect to the effectiveness of this Amendment, the following
statements by the Company shall be true and correct (and the Company, by its
execution of this Amendment, hereby represents and warrants to the Agents and
each Lender that such statements are true and correct as at such times):
(a) the representations and warranties set forth in Article
VII of the Credit Agreement shall be true and correct with the same
effect as if then made (unless stated to relate solely to an earlier
date, in which case such
-2-
<PAGE> 3
representations and warranties shall be true and correct as of such
earlier date); and
(b) no Default or Event of Default shall have then occurred
and be continuing, and neither the Company nor any Guarantor shall be
in material violation of any law or governmental regulation or court
order or decree.
SECTION 2.3 Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Company or any Guarantor shall
be satisfactory in form and substance to the Administrative Agent and its
counsel; and the Administrative Agent and its counsel shall have received all
information, approvals, opinions, documents or instruments as the
Administrative Agent or its counsel may reasonably request.
SECTION 3 REPRESENTATIONS AND WARRANTIES. To induce the Lenders and
the Agents to enter into this Amendment, the Company represents and warrants to
each Agent and each Lender as follows:
SECTION 3.1 Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Company of this Amendment and the execution and
delivery by each Guarantor of its consent executed or to be executed by it in
connection with this Amendment, are within the Company's and each such
Guarantor's corporate powers, have been duly authorized by all necessary
corporate action, and do not
(a) contravene the Company's or any such Guarantor's
Organization Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting the Company or any such Guarantor; or
(c) result in, or require the creation or imposition of, any
Lien on any of the Company's or any Guarantor's properties.
SECTION 3.2 Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Company or any other Guarantor of this Amendment
or any consent to be executed by it in connection with this Amendment.
SECTION 3.3 Validity, etc. This Amendment constitutes the legal, valid
and binding obligation of the Company enforceable in accordance with its
respective terms; and each consent executed pursuant hereto by each other
Guarantor will, on the due
-3-
<PAGE> 4
execution and delivery thereof by such Guarantor, be the legal, valid and
binding obligation of such Guarantor enforceable in accordance with its terms.
SECTION 4 MISCELLANEOUS.
SECTION 4.1 Continuing Effectiveness, etc. This Amendment shall be
deemed to be an amendment to the Credit Agreement, and the Credit Agreement, as
amended hereby, shall remain in full force and effect and is hereby ratified,
approved and confirmed in each and every respect. After the effectiveness of
this Amendment in accordance with its terms, all references to the Credit
Agreement in the Loan Documents or in any other document, instrument, agreement
or writing shall be deemed to refer to the Credit Agreement as amended hereby.
SECTION 4.2 Payment of Costs and Expenses. The Company agrees to pay
on demand all expenses of the Administrative Agent (including Attorney Costs)
in connection with the negotiation, preparation, execution and delivery of this
Amendment.
SECTION 4.3 Severability. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 4.4 Headings. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment or any provisions hereof.
SECTION 4.5 Execution in Counterparts. This Amendment may be executed
by the parties hereto in several counterparts, each of which shall be deemed to
be an original and all of which shall constitute together but one and the same
agreement.
SECTION 4.6 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF ILLINOIS; PROVIDED THAT THE AGENTS, THE LENDERS AND THE
COMPANY SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAWS.
SECTION 4.7 Successors and Assigns. This Amendment shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
-4-
<PAGE> 5
AMERISERVE FOOD DISTRIBUTION, INC.
By:
--------------------------------
Title:
-----------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:
--------------------------------
Title:
-----------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Issuing Lender and Lender
By:
--------------------------------
Title:
-----------------------------
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION,
as Documentation Agent
By:
--------------------------------
Title:
-----------------------------
LASALLE NATIONAL BANK
By:
--------------------------------
Title:
-----------------------------
THE MITSUBISHI TRUST AND BANKING
CORPORATION, CHICAGO BRANCH
By:
--------------------------------
Title:
-----------------------------
SOUTHERN PACIFIC BANK
By:
--------------------------------
Title:
-----------------------------
-5-
<PAGE> 6
TRANSAMERICA BUSINESS CREDIT
By:
----------------------------------
Title:
-------------------------------
CHRISTIANIA BANK OG KREDITKASSE
By:
----------------------------------
Title:
-------------------------------
FLEET CAPITAL CORPORATION
By:
----------------------------------
Title:
-------------------------------
-6-
<PAGE> 1
EXHIBIT 10.10
EXECUTION COPY
================================================================================
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
dated as of July 28, 1998
among
AMERISERVE FUNDING CORPORATION,
as Transferor,
AMERISERVE FOOD DISTRIBUTION, INC.,
as the initial Servicer,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS
SECTION 1.1 Definitions.....................................................1
ARTICLE II CONVEYANCE OF ASSETS
SECTION 2. Creation of the Trust; Conveyance of Certain Assets.............1
SECTION 2.2 Acceptance by Trustee...........................................4
SECTION 2.3 Representations and Warranties of Transferor
Relating to the Transferred Assets..............................4
SECTION 2.4 No Assumption of Obligations Relating to Receivables,
Related Transferred Assets or Contracts.........................5
SECTION 2.5 Conveyance of Purchased Interests...............................6
ARTICLE III ADMINISTRATION AND SERVICING
SECTION 3.1 Acceptance of Appointment; Other Matters........................6
SECTION 3.2 Duties of Servicer and Transferor...............................7
SECTION 3.3 Lockbox Accounts; Blocked Accounts.............................10
SECTION 3.4 Servicing Compensation.........................................12
SECTION 3.5 Records of Servicer and Reports to be
Prepared by Servicer...........................................13
SECTION 3.6 Monthly Servicer's Certificate.................................15
SECTION 3.7 Servicing Report of Independent Public
Accountants; Forms 10Q and 10K.................................15
SECTION 3.8 Rights of Trustee..............................................16
SECTION 3.9 Ongoing Responsibilities of AmeriServe.........................18
SECTION 3.10 Further Action Evidencing Transfers............................19
ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS; ALLOCATIONS
SECTION 4.1 Rights of Certificateholders...................................20
SECTION 4.2 Establishment of Transaction Accounts..........................20
SECTION 4.3 TrustLevel Calculations and Funds Allocations..................22
SECTION 4.4 Investment of Funds in Transaction Accounts....................23
SECTION 4.5 Attachment of Transaction Accounts.............................23
ARTICLE V DISTRIBUTIONS AND REPORTS..........................................................24
ARTICLE VI THE CERTIFICATES
SECTION 6.1 The Certificates...............................................24
SECTION 6.2 Authentication of Certificates.................................25
SECTION 6.3 Registration of Transfer and Exchange
of Certificates................................................25
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates..............27
SECTION 6.5 Persons Deemed Owners..........................................28
SECTION 6.6 Appointment of Paying Agent....................................28
SECTION 6.7 Access to List of Certificateholders'
Names and Addresses............................................29
SECTION 6.8 Authenticating Agent...........................................30
SECTION 6.9 Tax Treatment..................................................31
SECTION 6.10 Issuance of Additional Series of Certificates and
Sales of Purchased Interests...................................32
SECTION 6.11 BookEntry Certificates.........................................36
SECTION 6.12 Notices to Clearing Agency.....................................41
SECTION 6.13 Definitive Certificates........................................41
SECTION 6.14 Letter of Representations......................................42
ARTICLE VII TRANSFEROR
SECTION 7.1 Representations and Warranties of
Transferor Relating to Transferor and the
Transaction Documents..........................................42
SECTION 7.2 Covenants of Transferor........................................46
SECTION 7.3 Indemnification by Transferor..................................55
ARTICLE VIII SERVICER
SECTION 8.1 Representations and Warranties of Servicer.....................57
SECTION 8.2 Covenants of Servicer..........................................59
SECTION 8.3 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer.......................................60
SECTION 8.4 Indemnification by Servicer....................................60
SECTION 8.5 Servicer Liability.............................................61
SECTION 8.6 Servicing in Florida...........................................61
ARTICLE IX EARLY AMORTIZATION EVENTS;
TERMINATION BY SELLERS
SECTION 9.1 Early Amortization Events......................................61
SECTION 9.2 Remedies.......................................................61
SECTION 9.3 Termination By Sellers.........................................62
SECTION 9.4 Additional Rights Upon the Occurrence
of Certain Events..............................................62
ARTICLE X SERVICER DEFAULTS
SECTION 10.1 Servicer Defaults..............................................63
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 10.2 Trustee to Act; Appointment of Successor.......................65
SECTION 10.3 Notification of Servicer Default; Notification
of Termination of Servicer and Appointment
of Successor Servicer..........................................67
SECTION 10.4 Waiver of Servicer Defaults....................................68
ARTICLE XI TRUSTEE
SECTION 11.1 Duties of Trustee..............................................68
SECTION 11.2 Certain Matters Affecting Trustee..............................72
SECTION 11.3 Limitation on Liability of Trustee.............................74
SECTION 11.4 Trustee May Deal with Other Parties............................75
SECTION 11.5 Servicer To Pay Trustee's Fees and Expenses....................75
SECTION 11.6 Eligibility Requirements for Trustee...........................76
SECTION 11.7 Resignation or Removal of Trustee..............................76
SECTION 11.8 Successor Trustee..............................................77
SECTION 11.9 Merger or Consolidation of Trustee.............................78
SECTION 11.10 Appointment of CoTrustee or Separate Trustee...................78
SECTION 11.11 Tax Returns....................................................79
SECTION 11.12 Trustee May Enforce Claims Without
Possession of Certificates.....................................80
SECTION 11.13 Suits for Enforcement..........................................80
SECTION 11.14 Rights of Required Investors To Direct Trustee.................80
SECTION 11.15 Representations and Warranties of Trustee......................81
SECTION 11.16 Maintenance of Office or Agency................................81
SECTION 11.17 Conduct of Business, Office, Place of Business,
Agents or Employees Relating to Florida........................82
SECTION 11.18 Trust Not to Become a Limited Liability
Company or Corporation.........................................82
ARTICLE XII TERMINATION
SECTION 12.1 Termination of Trust...........................................82
SECTION 12.2 Final Distribution.............................................83
SECTION 12.3 Rights Upon Termination of the Trust...........................84
SECTION 12.4 Optional Repurchase of Investor Interests......................85
ARTICLE XIII MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment, Waiver, Etc.........................................85
SECTION 13.2 Actions by Certificateholders and Purchasers...................88
SECTION 13.3 Limitation on Rights of Certificateholders.....................89
SECTION 13.4 Limitation on Rights of Purchasers.............................90
SECTION 13.5 Governing Law..................................................91
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 13.6 Notices........................................................91
SECTION 13.7 Severability of Provisions.....................................92
SECTION 13.8 Certificates Nonassessable and Fully Paid......................92
SECTION 13.9 Nonpetition Covenant...........................................92
SECTION 13.10 No Waiver; Cumulative Remedies.................................93
SECTION 13.11 Counterparts...................................................93
SECTION 13.12 ThirdParty Beneficiaries.......................................93
SECTION 13.13 Integration....................................................93
SECTION 13.14 Binding Effect; Assignability; Survival of Provisions .........94
SECTION 13.15 Recourse to Transferor.........................................94
SECTION 13.16 Recourse to Transferred Assets.................................94
SECTION 13.17 Submission to Jurisdiction.....................................94
SECTION 13.18 Waiver of Jury Trial...........................................95
SECTION 13.19 Certain Partial Releases.......................................95
SECTION 13.20 Effect on Existing Pooling Agreement...........................96
SECTION 13.20 Effect on Existing Pooling Agreement...........................95
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Lockbox Agreement (Section 3.3(a))
EXHIBIT B Form of Blocked Account Agreement (Section 3.3(b))
EXHIBIT C Form of Monthly Servicer's Certificate (Section 3.6)
EXHIBIT D Annual Agreed-Upon Procedures (Section 3.7)
EXHIBIT E Form of Transferor Certificate (Section 3.8)
EXHIBIT F Form of Certificate to be Given by Certificate Owner
(Section 6.11(d))
EXHIBIT G Form of Certificate to be Given by Euroclear or Cedel
(Section 6.11(d))
EXHIBIT H Form of Certificate to be Given by Transferee of
Beneficial Interest in a Regulation S Temporary
Book-Entry Certificate (Section 6.11(e)(ii))
EXHIBIT I Form of Transfer Certificate for Exchange or Transfer from 144A
Book-Entry Certificate to Regulation S Book-Entry Certificate
(Section 6.11(e)(ii))
EXHIBIT J Form of Placement Agent Exchange Instructions
(Section 6.11(e)(iv))
EXHIBIT K Form of Annual Servicer Certificate (Section 3.2(j))
EXHIBIT L Data Fields (Section 3.5)
</TABLE>
APPENDIX
APPENDIX A Definitions
-iv-
<PAGE> 6
THIS AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated as of
July 28, 1998 (this "Agreement"), is made among AMERISERVE FUNDING CORPORATION,
a Delaware corporation ("Transferor"), AMERISERVE FOOD DISTRIBUTION, INC., a
Delaware corporation ("AmeriServe"), as the initial Servicer, and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, as Trustee. This Agreement amends and restates
the Pooling and Servicing Agreement dated as of July 1, 1997 among the parties
hereto (the "Existing Pooling Agreement").
ARTICLE I DEFINITIONS
SECTION 1.1 Definitions. Capitalized terms used in this Agreement have
the meanings that Appendix A assigns to them, and this Agreement shall be
interpreted in accordance with Part B of Appendix A.
ARTICLE II CONVEYANCE OF ASSETS
SECTION 2.1 Creation of the Trust; Conveyance of Certain Assets. (a)
Transferor hereby transfers, assigns, sets over, grants and otherwise conveys to
Trustee, in its capacity as representative of the Certificateholders and the
Purchasers, without recourse (except as expressly provided herein), all of its
right, title and interest in, to and under, (i) all Receivables that have been
or are hereafter transferred (whether by sale or contribution) by the Sellers to
Transferor, (ii) all Related Assets, (iii) all of Transferor's rights, remedies,
powers and privileges, and all claims of Transferor against any Person under and
with respect to the Seller Transaction Documents (the property described in
clauses (ii) and (iii) being called the "Related Transferred Assets"), (iv) all
funds from time to time on deposit in each of the Transaction Accounts
(including funds deposited in a Transaction Account in connection with the
issuance of any prefunded Series) and all certificates and instruments, if any,
from time to time evidencing such funds, all investments made with such funds,
all claims thereunder or in connection therewith and all interest, dividends,
monies, instruments, securities and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the foregoing, (v) any Enhancement obtained for the benefit of any Series or
Purchased Interest and (vi) all moneys due or to become due and all amounts
received or receivable with respect to any of the foregoing and all proceeds of
the foregoing. Such property, whether now existing or hereafter acquired, shall
constitute the assets of the Trust (collectively, the "Transferred Assets"). The
foregoing transfer, assignment, setover, grant and conveyance shall be made to
Trustee, on behalf of the Trust, and each reference in this Agreement to such
transfer, assignment, setover, grant and conveyance shall be construed
accordingly.
<PAGE> 7
(b) In connection with the transfer described in subsection (a),
Transferor and Servicer shall record and file or cause to be recorded and filed,
as an expense of Servicer paid out of the Servicing Fee, UCC financing
statements with respect to the Transferred Assets meeting the requirements of
applicable state law in such manner and in such jurisdictions as are necessary
to perfect the transfer and assignment of the Transferred Assets to the Trustee.
In connection with the transfer described in subsection (a), Transferor and
Servicer further agree to deliver immediately to Trustee, as an expense of
Servicer paid out of the Servicing Fee, each Transferred Asset (including any
original documents or instruments included in the Transferred Assets as are
necessary to effect such transfer) in which the transfer of an interest is
perfected under the UCC or otherwise by possession.
(c) In connection with the transfer described above in subsection (a),
Servicer shall, on behalf of Transferor, as an expense of Servicer paid out of
the Servicing Fee, on or prior to the date of this Agreement, mark the master
data processing records evidencing the Receivables with the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO AMERISERVE FUNDING
CORPORATION PURSUANT TO A SECOND AMENDED AND RESTATED RECEIVABLES
PURCHASE AGREEMENT, AMONG AMERISERVE FOOD DISTRIBUTION, INC.
("AMERISERVE") AS INITIAL SERVICER, AMERISERVE AND CERTAIN OF ITS
SUBSIDIARIES, AS SELLERS, AND AMERISERVE FUNDING CORPORATION, AS BUYER;
AND SUCH RECEIVABLES HAVE BEEN TRANSFERRED TO THE AMERISERVE
RECEIVABLES MASTER TRUST PURSUANT TO AN AMENDED AND RESTATED POOLING
AND SERVICING AGREEMENT, AMONG AMERISERVE FUNDING CORPORATION, AS
TRANSFEROR, AMERISERVE, AS INITIAL SERVICER, AND NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, AS TRUSTEE."
(d) Upon the written request of Transferor, Trustee will cause
Certificates in authorized denominations evidencing the entire interest in the
Trust to be duly authenticated and delivered to or upon the order of Transferor
pursuant to Section 6.2. Pursuant to the Transferor Certificate, Transferor
shall be entitled to receive current and deferred transfer payments at the times
and in the amounts specified in the various Supplements and PI Agreements
executed from time to time.
(e) The parties hereto intend the transfers of Tricon Assets hereunder
to be true sales by the Transferor to the Trust that are absolute and
irrevocable and that provide the Trust and the Trustee with the full benefits of
ownership of the Tricon Assets, and none of the parties hereto intends the sale
of the Tricon Assets hereunder to be, or for any purpose to be characterized as,
loans from the Trust to
page 2
<PAGE> 8
the Transferor. It is, further, not the intention of any party hereto that the
conveyance of the Tricon Assets by Transferor be deemed a grant of a
security interest in the Tricon Assets by Transferor to Trustee to secure a debt
or other obligation of Transferor. However, in the event that, notwithstanding
the intent of the parties, any Tricon Assets are property of Transferor's
estate, then (i) this Agreement also shall be deemed to be and hereby is a
security agreement within the meaning of the UCC, and (ii) the conveyance by
Transferor provided for in this Agreement shall be deemed to be a grant by
Transferor to the Trustee, for the benefit of the Trustee, the
Certificateholders and the Purchasers, of a security interest in all of
Transferor's right, title and interest in, to and under the Tricon Assets,
whether now or hereafter owned, existing or arising and wherever located (which
shall be deemed to be a first priority perfected security interest and which
shall secure Transferor's obligations (monetary or otherwise) under the
Transaction Documents, the Certificates and the Purchased Interests).
(f) The parties hereto intend that this Agreement constitute a security
agreement under applicable law. Transferor hereby grants to the Trustee, for the
benefit of the Trustee, the Certificateholders and the Purchasers, a security
interest in all of Transferor's right, title and interest in, to and under the
Receivables and other Transferred Assets, whether now or hereafter owned,
existing or arising and wherever located (which shall be deemed to be a first
priority perfected security interest and which shall secure Transferor's
obligations (monetary or otherwise) under the Transaction Documents, the
Certificates and the Purchased Interests); provided, however, with respect to
Tricon Assets, this paragraph (f) is subject to paragraph (e) above.
(g) On the terms and subject to the conditions set forth herein, the
Trust agrees to pay to the Transferor on any date (each, a "Transfer Date") on
which Tricon Assets are sold by the Transferor to the Trust a purchase price as
follows: a cash payment to the Transferor to the extent that (x) funds are made
available from an increase in the Invested Amounts of the Series 1998-1
Certificateholders (as defined in the Series 1998-1 Supplement) and (y) Tricon
Collections are available for such purpose pursuant to the Series 1998-1
Supplement.
(h) Except as specifically provided in this Agreement, and subject to
the terms and conditions of the Series 1998-1 Supplement, the sale and purchase
of Tricon Assets under this Agreement shall be without recourse to Transferor;
it being understood that the Transferor shall be liable to the Trust for all
representations, warranties, covenants and indemnities made by the Transferor
pursuant to the terms of this Agreement, all of which obligations are limited so
as not to constitute recourse to the Transferor for the credit risk of Tricon.
page 3
<PAGE> 9
(i) If at any time the Servicer or the Trustee shall determine that any
of the representations and warranties made by the Transferor in Section 2.3 with
respect to any Tricon Asset was not true on the date of the purchase thereof by
the Trust or when otherwise made or deemed certified, Transferor shall be
required to repurchase such nonconforming Tricon Asset for an amount equal to
the Unpaid Balance of the related Tricon Receivable.
(j) The Trust shall have the sole right to retain any gains or profits
created by buying, selling or holding the Tricon Assets and shall have the sole
risk of and responsibility for losses or damages created by such buying, selling
or holding.
SECTION 2.2 Acceptance by Trustee. Trustee hereby acknowledges its
acceptance on behalf of the Trust of all right, title and interest to the
Transferred Assets and declares that it shall maintain such right, title and
interest, upon the trust herein set forth, for the benefit of all
Certificateholders and Purchasers, on the terms and subject to the conditions
hereinafter set forth.
SECTION 2.3 Representations and Warranties of Transferor Relating to
the Transferred Assets.
(a) Representations and Warranties. At the time that any Receivable or
Related Asset is transferred by Transferor to the Trustee, Transferor hereby
represents and warrants that:
(i) Quality of Title. (A) Immediately before each transfer to
be made by Transferor hereunder, each Receivable and Related
Transferred Asset that was then to be transferred to the Trustee
hereunder was owned by Transferor free and clear of any Adverse Claim
(other than any Permitted Adverse Claim); and on or prior to the First
Issuance Date, Transferor and Servicer made, or caused to be made, all
filings and took all other action under applicable law in each relevant
jurisdiction in order to protect and perfect the Trustee's interest in
such Receivables, such Related Transferred Assets and the funds in the
Transaction Accounts against all creditors of, and purchasers from,
Transferor and the Sellers.
(B) Each transfer of Receivables and other Transferred Assets
by Transferor to the Trustee pursuant to this Agreement constitutes a
valid transfer and assignment to the Trustee of all right, title and
interest of Transferor in the Receivables and the Related Transferred
Assets, free and clear of any Adverse Claim (other than any Permitted
Adverse Claim), and constitutes either an absolute transfer of such
property to the Trustee or a grant of a first priority perfected
security interest in such property to the Trustee.
page 4
<PAGE> 10
(C) No effective UCC financing statement or other instrument
similar in effect that covers all or part of any Transferred Asset or
any interest in any proceeds thereof is on file in any recording office
except any filings relating to any Permitted Adverse Claim.
(D) No acquisition of any Receivable or Related Transferred
Asset by Transferor or the Trustee constitutes a fraudulent transfer or
fraudulent conveyance under the United States Bankruptcy Code or
applicable state bankruptcy or insolvency laws or is otherwise void or
voidable or subject to subordination under similar laws or principles
or for any other reason.
(ii) Governmental Approvals. With respect to each Receivable
and Related Transferred Asset, all consents, licenses, approvals or
authorizations of, or notices to or registrations, declarations or
filings with, any Governmental Authority required to be obtained,
effected or made by the Sellers, Servicer or Transferor in connection
with the conveyance of the Receivable and Related Transferred Asset by
the Sellers to Transferor, or by Transferor to the Trustee, have been
duly obtained, effected or given and are in full force and effect.
(iii) Eligible Receivables. (A) On the date on which the
applicable Seller transfers a Receivable to Transferor, and Transferor
transfers such Receivable to the Trustee, unless otherwise identified
by Servicer in the Daily Report for such date, such Receivable is an
Eligible Receivable, and (B) on the date of each Daily Report or
Monthly Report that identifies a Receivable as an Eligible Receivable,
such Receivable exists and is an Eligible Receivable.
(b) Notice of Breach. The representations and warranties set forth in
subsection (a) shall survive the transfer of the Receivables and the Related
Transferred Assets to the Trustee. Upon discovery by Transferor, Servicer or
Trustee of a breach of any of the representations and warranties set forth in
subsection (a), the party discovering the breach shall give written notice to
the others within two Business Days following the discovery; provided, however,
that if such breach arises from a Seller's failure to perform its obligations
under the Purchase Agreement and such failure is of the type that may be cured
by settlement of a Seller Non-Complying Receivables Adjustment or Seller
Dilution Adjustment under Sections 3.1 and 3.5 of the Purchase Agreement, and
such settlement shall have (in fact) been made, then no breach shall be deemed
to have occurred under this Agreement. Trustee's obligations in respect of
discovering any breach are limited as provided in Section 11.2(g).
page 5
<PAGE> 11
SECTION 2.4 No Assumption of Obligations Relating to Receivables,
Related Transferred Assets or Contracts. The transfer, assignment, set over,
grant and conveyance described in Section 2.1 does not constitute and is not
intended to result in a creation or an assumption by the Trust, Trustee or any
Purchaser or Investor Certificateholder of any obligation of Servicer,
Transferor, the applicable Seller or any other Person in connection with the
Receivables or the Related Transferred Assets or under the related contracts or
any other agreement or instrument relating thereto. None of Trustee, the Trust
or any Purchaser or Investor Certificateholder shall have any obligation or
liability to any Obligor or other customer or client of a Seller.
SECTION 2.5 Conveyance of Purchased Interests. Pursuant to the terms of
a PI Agreement, Trustee, on behalf of the Trust, from time to time may sell,
transfer, assign, set over and otherwise convey Purchased Interests to a
Purchaser or an Agent for the account of a Purchaser; and Trustee, on behalf of
the Trust, is authorized and directed (subject to the applicable terms of
Section 6.10), upon the written request of Transferor, to enter into one or more
PI Agreements in the form annexed to each such written request. Pursuant to a PI
Agreement, Collections allocated to Purchased Interests may be reinvested and
such Purchased Interests may be recomputed, each from time to time as provided
therein.
ARTICLE III ADMINISTRATION AND SERVICING
SECTION 3.1 Acceptance of Appointment; Other Matters.
(a) Designation of Servicer. The servicing, administering and
collection of the Receivables and the Related Transferred Assets shall be
conducted by the Person designated as Servicer hereunder from time to time in
accordance with this section. Subject to Section 3.1(d), AmeriServe is
designated (and agrees to act) as Servicer.
(b) Delegation of Certain Servicing Activities. In the ordinary course
of business, Servicer may at any time delegate its duties hereunder with respect
to the Receivables and the Related Transferred Assets to any Person. Each Person
to whom any such duties are delegated in accordance with this Section is called
a "Sub-Servicer". Notwithstanding any such delegation, Servicer shall remain
liable for the performance of all duties and obligations of Servicer pursuant to
the terms of this Agreement and the other Transaction Documents. The fees and
expenses of any Sub-Servicers shall be as agreed between Servicer and the
Sub-Servicers from time to time and none of the Trust, Trustee or the
Certificateholders or Purchasers shall have any responsibility therefor. Upon
any termination of a Servicer pursuant to Section 10.1, all Sub-Servicers
designated pursuant to this subsection by such Servicer shall automatically also
be terminated.
page 6
<PAGE> 12
(c) Termination. The designation of Servicer (and each Sub-Servicer)
under this Agreement shall automatically terminate upon termination of the Trust
pursuant to Section 12.1. AmeriServe shall not be removed as Servicer except
upon the delivery of a Termination Notice pursuant to Section 10.1.
(d) Resignation of Servicer. AmeriServe shall not resign as Servicer
unless it determines that (i) the performance of its duties is no longer
permissible under applicable law and (ii) there is no reasonable action that it
could take to make the performance of its duties permissible under applicable
law. If AmeriServe determines that it must resign for the reasons stated above,
it shall, prior to the tendering of its resignation, deliver to Trustee an
Opinion of Counsel confirming the satisfaction of the conditions set forth in
clause (i) of the preceding sentence. Notwithstanding any other provision of
this Agreement, no resignation by AmeriServe shall become effective until
Trustee or another Successor Servicer shall have assumed the responsibilities
and obligations of Servicer in accordance with Section 10.2. Trustee shall give
prompt notice to the Rating Agencies of the appointment of any Successor
Servicer.
SECTION 3.2 Duties of Servicer and Transferor.
(a) Duties of Servicer in General. Servicer shall service the
Receivables and the Related Transferred Assets and, subject to the terms and
provisions of this Agreement, shall have full power and authority, acting alone
or through any Sub- Servicer, to do any and all things in connection with such
servicing that it may deem necessary or appropriate. Trustee shall execute and
deliver to Servicer any powers of attorney or other instruments or documents
that are prepared by Servicer and stated in an Officer's Certificate to be, and
shall furnish Servicer with any documents in its possession, necessary or
appropriate to enable Servicer to carry out its servicing duties. Servicer shall
exercise the same care and apply the same policies with respect to the
collection and servicing of the Receivables and the Related Transferred Assets
that it would exercise and apply if it owned such Receivables and the Related
Transferred Assets, all in substantial compliance with applicable law and in
accordance with the Credit and Collection Policy.
Servicer shall take or cause to be taken (and shall cause each
Sub-Servicer (if any) to take or cause to be taken) all such actions as Servicer
deems necessary or appropriate to collect each Receivable and Related
Transferred Asset, all in accordance with applicable law and the Credit and
Collection Policy.
Without limiting the generality of the foregoing and subject to the
preceding paragraph and Article X, Servicer or its designee is hereby authorized
and empowered, unless such power and authority is revoked by Trustee on account
of the occurrence of a Servicer Default, (i) to instruct Trustee to make
withdrawals
page 7
<PAGE> 13
and payments from the Transaction Accounts as set forth in this Agreement (and
any Supplement and PI Agreement), (ii) to execute and deliver, on behalf of the
Trust for the benefit of the Certificateholders and Purchasers, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Receivables
and the Related Transferred Assets, (iii) to make any filings, reports, notices,
applications and registrations with, and to seek any consents or authorizations
from, the Securities and Exchange Commission and any state securities authority
on behalf of the Trust as may be necessary or appropriate to comply with any
federal or state securities laws or reporting requirements or other laws or
regulations, and (iv) to the extent permitted under and in compliance with the
Credit and Collection Policy and with all applicable laws, rules, regulations,
judgments, orders and decrees of courts and other Governmental Authorities
(whether federal, state, local or foreign) and all other tribunals, to commence
or settle collection proceedings with respect to the Receivables and otherwise
to enforce the rights and interests of the Trust and the Certificateholders and
Purchasers in, to and under the Receivables or Related Transferred Assets (as
applicable).
(b) Identification and Transfer of Collections. Servicer shall cause
Collections and all other Transferred Assets that consist of cash or cash
equivalents to be deposited into the Bank Accounts and the Transaction Accounts
pursuant to the terms and provisions of Section 3.3 and Article IV.
Following notification from an Account Bank that any item has been
returned or is uncollected and that such Account Bank has not been otherwise
reimbursed pursuant to the terms of the applicable Account Agreement for any
amounts it credited to the relevant Bank Account (and then transferred to the
Master Collection Account), Servicer shall instruct Trustee in writing to, and
Trustee shall, turn over to such Account Bank Collections in such amount from
Collections on deposit in the Master Collection Account.
(c) Modification of Receivables, Etc. So long as no Servicer Default
shall have occurred and be continuing, Servicer may adjust, and may permit each
Sub- Servicer to adjust, in accordance with Section 3.2(a) and the Credit and
Collection Policy, the Unpaid Balance of any Receivable, or otherwise amend,
modify or waive the terms of any Receivable or any contract related thereto,
provided, however, that in each case Servicer shall have determined that such
adjustment, amendment, modification and waiver is appropriate to maximize
collection of such Receivable. Servicer shall, or shall cause the applicable
Sub-Servicer to, write off Receivables from time to time in accordance with the
Credit and Collection Policy.
(d) Documents and Records. At any time when (i) an Early Amortization
Event shall have occurred and be continuing or (ii) AmeriServe is not Servicer,
page 8
<PAGE> 14
Transferor, to the extent that it is entitled to do so under the Purchase
Agreement, shall, upon the request of the then-acting Servicer, cause the
applicable Seller to deliver to Servicer, and Servicer shall hold in trust for
Transferor and Trustee in accordance with their respective interests, all
Records that evidence or relate to the Receivables and Related Transferred
Assets originated by such Seller and the contracts related to the Receivables,
or that are otherwise necessary or desirable to collect the Receivables or
Related Transferred Assets of the applicable Seller, and Servicer shall make the
same available to Trustee at one or more places selected by Trustee or its
designee.
(e) Certain Duties to the Sellers. Servicer, if other than AmeriServe,
shall, as soon as practicable after a demand by any Seller, deliver to the
Seller all documents, instruments and records in its possession that evidence or
relate to accounts receivable of AmeriServe Persons that are not Receivables or
Related Transferred Assets, and copies of all documents, instruments and records
in its possession that evidence or relate to Receivables and Related Transferred
Assets.
(f) Identification of Eligible Receivables. The initial Servicer will
(i) establish and maintain such procedures as are necessary for determining no
less frequently than each Business Day whether each Receivable qualifies as an
Eligible Receivable, and for identifying, on any Business Day, all Receivables
that are not Eligible Receivables, and (ii) include in each Daily Report
information that shows whether, and to what extent, the Receivables described in
such Daily Report are Eligible Receivables.
(g) Authorization to Act as Transferor's Agent. Without limiting the
generality of subsection (a), Transferor hereby appoints Servicer as its agent
for the following purposes: (i) specifying deposit accounts to which payments to
Transferor are to be made, (ii) making transfers among, and deposits to and
withdrawals from, all deposit accounts of Transferor for the purposes described
in the Transaction Documents, and (iii) arranging payment by Transferor of all
fees, expenses and other amounts payable by Transferor pursuant to the
Transaction Documents. Transferor irrevocably agrees that (A) it shall be bound
by all actions taken by Servicer pursuant to the preceding sentence, and (B)
Trustee and the banks holding all deposit accounts of Transferor are entitled to
accept submissions, determinations, selections, specifications, transfers,
deposits and withdrawal requests, and payments from Servicer on behalf of
Transferor.
(h) Grant of Power of Attorney. Transferor and Trustee hereby each
grant to Servicer a power of attorney, with full power of substitution, to take
in the name of Transferor and Trustee all steps that are necessary or
appropriate to endorse, negotiate, deposit or otherwise realize on any writing
of any kind held or transmitted by Transferor or transmitted or received by
Trustee (whether or not
page 9
<PAGE> 15
from Transferor) in connection with any Receivable or Related Transferred Asset.
The power of attorney that Transferor and Trustee have granted to Servicer may
be revoked by Trustee, and shall be deemed to have been revoked by Transferor,
on the date on which Trustee shall be entitled to exercise the powers granted to
Trustee pursuant to Section 3.8(b). In exercising its power granted
hereby,Servicer shall take directions from Trustee, if any, arising out of the
exercise of the rights granted under Section 11.14.
(i) Turnover of Collections. If Servicer, Transferor or any of their
respective agents or representatives shall at any time receive any cash, checks
or other instruments constituting Collections, such recipient shall segregate
such payments and hold such payments in trust for Trustee and shall, promptly
upon receipt (and in any event within one Business Day following receipt), remit
all such cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to a Bank Account or the Master Collection Account.
(j) Annual Statement as to Compliance. Servicer will deliver to Trustee
and each Rating Agency on or before March 31 of each year, beginning with March
31, 1998 an Officer's Certificate, in substantially the form of Exhibit K,
stating, as to each signer thereof, that (i) a review of the activities of
Servicer during the preceding calendar year and of the performance by Servicer
under this Agreement (and each Supplement) during such calendar year has been
made under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, Servicer has fulfilled all its obligations
under this Agreement (and each Supplement) throughout such year, or, if there
has been a default in the fulfillment of any such obligation, specifying each
such default known to such officer and the nature and status thereof and
remedies therefor being pursued.
(k) Intercreditor Agreements. The Servicer shall comply with the terms
of each Intercreditor Agreement as if it were the Trustee party thereto.
SECTION 3.3 Lockbox Accounts; Blocked Accounts. (a) Each Bank Account
shall be subject to an Account Agreement and maintained in the name of the
Trustee. Unless instructed otherwise (after the occurrence and continuance of an
Early Amortization Event) by Trustee, each Lockbox Bank shall be instructed by
Servicer to transfer to the related Lockbox Account, on a daily basis, all items
in the applicable Lockbox and to remit, on a daily basis (but subject to the
Lockbox Bank's customary funds availability schedule), all amounts deposited in
the Lockbox Accounts maintained with it to the Master Collection Account. Unless
instructed otherwise (after the occurrence and continuance of an Early
Amortization Event) by the Trustee, each Blocked Account Bank shall be
instructed by Servicer to remit, on a daily basis (but subject to the Blocked
Account Bank's customary funds availability schedule), all amounts on deposit in
page 10
<PAGE> 16
the Blocked Account maintained with it to the Master Collection Account. Except
as provided in this Agreement and the applicable Account Agreements, none of any
Seller, Transferor, Servicer, or any Person claiming by, through or under any
Seller, Transferor or Servicer shall have any control over the use of, or any
right to withdraw any item or amount from, any Lockbox, Lockbox Account or
Blocked Account. Servicer and Trustee are each hereby irrevocably authorized and
empowered, as Transferor's attorney-in-fact, to endorse any item deposited in a
lockbox or presented for deposit in any Lockbox Account or Blocked Account
requiring the endorsement of Transferor, which authorization is coupled with an
interest and is irrevocable. Each Bank Account shall be an Eligible Deposit
Account.
(b) Servicer shall instruct (or shall cause the applicable Seller to
instruct) all Obligors to make all payments due to Transferor or the applicable
Seller relating to or constituting Collections (or any proceeds thereof) (i) to
the Lockboxes for deposit in a Lockbox Account or (ii) directly to a Bank
Account. If Transferor or the applicable Seller receives any Collections,
Servicer shall cause such recipient to (x) segregate such payment and hold it in
trust for the benefit of Trustee, and (y) as soon as practicable, but no later
than the first Business Day following receipt of such item by such Person,
deposit such payment in a Bank Account or the Master Collection Account.
Servicer shall, and shall cause Transferor and the applicable Seller to, use
reasonable efforts to prevent the deposit of any amounts other than Collections
in any Bank Account or the Master Collection Account. If Servicer is notified by
the applicable Seller that any amount other than Collections has been deposited
in any Bank Account or the Master Collection Account (other than in accordance
with the terms of a Transaction Document), Servicer shall cause such amount to
be segregated, apart and in a different account, from the Bank Accounts and the
Transaction Accounts. After such misapplied amount has been reasonably
identified by Servicer to the appropriate Account Bank or Trustee, as the case
may be, Servicer shall promptly instruct such Account Bank or Trustee, as
applicable, to segregate such amount, and shall direct such Account Bank or
Trustee (as appropriate) to turn over such amounts to a Person designated in
such instruction (which Person shall be the applicable Seller or other
AmeriServe Person (or their designees) to whom such amounts are owed unless the
terms of a Transaction Document provide for a different result).
(c)(i) Servicer may, from time to time after the First Issuance Date,
designate a new account as a Lockbox Account (and a new lockbox or post office
box relating thereto) or a Blocked Account, and such account shall become a
Lockbox Account or a Blocked Account (and the bank at which such account is
maintained shall become a Lockbox Bank or a Blocked Account Bank, and such
lockbox or post office box shall become a Lockbox, for purposes of this
Agreement); provided that Trustee shall have received not less than 15 Business
page 11
<PAGE> 17
Days' (or such shorter number of days as is acceptable to Trustee) prior written
notice of the account (and related lockbox or post office box) and/or the bank
that are proposed to be added as a Bank Account (or Lockbox) or an Account Bank
(as applicable) and, not less than ten Business Days (or such shorter number of
days as is acceptable to Trustee) prior to the effective date of any such
proposed addition, Trustee shall have received (x) counterparts of an Account
Agreement, with each new Account Bank, duly executed by such new Account Bank
and all other parties thereto, which Account Agreement shall cover such Lockbox
and Bank Account, and (y) copies of all other agreements and documents signed by
the new Account Bank or such other parties with respect to such Lockbox and Bank
Account.
(ii) Servicer may, from time to time after the First Issuance Date,
terminate an account as a Lockbox Account or a Blocked Account or a bank as an
Account Bank; provided that no such termination shall occur unless Trustee shall
have received not less than ten Business Days' (or such shorter number of days
as is acceptable to Trustee) prior written notice of the account and/or the bank
that are proposed to be terminated as a Bank Account or an Account Bank (as
applicable) and, not less than ten Business Days (or such shorter number of days
as is acceptable to Trustee) prior to the effective date of any such proposed
termination, Trustee shall have received counterparts of an agreement, duly
executed by the applicable Account Bank and reasonably satisfactory in form and
substance to Trustee, pursuant to which such Account Bank agrees that, if it
receives any funds or items that constitute Collections on or after the
effective date of the termination of the applicable Bank Account or the
effective date of its termination as an Account Bank (as the case may be), such
Account Bank or former Account Bank (as applicable) shall cause such funds and
items to be delivered in the form received to the Master Collection Account (or
to the Trustee) promptly after such Account Bank or former Account Bank (as
applicable) discovers that it has received any such funds or items.
(iii) Notwithstanding any other provision of this Agreement, Transferor
and Servicer may at any time establish alternative collection procedures that do
not require the use of Lockbox Accounts with the consent of each Agent and any
Enhancement Provider and upon satisfaction of the Modification Condition.
SECTION 3.4 Servicing Compensation. As full compensation for its
servicing activities hereunder and under the other Transaction Documents, and as
reimbursement for any expense incurred by it in connection herewith and there
with, Servicer shall be entitled to receive a monthly servicing fee (the
"Servicing Fee") in respect of each Series and Purchased Interest, payable in
arrears on each Distribution Date in respect of each Distribution Period (or
portion thereof) during which that Series or Purchased Interest is outstanding.
The Servicing Fee in respect
page 12
<PAGE> 18
of any Series or Purchased Interest shall be payable solely as provided in the
related Supplement or PI Agreement.
Unless otherwise provided in the applicable Supplement or PI Agreement,
the Servicing Fee payable with respect to any Series or Purchased Interest shall
be calculated as follows. At any time when AmeriServe or any of its Affiliates
is Servicer, the Servicing Fee for any Distribution Period shall be equal to
one-twelfth of the product of (a) 2%, multiplied by (b) the aggregate Unpaid
Balance of the Receivables as measured on the first Business Day of that
Distribution Period, multiplied by (c) the applicable Series Collection
Allocation Percentage. If AmeriServe ceases to be Servicer, the Servicing Fee
for a Successor Servicer that is not an AmeriServe Person shall be an amount
equal to the greater of (i) the amount calculated pursuant to the preceding
sentence and (ii) an alternative amount specified by such Servicer not exceeding
the sum of (x) 110% of the aggregate reasonable costs and expenses incurred by
such Servicer during such Distribution Period in connection with the performance
of its obligations under this Agreement and the other Transaction Documents, and
(y) the other costs and expenses that are to be paid out of the Servicing Fee,
as described in the next sentence; provided that the amount provided for in
clause (x) shall not exceed one-twelfth of 2% of the aggregate Unpaid Balance of
the Receivables as measured on the first Business Day of the Distribution
Period. The fees, costs and expenses of Trustee, the Paying Agent, any
Authenticating Agent, the Lockbox Banks, the Blocked Account Banks and the
Transfer Agent and Registrar, and certain other costs and expenses payable from
the Servicing Fee pursuant to other provisions of this Agreement, and all other
fees and expenses that are not expressly stated in this Agreement, any
Supplement or any PI Agreement to be payable by the Trust or Transferor, other
than Federal, state, local and foreign income and franchise taxes, if any, or
any interest or penalties with respect thereto, of the Trust, shall be paid out
of the Servicing Fee and shall be paid by Servicer from the funds that
constitute the Servicing Fee.
SECTION 3.5 Records of Servicer and Reports to be Prepared by Servicer.
(a) Keeping of Records and Books of Account. Servicer shall maintain at
all times accurate and complete books, records and accounts relating to the
Receivables, Related Transferred Assets and related contracts of each Seller and
all Collections thereon in which timely entries shall be made. Servicer shall
maintain and implement administrative and operating procedures (including an
ability to generate duplicates of Records evidencing Receivables and the Related
Transferred Assets in the event of the destruction of the originals thereof),
and shall keep and maintain all documents, books, records and other information
that Servicer deems
page 13
<PAGE> 19
reasonably necessary for the collection of all Receivables and Related
Transferred Assets.
(b) Receivables Reviews. Servicer shall provide Trustee access to the
documentation regarding the Receivables when Trustee is required, in connection
with the enforcement of the rights of Certificateholders or the Purchasers or by
applicable statutes or regulations, to review such documentation, such access
being afforded without charge but only (i) upon reasonable request, (ii) during
normal business hours, (iii) subject to Servicer's normal security and
confidentiality procedures, (iv) at reasonably accessible offices in the
continental United States of America designated by Servicer and (v) upon five
Business Days' prior notice; provided that no notice shall be required if an
Early Amortization Event shall have occurred and be continuing.
(c) Daily Reports. Prior to noon, New York City time, on each Business
Day, Servicer shall prepare and deliver to Trustee and any Agent a report
relating to each outstanding Series and Purchased Interest, substantially in the
form specified by the applicable Supplement or PI Agreement or in such other
form as is reasonably acceptable to Trustee and Servicer (each such report being
a "Daily Report") setting out, among other things, the Base Amount and Series
Collection Allocation Percentage for that Series or Purchased Interest as of the
end of business on the preceding Business Day; provided that if, on any Business
Day, Servicer is unable to prepare and deliver a Daily Report to Trustee because
of acts of God or the public enemy, riots, acts of war, acts of terrorism,
epidemics, fire, failure of communication lines, equipment or power failure,
computer systems failure, flood, embargoes, weather, earthquakes or other
unanticipated disruptions of Servicer's ability to monitor the origination
and/or preparation of Receivables, then (x) the Base Amount for purposes of each
outstanding Series and Purchased Interest shall be the lowest Base Amount shown
in the related Daily Reports delivered during the immediately preceding month
(such amount, an "Estimated Base Amount") and (y) the Series Collection
Allocation Percentage for that Series or Purchased Interest shall be the one
shown in the Daily Report most recently delivered. Servicer may use an Estimated
Base Amount and the most recently reported Series Collection Allocation
Percentage to prepare the Daily Report until the earlier to occur of (i) the day
upon which disruption no longer prevents Servicer from preparing the Daily
Report using the actual data required by the Daily Report and delivering it to
Trustee, and (ii) the sixth Business Day following the commencement of such
disruption. Servicer shall notify each Rating Agency promptly following its use
of an Estimated Base Amount in any Daily Report.
On the second Business Day of each week, Servicer shall prepare and
deliver to Trustee, no later than 1:00 New York City time on such Business Day,
a computer tape or disk in form and substance satisfactory to Trustee,
containing the
page 14
<PAGE> 20
information (and the data fields contained in Exhibit L) that Servicer used to
prepare the last Daily Report during the immediately preceding week. The Trustee
shall have no obligation to verify whether the information contained in the
weekly tape is true and correct. Section 11.1(b) sets forth obligations of
Trustee in respect of the Daily Reports.
(d) Monthly Report. On each Report Date, Servicer shall prepare and
deliver to (i) Trustee and the Rating Agencies a report relating to each
outstanding Series and Purchased Interest, substantially in the form specified
by the applicable Supplement or PI Agreement or in such other form as is
reasonably acceptable to Trustee and Servicer (each such report being a "Monthly
Report") and (ii) Trustee a computer tape or disk in form and substance
satisfactory to Trustee, containing the information (and the data fields
contained in Exhibit L) that Servicer used to prepare such Monthly Report (each
such tape or disk being a "Monthly Tape"). Section 11.1(b) sets forth
obligations of Trustee in respect of the Monthly Reports and Monthly Tapes.
(e) Notice of Seller Change Events; Supplements to Monthly Reports.
Sections 1.7 and 1.8 of the Purchase Agreement describe circumstances under
which (i) additional Sellers may be added to the Purchase Agreement and (ii) a
Seller may terminate its status as Seller under the Purchase Agreement (each
such event being a "Seller Change Event"). Those Sections of the Purchase
Agreement require AmeriServe to give prior written notice to Transferor of the
occurrence of a Seller Change Event, and Transferor hereby agrees to give prompt
written notice of its receipt of any such notice to Trustee and the Rating
Agencies. If the notice is given to Trustee, then, within five Business Days
after the receipt of the notice by Trustee (or such later date, as specified in
the notice, on which the applicable Seller Change Event shall become effective),
Servicer shall deliver to Trustee and the Rating Agencies a supplement to the
Monthly Report then in effect for each outstanding Series or Purchased Interest,
which supplement shall show the calculation (complete with the historical and/or
pro forma receivables data necessary to perform such calculation) of (A) the
Required Receivables and the applicable reserve ratios (as described in each
Supplement or PI Agreement) to reflect the addition of accounts receivable
originated by any Person that is being added to the Purchase Agreement as a
Seller, and the exclusion of any Receivables originated by any Person that is
terminating its status as a Seller (as applicable), and (B) the Loss Discount
and the Purchase Discount Reserve Ratio for any such Person that is being added
to the Purchase Agreement as a Seller. For purposes of all calculations
hereunder and under the Purchase Agreement, the Required Receivables, such
reserve ratios and (if applicable) the Loss Discount and the Purchase Discount
Reserve Ratio for the relevant Person shown in such supplement shall supersede
and/or supplement the calculation of such items in the then outstanding Monthly
Report, effective as of the fifth Business Day following
page 15
<PAGE> 21
Trustee's receipt of such notice (or such later date, as specified in such
notice, on which the applicable Seller Change Event shall become effective).
SECTION 3.6 Monthly Servicer's Certificate. On each Report Date,
Servicer shall deliver to Trustee, the Paying Agent, Transferor and the Rating
Agencies a certificate of an Authorized Officer of Servicer substantially in the
form of Exhibit C, with such additions as may be required by any Supplement.
SECTION 3.7 Servicing Report of Independent Public Accountants; Forms
10-Q and 10-K. (a)(i) On or before 120 days after the end of each fiscal year of
Transferor beginning with the end of Transferor's fiscal year 1997, Servicer
shall, as an expense of Servicer paid out of the Servicing Fee, cause Ernst &
Young or another firm of recognized independent public accountants that is
generally recognized as being among the "big six" (which may also render other
services to Servicer, the Sellers or Transferor) to furnish a report to Trustee,
Servicer, the Rating Agencies and Transferor (which report shall be addressed to
Trustee and shall relate to Transferor's most recently ended fiscal year). The
accountants' report shall set forth the results of their performance of the
procedures described in Exhibit D with respect to the Monthly Reports and Daily
Reports delivered to Trustee pursuant to Section 3.5 during the prior fiscal
year.
(ii) Each accountants' report shall state that the accountants have
compared the amounts contained in the Monthly Reports and Daily Reports
contemplated by Exhibit D and delivered to Trustee during the period covered by
the report with the documents and records (including computer records) from
which the amounts were derived and that, on the basis of such comparison, the
amounts are in agreement with the documents and records, except for such
exceptions as they believe to be immaterial and such other exceptions as shall
be set forth in the report. Except as provided otherwise in a Supplement or PI
Agreement, as the case may be, a copy of the report may be obtained by any
Investor Certificateholder or Purchaser, as the case may be, by a request in
writing to Trustee addressed to the Corporate Trust Office.
(b) Promptly after the filing of any such reports, if applicable, with
the Securities and Exchange Commission, Servicer shall provide each of the
Rating Agencies and the Trustee with copies of each Quarterly Report on Form
10-Q and each Annual Report on Form 10-K of Servicer.
SECTION 3.8 Rights of Trustee.
(a) Trustee has the exclusive dominion and control over the Bank
Accounts, and, until such time as the Trust shall have been terminated pursuant
to Section 12.1 and all amounts owed under the Transaction Documents have been
page 16
<PAGE> 22
paid in full, Transferor shall take any action that Trustee may reasonably
request to effect or evidence such dominion and control. At any time following
the occurrence of a Servicer Default, Trustee is hereby authorized to give
notice to the Account Banks, as provided in the Account Agreements, of the
revocation of Servicer's authority to give instructions or take any other
actions with respect to the Bank Accounts that Servicer would otherwise be
authorized to give or to take.
(b) At any time following the designation of a Servicer other than
AmeriServe until a Successor Servicer (if other than Trustee) has been
appointed:
(i) Trustee may direct any Obligors of Receivables to pay all
amounts payable under any Receivable or any Related Transferred Assets
directly to Trustee or its designee; provided that Trustee shall
provide the applicable Seller with a copy of such notice at least one
Business Day prior to sending it to any Obligor and consult in good
faith with the applicable Seller as to the text of the notice.
(ii) Trustee may direct any Seller to make payment of all
amounts payable to Transferor under any Transaction Document to which
the Seller is a party directly to Trustee or its designee.
(iii) Transferor and Servicer shall, at Trustee's request and
as an expense of Servicer paid out of the Servicing Fee, give notice of
the Trustee's ownership of the Receivables and the Related Transferred
Assets to each Obligor and direct that payments be made directly to
Trustee or its designee.
(iv) Transferor shall, and shall cause (in accordance with
the Purchase Agreement) the Sellers to, at Trustee's request, (A)
assemble all of the Records that evidence or relate to the Receivables
and Related Transferred Assets originated by each Seller and the
contracts related to the Receivables, or that are otherwise necessary
or desirable to collect the Receivables and Related Transferred Assets,
and shall make the same available to Trustee at one or more places
selected by Trustee or its designee, (B) segregate all cash, checks and
other instruments received by it from time to time constituting
Collections in a manner acceptable to Trustee and shall, promptly upon
receipt (and, subject to Section 3.2(i), in no event later than the
first Business Day following receipt), remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of
transfer, to a Bank Account or the Master Collection Account and (C)
permit, upon not less than two Business Days' prior written notice, any
Successor Servicer and its agents, employees and assignees access to
their respective facilities and their respective Records.
page 17
<PAGE> 23
(c) Each of Transferor and Servicer hereby authorizes Trustee, from
time to time after the designation of a Servicer other than AmeriServe, to take
any and all steps in Transferor's name and on behalf of Transferor and Servicer
that are necessary or appropriate, in the reasonable determination of Trustee,
to collect all amounts due under any and all Receivables or Related Transferred
Assets, including endorsing the name of Transferor or the applicable Seller on
checks and other instruments representing Collections and enforcing such
Receivables and the Related Transferred Assets.
(d) Transferor hereby irrevocably appoints Trustee to act as
Transferor's attorney-in-fact, with full authority in the place and stead of
Transferor and in the name of Transferor or otherwise, from time to time after
the designation of a Servicer other than AmeriServe, to take (subject to Section
11.14) any action and to execute any instrument or document that Trustee, in its
reasonable determination, may deem necessary to accomplish the purposes of this
Agreement, including:
(i) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any Receivable or any Related Transferred
Asset;
(ii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause
(i);
(iii) to file any claims or take any action or institute any
proceedings that Trustee in its reasonable determination may deem
necessary or appropriate for the collection of any of the Receivables
or any Related Transferred Asset or otherwise to enforce the rights of
Trustee and the Certificateholders and the Purchasers with respect to
any of the Receivables or any Related Transferred Asset; and
(iv) to perform the affirmative obligations of Transferor
under any Transaction Document.
Transferor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 3.9 Ongoing Responsibilities of AmeriServe. Anything herein to
the contrary notwithstanding:
(a) If at any time AmeriServe shall not be Servicer, it shall
deliver all Collections received or deemed received by it or its
Subsidiaries to Trustee no later than one Business Day after receipt
or deemed receipt
page 18
<PAGE> 24
thereof and Trustee shall distribute such Collections to the same
extent as if such Collections had actually been received from the
related Obligor on the applicable dates. So long as AmeriServe or any
of its Subsidiaries shall hold any Collections or deemed Collections
required to be paid to Trustee, each of them shall hold such amounts
in trust (and separate and apart from its own funds) and shall clearly
mark its records to reflect such trust. AmeriServe hereby grants to
Trustee an irrevocable power of attorney, with full power of
substitution, coupled with an interest, upon the occurrence of a
Servicer Default, to take in the name of AmeriServe all steps
necessary or appropriate to endorse, negotiate or otherwise realize on
any writing or other right of any kind held or transmitted by
AmeriServe or transmitted and received by Trustee (whether or not from
AmeriServe) in connection with any Receivable or Related Transferred
Asset.
(b) In addition, if at any time AmeriServe shall not be
Servicer, it shall act (if the Successor Servicer so requests) as the
data processing agent of Servicer and, in such capacity, AmeriServe
shall conduct (and shall cause any other necessary Persons to conduct)
the data processing functions of the administration of the
Receivables, the Related Transferred Assets and the Collections
thereon in substantially the same way that AmeriServe (or its
Sub-Servicers) conducted such data processing functions while
AmeriServe acted as Servicer. AmeriServe and each such other Person
shall be entitled to reasonable compensation for such service to be
paid from the Servicing Fee.
(c) Notwithstanding any termination of AmeriServe as Servicer
hereunder, AmeriServe shall continue to indemnify Trustee on the terms
set out in Section 11.5 with respect to circumstances existing, or
actions taken or omitted, prior to such termination.
SECTION 3.10 Further Action Evidencing Transfers. Servicer shall cause
all UCC financing statements and continuation statements and any other necessary
documents relating to the right, title and interest of Trustee in and to the
Transferred Assets to be promptly recorded, registered and filed, and at all
times to be kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve, maintain and protect the
right, title and interest of Trustee hereunder in and to all property comprising
the Transferred Assets. Servicer shall deliver to Trustee file-stamped copies
of, or filing receipts for, any document recorded, registered or filed as
provided above, as soon as available following such recording, registration or
filing. Transferor shall cooperate fully with Servicer in connection with the
obligations set forth above and will execute any and all documents that are
reasonably required to fulfill the intent of this section.
page 19
<PAGE> 25
If Transferor or Servicer fails to perform any of its agreements or
obligations under any Transaction Document and does not remedy such failure
within the applicable cure period, if any, then Trustee or its designee may (but
shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the reasonable expenses of Trustee or its designee
incurred in connection therewith shall be payable by Servicer as provided in
Section 11.5 and (if applicable) by Transferor as provided in Section 7.3.
ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS; ALLOCATIONS
SECTION 4.1 Rights of Certificateholders. Each Series of Investor
Certificates shall collectively represent a fractional undivided beneficial
interest (as to any Series, the "Series Interest") in the Trust, and the amount
of that undivided beneficial interest shall equal the Series Collection
Allocation Percentage for that Series from time to time, provided that so long
as Series 1998-1 is outstanding, only Series 1998-1 shall represent a fractional
undivided interest in the Tricon Assets. Each Certificate within a Series shall
represent a partial ownership interest in the related Series Interest,
representing the right to receive, to the extent necessary to make the required
payments with respect to that Certificate at the times and in the amounts
specified in this Article IV and in the related Supplement, the portion of
Collections allocable to Investor Certificateholders of such Series pursuant to
this Agreement and such Supplement, funds on deposit in the Transaction Accounts
allocable to Investor Certificateholders of such Series and funds available
pursuant to any related Enhancement. Unless the applicable Supplement or PI
Agreement provides otherwise, the Investor Certificates of any Series or class
shall not represent any interest in any funds allocable to, or Enhancement for
the benefit of, any other Series or Purchased Interest. The Transferor
Certificate shall represent an interest in the Trust (the "Transferor Interest")
consisting of the right to receive current and deferred transfer payments in
respect of the various Series and Purchased Interests outstanding from time to
time at the times and in the amounts specified in the related Supplements and PI
Agreements.
SECTION 4.2 Establishment of Transaction Accounts. (a) On or prior to
the date of this Agreement, Trustee has established, and until the Trust is
terminated Trustee shall (except as expressly permitted or required below)
maintain, in the name of Trustee and for the benefit of the Certificateholders
and Purchasers, the following accounts:
(i) an account which shall be called the "Master Collection
Account" and into which all Collections and all other Transferred
Assets consisting of cash or cash equivalents shall be transferred on
a daily basis from the Bank Accounts;
page 20
<PAGE> 26
(ii) an account which shall be called the "Carrying Cost
Account" and into which funds allocated to a particular Series or
Purchased Interest shall be allocated from time to time to cover
carrying costs allocable to that Series or Purchased Interest
(including interest payable on, and the Servicing Fee allocated to,
that Series or Purchased Interest);
(iii) an account which shall be called the "Equalization
Account" and into which funds will from time to time be transferred
from the Master Collection Account to compensate for fluctuations in
the Base Amounts for the various outstanding Series and Purchased
Interests; and
(iv) an account which shall be called the "Principal Funding
Account" and into which funds will from time to time be transferred in
anticipation of distributions to the Holders of Investor Certificates
or Purchasers on account of their respective principal investments.
(b) In addition, if an Early Amortization Period occurs with respect to
any Series or Purchased Interest, and if the related Supplement or PI Agreement
so provides, Trustee shall establish an additional account which shall be called
the "Holdback Account" and into which funds that would otherwise be remitted by
Trustee to the Transferor in respect of the Transferor Certificate will be
deposited to the extent so provided in the related Supplement or PI Agreement.
(c) The Master Collection Account, the Carrying Cost Account, the
Equalization Account, the Principal Funding Account, any Holdback Account and
any additional accounts required by any Supplement or PI Agreement to be
established (unless otherwise indicated in such Supplement or PI Agreement) are
collectively called the "Transaction Accounts." Each of the Transaction Accounts
shall be established and maintained as an Eligible Deposit Account and shall
bear a designation clearly indicating that funds deposited therein are held for
the benefit of the Certificateholders and the Purchasers. If any Transaction
Account ceases to be an Eligible Deposit Account, Servicer shall cause Trustee
to open a substitute Transaction Account that is an Eligible Deposit Account and
transfer the funds in the existing Transaction Account to the substitute
Transaction Account, and thereafter all references in any Transaction Document
to the original Transaction Account shall be deemed instead to refer to the
substitute Transaction Account.
(d) The Master Collection Account, the Carrying Cost Account, the
Equalization Account, the Principal Funding Account and any Holdback Account
shall be held by Trustee for the benefit of all Certificateholders and
Purchasers. However, there shall be established within each of the Carrying Cost
Account, the Equalization Account, the Principal Funding Account and any
Holdback Account an administrative sub-account for each outstanding Series and
Purchased Interest
page 21
<PAGE> 27
and, if so provided in the applicable Supplement, there may be established
within the Master Collection Account an administrative sub-account; provided,
that any administrative sub-account can be held by the Trustee as a separate
account, subject in each case to clause (c) above. Funds allocated to the
Carrying Cost Account, the Equalization Account, the Principal Funding Account
and any Holdback Account pursuant to any Supplement or PI Agreement shall be
allocated to the applicable Series' or Purchased Interest's sub-account and
shall be available solely to the Holders of the Certificates in that Series or
the Purchaser of that Purchased Interest, as applicable, except to the extent
that such funds are subsequently reallocated to another Series or Purchased
Interest, or the Transferor, in accordance with the terms of the applicable
Supplement or Purchase Agreement and this Agreement. Any additional Transaction
Accounts established pursuant to any Supplement or PI Agreement shall be held by
Trustee for the benefit of only the related Series or Purchased Interest.
(e) Trustee shall possess (for its benefit and for the benefit of the
Certificateholders and the Purchasers) all right, title and interest in and to
all funds on deposit from time to time in each of the Transaction Accounts and
in all proceeds thereof. The Transaction Accounts shall be under the sole
dominion and control of Trustee for the benefit of the applicable
Certificateholders and/or Purchasers. Each of Servicer and Trustee agrees that
it shall have no right of setoff against, and no right otherwise to deduct from,
any funds held in any of the Transaction Accounts or the Bank Accounts for any
amount owed to it by the Trust, any party hereto or any Certificateholder or
Purchaser.
(f) The Trustee shall provide the Servicer with monthly statements with
respect to activity in the Transaction Accounts, in a form that the Trustee
customarily provides in its capacity as a trustee in connection with
securitization transactions of the type contemplated hereby.
SECTION 4.3 Trust-Level Calculations and Funds Allocations.
(a) Allocation of Daily Collections. On each Business Day, Servicer
shall determine the amount of collected funds received in the Master Collection
Account (other than (i) funds that are required to be returned to AmeriServe
Persons (or their designees) pursuant to Section 3.3(b) and (ii) funds that
represent Tricon Collections) since the preceding Business Day and shall
allocate to each outstanding Series (other than Series 1998-1) and Purchased
Interest a share of such funds in an amount equal to the product of the
applicable Series Collection Allocation Percentage and the amount of such funds.
In addition, the Servicer shall on each Business Day, so long as Series 1998-1
is outstanding, determine the amount of Tricon Collections since the preceding
Business Day and shall allocate such amounts to Series 1998-1. The portion of
such funds allocated to any Series
page 22
<PAGE> 28
or Purchased Interest shall be further allocated and otherwise dealt with in
accordance with the terms of the related Supplement or PI Agreement. In
addition, funds initially allocated to a Series or Purchased Interest on any
Business Day that are designated as Shared Investor Collections shall be
reallocated to other Series or Purchased Interests pro rata based upon the
respective Shortfalls (if any) of the other Series and Purchased Interests.
(b) Allocation of Write-Offs and Dilution. In each Monthly Report
relating to a Series or Purchased Interest that is in an Early Amortization
Period, Servicer shall calculate the amount of (i) Write-Offs (net of
Recoveries) and (ii) Dilutions as to which no settlement payment has been made
pursuant to Section 3.1 and 3.5 of the Purchase Agreement, in each case during
the related Calculation Period (or the portion of that Calculation Period
falling in the Early Amortization Period) and shall allocate to such Series or
Purchased Interest a portion of the amounts referred to in clauses (i) and (ii)
equal to the product of each such amount and the related Series Loss Allocation
Percentage.
SECTION 4.4 Investment of Funds in Transaction Accounts. On any day
when there are any funds on deposit in any Transaction Account (after giving
effect to the allocations of such funds required by this Article IV and the
various Supplements and PI Agreements), Trustee, at the written direction of
Transferor (or Servicer, on its behalf) shall invest and reinvest monies on
deposit in such Transaction Account (in the name of Trustee) in such Eligible
Investments as are specified in a notice from Servicer, subject to the
restrictions set forth hereinafter; provided, however, that whenever an Early
Amortization Event shall be existing, such investments shall be made at the
written direction of the Servicer. Money in any Transaction Account shall be
invested in Eligible Investments that mature no later than one Business Day
prior to the next Distribution Date. All Eligible Investments made from funds in
any Transaction Account, and the interest, dividends and income received thereon
and therefrom and the net proceeds realized on the sale thereof, shall be
deposited in such Transaction Account. Trustee may liquidate an Eligible
Investment prior to maturity if such liquidation would not result in a loss of
all or part of the principal portion of such Eligible Investment or if, prior to
the maturity of such Eligible Investment, a default occurs in the payment of
principal, interest or any other amount with respect to such Eligible
Investment. In the absence of written direction, the Trustee shall invest funds
in any Transaction Account in Eligible Investments described in clause (h)
thereof. Trustee shall have no liability in connection with investment losses
incurred on Eligible Investments. It is intended for income tax purposes that
the income earned through investment of funds in the Transaction Accounts shall
be treated as income of Transferor.
SECTION 4.5 Attachment of Transaction Accounts. If Trustee receives
written notice that any Transaction Account has or will become subject to any
writ,
page 23
<PAGE> 29
judgment, warrant of attachment, execution or similar process, Trustee shall
(notwithstanding any other provision of the Transaction Documents) promptly
notify Transferor, Servicer, the Certificateholders and the Agents thereof, and
shall not deposit or transfer funds into such Transaction Account but shall
cause funds otherwise required to be deposited into such Transaction Account to
be held in another account pending distribution of such funds in the manner
required by the Transaction Documents.
ARTICLE V DISTRIBUTIONS AND REPORTS
DISTRIBUTIONS SHALL BE MADE, AND REPORTS SHALL BE PROVIDED, TO
CERTIFICATEHOLDERS AND PURCHASERS AS SET FORTH IN THE APPLICABLE SUPPLEMENT OR
PI AGREEMENT.
ARTICLE VI THE CERTIFICATES
SECTION 6.1 The Certificates. The Investor Certificates in each Series
shall be substantially in the forms contemplated by the Supplements pursuant to
which the Investor Certificates are issued, and the Transferor Certificate shall
be substantially in the form of Exhibit E. Upon issuance, all Certificates shall
be executed and delivered by Transferor to Trustee for authentication and
redelivery as provided in Sections 6.2 and 6.10. Except to the extent provided
otherwise in an applicable Supplement, Investor Certificates shall be issued in
minimum denominations of $1,000,000 and in integral multiples of $100,000 and
shall not be subdivided for resale into Certificates smaller than a Certificate,
the initial offering price for which would have been at least $1,000,000.
Each Certificate issued as a Definitive Certificate shall be executed
by manual or facsimile signature on behalf of Transferor by its President or any
Vice President or by any attorney-in-fact duly authorized to execute the
Definitive Certificate on behalf of any such officer. The Definitive
Certificates shall be authenticated on behalf of the Trustee by manual signature
of a duly authorized signatory of Trustee. Definitive Certificates bearing the
manual or facsimile signature of the individual who was, at the time when the
signature was affixed, authorized to sign on behalf of Transferor or the Trustee
(as applicable) shall be valid and binding, notwithstanding that the individuals
or any of them ceased to be so authorized prior to the authentication and
delivery of the Definitive Certificates or does not hold such office on the date
of issuance of such Definitive Certificates. No Definitive Certificates shall be
entitled to any benefit under this Agreement, or be valid for any purpose,
unless there appears on the Definitive Certificate a certificate of
authentication executed by or on behalf of Trustee by the manual signature of a
duly authorized signatory, and the certificate of authentication upon any
Definitive Certificate shall be conclusive evidence, and the only evidence, that
page 24
<PAGE> 30
the Definitive Certificate has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Agreement. Except as otherwise provided
in the applicable Supplement, all Definitive Certificates shall be dated the
date of their authentication.
As provided in any Supplement, Investor Certificates of any Series may
be offered and sold pursuant to an offering registered under the Securities Act
or issued and sold pursuant to an exemption from the Securities Act. Any Series
sold pursuant to a public offering registered under the Securities Act, or
pursuant to Rule 144A, Regulation S or another exemption under the Securities
Act, may be delivered in book-entry form as provided in Section 6.11.
SECTION 6.2 Authentication of Certificates. Contemporaneously with the
initial assignment and transfer of Receivables and other Transferred Assets to
the Trustee, Trustee shall authenticate and deliver the Transferor Certificate
to Transferor. On each Issuance Date, upon the order of Transferor, Trustee
shall authenticate and deliver to Transferor (or to such other Person or Persons
as the Transferor shall designate) the Series of Certificates that are to be
issued originally on such Issuance Date pursuant to the applicable Supplement.
SECTION 6.3 Registration of Transfer and Exchange of Certificates. (a)
Trustee, as agent for Transferor, shall keep, or shall cause to be kept, at the
office or agency to be maintained in accordance with the provisions of Section
11.16, a register in written form or capable of being converted into written
form within a reasonable time (the "Certificate Register") in which, subject to
such reasonable regulations as it may prescribe, a transfer agent and registrar
(which may be Trustee) (the "Transfer Agent and Registrar") shall provide for
the registration of the Certificates and of transfers and exchanges of the
Certificates as herein provided. Transferor hereby appoints Trustee as the
initial Transfer Agent and Registrar and Trustee hereby accepts such
appointment.
Transferor, or Trustee as agent for Transferor, may revoke the
appointment as Transfer Agent and Registrar and remove the then-acting Transfer
Agent and Registrar if Trustee or Transferor (as applicable) determines in its
sole discretion that the then-acting Transfer Agent and Registrar has failed to
perform its obligations under this Agreement in any material respect. The
then-acting Transfer Agent and Registrar shall be permitted to resign as
Transfer Agent and Registrar upon 30 days' prior written notice to Trustee,
Transferor and Servicer; provided that such resignation shall not be effective
and the then-acting Transfer Agent and Registrar shall continue to perform its
duties as Transfer Agent and Registrar until Trustee has appointed a successor
Transfer Agent and Registrar reasonably acceptable to Transferor and the Person
so appointed has given Trustee written notice that it accepts the appointment.
The provisions of Sections 11.1 through
page 25
<PAGE> 31
11.5 shall apply to the Transfer Agent and Registrar as if all references to
"Trustee" in the applicable provisions of Sections 11.1 through 11.5 were
references to the Transfer Agent and Registrar.
It is intended that the registration of Certificates that is described
in this Section comply with the registration requirements contained in Section
163 of the Internal Revenue Code.
(b) No transfer of all or any part of the Transferor Certificate shall
be made unless (i) Transferor shall have given the Rating Agencies and Trustee
prior written notice of the proposed transfer, (ii) the Modification Condition
shall have been satisfied in connection with the proposed transfer and (iii)
Transferor shall have delivered to Trustee, the Rating Agencies, each Purchaser
and each Enhancement Provider a Tax Opinion for each outstanding Series of
Investor Certificates, Purchased Interest and Enhancement (provided that such
opinion in respect of each Series or Purchased Interest shall be limited to the
Tax Opinion required by the related Supplement or PI Agreement). To the extent
any interest in the Transferor Certificate is transferred pursuant to this
Section 6.3(b), all payments to Transferor in respect of the Transferor Interest
or the Transferor Certificate thereafter shall be made pro rata to all Persons
owning any portion of the Transferor Certificate according to such percentages
as are set forth in the notice delivered pursuant to clause (i) above.
The portion of the Transferor Interest relating to the Tricon Assets
shall be referred to herein as the "Tricon Transferor Interest" and as of any
date of determination shall be equal to the excess of (x) the Unpaid Balance of
the Tricon Receivables then owned by the Trust, over (y) the Aggregate Invested
Amount (as defined in the Series 1998-1 Supplement) of the Series 1998-1
Investor Certificates. Subject to compliance with the first sentence of this
clause (b), the Transferor may transfer to AmeriServe a portion (but only a
portion) of the Tricon Transferor Interest. Such portion shall be calculated at
all times in a manner so that the Transferor retains an interest in the Tricon
Transferor Interest (the "Retained Tricon Transferor Interest") equal to the
lesser of (x) ten percent (10%) of the Aggregate Invested Amount (as defined in
the Series 1998-1 Supplement) of the Series 1998-1 Investor Certificates and (y)
the outstanding amount of the Tricon Transferor Interest. Any Tricon Write-Offs
shall be allocated first to the then outstanding Retained Tricon Transferor
Interest and then to the remaining portion of the Tricon Transferor Interest.
"Tricon Write-Off" means, with respect to a Tricon Receivable, that, as the
result of the financial inability to pay of Tricon, such Tricon Receivable has
been written off in accordance with the Credit and Collection Policy.
page 26
<PAGE> 32
Any attempted transfer of all or any part of the Transferor Certificate
other than as provided above shall be void and of no effect.
(c) Subject to the requirements of subsection (e), if applicable,
having been fulfilled, upon surrender for registration of transfer of any
Certificate, and, in the case of Investor Certificates, at any office or agency
of the Transfer Agent and Registrar maintained for such purpose, Transferor
shall execute, and Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the
appropriate class and Series that are in authorized denominations of like
aggregate fractional interest in the related Series Interest that bear numbers
that are not contemporaneously outstanding.
At the option of an Investor Certificateholder, its Investor
Certificates may be exchanged for other Investor Certificates of the same class
and Series (and bearing the same interest rate as the Investor Certificate
surrendered for registration of exchange) of authorized denominations of like
aggregate fractional interests in the related Series Interest and bearing
numbers that are not contemporaneously outstanding, upon surrender of the
Investor Certificates to be exchanged at any such office or agency. Whenever any
Investor Certificates are so surrendered for exchange, Transferor shall execute,
and Trustee shall authenticate and deliver, the appropriate number of Investor
Certificates of the class and Series that the Investor Certificateholder making
the exchange is entitled to receive. Every Investor Certificate presented or
surrendered for registration of transfer or exchange shall be accompanied by a
written instrument of transfer in a form satisfactory to Trustee or the Transfer
Agent and Registrar duly executed by the Certificateholder thereof or his
attorney-in-fact duly authorized in a writing delivered to the Transfer Agent
and Registrar.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Transfer Agent and Registrar may require the
Certificateholder to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Investor Certificates.
All Certificates surrendered for registration of transfer and exchange
shall be cancelled and disposed of in a manner satisfactory to Trustee.
(d) Certificates may be surrendered for registration of transfer or
exchange at the office of the Transfer Agent and Registrar designated in Section
13.6.
(e) Certificateholders holding Definitive Certificates shall not sell,
transfer or otherwise dispose of the Certificates unless the sale, transfer or
disposition is being made pursuant to an exemption from the registration
requirements of the Securities Act and applicable state securities laws. If the
applicable Supplement so
page 27
<PAGE> 33
provides, prior to the proposed sale, transfer or disposition, the
Certificateholder and the proposed transferee each provide Trustee and
Transferor with representations set forth in such Supplement, and, if requested
by Trustee or Transferor, an Opinion of Counsel in form and substance
acceptable to Trustee and Transferor, concerning the proposed sale, transfer or
disposition and the availability of the exemption.
(f) The Investor Certificates shall bear such restrictive legends as
shall be set forth in the applicable Supplements.
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate is surrendered to the Transfer Agent and Registrar, or
the Transfer Agent, and Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there is delivered to the
Transfer Agent and Registrar, Trustee and Transferor such security or indemnity
as may be required by them to hold each of them and the Trust harmless, then, in
the absence of notice to Trustee that such Certificate has been acquired by a
bona fide purchaser, Transferor shall execute and, upon the request of
Transferor, Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of like class, Series, tenor, terms and principal amount and bearing a number
that is not contemporaneously outstanding. In connection with the issuance of
any new Certificate under this section, Trustee or the Transfer Agent and
Registrar may require the payment by the Certificateholder of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the reasonable fees and expenses of
Trustee and Transfer Agent and Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this section shall constitute conclusive and
indefeasible evidence of ownership of an interest in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be
enforceable by anyone, and shall be entitled to all the benefits of this
Agreement equally and proportionately with any and all Certificates of the same
class and Series that are duly issued hereunder.
SECTION 6.5 Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, Transferor, Trustee, the Paying Agent,
the Transfer Agent and Registrar and any agent of any of them may treat the
Person in whose name any Certificate is registered in the Certificate Register
as the owner of such Certificate for the purpose of receiving distributions
pursuant to Article V and for all other purposes whatsoever, and none of
Transferor, Trustee, the Paying Agent, the Transfer Agent and Registrar or any
agent of any of them shall be affected by any notice to the contrary; provided
that, in determining whether the required number or type of Holders or other
Persons have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Certificates
page 28
<PAGE> 34
and Purchased Interests owned by Transferor, Servicer or any Affiliate thereof
shall be disregarded and deemed not to be outstanding, except that, in
determining whether Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Certificates
and Purchased Interests that Trustee knows to be so owned shall be so
disregarded. Certificates and Purchased Interests so owned that have been
pledged in good faith shall not be disregarded and may be regarded as
outstanding if the pledgee establishes to the satisfaction of Trustee the
pledgee's right so to act with respect to such Certificates or Purchased
Interests and that the pledgee is not Transferor, Servicer or an Affiliate
thereof.
SECTION 6.6 Appointment of Paying Agent. The Paying Agent initially
shall be Trustee. Transferor hereby appoints the Paying Agent as its agent to
make distributions to Certificateholders and Purchasers pursuant to the
applicable Supplements or PI Agreements and to report the amounts of the
distributions to Trustee, and the Paying Agent hereby accepts such appointment.
Any Paying Agent shall have the revocable power to withdraw funds from the
Master Collection Account for the purpose of making such distributions. Trustee
or, at any time when Trustee is also the Paying Agent, Transferor may revoke
such power of the Paying Agent and remove the Paying Agent if Trustee or
Transferor (as applicable) determines in its sole discretion that the Paying
Agent shall have failed to perform its obligations under this Agreement in any
material respect. The Paying Agent shall be permitted to resign as Paying Agent
upon 30 days' prior written notice to Trustee, Transferor, Servicer and the
Rating Agencies. Any resignation or removal of the Paying Agent, and appointment
of a successor Paying Agent, shall not become effective until the appointment
has been accepted by the successor Paying Agent. If no successor Paying Agent
shall have been appointed and shall have accepted appointment within 30 days
after the giving of the notice of resignation, the resigning Paying Agent may
petition any court of competent jurisdiction to appoint a successor Paying
Agent. In the event that Trustee shall no longer be the Paying Agent, Trustee
shall appoint a successor Paying Agent (which shall be a bank or trust company)
reasonably acceptable to Transferor, which appointment shall be effective on the
date on which the Person so appointed gives Trustee written notice that it
accepts the appointment. Trustee shall cause the successor Paying Agent or any
additional Paying Agent appointed by Trustee to execute and deliver to Trustee
an instrument in which it shall agree with Trustee that, as Paying Agent, it
will hold all sums, if any, held for payment to the Certificateholders and
Purchasers in trust for the benefit of the Certificateholders and Purchasers
entitled thereto until the sums shall be paid to the Certificateholders and
Purchasers. The Paying Agent shall return all unclaimed funds to Trustee, and
upon removal of a Paying Agent such Paying Agent shall also return all funds in
its possession to Trustee. The provisions of Sections 11.1 through 11.5 shall
apply to the Paying
page 29
<PAGE> 35
Agent as if all references in the applicable provisions thereof to "Trustee"
were references to the Paying Agent.
SECTION 6.7 Access to List of Certificateholders' Names and Addresses.
Trustee will furnish or cause to be furnished by the Transfer Agent and
Registrar to Transferor, Servicer, any Seller or the Paying Agent, within two
Business Days after receipt by Trustee of a written request therefor from
Servicer or the Paying Agent, a list in the form Servicer or the Paying Agent
may reasonably require of the names and addresses of the Certificateholders or
Purchasers as of the most recent Distribution Date. If (x) any Holder or group
of Holders of Investor Certificates in any Series evidencing not less than 10%
of the aggregate unpaid principal amount of the Series or (y) any Purchaser or
group of Purchasers of Purchased Interests under any PI Agreement holding not
less than 10% of the Purchased Interests then outstanding under such PI
Agreement (in either case, the "Applicant") applies in writing to Trustee, and
the application states that the Applicant desires to communicate with other
Certificateholders or Purchasers, as applicable, with respect to their rights
under this Agreement, any Supplement, the Certificates or any PI Agreement and
is accompanied by a copy of the communication that the Applicant proposes to
transmit, then Trustee, after having been adequately indemnified by the
Applicant for its costs and expenses, shall afford or shall cause the Transfer
Agent and Registrar to afford the Applicant access during normal business hours
to the most recent list of Certificateholders or Purchasers, as applicable, held
by Trustee, within five Business Days after the receipt of the application and
indemnification. The list shall be as of a date no more than 45 days prior to
the date of receipt of the Applicant's request.
Every Certificateholder, by receiving and holding a Certificate, agrees
with Trustee that neither Trustee, the Transfer Agent and Registrar, Transferor,
Servicer, any Seller nor any of their respective agents shall be held
accountable by reason of the disclosure of any information as to the names and
addresses of the Certificateholders hereunder, regardless of the sources from
which the information was derived.
SECTION 6.8 Authenticating Agent. (a) Trustee may appoint one or more
authenticating agents (each an "Authenticating Agent") with respect to the
Certificates that shall be authorized to act on behalf of Trustee in
authenticating the Certificates in connection with the issuance, delivery,
registration of transfer, exchange or repayment of the Certificates. Either
Trustee or the Authenticating Agent, if any, then appointed and acting on behalf
of Trustee shall authenticate the Certificates. Whenever reference is made in
this Agreement to the authentication of Certificates by Trustee or Trustee's
certificate of authentication, such reference shall be deemed to include
authentication on behalf of Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of Trustee by an
page 30
<PAGE> 36
Authenticating Agent. Each Authenticating Agent must be acceptable to
Transferor.
(b) Any institution succeeding to the corporate agency business of an
Authenticating Agent shall continue to be an Authenticating Agent without the
execution or filing of any document or any further act on the part of Trustee,
the Authenticating Agent or any other Person.
(c) An Authenticating Agent may at any time resign by giving written
notice of resignation to Trustee and Transferor. Trustee may at any time
terminate the agency of an Authenticating Agent by giving notice of termination
to the Authenticating Agent and Transferor. Upon receiving a notice of
resignation or upon a termination, or in case at any time an Authenticating
Agent shall cease to be acceptable to Trustee or Transferor, Trustee may
promptly appoint a successor Authenticating Agent. Any successor Authenticating
Agent, upon acceptance of its appointment, shall become vested with all the
rights, powers and duties of its predecessor, with like effect as if originally
named as an Authenticating Agent. No successor Authenticating Agent shall be
appointed unless acceptable to Trustee and Transferor.
(d) Servicer agrees to pay to each Authenticating Agent (if any), as an
expense of Servicer paid out of the Servicing Fee, reasonable compensation from
time to time for services performed under this section.
(e) The provisions of Sections 11.1, 11.2 and 11.3 shall be applicable
to any Authenticating Agent as if the references in the applicable provisions
thereof to "Trustee" were references to the Authenticating Agent.
(f) Pursuant to an appointment made under this section, the
Certificates may have endorsed thereon, in lieu of Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
page 31
<PAGE> 37
"This is one of the Certificates described in the
Supplement dated as of __________ ___, 199_.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By:
-----------------------------
as Authenticating Agent
for Trustee,
By:
-----------------------------
Authorized Officer."
SECTION 6.9 Tax Treatment. It is the intent of Transferor and the
Investor Certificateholders and the Purchasers that, for purposes of Federal,
state and local income and franchise taxes and any other taxes measured by or
imposed on income, the Investor Certificates and the Purchased Interests will be
treated as evidence of indebtedness secured by the Transferred Assets and the
Trust will not be characterized as an association taxable as a corporation.
Transferor, by entering into this Agreement, and each Investor Certificateholder
and Purchaser, by its acceptance of its Investor Certificate or Purchased
Interest, agree to treat the Investor Certificates as indebtedness (or, if so
provided in the applicable Supplement, an interest in a partnership) for
purposes of Federal, state and local income and franchise taxes and any other
taxes measured by or imposed on income. The provisions of this Agreement and all
related Transaction Documents shall be construed to further these intentions of
the parties. In accordance with the foregoing, Transferor agrees that it will
report its income for purposes of Federal, state and local income or franchise
taxes, and any other taxes measured by or imposed on income, on the basis that
it is the owner of the Receivables. Except to the extent otherwise required by
applicable law or any Governmental Authority, Trustee hereby agrees to treat the
Trust as a security device only, and shall not file tax returns or obtain an
employer identification number on behalf of the Trust.
SECTION 6.10 Issuance of Additional Series of Certificates and Sales of
Purchased Interests. (a) Transferor may from time to time direct Trustee in
writing to issue and authenticate one or more classes of any newly issued Series
of Investor Certificates (a "New Issuance"). In addition, to the extent
permitted for any Series of Investor Certificates as specified in the related
Supplement, the Investor Certificateholders of the Series may tender their
Investor Certificates to Trustee, and Transferor may allocate a portion of the
Transferor Interest pursuant to the
page 32
<PAGE> 38
terms and conditions set forth in the Supplement, in exchange for one or more
newly issued Series of Investor Certificates (an "Investor Exchange"). New
Issuances and Investor Exchanges collectively are referred to as "Issuances".
(b) Transferor may direct Trustee to authenticate an Issuance by
notifying Trustee, in writing, at least five Business Days (or such shorter
period as shall be acceptable to Trustee) in advance (an "Issuance Notice") of
the date upon which the Issuance is to occur (an "Issuance Date"). Any Issuance
Notice shall state the designation of any Series to be issued on the Issuance
Date and, with respect to each class or Series: (i) its initial invested amount
(or the method for calculating the initial invested amount), (ii) its interest
rate (or the method for allocating interest payments or other cash flows to the
Series), if any, and (iii) the Enhancement Provider, if any, with respect to the
Series.
(c) On the Issuance Date, Transferor shall deliver to Trustee for
authentication under Section 6.2, and Trustee shall authenticate and deliver any
such class or classes of Series of Investor Certificates only upon delivery to
it (and, in the case of item (iv) below, each Rating Agency, Purchaser and any
Enhancement Provider) of the following:
(i) a Supplement satisfying the criteria set forth in
subsection (d) and in form reasonably satisfactory to Trustee executed
by Transferor and Servicer and specifying the principal terms of the
Series;
(ii) the applicable Enhancement, if any;
(iii) the agreement, if any, pursuant to which the
Enhancement Provider agrees to provide the Enhancement, if any;
(iv) a Tax Opinion for each outstanding Series of Investor
Certificates, Purchased Interest and Enhancement with respect to such
Issuance (provided that such opinion with respect to any Series or
Purchased Interest shall be limited to the Tax Opinion required by the
related Supplement or PI Agreement);
(v) evidence that the Modification Condition has been
satisfied with respect to such Issuance (unless such Issuance occurs
on the First Issuance Date);
(vi) for any Issuance other than an Issuance occurring on the
First Issuance Date, an Officer's Certificate of Transferor that on
the Issuance Date, after giving effect to the Issuance (and the
repayment, on the date of the Issuance, of any existing Investor
Certificates with funds (including
page 33
<PAGE> 39
proceeds of sale of the new Series) on deposit in the Principal
Funding Account), any requirements set out in the Supplement with
respect to any then-outstanding Series with respect to the amount of
Certificates that may not, by their terms, be transferred has been
satisfied;
(vii) an Officer's Certificate of Servicer stating that no
Early Amortization Event or Unmatured Early Amortization Event has
occurred and is continuing and that there is not a substantial
likelihood that the Issuance would result in an Early Amortization
Event or an Unmatured Early Amortization Event at any time in the
future;
(viii) in the case of an Investor Exchange, any Investor
Certificates that are being exchanged in connection therewith;
(ix) any other documents, certificates and Opinions of
Counsel as may be required by the applicable Supplement; and
(x) an Officer's Certificate of Servicer to the effect that
all conditions specified in clauses (i) through (ix) have been
satisfied.
Upon satisfaction of the conditions, Trustee shall cancel any applicable
Investor Certificates and issue, as provided above, the new Series of Investor
Certificates dated the Issuance Date. Any such Series of Investor Certificates
shall be substantially in the form specified in the related Supplement and shall
bear, upon its face, the designation for the Series to which it belongs, as
selected by Transferor. There is no limit to the number of Issuances (or PI
Issuances) that may be made under this Agreement.
(d) In conjunction with an Issuance, the parties hereto shall execute a
Supplement, which shall specify the relevant terms with respect to any newly
issued Series of Investor Certificates, which may include: (i) its name or
designation, (ii) the initial invested amount or the method of calculating the
initial invested amount, (iii) the applicable interest rate (or formula for the
determination thereof), (iv) the Issuance Date, (v) the rating agency or
agencies rating the Series, if any, (vi) the name of the Clearing Agency, if
any, (vii) the interest payment date or dates and the date or dates from which
interest shall accrue, (viii) the method of allocating Collections with respect
to Receivables for the Series and, if applicable, with respect to any paired
Series and the method by which the principal amount of Investor Certificates of
the Series shall amortize or accrete, (ix) the names of any accounts to be used
by the Series and the terms governing the operation of any such account, (x) the
terms of any Enhancement with respect to the Series, (xi) the Enhancement
Provider, if applicable, (xii) the Base Amount applicable to the Series, (xiii)
the terms on which the Certificates of the Series may be repurchased
page 34
<PAGE> 40
or remarketed to other investors, (xiv) any deposit into any account provided
for the Series, (xv) the number of classes of the Series, and if more than one
class, the rights and priorities of each class, (xvi) whether any fees, breakage
payments or early termination payments will be included in the funds available
to be paid for the Series, (xvii) the subordination of the Series to any other
Series, (xviii) whether the Series will be a part of a group or subject to being
paired with any other Series, (xix) whether the Series will be prefunded and
(xx) any other relevant terms of the Series. The terms of the Supplement may
modify or amend the terms of this Agreement or the Purchase Agreement (including
the related definitions) solely as applied to the new Series.
(e) Except as specified in any Supplement for the related Series, all
Investor Certificates of any Series shall rank pari passu and be equally and
ratably entitled as provided herein to the benefits hereof (except that the
Enhancement provided for any Series shall not be available for any other Series)
without preference, priority or distinction on account of the actual time or
times of authentication and delivery, all in accordance with the terms and
provisions of this Agreement and the related Supplement.
(f) Transferor may from time to time direct Trustee in writing, on
behalf of the Trust, to sell one or more Purchased Interests pursuant to, and
direct Trustee in writing to enter into, a PI Agreement (such sale being
referred to as a "PI Issuance" and the date of such PI Issuance being referring
to as a "PI Issuance Date"). No Purchased Interest shall represent any interest
in any Enhancement for the benefit of any Series, any class of Investor
Certificates or any other Purchased Interest, any Transaction Account
established pursuant to any Supplement or the PI Agreement relating to any other
Purchased Interest except to the extent set forth in the PI Agreement with
respect to such other Purchased Interest. Each PI Agreement may provide that no
Investor Certificateholder, Purchaser under any other PI Agreement or
Enhancement Provider shall be a third-party beneficiary thereof or have any
benefit or any legal or equitable right, remedy or claim under the PI Agreement.
(g) On or before the date of the initial sale of a Purchased Interest
pursuant to a particular PI Agreement, the parties hereto and the related
Purchaser will execute and deliver a PI Agreement that will specify the terms of
the Purchased Interest. The obligation of Trustee to execute and deliver the
related PI Agreement is subject to the satisfaction of the following conditions:
(i) on or before the tenth Business Day (or a shorter period
as shall be acceptable to the Trustee) immediately preceding the
related PI Issuance Date, Transferor shall have given Trustee,
Servicer, each Rating Agency (unless such PI Issuance occurs on the
First Issuance Date), each Purchaser
page 35
<PAGE> 41
and each Enhancement Provider (if any) written notice of the sale of
the Purchased Interest and the PI Issuance Date;
(ii) Transferor shall have delivered to Trustee the related
PI Agreement, in form satisfactory to Trustee, each executed by each
party thereto other than Trustee;
(iii) the Modification Condition shall have been satisfied
with respect to the sale (unless such PI Issuance occurs on the First
Issuance Date);
(iv) the sale will not (A) contravene any provision of this
Agreement, any Supplement, any agreement pursuant to which any
Enhancement is provided or any PI Agreement (or any agreement related
thereto) or (B) constitute, or result in (or have a substantial
likelihood that it will result, at any time in the future, in) the
occurrence of, an Early Amortization Event or an Unmatured Early
Amortization Event;
(v) Transferor shall have delivered to Trustee, each Rating
Agency, each Purchaser and any Enhancement Provider, a Tax Opinion for
each outstanding Series of Investor Certificates, Purchased Interest
and Enhancement (provided that such opinion with respect to any Series
or Purchased Interest shall be limited to the Tax Opinion required by
the related Supplement or PI Agreement), dated the PI Issuance Date,
with respect to the sale; and
(vi) Transferor shall have delivered to Trustee an Officer's
Certificate, dated the PI Issuance Date for such Purchased Interest,
to the effect that all conditions set forth in clauses (i) through (v)
of this Section for the sale of the Purchased Interest and the
execution and delivery of the related PI Agreement has been satisfied.
Upon satisfaction of the above conditions, Trustee shall execute and, at the
written direction of Transferor, deliver the related PI Agreement and any
related documents that Transferor shall reasonably request. The terms of the PI
Agreement may modify or amend the terms of this Agreement or the Purchase
Agreement (including the related definitions) solely as applied to the new
Purchased Interest.
(h) Transferor may from time to time direct Trustee to extend any PI
Agreement, subject to the satisfaction of the following conditions:
(i) on or before the tenth Business Day (or a shorter period
as shall be acceptable to the Trustee) immediately preceding the date
of the
page 36
<PAGE> 42
extension, Transferor shall have given Trustee, Servicer, the Rating
Agency and any Enhancement Provider written notice of the extension
and the date on which the extension shall occur;
(ii) Transferor shall have delivered to Trustee the related
document(s) effecting such extension, in form satisfactory to Trustee,
executed by each party thereto other than Trustee;
(iii) the extension will not (A) contravene any provision of
this Agreement, any Supplement, any agreement pursuant to which any
Enhancement is provided or any PI Agreement (or any agreement related
thereto) or (B) constitute, or result in the occurrence of, an Early
Amortization Event or an Unmatured Early Amortization;
(iv) Transferor shall have delivered to Trustee, the Rating
Agency, each Purchaser and any Enhancement Provider a Tax Opinion for
each outstanding Series of Investor Certificates, Purchased Interest
and Enhancement (provided that such opinion with respect to any Series
or Purchased Interest shall be limited to the Tax Opinion required by
the related Supplement or PI Agreement), dated the date of the
extension, with respect to the extension;
(v) Transferor shall have delivered to Trustee an Officer's
Certificate, dated the date of the extension, to the effect that all
conditions set forth in clauses (i) through (iv) of this Section for
the extension of such PI Agreement and the execution and delivery of
the related document(s) has been satisfied; and
(vi) the Modification Condition shall have been satisfied.
SECTION 6.11 Book-Entry Certificates. (a) If provided in any
Supplement, the Investor Certificates of any Series, upon original issuance,
will be issued in the form of one or more Book-Entry Certificates, to be
delivered to the applicable Clearing Agency by, or on behalf of, Transferor. The
Investor Certificates of the Series initially shall be registered on the
Certificate Register in the name of the nominee of the Clearing Agency, and no
Certificate Owner will receive a Definitive Certificate representing such
Certificate Owner's interest in the Investor Certificates, except as provided in
Section 6.13. To the extent a Supplement provides that the Investor Certificates
of a Series will originally be issued in the form of one or more Book-Entry
Certificates, then unless and until Definitive Certificates have been issued to
Certificate Owners pursuant to Section 6.13:
page 37
<PAGE> 43
(i) the provisions of this section shall be in full force
and effect in respect of such Series;
(ii) Transferor, Servicer, the Paying Agent, the Transfer
Agent and Registrar and Trustee may deal with the Clearing Agency and
the Clearing Agency Participants for all purposes (including the
making of distributions on the Investor Certificates) as the
authorized representatives of the Certificate Owners;
(iii) to the extent that the provisions of this section
conflict with any other provisions of this Agreement, the provisions
of this section shall control; and
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and
shall be limited to those established by law and agreements between
the Certificate Owners and the Clearing Agency and/or the Clearing
Agency Participants. Unless and until Definitive Certificates are
issued pursuant to Section 6.13, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and
receive and transmit distributions of principal and interest on the
Investor Certificates to the Clearing Agency Participants.
(b) Certificates sold to "qualified institutional buyers" as defined in
and in reliance on Rule 144A under the Securities Act shall be represented by
one or more Book-Entry Certificates (the "144A Book-Entry Certificates"), in
registered form, without coupons, which will be deposited upon the order of
Transferor on the Issuance Date with Trustee as custodian for and registered in
the name of Cede & Co., as nominee of the Clearing Agency.
(c) Certificates of a Series sold in offshore transactions in reliance
on Regulation S under the Securities Act shall be represented initially by
temporary Book-Entry Certificates (the "Regulation S Temporary Book-Entry
Certificates"). The Regulation S Temporary Book-Entry Certificates shall be
exchanged on the later of (i) 40 days after the later of (A) the Issuance Date
and (B) the completion of the distribution of the Certificates of such Series,
as certified by the Lead Placement Agent and (ii) the date on which the
requisite certifications are due to and provided to Trustee (the later of
clauses (i) and (ii) is referred to as the "Exchange Date") for permanent
Book-Entry Certificates (the "Unrestricted Book-Entry Certificates," and
together with the Regulation S Temporary Book- Entry Certificates, the
"Regulation S Book-Entry Certificates"). The Regulation S Book-Entry
Certificates shall be issued in registered form, without coupons, and deposited
upon the order of Transferor with Trustee as custodian for and registered
page 38
<PAGE> 44
in the name of a nominee of the Clearing Agency for credit to the account of the
depositaries for Euroclear and Cedel, which depositaries shall, on behalf of
Euroclear and Cedel, hold the interests on behalf of account holders (each a
"Member Organization"), which have rights in respect of the Certificates
credited to their securities accounts with Euroclear or Cedel from time to time.
(d) A Certificate Owner holding an interest in a Regulation S Temporary
Book-Entry Certificate may receive payments in respect of the Certificates on
the Regulation S Temporary Book-Entry Certificate only after delivery to
Euroclear or Cedel, as the case may be, of a written certification substantially
in the form set forth in Exhibit F, and upon delivery by Euroclear or Cedel, as
the case may be, to the Transfer Agent and Registrar of a certification or
certifications substantially in the form set forth in Exhibit G. The delivery by
a Certificate Owner of the certification referred to above shall constitute its
irrevocable instruction to Euroclear or Cedel, as the case may be, to arrange
for the exchange of the Certificate Owner's interest in the Regulation S
Temporary Book-Entry Certificate for a beneficial interest in the Unrestricted
Book-Entry Certificate after the Exchange Date in accordance with the paragraph
below.
After (i) the Exchange Date and (ii) receipt by the Transfer Agent and
Registrar of written instructions from Euroclear or Cedel, as the case may be,
directing the Transfer Agent and Registrar to credit or cause to be credited to
either Euroclear's or Cedel's, as the case may be, depositary's account a
beneficial interest in the Unrestricted Book-Entry Certificate in a principal
amount not greater than that of the beneficial interest in the Regulation S
Temporary Book- Entry Certificate, the Transfer Agent and Registrar shall
instruct the Clearing Agency to reduce the principal amount of the Regulation S
Temporary Book- Entry Certificate and increase the principal amount of the
Unrestricted Book-Entry Certificate, by the principal amount of the beneficial
interest in the Regulation S Temporary Book-Entry Certificate to be so
transferred, and to credit or cause to be credited to the account of Euroclear,
Cedel or a Person who has an account with the Clearing Agency (a "Clearing
Agency Participant"), as the case may be, a beneficial interest in the
Unrestricted Book-Entry Certificate having a principal amount of the Regulation
S Temporary Book-Entry Certificate that was reduced upon the transfer.
Upon return of the entire principal amount of the Regulation S
Temporary Book-Entry Certificate to Trustee in exchange for beneficial interests
in the Unrestricted Book-Entry Certificate, Trustee shall cancel the Regulation
S Temporary Book-Entry Certificate by perforation and shall forthwith destroy
it.
(e) Transfers within a single Series between different Book-Entry
Certificates shall be made in accordance with this Section.
page 39
<PAGE> 45
(i) For transfer of an interest in an Unrestricted Book-Entry
Certificate for an interest in the 144A Book-Entry Certificate, if the
Certificateholder of a beneficial interest in an Unrestricted
Book-Entry Certificate deposited with the Clearing Agency wishes at
any time to exchange its interest in the Unrestricted Book-Entry
Certificate, or to transfer its interest in the Unrestricted
Book-Entry Certificate to a Person who wishes to take delivery thereof
in the form of an interest in the 144A Book-Entry Certificate, the
Certificateholder may, subject to the rules and procedures of
Euroclear or Cedel and the Clearing Agency, as the case may be, give
directions for the Transfer Agent and Registrar to exchange or cause
the exchange or transfer or cause the transfer of the interest for an
equivalent beneficial interest in the 144A Book-Entry Certificate.
Upon receipt by the Transfer Agent and Registrar of instructions from
Euroclear or Cedel (based on instructions from a Member Organization)
or from a Clearing Agency Participant, as applicable, or the Clearing
Agency, as the case may be, directing the Transfer Agent and Registrar
to credit or cause to be credited a beneficial interest in the 144A
Book-Entry Certificate equal to the beneficial interest in the
Unrestricted Book-Entry Certificate to be exchanged or transferred
(such instructions to contain information regarding the Clearing
Agency Participant account to be credited with the increase, and, with
respect to an exchange or transfer of an interest in the Unrestricted
Book-Entry Certificate, information regarding the Clearing Agency
Participant account to be debited with the decrease), the Transfer
Agent and Registrar shall instruct the Clearing Agency to reduce the
Unrestricted Book-Entry Certificate by the aggregate principal amount
of the beneficial interest in the Unrestricted Book-Entry Certificate
to be exchanged or transferred, and the Transfer Agent shall instruct
the Clearing Agency, concurrently with the reduction, to increase the
principal amount of the 144A Book-Entry Certificate by the aggregate
principal amount of the beneficial interest in the Unrestricted
Book-Entry Certificate to be so exchanged or transferred, and to
credit or cause to be credited to the account of the Person specified
in the instructions a beneficial interest in the 144A Book-Entry
Certificate equal to the reduction in the principal amount of the
Unrestricted Book-Entry Certificate.
(ii) For transfers of an interest in the 144A Book-Entry
Certificate for an interest in a Regulation S Book-Entry Certificate,
if a Certificate Owner holding a beneficial interest in the 144A
Book-Entry Certificate wishes at any time to exchange its interest in
the 144A Book-Entry Certificate for an interest in a Regulation S
Book-Entry Certificate, or to transfer its interest in the 144A
Book-Entry Certificate to a Person who wishes to take delivery thereof
in the form of an interest in the Regulation S Book-Entry Certificate,
the Certificateholder may, subject to the rules and
page 40
<PAGE> 46
procedures of the Clearing Agency, give directions for the Transfer
Agent and Registrar to exchange or cause the exchange or transfer or
cause the transfer of the interest for an equivalent beneficial
interest in the Regulation S Book-Entry Certificate. Upon receipt by
the Transfer Agent and Registrar of (A) instructions given in
accordance with the Clearing Agency's procedures from a Clearing
Agency Participant directing the Transfer Agent and Registrar to
credit or cause to be credited a beneficial interest in the Regulation
S Book-Entry Certificate in an amount equal to the beneficial interest
in the 144A Book-Entry Certificate to be exchanged or transferred, (B)
a written order given in accordance with the Clearing Agency's
procedures containing information regarding the account of the
depositaries for Euroclear or Cedel or another Clearing Agency
Participant, as the case may be, to be credited with the increase and
the name of the account and (C) certificates in the forms of Exhibits
H and I, respectively, given by the Certificate Owner and the proposed
transferee of the interest, the Transfer Agent and Registrar shall
instruct the Clearing Agency to reduce the 144A Book-Entry Certificate
by the aggregate principal amount of the beneficial interest in the
144A Book-Entry Certificate to be so exchanged or transferred and the
Transfer Agent and Registrar shall instruct the Clearing Agency,
concurrently with the reduction, to increase the principal amount of
the Regulation S Book-Entry Certificate by the aggregate principal
amount of the beneficial interest in the 144A Book- Entry Certificate
to be so exchanged or transferred, and to credit or cause to be
credited to the account of the Person specified in the instructions a
beneficial interest in the Regulation S Book-Entry Certificate equal
to the reduction in the principal amount of the 144A Book-Entry
Certificate.
(iii) Notwithstanding any other provisions of this section, a
placement agent for the Investor Certificates may exchange beneficial
interests in the Regulation S Temporary Book-Entry Certificate held by
it for interests in the 144A Book-Entry Certificate only after
delivery by the placement agent of instructions for the exchange
substantially in the form of Exhibit J. Upon receipt of the
instructions provided in the preceding sentence, the Transfer Agent
and Registrar shall instruct the Clearing Agency to reduce the
principal amount of the Regulation S Temporary Book-Entry Certificate
to be so transferred and shall instruct the Clearing Agency to
increase the principal amount of the 144A Book-Entry Certificate and
credit or cause to be credited to the account of the placement agent a
beneficial interest in the 144A Book-Entry Certificate having a
principal amount equal to the amount by which the principal amount of
the Regulation S Temporary Book-Entry Certificate was reduced upon the
transfer pursuant to the instructions provided in the first sentence
of this subclause.
page 41
<PAGE> 47
(iv) If Book-Entry Certificate is exchanged for a Definitive
Certificate, the Certificates may be exchanged or transferred for one
another only in accordance with such procedures as are substantially
consistent with the provisions of clauses (i) through (iii) above
(including the certification requirements intended to ensure that the
exchanges or transfers comply with Rule 144 or Regulation S under the
Securities Act, as the case may be) and as may be from time to time
adopted by Trustee.
SECTION 6.12 Notices to Clearing Agency. Whenever notice or other
communication to the Investor Certificateholders of any Series represented by
Book-Entry Certificates is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificate Owners pursuant to
Section 6.13, Trustee, Servicer and the Paying Agent shall give all such notices
and communications specified herein to be given to the Investor
Certificateholders of the Series to the Clearing Agency.
SECTION 6.13 Definitive Certificates. If (a)(i) Transferor advises
Trustee in writing that the Clearing Agency is no longer willing or able to
discharge its responsibilities under any Letter of Representations properly, and
(ii) Transferor is unable to locate a qualified successor, (b) Transferor, at
its option, advises Trustee in writing that, with respect to any Series, it
elects to terminate the book-entry system through the Clearing Agency or (c)
after the occurrence of a Servicer Default, Certificate Owners representing
beneficial interests aggregating not less than 50% of the Invested Amount of the
Series advise Trustee and the Clearing Agency through the Clearing Agency
Participants in writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interests of the Certificate Owners of
the Series, Trustee shall notify the Clearing Agency of the occurrence of any
such event and of the availability of Definitive Certificates of the Series to
Certificate Owners of the Series requesting the same. Upon surrender to Trustee
of the Investor Certificates of the Series by the Clearing Agency accompanied by
registration instructions from the Clearing Agency for registration, Trustee
shall authenticate and deliver Definitive Certificates of the Series. Neither
Transferor, the Transfer Agent and Registrar nor Trustee shall be liable for any
delay in delivery of the instructions and may conclusively rely on, and shall be
protected in relying on, the instructions. Upon the issuance of Definitive
Certificates of any Series, all references herein to obligations with respect to
the Series imposed upon or to be performed by the Clearing Agency shall be
deemed to be imposed upon and performed by Trustee, to the extent applicable
with respect to the Definitive Certificates and Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder.
page 42
<PAGE> 48
SECTION 6.14 Letter of Representations. Notwithstanding anything to the
contrary in this Agreement or any Supplement, the parties hereto shall comply
with the terms of each Letter of Representations.
ARTICLE VII TRANSFEROR
SECTION 7.1 Representations and Warranties of Transferor Relating to
Transferor and the Transaction Documents. On the date hereof and on each
Issuance Date, Transferor hereby represents and warrants that:
(a) Organization and Good Standing. Transferor is a
corporation duly organized and validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all
necessary corporate power and authority to acquire, own and transfer
the Receivables and the Related Transferred Assets.
(b) Due Qualification. Transferor is duly qualified to do
business and is in good standing as a foreign corporation (or is
exempt from such requirements), and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires
qualification, licenses or approvals and where the failure so to
qualify, to be in good standing, to obtain the licenses and approvals
or to preserve and maintain such qualification, licenses or approvals
would have a substantial likelihood of having a Material Adverse
Effect.
(c) Power and Authority. Transferor has all necessary
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents
to which it is a party.
(d) Valid Sale, Binding Obligations. Each sale of Receivables
and Related Assets made by Transferor pursuant to this Agreement
constitutes a valid sale, transfer, and assignment of all of
Transferor's right, title and interest in, to and under such
Receivables and the Related Assets of Transferor to the Trust that is
perfected and of first priority under the UCC and otherwise,
enforceable against creditors of, and purchasers from, Transferor and
free and clear of any Adverse Claim (other than any Permitted Adverse
Claim or any Adverse Claim arising solely as a result of any action
taken by Trustee hereunder). This Agreement constitutes, and each
other Transaction Document to which Transferor is a party when
executed and delivered will constitute, a legal, valid and binding
obligation of Transferor, enforceable against it in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or
page 43
<PAGE> 49
other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at law.
(e) Authorization; No Conflict or Violation. The execution,
delivery and performance of, and the consummation of the transactions
contemplated by, this Agreement and the other Transaction Documents
and the fulfillment of the terms hereof and thereof have been duly
authorized by all necessary action and will not (i) conflict with,
violate, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a
default under, (A) its certificate of incorporation or bylaws or (B)
any contract, indenture, loan agreement, mortgage, deed of trust or
other material agreement or instrument to which Transferor is a party
or by which it or any of its properties is bound, (ii) result in the
creation or imposition of any Adverse Claim upon any of its properties
other than pursuant to this Agreement and the other Transaction
Documents, or (iii) conflict with or violate any federal, state, local
or foreign law or any decision, decree, order, rule or regulation
applicable to it or any of its properties of any court or of any
federal, state, local or foreign regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
it or any of its properties, which conflict, violation, breach,
default or Adverse Claim, individually or in the aggregate, would have
a substantial likelihood of having a Material Adverse Effect.
(f) Litigation and Other Proceedings. (i) There is no action,
suit, proceeding or investigation pending or, to the best knowledge of
Transferor, threatened against it before any court, regulatory body,
arbitrator, administrative agency or other tribunal or governmental
instrumentality and (ii) it is not subject to any order, judgment,
decree, injunction, stipulation or consent order of or with any court
or other government authority that, in the case of clauses (i) and
(ii), (A) asserts the invalidity of this Agreement or any other
Transaction Document, (B) seeks to prevent the transfer of any
Receivables or Related Transferred Assets to the Trustee, the issuance
of the Certificates or any Purchased Interest or the consummation of
any of the transactions contemplated by this Agreement or any other
Transaction Document, (C) seeks any determination or ruling that would
adversely affect the performance by Transferor of its obligations
under this Agreement or any other Transaction Document or the validity
or enforceability of this Agreement or any other Transaction Document,
(D) seeks to affect adversely the income tax attributes of the
transfers hereunder or the Trust under the United States Federal
income tax system or any state income tax system or (E) individually
or in the aggregate for all such
page 44
<PAGE> 50
actions, suits, proceedings, investigations, orders, judgments,
decrees, injunctions, stipulations or consent orders would have a
substantial likelihood of having a Material Adverse Effect.
(g) Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority or other
Person that are required to be obtained by Transferor, and all notices
to and filings with any Governmental Authority or other Person, that
are required to be made by it, in the case of each of the foregoing in
connection with the transfer of Receivables and Related Transferred
Assets to the Trustee or the execution, delivery and performance by it
of this Agreement and any other Transaction Documents to which it is a
party and the consummation of the transactions contemplated by this
Agreement, have been obtained or made and are in full force and
effect, except where the failure to obtain or make any such
authorization, consent, order, approval, action, notice or filing,
individually or in the aggregate for all such failures, would not
reasonably be expected to have a Material Adverse Effect.
(h) Offices. Transferor's principal place of business and
chief executive office is, and since the date of its incorporation has
been, located at the address set forth under Transferor's signature
hereto (or at such other locations, notified to Servicer and Trustee
in accordance with Section 7.2(c), in jurisdictions where all action
required by Section 7.2(c) has been taken and completed).
(i) Account Banks. The names and addresses of all the banks,
together with the account numbers of the accounts at such banks (and
all related lockboxes and post office boxes), into which Collections
are paid as of the First Issuance Date have been accurately identified
to Trustee in the letter dated the First Issuance Date from the
Sellers to Buyer and the Trustee delivered pursuant to Section 5.1(o)
of the Purchase Agreement, and such banks, accounts, lockboxes and
post office boxes constitute all of the Account Banks, Bank Accounts
and Lockboxes as of the First Issuance Date. Any changes in the
information set forth in such letter after the First Issuance Date,
have been provided by Servicer to Trustee pursuant to Section 3.3(c).
The Account Agreements to which Transferor is a party constitute the
legal, valid and binding obligations of the parties thereto
enforceable against such parties in accordance with their respective
terms subject to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting creditors' rights generally and
general equitable principles.
page 45
<PAGE> 51
(j) Investment Company Act. Transferor is not, and is not
controlled by, an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended.
(k) Bulk Sales Act. No transaction contemplated by this
Agreement or any other Transaction Document requires compliance with,
or will be subject to avoidance under, any bulk sales act or similar
law.
(l) Margin Regulations. No use of any funds obtained by
Transferor under this Agreement will conflict with or contravene any
of Regulations G, T, U and X promulgated by the Federal Reserve Board
from time to time.
(m) Compliance with Applicable Laws. Transferor is in
compliance with the requirements of all applicable laws, rules,
regulations and orders of all Governmental Authorities (federal,
state, local or foreign, and including environmental laws), a
violation of any of which, individually or in the aggregate for all
such violations, would have a substantial likelihood of having a
Material Adverse Effect.
(n) Taxes. Transferor has filed or caused to be filed all tax
returns and reports required by law to have been filed by it and has
paid all taxes, assessments and governmental charges thereby shown to
be owing, except any such taxes, assessments or charges (i) that are
being contested in good faith, (ii) for which adequate reserves in
accordance with GAAP shall have been set aside on its books and (iii)
with respect to which no Adverse Claim, except Permitted Adverse
Claims, has been imposed upon any Receivables or Transferred Assets.
(o) Accuracy of Information. All written information
furnished by or on behalf of Transferor to the Servicer or the Trustee
pursuant to or in connection with any Transaction Document or any
transaction contemplated herein or therein does not and shall not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made not misleading, in
each case on the date the statement was made and in light of the
circumstances under which the statements were made or the information
was furnished.
(p) Legal Names. Since the date of its incorporation,
Transferor has not been known by any legal name other than its
corporate name as of the date hereof (which corporate name is set
forth on its signature page hereto), except to the extent permitted
otherwise pursuant to Section 7.2(h), and (ii) Transferor has not been
the subject of any merger or
page 46
<PAGE> 52
other corporate reorganization that resulted in a change of name,
identity or corporate structure. Transferor uses no trade names other
than its actual corporate name.
(q) Ordinary Course; No Insolvency. The transfer of the
Tricon Assets contemplated by this Agreement is being consummated by
the Transferor in furtherance of the Transferor's ordinary business
purposes and constitutes a practical and reasonable course of action
by the Transferor, designed to improve the financial position of the
Transferor, with no contemplation of insolvency and with no intent to
hinder, delay or defraud any of its present or future creditors.
Neither as a result of the transactions contemplated by this
Agreement, nor immediately before or after such transactions, will the
Transferor be insolvent or have an unreasonably small capital for the
conduct of its business and the payment of anticipated obligations.
(r) Fair Consideration. The consideration received and to be
received by the Transferor in exchange for the transfer of each Tricon
Asset pursuant to this Agreement is fair consideration.
The representations and warranties set forth in this section shall
survive the transfer and assignment of the Receivables and the other Transferred
Assets to the Trustee. Upon discovery by Transferor, Servicer or Trustee of a
breach of any of the foregoing representations and warranties, the party
discovering the breach shall give written notice to the other parties to this
Agreement within three Business Days following the discovery; provided, however,
that if such breach arises from a Seller's failure to perform its obligations
under the Purchase Agreement and such failure is of the type that may be cured
by settlement of a Seller Non-Complying Receivables Adjustment or Seller
Dilution Adjustment under Sections 3.1 and 3.5 of the Purchase Agreement, and
such settlement shall have (in fact) been made, then no breach shall be deemed
to have occurred under this Agreement. Trustee's obligations in respect of
discovering any breach are limited as provided in Section 11.2(g).
SECTION 7.2 Covenants of Transferor. So long as any Investor
Certificates or Purchased Interests remain outstanding Transferor shall:
(a) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations, judgments,
decrees and orders (including those relating to the Receivables, the
Related Transferred Assets, the funds in the Transaction Accounts and
the related contracts and any other agreements related thereto), in
each case to the extent the failure to comply, individually or in the
aggregate for all such
page 47
<PAGE> 53
failures, would have a substantial likelihood of having a Material
Adverse Effect.
(b) Preservation of Corporate Existence. Preserve and
maintain its corporate existence, rights, franchises and privileges in
the jurisdiction of its incorporation, and qualify and remain
qualified in good standing as a foreign corporation in each
jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualifications would
have a substantial likelihood of having a Material Adverse Effect.
(c) Location of Offices. Keep its principal place of business
and chief executive office at the address referred to in Section
7.1(h) or, upon not less than 30 days' (or such shorter number of days
as is acceptable to the Servicer and Trustee) prior written notice
given by Transferor to Servicer and Trustee, at such other location in
a jurisdiction where all action required pursuant to Section 3.10
shall have been taken and completed. Transferor will at all times
maintain its chief executive offices within the United States of
America.
(d) Reporting Requirements of Transferor. Unless Trustee and
the Required Investors shall otherwise consent in writing, furnish to
Trustee, the Investor Certificateholders and the Rating Agencies:
(i) Early Amortization Events. As soon as possible,
and in any event within three Business Days after an
Authorized Officer of Transferor has obtained knowledge of
the occurrence of any Early Amortization Event or any
Unmatured Early Amortization Event, a written statement of an
Authorized Officer of Transferor describing the event and the
action that Transferor proposes to take with respect thereto,
in each case in reasonable detail,
(ii) Material Adverse Effect. As soon as possible
and in any event within three Business Days after an
Authorized Officer of Transferor has knowledge thereof,
written notice that describes in reasonable detail any
Adverse Claim, other than any Permitted Adverse Claim,
against the Transferred Assets or any other event or
occurrence that, individually or in the aggregate for all
such events or occurrences, has had, or would have a
substantial likelihood of having, in the reasonable, good
faith judgment of Transferor, a Material Adverse Effect,
page 48
<PAGE> 54
(iii) Proceedings. As soon as possible and in any
event within three Business Days after an Authorized Officer
of Transferor has knowledge thereof, written notice of (A)
any action, suit, investigation or proceeding of the type
described in Section 7.1(f) not previously disclosed to
Trustee and (B) any material adverse development that has
occurred with respect to any such previously disclosed
action, suit, investigation or proceeding,
(iv) Other. Promptly, from time to time, any other
information, documents, records or reports respecting the
Receivables or the Related Transferred Assets or any other
information respecting the condition or operations, financial
or otherwise, of Transferor, in each case as Trustee may from
time to time reasonably request in order to protect the
interests of Trustee, the Trust, the Investor
Certificateholders or the Purchasers under or as contemplated
by this Agreement.
(e) Adverse Claims. Except as otherwise provided herein,
Transferor will not (i)(A) sell, assign (by operation of law or
otherwise) or otherwise transfer to any Person, (B) pledge any
interest in, (C) grant, create, incur, assume or permit to exist any
Adverse Claim (other than Permitted Adverse Claims) to or in favor of
any Person upon or with respect to, or (D) cause to be filed any UCC
financing statement or equivalent document relating to perfection with
respect to any Transferred Asset or any contract related to any
Receivable, or upon or with respect to any lockbox or account to which
any Collections of any such Receivable or any other Transferred Assets
are sent or any interest therein, or (ii) assign to any Person any
right to receive income from or in respect of any of the foregoing.
Transferor shall defend the right, title and interest of the Trustee
in, to and under the Transferred Assets, whether now existing or
hereafter created, against all claims of third parties claiming
through or under Transferor.
(f) Extension or Amendment of Receivables; Change in Credit
and Collection Policy or Contracts. Not (and not permit any Seller to)
(i) extend, amend or otherwise modify the terms of any Receivable or
related contract with an Obligor, except as permitted by Section
3.2(c); or (ii) change (or permit any Seller to change) the terms and
provisions of the Credit and Collection Policy in any material respect
(unless (x) with respect to collection policies, the change is made
with the prior written approval of the Trustee and each Agent and the
Modification Condition is satisfied with respect thereto, (y) with
respect to collection
page 49
<PAGE> 55
procedures, the change is made with prior written notice to the
Trustee and each Agent, if any, and no Material Adverse Effect would
result and (z) with respect to accounting policies relating to
Receivables that have become Write-Offs, the change is made in
accordance with GAAP).
(g) Mergers, Acquisitions, Sales, Etc. Not:
(i) except pursuant to the Transaction Documents (A)
be a party to any merger or consolidation, or directly or
indirectly purchase or otherwise acquire all or substantially
all of the assets or any stock of any class of, or any
partnership or joint venture interest in, any other Person,
or (B) directly or indirectly, sell, transfer, assign, convey
or lease, whether in one transaction or in a series of
transactions, all or substantially all of its assets, or sell
or assign with or without recourse any Receivables or Related
Transferred Assets (other than pursuant hereto) unless:
(x)(1) the Person formed by the consolidation or
into which Transferor is merged or the Person that
acquires by sale, assignment, lease, conveyance or
transfer all or substantially all of the assets of
Transferor shall be, if Transferor is not the
surviving entity, organized and existing under the
laws of the United States of America or any state
thereof or the District of Columbia, and shall
expressly assume, by an agreement supplemental
hereto, executed and delivered to Trustee, in form
satisfactory to Trustee and each Agent, the
performance of every covenant and obligation of
Transferor hereunder, including its obligations
under Section 7.3, under each Supplement and under
each PI Agreement, and (2) Transferor has delivered
to Trustee an Officer's Certificate stating that the
consolidation, merger, sale, assignment, lease,
conveyance or transfer and the supplemental
agreement comply with this section and an Opinion of
Counsel stating that the supplemental agreement is a
valid and binding obligation of the surviving entity
enforceable against it in accordance with its terms,
except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting
creditors' rights generally from time to time in
effect and except as such enforceability may be
limited by general principles of equity (whether
considered in a suit at law or in equity), and
page 50
<PAGE> 56
(y) the Modification Condition shall have been
satisfied with respect to the consolidation,
merger, sale, assignment, lease, conveyance or
transfer, and the Transferor's independent directors
shall have approved such consolidation, merger,
sale, assignment, lease, conveyance or transfer, and
(z) Transferor shall have delivered to Trustee, each
Rating Agency, each Purchaser and each Enhancement
Provider a Tax Opinion for each outstanding Series
of Investor Certificates, Purchased Interest and
Enhancement (provided that such opinion with respect
to any Series or PI Interest shall be limited to the
Tax Opinion required by the related Supplement or PI
Agreement), dated the date of the consolidation,
merger, sale, assignment, lease, conveyance or
transfer, with respect thereto; or
(ii) except as contemplated in the Purchase
Agreement in connection with Transferor's purchases of
Receivables and Related Assets from the Sellers, (A) make,
incur or suffer to exist an investment in, equity
contribution to, or payment obligation in respect of the
deferred purchase price of property or services from, any
Person, or (B) declare or pay any dividends on its capital
stock or make any loan or advance to any Person other than
for reasonable and customary operating expenses, provided
that notwithstanding clauses (A) or (B) above, (I) Transferor
may make payments in respect of its obligations under the
Buyer Notes in accordance with their terms and (II) at any
time when Transferor shall be in compliance with its covenant
under Section 7.2(o), but subject to Section 7.2(m),
Transferor shall be permitted to declare and pay dividends on
its capital stock and make loans and/or suffer to exist an
investment in AmeriServe pursuant to the Transaction
Documents.
(h) Change in Name. Not change its corporate name or the name
under or by which it does business, or permit any Seller to change its
corporate name or the name under or by which it does business, unless
prior to the change in name, Transferor shall have filed (or shall have
caused to be filed) any UCC financing statements or amendments as
Servicer or Trustee determines may be necessary to continue the
page 51
<PAGE> 57
perfection of the Trustee's interest in the Receivables, the Related
Transferred Assets and the proceeds thereof.
(i) Amendment of Certificate of Incorporation; Change in
Business. Not amend its Certificate of Incorporation, or engage in any
business other than as contemplated by the Transaction Documents,
unless the Modification Condition has been satisfied in connection
with the amendment or change in Transferor's business.
(j) Amendments to Purchase Agreement or Buyer Notes . Except
as expressly provided otherwise in this Agreement, not make or suffer
to exist any amendment or modification to or waiver of or consent to
departure from the Purchase Agreement or any Buyer Note that could
adversely affect the interests of the Investor Certificateholders, the
Purchasers or any Enhancement Provider.
(k) Enforcement of Purchase Agreement. Perform all its
obligations under and otherwise comply with the Purchase Agreement in
all material respects and, if requested by Trustee, enforce, for the
benefit of the Trust, the covenants and agreements of each Seller in
the Purchase Agreement.
(l) Other Indebtedness. Not (i) create, incur or permit to
exist any Indebtedness, Guaranty or liability or (ii) cause or permit
to be issued for its account any letters of credit or bankers'
acceptances, except for (A) Indebtedness incurred pursuant to the
Buyer Notes, (B) other liabilities specifically permitted to be
created, incurred or owed by Transferor pursuant to or in connection
with the Transaction Documents, (C) liabilities for reasonable and
customary operating expenses in an aggregate amount that do not exceed
$50,000 in any calendar year, (D) other liabilities for expenses that
are owed to an AmeriServe Person, the payment of which are subordinate
to obligations of Transferor under the Transaction Documents and which
subordination is evidenced by a written agreement containing
provisions substantially similar to the provisions of the Buyer Notes,
(E) liabilities under a tax sharing agreement among AmeriServe and its
Subsidiaries, provided that such agreement is in substantially the
form disclosed to the Trustee prior to the date hereof (or in a form
otherwise acceptable to the Trustee), and (F) liabilities for taxes
not yet due and taxes contested in good faith by proper proceedings,
provided that Transferor has maintained adequate reserves with respect
thereto in accordance with GAAP.
page 52
<PAGE> 58
(m) Separate Corporate Existence. Take all reasonable steps
to maintain its existence as a corporation separate and apart from
Servicer, each Seller and any other Person, and Transferor hereby
acknowledges that Trustee and the Investor Certificateholders and the
Purchasers are, and will be, entering into the transactions
contemplated by the Transaction Documents in reliance upon
Transferor's identity as a legal entity separate from any Seller,
Servicer and any other Person. Without limiting the generality of the
foregoing, Transferor shall take such actions as shall be reasonably
required in order that:
(i) Transferor will not incur any material indirect
or overhead expenses for items shared between Transferor and
any AmeriServe Person that are not reflected in the Servicing
Fee, other than shared items of expenses not reflected in the
Servicing Fee, such as legal, auditing and other professional
services, that will be allocated to the extent practical on
the basis of actual use or the value of services rendered,
and otherwise on a basis reasonably related to the actual use
or the value of services rendered, it being understood that
AmeriServe will pay all expenses owing by Transferor or any
AmeriServe Person relating to the preparation, negotiation,
execution and delivery of the Transaction Documents,
including, without limitation, legal, commitment, agency and
other fees.
(ii) Transferor will account for and manage its
liabilities separately from those of every other AmeriServe
Person, including payment of all payroll and administrative
expenses and taxes (other than taxes that are determined or
required to be determined on a consolidated or combined
basis) from its own assets.
(iii) Transferor will conduct its business at an
office segregated from the offices of each AmeriServe Person,
which office of Transferor may consist of office space shared
with an AmeriServe Person, a portion of which is allocated
solely to Transferor.
(iv) Transferor will maintain corporate records,
books of account and stationery separate from those of every
AmeriServe Person.
(v) Any financial statements of any AmeriServe
Person and which are consolidated to include Transferor will
contain
page 53
<PAGE> 59
footnotes stating that AmeriServe and certain of its
Subsidiaries have sold or contributed Receivables to
Transferor and indicating that the assets of Transferor will
not be available to AmeriServe or such Subsidiaries unless
Transferor's liabilities have been paid in full.
(vi) Transferor's assets will be maintained in a
manner that facilitates their identification and segregation
from those of any AmeriServe Person.
(vii) Transferor shall not, directly or indirectly,
be named and shall not enter into an agreement to be named as
a direct or contingent beneficiary or loss payee on any
insurance policy with respect to any loss relating to the
property of an AmeriServe Person.
(viii) Any transaction between Transferor and any
AmeriServe Person will be the type of transaction which would
be entered into by a prudent Person in the position of
Transferor with an AmeriServe Person, and will be on terms
that are at least as favorable as may be obtained from a
Person that is not an AmeriServe Person (it being understood
and agreed that the transactions contemplated in the
Transaction Documents meet the requirements of this clause).
(ix) Neither Transferor nor any AmeriServe Person
will be or will hold itself out to be responsible for the
debts of the other.
(x) Transferor shall not declare any dividend or
make any other distribution in respect of its capital stock
except in accordance with applicable law.
(xi) Transferor will operate, conduct its business
and otherwise act in a manner which is consistent with the
factual assumptions in the opinion of Thacher Profitt & Wood
dated the First Issuance Date regarding certain substantive
consolidation and true sale issues.
(n) Taxes. File or cause to be filed, and cause each Person
with whom it shares consolidated tax liability to file, all Federal,
state and local tax returns that are required to be filed by it, except
where the failure to file such returns would not have a substantial
likelihood of
page 54
<PAGE> 60
having a Material Adverse Effect, and pay or cause to be paid all taxes
shown to be due and payable on such returns or on any assessments
received by it, other than any taxes or assessments, the validity of
which are being contested in good faith by appropriate proceedings and
with respect to which Transferor shall have set aside adequate reserves
on its books in accordance with GAAP and which proceedings would not
have a substantial likelihood of having a Material Adverse Effect.
(o) Net Worth. Not permit the Transferor Net Worth to be less
than the greater of (i) 10% of the aggregate Unpaid Balance of the
Receivables held by the Transferor and the Trust and (ii) $25,000,000,
and in either case such condition shall continue for more than five
consecutive Business Days.
(p) Use of Funds. Apply all cash payments made to it hereunder
to make payments in the order of priority set out in Section 3.3 of the
Purchase Agreement.
(q) Change in Payment Instructions to Obligors. Not (i) add or
terminate any bank as an Account Bank from those listed in the letter
referred to in Section 5.1(o) of the Purchase Agreement unless, prior
to any such addition or termination, Trustee and the Rating Agencies
shall have received not less than ten Business Days' prior written
notice of the addition or termination and, not less than ten Business
Days prior to the effective date of any such proposed addition or
termination, Trustee shall have received (a) counterparts of the
applicable type of Account Agreement with each new Account Bank, duly
executed by such new Account Bank and all other parties thereto and (b)
copies of all other agreements and documents signed by the Account Bank
and such other parties with respect to any new Bank Account, all of
which agreements and documents shall be reasonably satisfactory in form
and substance to Trustee, or (ii) make any change in the instructions
to Obligors, given in accordance with Section 5.1(o) of the Purchase
Agreement, regarding payments to be made by Obligors, other than
changes in the instructions that direct Obligors to make payments to
another Bank Account at such Account Bank or another Account Bank or to
the Master Collection Account.
(r) Receivables Reviews. Transferor shall, during regular
business hours permit the Servicer, each Agent, and their respective
agents or representatives, at the expense of Transferor, (i) to examine
and make copies of and abstracts from, and to conduct accounting
reviews of, all Records in the possession or under the control of
Transferor relating to the
page 55
<PAGE> 61
Receivables or Transferred Assets, and (ii) to visit the offices and
properties of Transferor for the purpose of examining the materials
described in clause (i) above, and to discuss matters relating to any
Receivables or any Transferred Assets or such Transferor's performance
hereunder with any of the Authorized Officers of Transferor or, with
the prior consent of an Authorized Officer of Transferor, with
employees of Transferor having knowledge of such matters (the
examinations set forth in the foregoing clauses (i) and (ii) being
herein called a "Transferor Receivables Review"). The Servicer, each
Agent and their respective agents or representatives shall be entitled
to conduct Transferor Receivables Reviews whenever Servicer or such
Agent, in its reasonable judgment deems it appropriate; provided that
prior to the occurrence and continuance of an Early Amortization Event,
Servicer or such Agent (or its agent or representative) shall give
Transferor at least two Business Days' prior written notice of any
Transferor Receivables Review; provided further that no such notice
shall be required if an Early Amortization Event shall have occurred
and be continuing .
(s) Accounting for Purchases of Tricon Assets. Transferor
shall prepare its financial information stating that Transferor has
sold the Tricon Assets to the Trust. Transferor shall not prepare any
financial information that accounts for the transactions contemplated
in this Agreement in any manner other than as a sale of the Tricon
Assets by Transferor to the Trust, or in any other respect account for
or treat the transactions contemplated in this Agreement (including but
not limited to accounting and, where taxes are not consolidated, for
tax reporting purposes) in any manner other than as a sale of the
Tricon Assets by the Transferor to the Trust.
The covenants set forth in this section shall survive the transfer and
assignment of the Receivables and the other Transferred Assets to the Trustee.
Upon discovery by Transferor, Servicer or Trustee of a breach of any of the
foregoing covenants, the party discovering the breach shall give written notice
to the other parties to this Agreement within three Business Days following such
discovery; provided, however that if such breach arises from a Seller's failure
to perform its obligations under the Purchase Agreement and such failure is of
the type that may be cured by settlement of a Seller Non-Complying Receivables
Adjustment or Seller Dilution Adjustment under Sections 3.1 and 3.5 of the
Purchase Agreement, and such settlement shall have (in fact) been made, then no
breach shall be deemed to have occurred under this Agreement. Trustee's
obligations in respect of discovering any such breach are limited as provided in
Section 11.2(g).
page 56
<PAGE> 62
SECTION 7.3 Indemnification by Transferor. (a) Transferor hereby agrees
to indemnify the Trust, Trustee and each other Indemnified Party, forthwith on
demand, from and against any and all Indemnified Losses awarded against or
incurred by any of them that arise out of or relate to Transferor's performance
of, or failure to perform, any of its obligations under or in connection with
any Transaction Document.
Notwithstanding the foregoing, in no event shall any Indemnified Party
be indemnified against any Indemnified Losses (a) resulting from gross
negligence or willful misconduct on the part of such Indemnified Party (or the
gross negligence or willful misconduct on the part of any of its officers,
directors, employees, affiliates or agents), (b) to the extent they include
Indemnified Losses in respect of Receivables and reimbursement therefor that
would constitute credit recourse to Transferor for the amount of any Receivable
or Related Transferred Asset not paid by the related Obligor, (c) to the extent
they are or result from lost profits, (d) to the extent they are or result from
taxes (including interest and penalties thereon) asserted with respect to (i)
distributions on the Investor Certificates, (ii) franchise or withholding taxes
imposed on any Indemnified Party other than the Trust or Trustee in its capacity
as Trustee or (iii) federal or other income taxes on or measured by the net
income of the Indemnified Party and costs and expenses in defending against the
same, or (e) to the extent that they constitute consequential, special or
punitive damages.
If for any reason the indemnification provided in this Section is
unavailable to an Indemnified Party or is insufficient to hold it harmless, then
Transferor shall contribute to the amount paid by the Indemnified Party as a
result of any loss, claim, damage, judgment, cost, expense or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the Indemnified Party on the one hand and Transferor on the other hand, but
also the relative fault of the Indemnified Party (if any) and Transferor and any
other relevant equitable consideration.
Notwithstanding any provisions contained in any Transaction Document to
the contrary, Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section unless funds are allocated for such payment
pursuant to the provisions of a Supplement or PI Agreement governing the
allocation of funds in the Master Collection Account. Any amount which
Transferor does not pay pursuant to the operation of the preceding sentence
shall not constitute a claim (as defined in Section 101 of the Bankruptcy Code)
against or corporate obligation of Transferor for any such insufficiency.
(b) Transferor shall be liable to all creditors of the Trust (but not
to the Trust, Trustee, Investor Certificateholders or Purchasers) for all
liabilities of the
page 57
<PAGE> 63
Trust to the same extent as it would be if the Trust constituted a partnership
under Delaware law and Transferor were a general partner thereof (to the extent
Transferred Assets remaining after Investor Certificateholders and Purchasers
have been paid in full are insufficient to pay such losses, claims, damages or
liabilities). Notwithstanding anything to the contrary herein, any such creditor
shall be a third party beneficiary of this Section 7.3. Nothing in this
provision shall be construed as waiving any rights or claims (including rights
of recoupment or subrogation) which the Transferor may have against any third
party under this Agreement or applicable laws.
ARTICLE VIII SERVICER
SECTION 8.1 Representations and Warranties of Servicer. On the date
hereof and on each Issuance Date, Servicer hereby makes, and any Successor
Servicer also shall be deemed to make by its acceptance of its appointment
hereunder, the following representations and warranties for the benefit of
Trustee and the Certificateholders and the Purchasers:
(a) Organization and Good Standing. Servicer is a corporation
duly organized and validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all necessary corporate
power and authority to own its properties and to conduct its business
as the properties presently are owned and as the business presently is
conducted.
(b) Due Qualification. Servicer is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt
from such requirements), and has obtained all necessary licenses and
approvals, in all jurisdictions in which the servicing of the
Receivables and the Related Transferred Assets as required by this
Agreement requires qualification, licenses or approvals and where the
failure so to qualify, to be in good standing, to obtain the licenses
and approvals or to preserve and maintain the qualification, licenses
or approvals would have a substantial likelihood of having a material
adverse effect on its ability to perform its obligations as Servicer
under this Agreement or a Material Adverse Effect.
(c) Power and Authority. Servicer has all necessary corporate
power and authority to execute, deliver and perform its obligations
under this Agreement and the other Transaction Documents to which it is
a party.
(d) Binding Obligations. This Agreement constitutes, and each
other Transaction Document to which Servicer is a party when executed
and delivered will constitute, a legal, valid and binding obligation of
Servicer, enforceable against it in accordance with its terms, except
as
page 58
<PAGE> 64
enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at law.
(e) Authorization; No Conflict or Violation. The execution and
delivery by Servicer of this Agreement and the other Transaction
Documents to which it is a party, the performance by it of its
obligations hereunder and thereunder and the fulfillment by it of the
terms hereof and thereof that are applicable to it have been duly
authorized by all necessary action and will not (i) conflict with,
violate, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default
under, (A) its certificate of incorporation or bylaws or (B) any
indenture, loan agreement, mortgage, deed of trust, or other material
agreement or instrument to which it is a party or by which it or any of
its properties is bound or (ii) conflict with or violate any federal,
state, local or foreign law or any decision, decree, order, rule or
regulation applicable to it or any of its properties of any court or of
any federal, state, local or foreign regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
it or any of its properties, which conflict, violation, breach or
default described, individually or in the aggregate, would have a
substantial likelihood of having a Material Adverse Effect.
(f) Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority or other
Person that are required to be obtained by Servicer, and all notices to
and filings with any Governmental Authority or other Person that are
required to be made by it, in the case of each of the foregoing in
connection with the execution, delivery and performance by it of this
Agreement and any other Transaction Documents to which it is a party
and the consummation of the transactions contemplated by this
Agreement, have been obtained or made and are in full force and effect
except where the failure to obtain or make such authorization, consent,
order, approval, action, notice or filing, individually or in the
aggregate for all such failures, would not reasonably be expected to
have a Material Adverse Effect.
(g) Litigation and Other Proceedings. (i) There is no action,
suit, proceeding or investigation pending or, to the best knowledge of
Servicer, threatened against it before any court, regulatory body,
arbitrator, administrative agency or other tribunal or governmental
instrumentality and (ii) it is not subject to any order, judgment,
decree, injunction, stipulation or consent order of or with any court
or other Government Authority that, in
page 59
<PAGE> 65
the case of clauses (i) and (ii), (A) seeks to affect adversely the
income tax attributes of the transfers hereunder or the Trust under the
United States federal income tax system or any state income tax system
or (B) individually or in the aggregate for all such actions, suits,
proceedings, investigations, orders, judgments, decrees, injunctions,
stipulations or consent orders would have a substantial likelihood of
having a Material Adverse Effect.
(h) Year 2000 Problem. On the basis of a comprehensive review
and assessment undertaken by Servicer of Servicer's computer
applications and inquiry made of Servicer's material suppliers, vendors
and customers, Servicer reasonably believes that the "Year 2000
problem" (that is, the risk that computer applications used by any
Person may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December
31, 1999) shall not result in a material adverse change in the
operations, business, properties, or condition (financial or otherwise)
of Servicer or in Servicer's ability to carry out any of its
obligations under the Transaction Documents.
The representations and warranties set forth in this section shall survive the
transfer and assignment of the Receivables and the other Transferred Assets to
the Trust. Upon discovery by Transferor, Servicer or Trustee of a breach of any
of the foregoing representations and warranties, the party discovering the
breach shall give written notice to the other parties to this Agreement within
three Business Days following the discovery. Trustee's obligations in respect of
discovering any breach are limited as provided in Section 11.2(g).
SECTION 8.2 Covenants of Servicer. So long as any Investor Certificates
or Purchased Interests remain outstanding Servicer shall:
(a) Compliance with Laws, Etc. Maintain in effect all
qualifications required under applicable law in order to service
properly the Receivables and shall comply in all material respects with
all applicable laws, rules, regulations, judgments, decrees and orders,
in each case to the extent the failure to comply, individually or in
the aggregate for all such failures, would have a substantial
likelihood of having a Material Adverse Effect.
(b) Preservation of Corporate Existence. Preserve and maintain
its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in
good standing as a foreign corporation in each jurisdiction where the
failure to preserve and maintain such existence, rights, franchises,
privileges and
page 60
<PAGE> 66
qualification would have a substantial likelihood of having a Material
Adverse Effect.
(c) Notice. As soon as possible (and in any event within five
Business Days after an Authorized Officer of Servicer has knowledge
thereof), furnish to Transferor, Trustee, the Investor
Certificateholders, the Purchasers and the Rating Agencies notice of
(x) any of the events described in clauses (i), (ii) and (iii) of
Section 7.2(d) and (y) any "Default" or "Event of Default" (as such
terms are defined in the AmeriServe Credit Agreement).
(d) Location of Offices. Maintain at all times its chief
executive offices within the United States of America.
The covenants set forth in this section shall survive the transfer and
assignment of the Transferred Assets to the Trustee. Upon discovery by
Transferor, Servicer or Trustee of a breach of any of the foregoing covenants,
the party discovering the breach shall give written notice to the other parties
to this Agreement within three Business Days following the discovery. Trustee's
obligations in respect of discovering any breach are limited as provided in
Section 11.2(g).
SECTION 8.3 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Servicer shall not consolidate with or merge into any
other Person or convey, transfer or sell all or substantially all of its
properties and assets to any Person, unless (a) Servicer is the surviving entity
or, if it is not the surviving entity, the Person formed by the consolidation or
into which Servicer is merged or the Person that acquires by conveyance,
transfer or sale all or substantially all of the properties and assets of
Servicer shall be a corporation organized and existing under the laws of the
United States of America or any State thereof or the District of Columbia and
such corporation shall expressly assume, by an agreement supplemental hereto,
executed and delivered to Trustee and in form and substance satisfactory to
Trustee, the performance of every covenant and obligation of Servicer hereunder
and under the other Transaction Documents to which Servicer is a party, and (b)
Servicer shall have delivered to Trustee an Officer's Certificate stating that
the consolidation, merger, conveyance, transfer or sale and the supplemental
agreement comply with this Section and an Opinion of Counsel stating that the
supplemental agreement is a valid and binding obligation of the surviving entity
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity.
page 61
<PAGE> 67
SECTION 8.4 Indemnification by Servicer. Servicer hereby agrees to
indemnify each Indemnified Party forthwith on demand, from and against any and
all Indemnified Losses awarded against or incurred by any of them that arise out
of or relate to Servicer's performance of, or failure to perform, any of its
obligations under or in connection with any Transaction Document.
Notwithstanding the foregoing, in no event shall any Indemnified Party
be indemnified against any Indemnified Losses (a) resulting from gross
negligence or willful misconduct on the part of such Indemnified Party (or the
gross negligence or willful misconduct on the part of any of its officers,
directors, employees, affiliates or agents), (b) to the extent they include
Indemnified Losses in respect of Receivables and reimbursement therefor that
would constitute credit recourse to Servicer for the amount of any Receivable or
Related Transferred Asset not paid by the related Obligor, or (c) to the extent
they are or result from taxes (including interest and penalties thereon)
asserted with respect to (i) distributions on the Investor Certificates, (ii)
franchise or withholding taxes imposed on any Indemnified Party other than the
Trust or Trustee in its capacity as Trustee or (iii) federal or other income
taxes on or measured by the net income of the Indemnified Party and costs and
expenses in defending against the same.
If for any reason the indemnification provided in this section is
unavailable to an Indemnified Party or is insufficient to hold it harmless, then
Servicer shall contribute to the amount paid by the Indemnified Party as a
result of any loss, claim, damage, judgment, cost, expense or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the Indemnified Party on the one hand and Servicer on the other hand, but
also the relative fault of the Indemnified Party (if any) and Servicer and any
other relevant equitable consideration.
SECTION 8.5 Servicer Liability. Servicer shall be liable in accordance
with this Agreement only to the extent of the obligations specifically
undertaken by Servicer in such capacity herein and as set forth herein.
SECTION 8.6 Servicing in Florida. No Florida Servicer shall have any
duties or perform any services as a Servicer or Sub-Servicer with respect to any
Receivables if such duties or services would subject such Receivables or the
Trust to any intangibles tax under Florida law. AmeriServe represents, warrants
and covenants that (i) it is not and shall not become a Florida Servicer; and
(ii) no Person other than ProSource shall be a Sub-Servicer of ProSource
Receivables. Without limiting the generality of the foregoing, AmeriServe shall
cause ProSource from time to time to cease to act as Sub-Servicer for any period
of time required by applicable law in order to avoid subjecting Receivables or
the Trust to any intangibles tax under Florida law.
page 62
<PAGE> 68
ARTICLE IX
EARLY AMORTIZATION EVENTS; TERMINATION BY SELLERS
SECTION 9.1 Early Amortization Events. The Early Amortization Events
with respect to each Series and Purchased Interest shall be specified in the
related Supplement or PI Agreement.
SECTION 9.2 Remedies. Upon the occurrence of an Early Amortization
Event, Trustee shall have, in addition to all other rights and remedies
available to Trustee under this Agreement or otherwise, (a) the right to apply
Collections to the payment of the obligations of Transferor and Servicer under
the Transaction Documents, as provided herein, and (b) all rights and remedies
provided under all other applicable laws, which rights, in the case of each and
all of the foregoing, shall be cumulative. Trustee shall exercise the rights at
the direction of the Required Investors pursuant to (and subject to the
limitations specified in) Section 11.14.
SECTION 9.3 Termination By Sellers. If the Sellers have notified the
Trustee in writing of their election to terminate their agreements to sell
Receivables under the Purchase Agreement (as provided in Section 8.1 of the
Purchase Agreement), (i) the Trustee shall notify the Certificateholders of all
Series and all Purchasers within five Business Days of its receipt of such
notice and (ii) Transferor shall cause each Series of Certificates and Purchased
Interest to be repaid out of Collections as early as is practicable in
accordance with the applicable Supplement or PI Agreement.
SECTION 9.4 Additional Rights Upon the Occurrence of Certain Events.
(a) If a Bankruptcy Event shall occur with respect to Transferor, this Agreement
(other than this Section 9.4) and the Trust shall be deemed to have terminated
on the day of the Bankruptcy Event. Within seven Business Days of the date of
written notice to Trustee of the Bankruptcy Event, Trustee shall:
(i) publish a notice in a newspaper of general circulation in
the Borough of Manhattan, The City of New York printed in the English
language and customarily published on each Business Day, whether or
not published on Saturdays, Sundays and holidays (an "Authorized
Newspaper"), that a Bankruptcy Event has occurred with respect to
Transferor, that the Trust has terminated, and that Trustee intends to
(A) if all amounts owed in respect of all Investor Certificates and
Purchased Interests shall have been paid in full or if sufficient
funds are on deposit in the Transaction Accounts for such purpose,
transfer the Transferred Assets to Transferor or (B) in any other
event, instruct Servicer to sell, dispose of or otherwise liquidate
the Transferred Assets pursuant to this
page 63
<PAGE> 69
Agreement in a commercially reasonable manner and on commercially
reasonable terms, which shall include the solicitation of competitive
bids (a "Disposition"), and
(ii) send written notice to the Investor Certificateholders
and Purchasers describing the provisions of this section and requesting
each Investor Certificateholder and Purchaser to advise Trustee in
writing whether (A) it wishes Trustee to instruct Servicer not to
effectuate a Disposition, (B) it refuses to advise Trustee as to the
specific action Trustee shall instruct Servicer to take or (C) it
wishes Servicer to effect a Disposition.
If, after 60 days from the day notice pursuant to subsection (a)(i) is
first published (the "Publication Date"), Trustee shall not have received the
written instruction described in subsection (a)(ii)(A) from Holders representing
(based on an Opinion of Counsel provided by Transferor) at least a majority in
interest within the meaning of Internal Revenue Service Revenue Procedure 94-46
(or subsequent authority promulgated by the Internal Revenue Service),
determined as if the Trust were classified as a partnership for Federal income
tax purposes (a "majority in interest"), of all Series of Investor Certificates
and Purchased Interests, Trustee shall instruct Servicer to effectuate a
Disposition, and Servicer shall proceed to consummate a Disposition. If,
however, Holders representing at least a majority in interest of all Series of
Investor Certificates and Purchased Interests instruct Trustee not to effectuate
a Disposition, the Trust shall be reconstituted and continue pursuant to the
terms of this Agreement.
(b) Notwithstanding the termination of this Agreement and the Trust
pursuant to subsection (a), the proceeds from any Disposition of the Transferred
Assets pursuant to subsection (a) shall be treated as Collections and shall be
allocated and deposited in accordance with the provisions of Article IV.
(c) Servicer may appoint an agent or agents to assist with its
responsibilities pursuant to this section with respect to competitive bids.
(d) Transferor or any of its Affiliates shall be permitted to bid for
the Transferred Assets. Trustee may obtain a prior determination from any
bankruptcy trustee, receiver or liquidator that the terms and manner of any
proposed Disposition are commercially reasonable.
(e) Notwithstanding the termination of this Agreement and the Trust
pursuant to subsection (a), Trustee shall continue to have the rights described
in Section 9.2 and Article XI, and be subject to direction on terms consistent
with
page 64
<PAGE> 70
those set out in Section 11.14, pending the completion of any Disposition and/or
the reconstitution of the Trust.
ARTICLE X SERVICER DEFAULTS
SECTION 10.1 Servicer Defaults. Any of the following events shall
constitute a "Servicer Default":
(a) any failure by Servicer in its capacity as Servicer to
make any payment, transfer or deposit required by any Transaction
Document to be made by it or to give instructions or to give notice to
Trustee to make such payment, transfer or deposit, which failure
continues unremedied for one Business Day,
(b) failure on the part of Servicer in its capacity as
Servicer duly to observe or perform in any material respect any other
covenants or agreements of Servicer set forth in this Agreement or any
other Transaction Document, which failure has a material adverse effect
on the Holders of any Series or Purchased Interest and continues
unremedied for a period of 30 days after the earlier of (i) the date on
which written notice of the failure, requiring the same to be remedied,
shall have been given to Servicer by Trustee, or to Servicer and
Trustee by any Investor Certificateholder or Purchaser and (ii) the
date on which Servicer became aware of such failure,
(c) Servicer shall assign its duties under this Agreement,
except as permitted by Sections 3.1(b) and 8.3,
(d) any Daily Report or Monthly Report shall fail to have been
correct in any material respect when made or delivered, or shall not
have been delivered when required under the terms hereof, and in either
case such condition continues unremedied for a period of three Business
Days,
(e) any other representation, warranty or certification made
by Servicer in any Transaction Document or in any certificate or other
document or instrument delivered pursuant to any Transaction Document
shall fail to have been correct in any material respect when made or
delivered, which failure has a materially adverse effect on the
Certificateholders or any Purchased Interest and which materially
adverse effect continues unremedied for a period of 15 days after the
earlier of (i) the date on which written notice of failure, requiring
the same to be remedied, shall have been given to Servicer by Trustee
or to Servicer and Trustee by any Investor Certificateholder or
Purchaser and (ii) the date on which Servicer became aware of such
failure, or
page 65
<PAGE> 71
(f) any Bankruptcy Event shall occur with respect to
Servicer.
In the event of any Servicer Default, so long as such Servicer Default shall not
have been remedied, Trustee may (and, at the direction of the Required
Investors, shall), by notice then given in writing to Servicer (a "Termination
Notice"), terminate all (but not less than all) the rights and obligations of
Servicer as Servicer under this Agreement and in and to the Receivables, the
Related Transferred Assets and the proceeds thereof.
Servicer shall provide notice of a Servicer Default in accordance with Section
10.3.
Notwithstanding the foregoing, a delay in or failure in performance
referred to in subsection (a) for a period of ten Business Days after the
applicable grace period, or in subsection (b) or (d) for a period of 30 days
after the applicable grace period, shall not constitute a Servicer Default if
the delay or failure could not have been prevented by the exercise of reasonable
diligence by Servicer and the delay or failure was caused by an act of God or
the public enemy, riots, acts of war, acts of terrorism, epidemics, flood,
embargoes, weather, landslides, fire, earthquakes or similar causes. The
preceding sentence shall not relieve Servicer from using its best efforts to
perform its obligations in a timely manner in accordance with the terms of the
Transaction Documents, and Servicer shall promptly give Trustee, each Agent and
Transferor an Officer's Certificate notifying them of its failure or delay.
SECTION 10.2 Trustee to Act; Appointment of Successor. (a) On and after
Servicer's receipt of a Termination Notice pursuant to Section 10.1, Servicer
shall continue to perform all servicing functions under this Agreement until the
date specified in the Termination Notice or otherwise specified by Trustee in
writing or, if no such date is specified in the Termination Notice, or otherwise
specified by Trustee, until a date mutually agreed upon by Servicer and Trustee.
Trustee shall, as promptly as possible after the giving of a Termination Notice,
nominate an Eligible Servicer as successor servicer (the "Successor Servicer");
provided that (a) in so appointing any Successor Servicer, Trustee shall give
due consideration to any Successor Servicer proposed by any Agent and (b) the
Successor Servicer shall accept its appointment by a written assumption in a
form acceptable to Trustee and each Agent. Any Person who is nominated to be a
Successor Servicer shall accept its appointment by a written assumption in form
and substance acceptable to Trustee. In the event that a Successor Servicer has
not been appointed or has not accepted its appointment at the time when Servicer
ceases to act as Servicer, Trustee without further action shall automatically be
appointed the Successor Servicer. Trustee may delegate any of its servicing
obligations to an affiliate or agent of Trustee in accordance with Section
3.1(b). If Trustee is prohibited by applicable law from performing the duties of
Servicer hereunder, Trustee may appoint, or may petition a court of competent
jurisdiction to appoint, a Successor
page 66
<PAGE> 72
Servicer hereunder. Trustee shall give notice of the appointment of a Successor
Servicer in accordance with Section 10.3.
(b) After Servicer's receipt of a Termination Notice, and on the date
that a Successor Servicer shall have been appointed by Trustee and shall have
accepted the appointment pursuant to subsection (a), all authority and power of
Servicer under this Agreement shall pass to and be vested in the Successor
Servicer (a "Service Transfer"); and, without limitation, Trustee is hereby
authorized and empowered to execute and deliver, on behalf of Servicer, as
attorney-in-fact or otherwise, all documents and instruments, and to do and
accomplish all other acts or things, that Trustee reasonably determines are
necessary or appropriate to effect the purposes of the Service Transfer. Upon
the appointment of the Successor Servicer and its acceptance thereof, Servicer
agrees that it will terminate its activities as Servicer hereunder in a manner
that Trustee indicates will facilitate the transition of the performance of such
activities to the Successor Servicer. Servicer agrees that it shall use
reasonable efforts to assist the Successor Servicer in assuming the obligations
to service and administer the Receivables and the Related Transferred Assets, on
the terms and subject to the conditions set forth herein, and to effect the
termination of the responsibilities and rights of Servicer to conduct servicing
hereunder, including the transfer to such Successor Servicer of all authority of
Servicer to service the Receivables and Related Transferred Assets provided for
under this Agreement and all authority over all cash amounts that shall
thereafter be received with respect to the Receivables or the Related
Transferred Assets. Servicer shall, within five Business Days after the
designation of a Successor Servicer, transfer its electronic records (and any
related software and software licenses, appropriately assigned and prepaid)
relating to the Receivables, the related contracts and the Related Transferred
Assets to the Successor Servicer in such electronic form as the Successor
Servicer may reasonably request and shall promptly transfer to the Successor
Servicer all other records, correspondence and documents necessary for the
continued servicing of the Receivables and the Related Transferred Assets in the
manner and at such times as the Successor Servicer shall request. The Successor
Servicer shall request all such items described above in this clause (b) as are
necessary or appropriate for it to carry out its obligations under or in
connection with the Transaction Documents. To the extent that compliance with
this Section shall require Servicer to disclose to the Successor Servicer
information of any kind that Servicer reasonably deems to be confidential, prior
to the transfer contemplated by the preceding sentence the Successor Servicer
shall be required to enter into such licensing and confidentiality agreements as
Servicer shall reasonably deem necessary to protect its interest. All reasonable
costs and expenses (including attorneys' fees and disbursements) incurred in
connection with transferring the Receivables, the Related Transferred Assets and
all related Records (including the related contracts) to the Successor Servicer
and amending this Agreement and the other Transaction Documents to reflect the
succession as Servicer pursuant to this
page 67
<PAGE> 73
Section shall be paid by the predecessor Servicer (or, if Trustee serves as
Successor Servicer on an interim basis, the initial Servicer) within 15 days
after presentation of reasonable documentation of the costs and expenses. Such
costs and expenses shall be designated as "Transition Costs."
(c) Upon its appointment and acceptance thereof, the Successor
Servicer shall be the successor in all respects to Servicer with respect to
servicing functions under this Agreement and shall be subject to all the
responsibilities and duties relating thereto placed on Servicer by the terms
and provisions hereof (and shall carry out such responsibilities and duties in
accordance with standards of reasonable commercial prudence subject in each
case to the terms of this Agreement), and all references in this Agreement to
Servicer shall be deemed to refer to the Successor Servicer. The Successor
Servicer shall not be liable for any acts, omissions or errors of the
predecessor Servicer.
(d) All authority and power granted to Servicer or the Successor
Servicer under this Agreement shall automatically cease and terminate upon
termination of the Trust pursuant to Section 12.1, and shall pass to and be
vested in Transferor and, without limitation, Transferor is hereby authorized
and empowered, on and after the effective date of such termination, to execute
and deliver, on behalf of the Servicer or the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments and to do and
accomplish all other acts or things that Transferor reasonably determines are
necessary or appropriate to effect the purposes of such transfer of servicing
rights. The Servicer or Successor Servicer agrees to cooperate with Transferor
in effecting the termination of the responsibilities and rights of the Servicer
or Successor Servicer to conduct servicing of the Receivables and the Related
Transferred Assets. The Successor Servicer shall, within five Business Days
after such termination, transfer its electronic records relating to the
Receivables and the Related Transferred Assets to Transferor in such electronic
form as Transferor may reasonably request and shall transfer all other records,
correspondence and documents relating to the Receivables and the Related
Transferred Assets to Transferor in the manner and at such times as Transferor
shall reasonably request. To the extent that compliance with this Section shall
require the Successor Servicer to disclose to Transferor information of any kind
that the Successor Servicer deems to be confidential, Transferor shall be
required to enter into such customary licensing and confidentiality agreements
as the Successor Servicer shall reasonably deem necessary to protect its
interests.
Notwithstanding any provisions contained in any Transaction Document to
the contrary, Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section unless funds are allocated for such payment
pursuant to the provisions of a Supplement or PI Agreement governing the
allocation of funds in
page 68
<PAGE> 74
the Master Collection Account. Any amount which Transferor does not pay
pursuant to the operation of the preceding sentence shall not constitute a
claim (as defined in Section 101 of the Bankruptcy Code) against or corporate
obligation of Transferor for any such insufficiency.
SECTION 10.3 Notification of Servicer Default; Notification of
Termination of Servicer and Appointment of Successor Servicer. Within three
Business Days after an Authorized Officer of Servicer becomes aware of any
Servicer Default, Servicer shall give written notice thereof to Trustee and the
Rating Agencies, and Trustee shall, promptly upon receipt of the written notice,
give notice to the Investor Certificateholders at their respective addresses
appearing in the Certificate Register and to the Purchasers. Upon any
termination of a Servicer or appointment of a Successor Servicer pursuant to
this Article X, Trustee shall give prompt written notice thereof to each Agent,
to the Investor Certificateholders at their respective addresses appearing in
the Certificate Register and to the Purchasers and the Rating Agencies.
SECTION 10.4 Waiver of Servicer Defaults. The Required Investors may,
on behalf of all Holders, waive in writing any Servicer Default hereunder and
its consequences. Upon any such waiver of a Servicer Default, such Servicer
Default shall cease to exist and shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other Servicer Default or impair any right consequent thereon except to the
extent expressly so waived.
ARTICLE XI TRUSTEE
SECTION 11.1 Duties of Trustee. (a) Trustee undertakes to perform the
duties and only the duties as are specifically set forth in this Agreement. The
provisions of this Article XI shall apply to Trustee solely in its capacity as
Trustee, and not to Trustee in its capacity as Servicer if it is acting as
Servicer. Following the occurrence of a Servicer Default of which a Responsible
Officer has actual knowledge, Trustee shall exercise such of the rights and
powers vested in it by this Agreement and use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs; provided that if Trustee
shall assume the duties of Servicer pursuant to Section 10.2, Trustee in
performing such duties shall, subject to the terms of Article III, use the
degree of skill and attention customarily exercised by a servicer with respect
to trade receivables that it services for itself or others. Trustee shall have
no power to create, assume or incur indebtedness or other liabilities in the
name of the Trust other than as contemplated in, or incidental to the
performance of its duties under, the Transaction Documents.
page 69
<PAGE> 75
(b) Trustee, upon receipt of any certificates, opinions, reports,
documents, orders or other instruments furnished to Trustee that are (i)
specifically required to be furnished pursuant to any provision of this
Agreement and (ii) based on a form attached hereto as an Exhibit, shall examine
them to determine whether they are substantially in the form required by this
Agreement. Trustee shall give prompt written notice to the Investor
Certificateholders and each Agent of any lack of substantial conformity of any
item of the type listed in the preceding sentence to the applicable requirements
of this Agreement discovered by Trustee that would entitle a specified
percentage of the Investor Certificateholders or the Holders of any Series of
Certificates or Purchasers or Agents to take any action pursuant to this
Agreement.
Within one Business Day of its receipt of any Daily Report, Trustee
shall (i) compare the beginning balance of the Transaction Accounts reported in
such Daily Report to the balances thereof set forth on the records of the
Trustee; (ii) examine the section of such Daily Report pertaining to Early
Amortization Events, Unmatured Early Amortization Events and Servicer Defaults
and determine whether the Servicer has indicated that an Early Amortization
Event, Unmatured Early Amortization Event or Servicer Default has occurred and
is continuing; and (iii) verify the mathematical computations set forth therein
based on the face of such Daily Report. By the close of business on such
Business Day, Trustee shall (i) notify Servicer, the Agent and each of the
Rating Agencies of any inaccuracy of such computations or of any discrepancies
in such computations or comparison (provided that the rounding of numbers will
not constitute a discrepancy), whereupon Servicer shall deliver to Trustee, the
Agents and the Rating Agencies within five Business Days thereafter a
certificate describing the nature and cause of such inaccuracies or
discrepancies and the action that Servicer proposes to take with respect
thereto; and (ii) notify the Agents and the Rating Agencies in the event that
the Servicer has so indicated that an Early Amortization Event, Unmatured Early
Amortization Event or Servicer Default has occurred and is continuing.
Within two Business Days of its receipt of any Monthly Report, Trustee
shall (i) verify the mathematical computations set forth therein (based on (x)
the face of such Monthly Report and (y) so long as such computations include
information contemplated by any of the data fields contained in Exhibit L, a
comparison of such Monthly Report to the Monthly Tape referred to in Section
3.5(d)); (ii) compare the beginning and ending balances of the Transaction
Accounts as reported in the related Monthly Report against such balances as set
forth in the records of Trustee (and by the close of business on such Business
Day Trustee shall notify Servicer, the Agent and each of the Rating Agencies of
any inaccuracy of such computations or comparisons contemplated by clause (i) or
(ii) or of any discrepancies therein (provided that the rounding of numbers will
not constitute a discrepancy), whereupon Servicer shall deliver to Trustee, the
Agents
page 70
<PAGE> 76
and the Rating Agencies within five Business Days thereafter a certificate
describing the nature and cause of such inaccuracies or discrepancies and the
action that Servicer proposes to take with respect thereto); (iii) examine the
section of such Monthly Report pertaining to Early Amortization Events,
Unmatured Early Amortization Events and Servicer Defaults and determine whether
the Servicer has indicated that an Early Amortization Event, Early Amortization
Event or Servicer Default has occurred and is continuing (and thereupon Trustee
shall notify the Agents and the Rating Agencies in the event that the Servicer
has so indicated that an Early Amortization Event, Unmatured Early Amortization
Event or Servicer Default has occurred and is continuing); and (iv) load the
Monthly Tape into the system of the Trustee and ensure that there are no
malfunctions (and if any such malfunctions occur, then Servicer and Trustee
shall work together in good faith to eliminate such malfunctions promptly and,
if such malfunctions are not eliminated within ten Business Days, notify the
Agents and Rating Agencies thereof).
During the first week of each year, Trustee shall provide the Rating
Agencies and the Agents with a certificate, signed by a Responsible Officer, to
the effect that Trustee is not aware of any Early Amortization Event (or, if it
is aware of any Early Amortization Event, specifying the nature of that event).
(c) Subject to subsection (a), no provision of this Agreement shall be
construed to relieve Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct; provided that:
(i) Trustee shall not be liable for an error of judgment
made in good faith by a Responsible Officer or Responsible Officers of
Trustee, unless it shall be proved that Trustee was negligent in
ascertaining the pertinent facts,
(ii) Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in
accordance with the direction (as applicable) of the Majority
Investors, the Required Investors, all Investors, any Agent, or the
Required Series Holders relating to the time, method and place of
conducting any proceeding for any remedy available to Trustee, or
exercising any trust or power conferred upon Trustee, under this
Agreement,
(iii) Trustee shall not be charged with knowledge of (A) any
failure by Servicer to comply with the obligations of Servicer referred
to in subsections (a), (b) or (c) of Section 10.1, (B) any breach of
the representations and warranties of Transferor set forth in Section
2.3 or 7.1 or the representations and warranties of Servicer set forth
in Section 8.1, (C) any breach of the covenants of Transferor set forth
in Section 7.2 or the
page 71
<PAGE> 77
covenants of Servicer set forth in Section 8.2 or (D) the ownership of
any Certificate or Purchased Interest for purposes of Section 6.5, in
each case unless a Responsible Officer of Trustee obtains actual
knowledge of the matter or Trustee receives written notice of the
matter from Servicer or from any Holder,
(iv) the duties and obligations of Trustee shall be determined
solely by the express provisions of this Agreement, Trustee shall not
be liable except for the performance of the duties and obligations that
specifically shall be set forth in this Agreement, no implied covenants
or obligations shall be read into this Agreement against Trustee and,
in the absence of bad faith on the part of Trustee, Trustee may
conclusively rely on the truth of the statements and the correctness of
the opinions expressed in any certificates or opinions that are
furnished to Trustee and that conform to the requirements of this
Agreement, and
(v) without limiting the generality of this section or Section
11.2, Trustee shall have no duty (A) to see to any recording, filing,
or depositing of this Agreement or any agreement referred to herein or
any financing statement evidencing a security interest in the
Receivables or the Related Transferred Assets, or to see to the
maintenance of any such recording or filing or depositing or to any
rerecording, refiling or redepositing of any thereof (except that
Trustee (x) shall note in its records the date of filing of each UCC
financing statement identified to it in writing as having been filed in
connection with the Transaction Documents, or filed in connection with
a predecessor receivables securitization and amended and/or assigned in
connection with the Transaction Documents, and naming Trustee as
secured party or assignee of the secured party and (y) shall, unless it
shall have received an Opinion of Counsel to the effect that no such
filing is necessary to continue the perfection of Transferor's or
Trustee's interests in the Receivables and the Related Assets, cause
continuation statements to be filed with respect to each such financing
statement not less than four years and six months and not more than
five years after (1) its filing date and (2) the date of filing of any
prior continuation statement), (B) to see to the payment or discharge
of any tax, assessment, or other governmental charge or any Adverse
Claim or encumbrance of any kind owing with respect to, assessed or
levied against, any part of the Trust, (C) subject to Section 11.1(b),
to confirm or verify the contents of any reports or certificates of
Servicer delivered to Trustee pursuant to this Agreement that are
believed by Trustee to be genuine and to have been signed or presented
by the proper party or parties or (D) to ascertain or inquire as to the
performance or observance of any of Transferor's or Servicer's
representations, warranties or covenants or Servicer's duties and
obligations as Servicer.
page 72
<PAGE> 78
(d) Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if Trustee
reasonably believes that the repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it, and none of the
provisions contained in this Agreement shall in any event require Trustee to
perform, or be responsible for the manner of performance of, any obligations of
Servicer under this Agreement except during the time, if any, that Trustee shall
be the successor to, and be vested with the rights, duties, powers and
privileges of, Servicer in accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement, Trustee
shall take no action reasonably likely to impair the interests of the Trust in
any Transferred Asset now existing or hereafter created or to impair the value
of any Transferred Asset now existing or hereafter created.
(f) Except to the extent expressly provided otherwise in this
Agreement, Trustee shall have no power to vary the Transferred Assets.
(g) In the event that the Paying Agent or the Transfer Agent and
Registrar shall fail to perform any obligation, duty or agreement in the manner
or on the day on which such obligation, duty or agreement is required to be
performed by the Paying Agent or the Transfer Agent and Registrar, as the case
may be, under this Agreement, Trustee shall be obligated, promptly upon its
actual knowledge thereof, to perform the obligation, duty or agreement in the
manner so required.
SECTION 11.2 Certain Matters Affecting Trustee. Except as otherwise
provided in Section 11.1:
(a) Trustee may rely on and shall be protected in acting on,
or in refraining from acting in accordance with, any resolution,
Officer's Certificate, opinion of counsel, certificate of auditors or
any other certificate, statement, instrument, instruction, opinion,
report, notice, request, consent, order, appraisal, bond or other paper
or document and any information contained therein believed by it to be
genuine and to have been signed or presented to it pursuant to this
Agreement by the proper party or parties including, but not limited to,
reports and records required by Article III,
(b) Trustee may consult with counsel and any opinion of
counsel rendered by counsel reasonably satisfactory to Transferor shall
be full and complete authorization and protection in respect of any
action taken or
page 73
<PAGE> 79
permitted or omitted by it hereunder in good faith and in accordance
with such opinion of counsel,
(c) Trustee (including in its role as Successor Servicer, if
it ever acts in that capacity) shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation or other proceeding
hereunder or in relation hereto, at the request, order or direction of
any of the Certificateholders, the Purchasers or any Agent, pursuant to
the provisions of this Agreement, unless such Certificateholders, the
Purchasers or Agent shall have offered to Trustee reasonable security
or indemnity against the costs, expenses and liabilities that may be
incurred therein or thereby; provided that nothing contained herein
shall relieve Trustee of the obligations, upon the occurrence and
continuance of a Servicer Default that has not been cured, to exercise
such of the rights and powers vested in it by this Agreement and to use
the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his or
her own affairs,
(d) Trustee shall not be personally liable for any action
taken, permitted or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred
upon it by this Agreement,
(e) Trustee shall not be bound to make any investigation into
the facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so
by the Required Investors; provided that if the payment within a
reasonable time to Trustee of the costs, expenses, or liabilities
likely to be incurred by it in connection with making such
investigation shall be, in the opinion of Trustee, not reasonably
assured to Trustee by the security afforded to it by the terms of this
Agreement, Trustee may require reasonable indemnity against such cost,
expense, or liability as a condition to proceeding with the
investigation. The reasonable expense of every examination shall be
paid by Servicer or, if paid by Trustee, shall be reimbursed by
Servicer upon demand,
(f) Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through
agents, representatives, attorneys or a custodian, and Trustee shall
not be responsible for any misconduct or negligence on the part of any
agent,
page 74
<PAGE> 80
representative, attorney or custodian appointed with due care by it
hereunder,
(g) except as may be required by Section 11.1(b) hereof,
Trustee shall not be required to make any initial or periodic
examination of any documents or records related to the Transferred
Assets for the purpose of establishing the presence or absence of
defects or for any other purpose,
(h) whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the
liability of or affording protection to Trustee shall be subject to the
provisions of this section,
(i) Trustee shall have no liability with respect to the acts
or omissions of Servicer (except and to the extent Servicer is
Trustee), including, but not limited to, acts or omissions in
connection with: (A) the servicing, management or administration of the
Receivables or the Related Transferred Assets, (B) calculations made by
Servicer whether or not reported to Trustee, and (C) deposits into or
withdrawals from any Bank Accounts or Transaction Accounts established
pursuant to the terms of this Agreement, and
(j) in the event that Trustee is also acting as Paying Agent
or Transfer Agent and Registrar hereunder, the rights and protections
afforded to Trustee pursuant to this Article XI shall also be afforded
to Trustee acting as Paying Agent or as Transfer Agent and Registrar.
SECTION 11.3 Limitation on Liability of Trustee. Trustee shall at no
time have any responsibility or liability for or with respect to the correctness
of the recitals contained herein or in the Certificates (other than the
certificate of authentication on the Certificates) or the Purchased Interests.
Except as set forth in Section 11.15, Trustee makes no representations as to the
validity or sufficiency of this Agreement, any PI Agreement, any Supplement, the
Certificates (other than the certificate of authentication on the Certificates)
or the Purchased Interests, any other Transaction Document or any Transferred
Asset or related document. Trustee shall not be accountable for the use or
application (i) by Transferor of any of the Certificates or the Purchased
Interests or of the proceeds of such Certificates or the Purchased Interests, or
(ii) for the use or application of any funds paid to Transferor or to Servicer
(other than to Trustee in its capacity as Servicer) in respect of the
Transferred Assets or deposited by Servicer in or withdrawn by Servicer from the
Bank Accounts, the Transaction Accounts or any other accounts hereafter
established to effectuate the transactions contemplated herein or in the other
Transaction Documents and in accordance with the terms hereof or thereof.
page 75
<PAGE> 81
Trustee shall at no time have any responsibility or liability for or
with respect to the legality, validity, or enforceability of any ownership or
security interest in any Transferred Asset, or the perfection or priority of
such a security interest or the maintenance of any such perfection or priority,
or for the generation of the payments to be distributed to Certificateholders or
Purchasers under this Agreement, including: (a) the existence and substance of
any Transferred Asset or any related Record or any computer or other record
thereof, (b) the validity of the transfer of any Transferred Asset to the Trust
or of any preceding or intervening transfer, (c) the performance or enforcement
of any Transferred Asset, (d) the compliance by Transferor or Servicer with any
warranty or representation made under this Agreement or in any other Transaction
Document and the accuracy of any such warranty or representation prior to
Trustee's receipt of actual notice of any noncompliance therewith or any breach
thereof, (e) any investment of monies pursuant to Section 4.4 or any loss
resulting therefrom, (f) the acts or omissions of Transferor, Servicer or any
Obligor, (g) any action of Servicer taken in the name of Trustee, or (h) any
action by Trustee taken at the instruction of Servicer; provided that the
foregoing shall not relieve Trustee of its obligation to perform its duties
(including but not limited to its duties, if any, to act as Servicer in
accordance with Section 10.2) under this Agreement in accordance with the terms
hereof.
Except with respect to a claim based on the failure of Trustee to
perform its duties under this Agreement or based on Trustee's gross negligence
or willful misconduct, no recourse shall be had against Trustee in its
individual capacity for any claim based on any provision of this Agreement, any
other Transaction Document, the Certificates, the Purchased Interests, any
Transferred Asset or any assignment thereof. Trustee shall not have any personal
obligation, liability, or duty whatsoever to any Certificateholder, any
Purchaser or any other Person with respect to any such claim, and any such claim
shall be asserted solely against the Trust or any indemnitor who shall furnish
indemnity to the Trust or Trustee as provided in this Agreement.
SECTION 11.4 Trustee May Deal with Other Parties. Subject to any
restrictions that may otherwise be imposed by Section 406 of ERISA or Section
4975(e) of the Internal Revenue Code, Trustee in its individual or any other
capacity may deal with the other parties hereto (other than Transferor) and
their respective Affiliates, with the same rights as it would have if it were
not Trustee.
SECTION 11.5 Servicer To Pay Trustee's Fees and Expenses. (a) To the
extent not paid by Servicer to Trustee from funds constituting the Servicing
Fee, Servicer covenants and agrees to pay to Trustee from time to time, and
Trustee shall be entitled to receive, such reasonable compensation as is agreed
upon in writing between Trustee and Servicer (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services
page 76
<PAGE> 82
rendered by it in connection with the Transaction Documents and in the exercise
and performance of any of the powers and duties hereunder of Trustee, and
Servicer will pay or reimburse Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by Trustee in accordance
with any of the provisions of the Transaction Documents to which it is a party
(including the reasonable fees and expenses of its agents, any co-Trustee and
counsel) except any expense, disbursement or advance that may arise from
Trustee's negligence or willful misconduct.
(b) In addition, Servicer agrees to indemnify Trustee from, and hold it
harmless against, any and all losses, liabilities, damages, claims or expenses
incurred by Trustee in connection with the Transaction Documents or in the
exercise or performance of any of the powers or duties of Trustee hereunder,
other than those resulting from the negligence or willful misconduct of Trustee.
(c) If Trustee is appointed Successor Servicer pursuant to Section
10.2, the provisions of this section shall not apply to expenses, disbursements
and advances made or incurred by Trustee in its capacity as Successor Servicer,
which shall be paid out of the Servicing Fee. Servicer's covenant to pay the
fees, expenses, disbursements and advances provided for in this section shall
survive the resignation or removal of Trustee and the termination of this
Agreement.
(d) Trustee shall look solely to Servicer for payment of amounts
described in this Section 11.5, and Trustee shall have no claim for payment of
such amounts against Transferor or the Transferred Assets.
SECTION 11.6 Eligibility Requirements for Trustee. Trustee hereunder
shall at all times: (a) be (i) a banking institution organized under the laws of
the United States, (ii) a member bank of the Federal Reserve System or (iii) any
other banking institution or trust company, incorporated and doing business
under the laws of any State or of the United States, a substantial portion of
the business of which consists of receiving deposits or exercising fiduciary
powers similar to those permitted to national banks under the authority of the
Comptroller of the Currency, and that is supervised and examined by a state or
federal authority having supervision over banks, (b) not be an Enhancement
Provider or an Affiliate of Bank of America National Trust and Savings
Association, (c) have, in the case of an entity that is subject to risk-based
capital adequacy requirements, risk-based capital of at least $250,000,000 or,
in the case of an entity that is not subject to risk-based capital adequacy
requirements, a combined capital and surplus of at least $250,000,000 and (d)
have an unsecured long-term debt rating of at least "A" or its equivalent from
each Rating Agency. If such corporation or association publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then, for the purpose of this
section,
page 77
<PAGE> 83
the combined capital and surplus of the corporation or association shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time Trustee shall cease to be
eligible in accordance with the provisions of this section, Trustee shall resign
immediately in the manner and with the effect specified in Section 11.7.
SECTION 11.7 Resignation or Removal of Trustee. (a) Trustee may at any
time resign and be discharged from its obligations hereunder by giving 30 days'
prior written notice thereof to Transferor, Servicer, the Rating Agencies, the
Investor Certificateholders and the Agents. Upon receiving the notice of
resignation, Transferor shall promptly appoint, subject to satisfaction of the
Modification Condition, a successor Trustee who meets the eligibility
requirements set forth in Section 11.6 by written instrument, in duplicate, one
copy of which shall be delivered to the resigning Trustee and one copy to the
successor Trustee. If no successor Trustee shall have been so appointed and
shall have accepted appointment within 30 days after the giving of the notice of
resignation, the resigning Trustee, upon notice to Transferor, Servicer, and
each Agent, may petition any court of competent jurisdiction to appoint a
successor Trustee.
(b) If at any time Trustee shall cease to be eligible to be Trustee
hereunder in accordance with the provisions of Section 11.6 hereof and shall
fail to resign promptly after its receipt of a written request therefor by
Servicer, or if at any time Trustee shall be legally unable to act, or shall be
adjudged bankrupt or insolvent, or if a receiver for Trustee or of its property
shall be appointed, or any public officer shall take charge or control of
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then Servicer may remove Trustee and, subject to
the consent of each Agent (which consent shall not be unreasonably withheld or
delayed) and satisfaction of the Modification Condition, promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which shall
be delivered to Trustee so removed and one copy to the successor Trustee.
(c) Any resignation or removal of Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this section shall not
become effective until (i) acceptance of appointment by the successor Trustee as
provided in Section 11.8 hereof, and (ii) such successor Trustee shall have
agreed in writing to be bound by any Intercreditor Agreements then in effect.
SECTION 11.8 Successor Trustee. (a) Any successor Trustee appointed as
provided in Section 11.7 shall execute, acknowledge and deliver to Transferor,
Servicer, the Investor Certificateholders, the Purchasers and the predecessor
Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall, upon payment of its
fees and expenses and other amounts owed to it pursuant to Section 11.5, become
page 78
<PAGE> 84
effective and the successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein. The predecessor Trustee shall deliver to the successor
Trustee, at the expense of Servicer, all documents or copies thereof and
statements held by it hereunder; and Transferor and the predecessor Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully vesting and confirming in the successor Trustee
all such rights, powers, duties and obligations. Servicer shall promptly give
notice to the Rating Agencies upon the appointment of a successor Trustee.
(b) No successor Trustee shall accept appointment as provided in this
section unless at the time of the acceptance the successor Trustee shall be
eligible to become Trustee under the provisions of Section 11.6.
(c) Upon acceptance of appointment by a successor Trustee as provided
in this section, the successor Trustee shall mail notice of the succession
hereunder to all Investor Certificateholders at their addresses as shown in the
Certificate Register and to each Rating Agency.
SECTION 11.9 Merger or Consolidation of Trustee. Any Person into which
Trustee may be merged or converted or with which it may be consolidated, or any
Person resulting from any merger, conversion or consolidation to which Trustee
shall be a party, or any Person succeeding to all or substantially all of the
corporate trust business of Trustee, shall be the successor of Trustee
hereunder, if the Person meets the requirements of Section 11.6, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. Servicer shall
promptly give notice to the Rating Agencies upon any merger or consolidation of
Trustee.
SECTION 11.10 Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust may at the time be located, Trustee shall have the power and may
execute and deliver all instruments to appoint one or more Persons (who may be
an employee or employees of Trustee) to act as a co-Trustee or co-Trustees, or
separate Trustee or separate Trustees, with respect to all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders and the Purchasers, such title to the Trust,
or any part thereof, and, subject to the other provisions of this section, such
powers, duties, obligations, rights and trusts as Trustee may consider necessary
or appropriate; provided, that such appointment shall be subject to the prior
written consent of Transferor unless an Early Amortization Event or Servicer
Default is continuing; and provided
page 79
<PAGE> 85
further, that in any event Trustee will give Transferor and Servicer prior
written notice of such appointment. No co-Trustee or separate Trustee shall be
required to meet the terms of eligibility as a successor Trustee under Section
11.6 and no notice to Certificateholders, Agents or Purchasers of the
appointment of any co-Trustee or separate Trustee shall be required under
Section 11.8.
(b) Every separate Trustee and co-Trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon Trustee shall be conferred or imposed upon and exercised
or performed by Trustee and the separate Trustee or co-Trustee jointly
(it being understood that the separate Trustee or co-Trustee is not
authorized to act separately without Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to Servicer hereunder), Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust or any portion thereof in any such jurisdiction)
shall be exercised and performed singly by such separate Trustee or
co-Trustee, but solely at the direction of Trustee,
(ii) no Trustee hereunder shall be personally liable by
reason of any act or omission of any other Trustee hereunder, and
(iii) Trustee may at any time accept the resignation of or
remove any separate Trustee or co-Trustee.
(c) Any notice, request or other writing given to Trustee shall be
deemed to have been given to each of the then separate Trustees and co-Trustees,
as effectively as if given to each of them. Every instrument appointing any
separate Trustee or co-Trustee shall refer to this Agreement and the conditions
of this Article XI. Each separate Trustee and co-Trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with Trustee or separately, as may
be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection or indemnity to,
Trustee. Every such instrument shall be filed with Trustee and a copy thereof
given to Servicer.
(d) Any separate Trustee or co-Trustee may at any time constitute
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to this
Agreement or any
page 80
<PAGE> 86
other Transaction Document on its behalf and in its name. If any separate
Trustee or co-Trustee shall die, become incapable of acting, resign or be
removed, all its estates, properties, rights, remedies and trusts shall vest in
and be exercised by Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.
SECTION 11.11 Tax Returns. No Federal, state, local or foreign income
tax return shall be filed on behalf of the Trust unless either (i) Trustee or
Servicer shall receive an Opinion of Counsel that there is no substantial
authority for not filing such return, or (ii) the Internal Revenue Service or
the applicable Governmental Authority shall determine that the Trust is required
to file such a return, or (iii) the Trust is required to file such a return by
order of a court of competent jurisdiction. In the event the Trust shall be
required to file tax returns, Servicer shall prepare or shall cause to be
prepared any tax returns required to be filed by the Trust and shall remit the
returns to Trustee for signature at least five Business Days before the returns
are due to be filed. Trustee shall promptly sign and deliver the returns to
Servicer and Servicer shall promptly file the returns. Subject to the
responsibilities of Trustee set forth in any Supplement, Servicer, in accordance
with that Supplement, shall also prepare or shall cause to be prepared all tax
information required by law to be made available to Certificateholders and
Purchasers and shall deliver the information to Trustee at least five Business
Days prior to the date it is required by law to be made available to the
Certificateholders and Purchasers. Trustee, upon request, will furnish Servicer
with all the information known to Trustee as may be reasonably required in
connection with the preparation of all tax returns of the Trust and shall, upon
request, execute such returns as Trustee determines are appropriate.
SECTION 11.12 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement, the
Certificates, the Purchased Interests or the other Transaction Documents may be
prosecuted and enforced by Trustee without the possession of any of the
Certificates or Purchased Interests or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by Trustee shall be brought
in its own name as Trustee. Any recovery of judgment shall, after provision for
the payment of the reasonable compensation, expenses, disbursements and advances
of Trustee, its agents and counsel, be distributed to the Certificateholders or
Purchasers in respect of which such judgment has been obtained in accordance
with the related Supplement or PI Agreement.
SECTION 11.13 Suits for Enforcement. If an Early Amortization Event or
a Servicer Default shall occur and be continuing, Trustee, in its discretion
may, subject to the provisions of Sections 11.1 and 11.14, proceed to protect
and enforce its rights and the rights of the Certificateholders or Purchasers
under this
page 81
<PAGE> 87
Agreement by suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in
this Agreement or any other Transaction Document or in aid of the execution of
any power granted in this Agreement or any other Transaction Document or for the
enforcement of any other legal, equitable or other remedy as Trustee, being
advised by counsel, shall deem most effectual to protect and enforce any of the
rights of Trustee or the Certificateholders or Purchasers. Nothing herein
contained shall be deemed to authorize Trustee to authorize or consent to or
accept or adopt on behalf of any Certificateholder or Purchaser any plan of
reorganization, arrangement, adjustment or composition affecting the Investor
Certificates or the rights of any Holder thereof, or the Purchasers, or to
authorize Trustee to vote in respect of the claim of any Investor
Certificateholder or Purchaser in any such proceeding.
SECTION 11.14 Rights of Required Investors To Direct Trustee. The
Required Investors shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to Trustee, or exercising any
trust or power conferred on Trustee; provided that such Required Investors
provide the Trustee with adequate indemnity, except that any institutional
investors shall be allowed to provide Trustee with an unsecured written promise
to hold Trustee harmless in lieu of any other security or indemnity, which
unsecured promise shall be in form and substance reasonably acceptable to
Trustee; provided that, subject to Section 11.1, Trustee may decline to follow
any such direction if Trustee, being advised by counsel, determines that the
action so directed may not be taken lawfully, or if a Responsible Officer or
Responsible Officers of Trustee shall determine, in good faith, that the
proceedings so directed would be illegal or involve Trustee in personal
liability or be unduly prejudicial to the rights of the Investor
Certificateholders or Purchasers not giving such direction; and provided
further, that nothing in this Agreement shall impair the right of Trustee to
take any action deemed proper by Trustee and that is not inconsistent with such
direction of the Required Investors.
SECTION 11.15 Representations and Warranties of Trustee. Trustee
represents and warrants that:
(a) it is a national banking association organized, existing
and in good standing under the laws of the United States of America,
(b) it has full power, authority and right to execute, deliver
and perform the Transaction Documents to which it is a party, and has
taken all necessary action to authorize the execution, delivery and
performance by it of the Transaction Documents, and
page 82
<PAGE> 88
(c) the Transaction Documents to which it is a party have been
duly executed and delivered by Trustee and, in the case of all such
Transaction Documents, are legal, valid and binding obligations of
Trustee, enforceable in accordance with their respective terms, except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding
in equity or at law.
SECTION 11.16 Maintenance of Office or Agency. Trustee will maintain,
at its address designated pursuant to Section 13.6, an office, offices, agency
or agencies where notices and demands to or upon Trustee in respect of the
Certificates, the Purchased Interests and the Transaction Documents to which it
is a party may be served. Trustee will give prompt written notice to Servicer
and to the Certificateholders and Agents of any change in the location of the
Certificate Register or any such office or agency.
SECTION 11.17 Conduct of Business, Office, Place of Business, Agents or
Employees Relating to Florida.
(a) The institution acting as Trustee will administer the Trust from
outside of the State of Florida, and the Trust will not conduct any business in
the State of Florida, except that the activities of the Servicer and any
Sub-Servicer pursuant to this Agreement, or the Purchase Agreement, are not
taken into account for this purpose.
(b) Neither the Trust nor the institution acting as Trustee will have
an office, place of business, agents or employees in the State of Florida at any
time during the existence of the Trust, except that the activities of the
Servicer and any Sub-Servicer pursuant to this Agreement, or the Purchase
Agreement, are not taken into account for this purpose. Notwithstanding the
foregoing, the institution acting as Trustee, in its individual capacity and not
in its capacity as trustee of the Trust or on behalf of the Trust, may have an
office, place of business, agents or employees in Florida while the Trust is in
existence, but in such situation the Florida office, place of business, agents
or employees, will not act for, or on behalf of, the Trust or the institution
acting as Trustee (in its capacity as trustee of the Trust) for any purpose.
SECTION 11.18 Trust Not to Become a Limited Liability Company or
Corporation. The Trustee shall not file any document in order to cause the Trust
to become a limited liability company or a corporation under any law unless the
Modification Condition shall have been satisfied.
page 83
<PAGE> 89
ARTICLE XII TERMINATION
SECTION 12.1 Termination of Trust. (a) The Trust and the respective
obligations and responsibilities of Transferor, Servicer and Trustee created
hereby (other than the obligation of Trustee to make payments to
Certificateholders or Purchasers as hereinafter set forth and the obligations of
Servicer contained in Sections 11.11) shall terminate, except with respect to
the duties and obligations described in Sections 3.9(c), 7.3, 8.4, 11.5,
12.2(b), 13.9, 13.15 and 13.16 upon the earliest to occur of (i) the day on
which the Investor Certificateholders, the Purchasers and Trustee shall have
been paid all amounts required to be paid to them pursuant to this Agreement and
Trustee has disposed of all property held hereunder (including pursuant to
Section 12.3) and (ii) the day which is 21 years less one day after the death of
the officers and the last survivor of all the lineal descendants of every
officer of the Trustee who are living on the date hereof.
(b) Notwithstanding the foregoing, the last payment of the principal of
and interest on the Investor Certificates of any Series shall be due and payable
no later than the Final Scheduled Payment Date for that Series. If, on the
Distribution Date immediately prior to the Final Scheduled Payment Date for any
Series, Servicer determines that the Invested Amount for the Series on the
applicable Final Scheduled Payment Date (after giving effect to all changes
therein on such date) will exceed zero, Servicer shall solicit bids for the sale
of interests in the Transferred Assets in an amount equal to 110% of the Base
Amount for the Series on the Final Scheduled Payment Date for the Series (after
giving effect to all distributions required to be made on the Final Scheduled
Payment Date for the Series), but in no event more than the Series Collection
Allocation Percentage for that Series of the aggregate Unpaid Balance of the
Receivables on that day. Transferor shall be entitled to participate in and to
receive notice of each bid submitted in connection with the bidding process.
Upon the expiration of the bidding period, Servicer shall determine (x) the
Highest Bid and (y) the Available Final Distribution Amount for the Series.
Servicer shall sell the interests in the Transferred Assets on the Final
Scheduled Payment Date for the applicable Series to the bidder with the Highest
Bid and shall deposit the proceeds of such sale in the Master Collection Account
for allocation (together with the Available Final Distribution Amount for such
Series) to the Certificateholders of such Series. Notwithstanding the foregoing,
so long as Series 1998-1 is outstanding, interests in Tricon Assets shall be
sold, and the proceeds thereof distributed, pursuant to this Section solely for
the benefit of Series 1998-1.
SECTION 12.2 Final Distribution. (a) Servicer shall give Trustee at
least ten days' prior written notice of the date on which the Trust is expected
to terminate in accordance with Section 12.1(a). The notice shall be
accompanied by a certificate of an Authorized Officer of Servicer setting forth
the information specified
page 84
<PAGE> 90
in Section 3.6 covering the period during the then current calendar year through
the date of the notice. Upon receiving the notification from Servicer, Trustee
shall give the Certificateholders and/or the Agents (as applicable) written
notice as soon as practicable after Trustee's receipt of notice from Servicer,
which notice shall specify (i) the Distribution Date upon which final payment
with respect to the Certificates is expected to be made, (ii) the amount of any
such final payment and (iii) that Certificateholders shall not receive such
final payment unless they surrender their Certificates in accordance with the
last sentence of this clause (a). Trustee shall give the notice to the Transfer
Agent and Registrar and the Paying Agent at the time such notice is given to
Certificateholders. On the Distribution Date specified in the notice, Trustee
shall, based upon the Daily Report relating to such Distribution Date, cause to
be distributed to the Certificateholders the amounts distributable to them on
such Distribution Date pursuant to the applicable Supplement. Each
Certificateholder shall present its Certificate to Trustee and surrender its
Certificate for cancellation at the address of Trustee set forth in Section 13.6
at least one Business Day prior to the Distribution Date upon which final
payment with respect to the Certificates is expected to be made.
(b) Notwithstanding the termination of the Trust pursuant to Section
12.1(a), all funds then on deposit in the Master Collection Account shall
continue to be held in trust for the benefit of the Certificateholders and the
Purchasers and the Paying Agent or Trustee shall pay such funds to the
Certificateholders and the Purchasers at the time set forth in Section 12.1(a).
If any Certificateholder or Purchaser does not claim the portion of such funds
to which it is entitled at such time, interest shall cease to accrue on its
Certificate or Purchased Interest (as applicable) and Trustee shall hold such
funds in trust for such Person, subject to the further provisions of this
Section. In the event that any of the Certificateholders shall not have claimed
their final payment with respect to their Certificates within six months after
the date specified in the above-mentioned written notice from Trustee, Trustee
shall give a second written notice to the remaining Certificateholders
concerning payment of the final distribution with respect thereto and surrender
of their Certificates for cancellation. If within one year after the second
notice all the Certificates shall not have been surrendered for cancellation,
Trustee may take appropriate steps, or may appoint an agent to take appropriate
steps, to contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds in the Master
Collection Account held for the benefit of such Certificateholders. Trustee and
the Paying Agent shall pay to Transferor any monies held by them for the payment
of principal of or interest on the Certificates that remains unclaimed for two
years after the termination of the Trust pursuant to Section 12.1(a). After
payment of the monies to Transferor, Certificateholders entitled to the money
must look to Transferor for payment as unsecured general creditors unless an
applicable abandoned property law designates another Person.
page 85
<PAGE> 91
SECTION 12.3 Rights Upon Termination of the Trust. Upon the termination
of the Trust pursuant to Section 12.1 and the surrender of the Transferor
Certificate by Transferor to Trustee, Trustee shall transfer, assign, set over
and otherwise convey to Transferor (without recourse, representation or
warranty), all right, title and interest of the Trust in the Receivables,
whether then existing or thereafter created, the Related Transferred Assets and
all of the other property and rights previously conveyed to Trustee hereunder,
except for amounts held by Trustee pursuant to Section 12.2(b) and except for
the rights of RPA Indemnified Parties (other than Transferor and its officers,
directors, shareholders, controlling Persons, employees and agents) to
indemnification and contribution under Section 9.1 of the Purchase Agreement.
Trustee shall execute and deliver the instruments of transfer and assignment
(including any document necessary to release the security interest in favor of
Trustee (for the benefit of the Certificateholders or the Purchasers) in such
Receivables and Related Transferred Assets, to release any filing evidencing or
perfecting such security interest and to terminate all powers of attorney
created by the Transaction Documents), in each case without recourse,
representation or warranty, that shall be reasonably requested by Transferor to
vest in Transferor all right, title and interest that Trustee had in the
Transferred Assets.
SECTION 12.4 Optional Repurchase of Investor Interests. Any Supplement
may provide that on any Distribution Date occurring on or after the date that
the aggregate Unpaid Balance of the Receivables is 10% or less of the aggregate
Unpaid Balance of the Receivables as of the commencement of any Amortization
Period, Transferor shall have the option, upon the giving of ten days' prior
written notice by Transferor to Servicer, Trustee and the Rating Agencies, to
repurchase the undivided interest of the Series in the Trust by depositing into
the Principal Funding Account, on such Distribution Date (the "Repurchase
Distribution Date"), an amount (the "Repurchase Amount") equal to the unpaid
Invested Amount of the Series plus accrued and unpaid interest on the unpaid
principal amount of the Series (and accrued and unpaid interest with respect to
interest amounts that were due but not paid on a prior Distribution Date)
through the day preceding the Distribution Date at the rates of interest then
applicable to such Series plus any "Additional Amounts" (as defined in the
Supplement for such Series) known to be payable through the day preceding the
Distribution Date for such Series. Upon tender of all outstanding Certificates
of the Series by the Certificateholders, Trustee shall then distribute such
amounts, together with all other amounts on deposit in the Principal Funding
Account with respect to that Series to the Certificateholders of the Series on
the next Distribution Date in repayment of the principal amount and all accrued
and unpaid interest owing to the Certificateholders. Following the Repurchase
Distribution Date, the Certificateholders of the Series shall have no further
rights with respect to the Receivables and at the request of Transferor, if no
other Series or Purchased Interest shall then
page 86
<PAGE> 92
be outstanding, Trustee shall execute and deliver the instruments of transfer
and assignment (including any document necessary to release the security
interest in favor of Trustee (for the benefit of the Certificateholders) in the
Receivables and Related Transferred Assets and to release any filing evidencing
or perfecting the security interest), in each case without recourse,
representation or warranty, as shall be reasonably requested by Transferor to
vest in Transferor all right, title and interest that Trustee had in the
Transferred Assets. In the event that Transferor fails for any reason to deposit
the Repurchase Amount for any Series, payments shall continue to be made to the
Certificateholders of the Series in accordance with the terms of this Agreement.
ARTICLE XIII MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment, Waiver, Etc. (a) This Agreement, any Supplement
and any Intercreditor Agreement may be amended from time to time by Servicer,
Transferor and Trustee by a written instrument signed by each of them, without
the consent of any of the Certificateholders, the Purchasers or the Agents;
provided that such action shall not adversely affect in any material respect the
interests of any Certificateholder or Purchaser, as evidenced by an Officer's
Certificate of Servicer; and provided further, that any amendment of this
Agreement to effect any modification of the Bank Account arrangements pursuant
to Section 3.3(c)(ii) shall not require the consent of any of the
Certificateholders, the Purchasers or the Agents. None of this Agreement, any
Supplement, the Purchase Agreement or any Intercreditor Agreement may be amended
unless Transferor shall have delivered the proposed amendment to each Agent and
the Rating Agencies at least ten Business Days (or such shorter period as shall
be acceptable to each of them) prior to the execution and delivery thereof and
the Modification Condition has been satisfied with respect to such amendment;
provided, however, that the Modification Condition shall not apply to proposed
amendments the purpose of which is to correct any ambiguities or inconsistencies
in this Agreement or such Supplement. Notwithstanding anything on this Section
13.1 to the contrary, the Supplement with respect to any Series may be amended
on the terms and in accordance with the procedures provided in such Supplement.
(b) Any PI Agreement with respect to a Purchased Interest may be
amended from time to time in accordance with the terms thereof without the
consent of the Investor Certificateholders; provided that any amendment will not
adversely affect in any material respect the interests of the Holders of any
Series or other Purchased Interest, as evidenced by an Officer's Certificate of
Servicer. No PI Agreement may be amended unless Transferor shall have delivered
the proposed amendment to each Agent and the Rating Agencies at least ten
Business Days (or such shorter period as shall be acceptable to each of them)
prior to the execution and delivery thereof and the Modification Condition has
been satisfied with respect
page 87
<PAGE> 93
to such amendment; provided, however, that the Modification Condition shall not
apply to proposed amendments the purpose of which is to correct any ambiguities
or inconsistencies in such PI Agreement.
(c) The provisions of this Agreement, any Supplement, any Intercreditor
Agreement and any PI Agreement may also be amended, modified or waived from time
to time by Servicer, Transferor and Trustee with the consent of: (i) in the case
of this Agreement or any Supplement, (A) the Required Series Holders of each
affected Series and (B) if any Purchased Interest shall or would be adversely
affected, each Agent of a Purchaser, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or any Supplement or of modifying in any manner the rights of the
Certificateholders or the Purchasers; provided that no amendment shall (w)
reduce in any manner the amount of or delay the timing of any distributions to
be made to Investor Certificateholders or deposits of amounts to be so
distributed or the amount available under any Enhancement without the consent of
each affected Certificateholder, (x) change the definition of or the manner of
calculating the interest of any Investor Certificateholder without the consent
of each affected Investor Certificateholder, (y) reduce the aforesaid percentage
required to consent to any amendment without the consent of each Investor
Certificateholder or (z) adversely affect the rating of any Series or class by
any Rating Agency without the consent of the Holders of Investor Certificates of
the Series or class evidencing not less than 66 2/3% of the aggregate unpaid
principal amount of the Investor Certificates of the Series or class or (ii) in
the case of any PI Agreement, (A) each Agent of a Purchaser and the other
parties thereto and (B) if any Series of Investor Certificates shall or would be
adversely affected, the Required Series Holders of each such adversely affected
Series. It is understood that the consent of the Required Series Holders of any
Series or the Agent of a Purchaser shall not be required for any amendment,
modification or waiver if all amounts owed to the Holders of such Series or such
Purchaser (as the case may be) will be paid (and any commitments of such Holders
or Purchaser will terminate) prior to, or contemporaneously with, the
effectiveness of such amendment, modification or waiver; provided further, that
any amendment of this Agreement to effect any modification of the Bank Account
arrangements pursuant to Section 3.3(c)(ii) shall not require the consent of any
of the Certificateholders, the Purchasers or the Agents. No PI Agreement may be
amended unless Transferor shall have delivered the proposed amendment to each
Agent and the Rating Agencies at least ten Business Days (or such shorter period
as shall be acceptable to each of them) prior to the execution and delivery
thereof and the Modification Condition has been satisfied with respect to such
amendment; provided, however, that the Modification Condition shall not apply to
proposed amendments the purpose of which is to correct any ambiguities or
inconsistencies in such PI Agreement.
page 88
<PAGE> 94
Transferor or Trustee shall establish a record date for determining
which Certificateholders may give such waivers and consents. No waiver of any
Early Amortization Event or other default hereunder given at any time shall
apply to any other prior or subsequent Early Amortization Event or default.
(d) Promptly after the execution of any amendment, consent or waiver
described in subsection (b) or (c), Trustee shall furnish written notification
of the substance of the amendment or consent to each Investor Certificateholder,
and Servicer shall furnish written notification of the substance of the
amendment or consent to the Rating Agency and each Enhancement Provider.
(e) It shall not be necessary for any waiver or consent given by the
Certificateholders under this section to approve the particular form of any
proposed amendment, but it shall be sufficient if the consent shall approve the
substance thereof. The manner of obtaining such waivers and consents and of
evidencing the authorization of the execution thereof by the Certificateholders
shall be subject to such reasonable requirements as Trustee may prescribe.
(f) Notwithstanding anything in this section to the contrary, no
amendment may be made to this Agreement, any Supplement or any PI Agreement that
would adversely affect in any material respect the interests of any Enhancement
Provider without the consent of the Enhancement Provider (it being understood
that Trustee shall not be responsible for making a determination as to such
adverse effect).
(g) Any Supplement or PI Agreement executed in accordance with the
provisions of Section 6.10 shall not be considered an amendment to this
Agreement for the purposes of this section.
(h) Prior to the execution of any amendment to this Agreement, Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of the amendment is authorized or permitted by this Agreement and
that all conditions precedent to the execution and delivery have been satisfied.
Trustee may, but shall not be obligated to, enter into any amendment that
affects Trustee's own rights, duties or immunities under this Agreement.
(i) Notwithstanding anything in this Section to the contrary, no
amendment may be made to this Agreement unless Transferor shall have delivered
to Trustee, the Rating Agencies, each Purchaser and each Enhancement Provider a
Tax Opinion with respect to such amendment (provided that such opinion with
respect to any Series or Purchased Interest shall be limited to the Tax Opinion
required by the related Supplement or PI Agreement).
page 89
<PAGE> 95
SECTION 13.2 Actions by Certificateholders and Purchasers. (a) By its
acceptance of Certificates pursuant to this Agreement and the applicable
Supplement, each Certificateholder (other than Transferor and any AmeriServe
Person) acknowledges and agrees that, wherever in this Agreement a provision
states that an action may be taken or a notice, demand or instruction given by
any Series of Investor Certificateholders, any class of Investor
Certificateholders or the Investor Certificateholders, the action, notice or
instruction may be taken or given by any Holder of an Investor Certificate of
the Series or class or by any Investor Certificateholder, respectively, unless
the provision requires a specific percentage of the Series or class of Investor
Certificateholders or of all Investor Certificateholders.
(b) By its acceptance of Certificates pursuant to this Agreement and
the applicable Supplement, each Certificateholder (other than Transferor and any
AmeriServe Person) acknowledges and agrees that any request, demand,
authorization, direction, notice, consent, waiver or other act by the Holder of
a Certificate shall bind the Holder and every subsequent Holder of the
Certificate and of any Certificate issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done
or omitted to be done by Trustee or Servicer in reliance thereon, whether or not
notation of the action is made upon such Certificate.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement, any Supplement or any PI
Agreement to be given or taken by Certificateholders or any Agent for a
Purchaser may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by the Certificateholders or any Agent for a
Purchaser in person or by agent duly appointed in writing; and except as herein
otherwise expressly provided, the action shall become effective when the
instrument or instruments are delivered to Trustee and, when required, to
Servicer. Proof of execution of any such instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Agreement, any
Supplement or any PI Agreement and conclusive in favor of Trustee and Servicer,
if made in the manner provided in this section.
(d) The fact and date of the execution by any Certificateholder or any
Agent for a Purchaser of any such instrument or writing may be proved in any
reasonable manner that Trustee deems sufficient.
SECTION 13.3 Limitation on Rights of Certificateholders. (a) The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor shall the death or incapacity entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a partition or
winding up of the Trust, nor
page 90
<PAGE> 96
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
(b) No Certificateholder shall have any right to vote (except as
expressly provided otherwise in this Agreement) or in any manner otherwise to
control the operation and management of the Trust, or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Certificates, be construed so as to constitute the Certificateholders
from time to time as partners or members of an association, nor shall any
Certificateholder be under any liability to any third Person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to the Transaction Documents
(except to the extent any Supplement or related certificate purchase agreement
creates independent and non-duplicative rights), unless the Certificateholder
previously shall have given to Trustee, and unless the Required Investors shall
have made, written request upon Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and Trustee, for 30 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder, every Purchaser and
Trustee, that no one or more Certificateholders or Purchasers shall have any
right in any manner whatever by virtue of, or by availing itself or themselves
of, any provisions of a Transaction Document to affect, disturb or prejudice the
rights of any other Investor Certificateholder or Purchaser, or to obtain or
seek to obtain priority over or preference to any such other Investor
Certificateholder or Purchaser, except to the extent provided in the Transaction
Documents, or to enforce any right under the Transaction Documents, except in
the manner herein provided and for the equal, ratable and common benefit of, all
Investor Certificateholders and Purchasers (subject to the priorities set forth
in the Transaction Documents). For the protection and enforcement of the
provisions of this section, each and every Certificateholder, each and every
Purchaser and Trustee shall be entitled to such relief as can be given either at
law or in equity.
(d) By their acceptance of Certificates pursuant to this Agreement and
the applicable Supplement, the Certificateholders agree to the provisions of
this section.
page 91
<PAGE> 97
SECTION 13.4 Limitation on Rights of Purchasers. (a) The death or
incapacity of any Purchaser shall not operate to terminate this Agreement or the
Trust, nor shall the death or incapacity entitle such Purchaser's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
(b) Except as expressly provided in this Agreement or a PI Agreement,
neither any Purchaser nor any Agent for a Purchaser shall have any right to
vote, or in any manner otherwise to control the operation and management of the
Trust, or the obligations of the parties hereto, nor shall anything herein set
forth, or contained in the terms of the Purchased Interests, be construed so as
to constitute the Purchasers from time to time as partners or members of an
association, nor shall any Purchaser be under any liability to any third Person
by reason of any action taken by the parties to this Agreement pursuant to any
provision hereof.
(c) Neither any Purchaser nor any Agent for a Purchaser shall have any
right by virtue of any provisions of this Agreement to institute any suit,
action or proceeding in equity or at law upon or under or with respect to any
Transaction Document (except to the extent a PI Agreement creates independent
and non- duplicative rights), unless such Purchaser or such Agent previously
shall have (i) made a written request upon Trustee to institute such action,
suit or proceeding and (ii) offered to Trustee such reasonable security or
indemnity as Trustee may require against the costs, expenses and liabilities to
be incurred by Trustee in compliance with such request, and Trustee, for 30 days
after its receipt of such request and offer of security or indemnity, shall have
neglected or refused to institute any such action, suit or proceeding. It is
understood and intended, and, upon the purchase of each Purchased Interest the
related Agent and Purchaser shall be deemed to have expressly covenanted and
agreed with every other Purchaser, Investor Certificateholder and Trustee, that
no one or more Purchasers or Certificateholders shall have any right in any
manner whatever by virtue of, or by availing itself or themselves of, any
provisions of a Transaction Document to affect, disturb or prejudice the rights
of any other Investor Certificateholder or Purchaser, or to obtain or seek to
obtain priority over or preference to any such other Investor Certificateholder
or Purchaser, except to the extent provided in the Transaction Documents, or to
enforce any right under the Transaction Documents, except in the manner herein
provided and for the equal, ratable and common benefit of all Investor
Certificateholders or Purchasers (subject to the priorities set forth in the
Transaction Documents). For the protection and enforcement of the provisions of
this section, each and every Certificateholder, each and every Purchaser and
Trustee shall be entitled to such relief as can be given either at law or in
equity.
page 92
<PAGE> 98
SECTION 13.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE.
SECTION 13.6 Notices. All demands, notices, instructions and other
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (including facsimile communication) and shall be personally delivered
or sent by certified mail, postage prepaid, by facsimile or by overnight
courier, to the intended party (a) in the case of Transferor, to its address set
forth below its signature hereto, (b) in the case of AmeriServe, to its address
set forth below its signature hereto, and (c) in the case of Trustee, the Paying
Agent or the Transfer Agent and Registrar, to the address of Trustee set forth
on the signature pages hereof; or, as to each party, at such other address or
facsimile number as shall be designated by it in a written notice to each other
party given in accordance with this section. Such demands, notices, instructions
and other communications provided for hereunder shall be effective, (a) if
personally delivered, when received, (b) if sent by certified mail, four
Business Days after having been deposited in the mail, postage prepaid and
properly addressed, (c) if transmitted by facsimile, when sent, receipt
confirmed by telephone or electronic means and (d) if sent by overnight courier,
two Business Days after having been given to the courier unless sooner received
by the addressee. Except to the extent expressly provided otherwise in an
applicable Supplement, any notice required or permitted to be mailed to a
Certificateholder shall be sent by first-class mail, postage prepaid, to the
address of the Certificateholder as shown in the Certificate Register. Except to
the extent expressly provided otherwise in an applicable Supplement, any notice
so mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given on the fourth Business Day after the notice is
so mailed, whether or not the Certificateholder receives the notice. Servicer
shall deliver or make available to the Rating Agencies each certificate and
report required to be prepared, forwarded or delivered pursuant to Section 3.5
(excluding the Daily Reports) or 3.6 and a copy of any amendment, consent or
waiver to this Agreement, at such address as shall be designated by the Rating
Agency in a written notice from time to time to Servicer.
SECTION 13.7 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement or any of the other
Transaction Documents shall for any reason whatsoever be held invalid, then the
unenforceable covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Agreement or the other Transaction Documents (as applicable) and shall in no way
page 93
<PAGE> 99
affect the validity or enforceability of the other provisions of this Agreement,
the Certificates, the Purchased Interests or any of the other Transaction
Documents or the rights of the Certificateholders or the Purchasers.
SECTION 13.8 Certificates Nonassessable and Fully Paid. Except to the
extent otherwise expressly provided in Section 7.3 with respect to Transferor,
it is the intention of the parties to this Agreement that the Certificateholders
and Purchasers shall not be personally liable for obligations of the Trust, that
the interests in the Trust represented by the Certificates or the Purchased
Interests shall be nonassessable for any losses or expenses of the Trust or for
any reason whatsoever and that Certificates upon authentication thereof by
Trustee pursuant to Section 6.2 are and shall be deemed fully paid.
SECTION 13.9 Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, each of Trustee, Servicer, Transferor, the Paying
Agent, each Authenticating Agent and the Transfer Agent and Registrar (and each
Investor Certificateholder or Purchaser by its acceptance of a Certificate or
Purchased Interest) agrees that it shall not, with respect to the Trust or
Transferor, institute or join any other Person in instituting any proceeding of
the type referred to in the definition of "Bankruptcy Event" against or with
respect to the Trust or the Transferor so long as any Certificates or Purchased
Interests issued by the Trust shall be outstanding or there shall not have
elapsed one year plus one day since the last day on which any such Certificates
or Purchased Interests shall have been outstanding. The foregoing shall not
limit the right of any such Person to file any claim in or otherwise take any
action with respect to any such proceeding that was instituted against
Transferor or the Trust by any Person other than Trustee, Servicer, Transferor,
the Paying Agent, an Authenticating Agent or the Transfer Agent and Registrar.
In addition, each of Servicer, the Paying Agent, each Authenticating Agent, the
Transfer Agent and Registrar (and each Investor Certificateholder or Purchaser
by its acceptance of a Certificate or Purchased Interest) and (as to the Trust)
Transferor agree that all amounts owed to them by the Trust or Transferor shall
be payable solely from amounts that become available for such payment pursuant
to this Agreement and the Purchase Agreement, and no such amounts shall
constitute a claim against the Trust or Transferor to the extent that they are
in excess of the amounts available for their payment.
SECTION 13.10 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of Trustee, the Investor
Certificateholders, or the Purchasers or any Agent, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights,
page 94
<PAGE> 100
remedies, powers and privileges herein provided are cumulative and are not
exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 13.11 Counterparts. This Agreement may be executed in any
number of counterparts (which may include facsimile) and by the different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original, and all of which together shall constitute one and the
same instrument.
SECTION 13.12 Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. The Certificateholders, the Purchasers, the
Agents, the Affected Parties, the Enhancement Providers and their respective
successors and assigns are intended third party beneficiaries of this Agreement.
Except as otherwise expressly provided in this Agreement, nothing contained in
this Agreement shall confer any rights upon any Person that is not a party to,
or a permitted assignee of a party to, this Agreement.
SECTION 13.13 Integration. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
SECTION 13.14 Binding Effect; Assignability; Survival of Provisions.
This Agreement shall be binding upon and inure to the benefit of Transferor,
Servicer and Trustee and their respective successors and permitted assigns;
provided, that Transferor shall not delegate any of its obligations hereunder.
This Agreement shall create and constitute the continuing obligations of the
parties hereto in accordance with its terms, and shall remain in full force and
effect until the termination of the Trust pursuant to Section 12.1. The rights
and remedies with respect to (a) any breach of any representation and warranty
made by Transferor in Section 2.3 or Section 7.1, (b) any breach of any
representation and warranty made by Servicer in Section 8.1 and (c) the
indemnification and payment provisions in Sections 3.9, 7.3, 8.4, 11.5 and
12.2(b) shall be continuing and shall survive the termination of this Agreement.
This Section 13.14 and Sections 13.5, 13.9, 13.12, 13.15, 13.17 and 13.18 also
shall survive the termination of this Agreement.
SECTION 13.15 Recourse to Transferor. Except to the extent expressly
provided otherwise in the Transaction Documents, the obligations of Transferor
under the Transaction Documents to which it is a party are solely the
obligations of Transferor, and no recourse shall be had for payment of any fee
payable by or other
page 95
<PAGE> 101
obligation of or claim against Transferor that arises out of any Transaction
Document to which Transferor is a party against any director, officer or
employee of Transferor. Payments to be made by Transferor pursuant to this
Agreement shall be paid to the extent that funds are available to make the
payments after all amounts to be paid to the Certificateholders and the
Purchasers pursuant to the applicable Supplement and PI Agreement shall have
been paid, and there shall be no recourse to Transferor for all or any part of
any amounts payable pursuant to any Transaction Document if the funds are at any
time insufficient to make all or part of any such payments. The provisions of
this section shall survive the termination of this Agreement.
SECTION 13.16 Recourse to Transferred Assets. The Certificates do not
represent an obligation of, or an interest in, Transferor, any Seller, Servicer,
Trustee or any Affiliate of any of them. Except as expressly provided otherwise
in this Agreement, the Certificates and Purchased Interests are limited in right
of payment to the Transferred Assets.
SECTION 13.17 Submission to Jurisdiction. EACH PARTY HERETO HEREBY (a)
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW
YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE TRANSACTION
DOCUMENTS, (b) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR FEDERAL COURT, (c)
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING, AND
(d) IN THE CASE OF TRANSFEROR AND AMERISERVE, IRREVOCABLY APPOINTS THE PROCESS
AGENT AS ITS AGENT TO RECEIVE ON BEHALF OF IT AND ITS PROPERTY SERVICE OF COPIES
OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS THAT MAY BE SERVED IN SUCH
ACTION OR PROCEEDING. THE SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF
THE PROCESS TO TRANSFEROR OR AMERISERVE IN CARE OF THE PROCESS AGENT AT THE
PROCESS AGENT'S ADDRESS, AND EACH OF TRANSFEROR AND AMERISERVE HEREBY
IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT THE SERVICE ON
ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, EACH OF TRANSFEROR AND SERVICER
ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES OF THE PROCESS TO TRANSFEROR OR SERVICER
(AS APPLICABLE) AT ITS ADDRESS SPECIFIED HEREIN. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY PARTY HERETO TO BRING ANY ACTION OR
PROCEEDING AGAINST ANY OR ALL OF THE OTHER PARTIES HERETO OR ANY OF THEIR
RESPECTIVE PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTION.
page 96
<PAGE> 102
SECTION 13.18 Waiver of Jury Trial. EACH PARTY HERETO WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR RELATING TO THE TRANSACTION DOCUMENTS OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION THEREWITH OR ARISING FROM ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS OF ANY OF THE PARTIES HERETO OR
ANY OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THE TRANSACTION DOCUMENTS,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
SECTION 13.19 Certain Partial Releases. If any Seller is discontinued
as a Seller pursuant to Section 1.8(a) or 1.8(c) of the Purchase Agreement,
Trustee shall, upon the request (and at the expense) of AmeriServe, execute and
deliver to AmeriServe such statements of termination, partial release and/or
amendment relating to the UCC-1 financing statements filed against such Seller
pursuant to the Purchase Agreement as shall be prepared by AmeriServe and
provided to Trustee to evidence such termination; provided that Trustee shall
have received (i) an Officer's Certificate of Servicer to the effect that all
conditions to such termination specified in such Section 1.8(a) have been
satisfied (and shall not have received notice from any Investor
Certificateholder or Agent to the contrary) and (ii) in the case of any such
partial release and/or amendment, an Opinion of Counsel to the effect that the
filing of such statements of partial release and/or amendment will not impair
the validity, perfection or priority of Transferor's or Trustee's rights in and
to any Receivables or Related Assets that remain in the Trust after giving
effect to any related conveyance of Receivables and Related Assets, and/or (iii)
in the case of any termination of filings against a Seller, an Officer's
Certificate of Servicer to the effect that Trustee no longer holds any right,
title or interest in the Receivables generated by such Seller. In connection
with a termination described in Section 1.8(c) of the Purchase Agreement,
Trustee shall, if demanded by Transferor, convey all of its right, title and
interest in all (but not less than all) of the Receivables (and Related Assets
with respect thereto) originated by the Terminating Seller to a Person
designated by the Terminating Seller, provided that such conveyance by Trustee
shall be made only against receipt by Trustee from the purchaser, in cash, of a
release price negotiated in good faith by the Terminating Seller (but in no
event shall such release price be less than the lesser of (i) 102% of the price
Transferor paid for such Receivables and Related Assets with respect thereto and
(ii) the Unpaid Balance of such Receivables, provided further that Trustee shall
have received an Officer's Certificate to the effect that such conveyance does
not violate the last sentence of this Section). No such release and conveyance
by Trustee shall, however, be permitted if as a result thereof any AmeriServe
Person would acquire the released Receivables.
page 97
<PAGE> 103
SECTION 13.20 Effect on Existing Pooling Agreement. This Agreement
amends and restates the Existing Pooling Agreement effective as of the date of
this Agreement. This Agreement shall not effect a novation of the obligations of
the parties to the Existing Pooling Agreement, but instead shall be merely a
restatement and, where applicable, an amendment of the terms governing such
obligations. The parties hereto hereby affirm, ratify and confirm all transfers
of Receivables and other Transferred Assets pursuant to the Existing Pooling
Agreement. The parties hereto agree that the existing Transferor Certificate
shall be deemed to have been amended and restated in the form of Exhibit E
hereto.
[SIGNATURES FOLLOW]
page 98
<PAGE> 104
IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
AMERISERVE FUNDING CORPORATION,
as Transferor
By:
---------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address: 14841 Dallas Parkway
Dallas, Texas 75240
Attention: President
AMERISERVE FOOD DISTRIBUTION, INC.,
as initial Servicer
By:
---------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address: 14841 Dallas Parkway
Dallas, Texas 75240
Attention: Chief Financial Officer
Telephone: 972/338-7000
Facsimile: 972/338-6947
<PAGE> 105
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
---------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address: Sixth & Marquette
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services/
Asset-Backed Administration
Facsimile: 612/667-3539
<PAGE> 106
EXHIBIT A
to Pooling Agreement
FORM OF
LOCKBOX AGREEMENT
, 199
------- --
[Full Name and Address Lockbox Bank]
Attention:
----------------------
Ladies and Gentlemen:
Please be advised that (a) [name of Seller] ("Company") has irrevocably
transferred, assigned, set over and conveyed exclusive ownership and control of
its lockbox numbered P.O. Box __________ of the post office located at
__________, __ _____ (the "Lockbox") and the corresponding demand deposit
account numbered ____________ (the "Lockbox Account") maintained with you to
AmeriServe Funding Corporation ("Transferor"), and (b) Transferor has
irrevocably transferred, assigned, set over and conveyed all of its rights and
title to and interest in the Lockbox and the Lockbox Account to Norwest Bank
Minnesota, National Association, as trustee (the "Trustee") for the benefit of
certain holders of certificates and purchased interests (collectively, the
"Holders") issued from time to time under an Amended and Restated Pooling and
Servicing Agreement, dated as of July 28, 1998, among Transferor, AmeriServe
Food Distribution, Inc., as initial Servicer, and the Trustee, as the same may
be amended, amended and restated, supplemented or otherwise modified from time
to time.
By executing this lockbox agreement, you (i) acknowledge and agree to
the transfers, assignments, setting overs and conveyances of the Lockboxes and
Lockbox Accounts described above; (ii) acknowledge and agree to the existence of
the Trustee's right to dominion and control over the Lockbox and the Lockbox
Account and its ownership of and security interest in the Lockbox and the
Lockbox Account, all moneys and instruments delivered to the Lockbox, the
Lockbox Account and the amounts from time to time on deposit therein; and (iii)
agree that, from and after the date hereof, you shall maintain the Lockbox and
the Lockbox Account and shall hold all such moneys and instruments and such
amounts for the benefit and subject to the interests of the Trustee (for the
benefit of itself and the Holders). You also acknowledge that your execution of
this lockbox agreement is a condition precedent to continued maintenance of the
Lockbox Account with you.
<PAGE> 107
The Lockbox Account is to be maintained in the name of "Norwest Bank Minnesota,
National Association, as Trustee."
Company and Transferor hereby irrevocably instruct you, and the
Trustee, by its acknowledgment hereof, hereby instructs you, at all times from
and after the date hereof until your receipt of contrary and/or terminating
instructions from the Trustee, to remit, on a daily basis, in immediately
available funds, all available amounts deposited in the Lockbox Account to the
following account (the "Master Collection Account") or such other account as the
Trustee or the Servicer may specify:
Norwest Bank Minnesota, National Association
Sixth & Marquette
Minneapolis, MN 55479-0070
ABA #091000019
Account #10-38-377
N/O: Corporate Trust Clearing Account
For further credit: AmeriServe Receivables Master Trust/
Master Collection Account #13339001
By executing this lockbox agreement, you irrevocably waive and agree
not to assert any right to setoff against, or otherwise deduct from, any items
collected from the Lockbox, the Lockbox Account or any funds from time to time
therein or in transit thereto; provided, however, that you may (i) debit the
Lockbox Account for any items deposited in the Lockbox Account that are returned
or otherwise not collected in accordance with your customary practices for the
chargeback of returned items, (ii) charge the Lockbox Account for any erroneous
crediting of funds by you to such Lockbox Account and (iii) apply funds in the
Lockbox Account for reimbursement of any fees and expenses owed to you under the
terms of this lockbox agreement, to the extent that such fees and expenses are
not paid or reimbursed by Company.
All transfers referred to above shall be made by you irrespective of,
and without deduction for, any counterclaim, defense, recoupment or set-off
(except as expressly permitted otherwise by this lockbox agreement) and shall be
final, and you agree that you will not seek to recover any amount from the
Trustee, Transferor, or the Servicer for any reason once any payment or transfer
has been made.
Company shall pay, or reimburse you for, customary and reasonable fees
and expenses incurred by you in the maintenance and operation of the Lockbox
Account in accordance with this lockbox agreement. The Trustee and Transferor
will have no liability to you or the Servicer for any costs, fees or charges
under
page 2
<PAGE> 108
your usual and customary procedures or this lockbox agreement. You hereby agree
to promptly notify the Trustee of your failure to receive timely payment of any
fee under this lockbox agreement.
The Trustee's instructions with respect to the Lockbox and the Lockbox
Account may be given through a "Servicer" that the Trustee may appoint from time
to time and will notify you thereof in writing, and you agree to follow the
instructions of such Servicer with the same effect as if such instructions were
given by the Trustee directly (subject to any limitations on such appointment
imposed by the Trustee that are communicated in writing to you) until such time
as the Trustee notifies you of the revocation of the Servicer's authority to act
for the Trustee. The initial Servicer is AmeriServe Food Distribution, Inc. The
Trustee and the Servicer shall each provide to you a list of their respective
employees authorized to issue instructions and give notices with respect to the
Lockbox and the Lockbox Account, which lists may be revised from time to time,
and you shall be entitled to rely on (and to assume) the authority of any
employee of the Trustee or the Servicer identified on such lists, and are hereby
authorized to act on any notice given on behalf of the Trustee or the Servicer
by any such employee, subject to any limitations on the appointment of the
Servicer and the revocation of the Servicer's authority as provided above.
Company and Transferor also hereby irrevocably notify you that, at all
times from and after the date hereof until your receipt of contrary and/or
terminating instructions from the Trustee, the Trustee shall be entitled
(subject to your rights set forth herein) to exercise in the place and stead of
Company and Transferor (or either of them) any and all rights of Company and
Transferor in respect of or in connection with the Lockbox, this lockbox
agreement and the Lockbox Account, including, without limitation (i) the right
to specify that payments are to be made out of or in connection with the Lockbox
Account to different accounts or at different times than those specified above
(subject to your customary and then-current procedures for lockbox processing)
and (ii) the right to require preparation of duplicate monthly bank statements
on the Lockbox Account for mailing directly to an address specified by the
Trustee.
By executing this lockbox agreement you acknowledge that you have not
heretofore received a notice, writ, order or any form of legal process from any
other person asserting, claiming or exercising, any right of set-off, banker's
lien or other purported form of claim with respect to the items collected from
the Lockbox, the Lockbox Account or any funds from time to time therein or in
transit thereto, and agree to promptly inform the Trustee in writing of any such
action in the future.
Except as otherwise provided herein, the Lockbox and the Lockbox
Account shall be subject to the customary terms and conditions adopted by you
page 3
<PAGE> 109
from time to time and generally applicable to lockboxes and lockbox accounts;
provided, however, that you shall remove all items from the Lockbox not less
than once each business day and deposit such items into the Lockbox Account on
such business day. Your duties and functions under this lockbox agreement shall
continue to be that of a debtor/creditor and you shall not by reason of this
lockbox agreement be deemed to have a fiduciary obligation or relationship of
trust in respect of Transferor or the Trustee. You shall not be deemed to have
knowledge of or liability under any agreements among the parties to this lockbox
agreement to which you are not a party.
You may terminate this lockbox agreement by canceling the Lockbox
Account and Lockbox, which cancellation and termination shall become effective
only upon sixty days' prior written notice thereof from you to the Trustee. Upon
the termination of this lockbox agreement, you will close the Lockbox Account
and, subject to your rights to charge the Lockbox Account as set forth herein,
transfer any monies remaining therein to the Master Collection Account. You
agree that you shall forward all incoming mail addressed to the Lockbox or the
Lockbox Account and all wire transfers and deposits to the Lockbox Account that
you receive after such cancellation in the form received to another lockbox or
to another lockbox account or the Master Collection Account or to such other
address or account as the Trustee (or the Servicer on behalf of the Trustee)
shall specify, promptly after you discover that you have received any such mail
or transfers. This lockbox agreement may also be terminated upon written notice
to you by the Trustee. Except as expressly set forth in this paragraph, this
lockbox agreement may not be terminated or amended without the prior written
consent of the Trustee.
You will use due care in performing your duties and responsibilities
and shall only be responsible for any liability, loss, cost or expense which
Company, Transferor or the Trustee sustains to the extent that (i) such loss is
a direct result of your mishandling of a deposit or (ii) such loss is
proximately caused by your negligence or wilful misconduct. In no event shall
you be liable to Company, Transferor or the Trustee for liabilities, losses,
costs or expenses resulting from actions beyond your control or for any
consequential or special damages. Except to the extent of the liability assumed
by you, Company hereby agrees to indemnify and hold you harmless against any and
all reasonable costs, losses, liabilities or expenses including attorneys' fees
and disbursements, which may be imposed upon you in connection with your duties
hereunder. This paragraph shall survive termination of the Lockbox, the Lockbox
Account, or this lockbox agreement.
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including facsimile
communication) and shall be personally delivered or sent by certified mail,
postage prepaid, by
page 4
<PAGE> 110
facsimile or by overnight courier, to the intended person at the address or
facsimile number of such person set forth under its name on the signature pages
hereof or at such other address or facsimile number as shall be designated by
such person in a written notice to the other parties hereto given in accordance
with the requirements of this paragraph. All notices and other communications
hereunder shall also be provided to the Trustee and shall be addressed as
follows until you receive written notice from the Trustee to the contrary:
Norwest Bank Minnesota, National Association
Sixth & Marquette
Minneapolis, MN 55479-0070
Attention: Corporate Trust Services -
Asset Backed Administration
Telephone: 612/667-2410
Facsimile: 612/667-3539
All notices and communications provided for hereunder shall be
effective, (i) if personally delivered, when received, (ii) if sent by certified
mail, four business days after having been deposited in the mail, postage
prepaid and properly addressed, (iii) if transmitted by facsimile, when sent,
receipt confirmed by telephone or electronic means and (iv) if sent by overnight
courier, two business days after having been given to such courier unless sooner
received by the addressee.
This lockbox agreement shall be binding upon you and your successors
and assigns and shall inure to the benefit of Company, Transferor, and the
Trustee and their respective successors, transferees and assigns; provided,
however, that you may not assign your rights and duties under this lockbox
agreement without the prior written consent of the Trustee.
THIS LOCKBOX AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF [________], NOT INCLUDING THE CHOICE OF LAW RULES
THEREOF.
This lockbox agreement may be executed in any number of counterparts
(which may include facsimile) and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which together shall constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
page 5
<PAGE> 111
Please acknowledge your agreement to the terms set forth in this
lockbox agreement by signing five (5) copies of this lockbox agreement in the
space provided below and returning such copies to us at the address indicated
below for Company.
Very truly yours,
[NAME OF SELLER]
By:
-----------------------------------
Title:
-----------------------------
Address:
Attention:
Telephone:
Facsimile:
AMERISERVE FUNDING CORPORATION
By:
-----------------------------------
Title:
-----------------------------
Address: 14841 Dallas Parkway
Dallas, Texas 75240
Attention: President
page 6
<PAGE> 112
The undersigned hereby acknowledges and agrees to the foregoing lockbox
agreement as of the date of the lockbox agreement.
[Name of Lockbox Bank]
By:
-----------------------------------
Title:
-----------------------------
Address:
Attention
Telephone:
Facsimile:
page 7
<PAGE> 113
The undersigned hereby acknowledges and agrees to the foregoing lockbox
agreement as of the date of the lockbox agreement.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
--------------------------------
Title:
-------------------------
page 8
<PAGE> 114
EXHIBIT B
to Pooling Agreement
FORM OF
BLOCKED ACCOUNT AGREEMENT
, 199
---------- ---
[Full Name and Address of Blocked Account Bank]
Attention:
Ladies and Gentlemen:
Please be advised that (a) [name of Seller] ("Company") has irrevocably
transferred, assigned, set over and conveyed exclusive ownership and control of
its demand deposit account numbered [ ] (the "Blocked Account") maintained with
you to AmeriServe Funding Corporation ("Transferor"), and (b) Transferor has
irrevocably transferred, assigned, set over and conveyed all of its rights and
title to and interest in the Blocked Account to Norwest Bank Minnesota, National
Association, as trustee (the "Trustee") for the benefit of certain holders of
certificates and purchased interests (collectively, the "Holders") from time to
time issued under an Amended and Restated Pooling and Servicing Agreement, dated
as of July 28, 1998, among Transferor, AmeriServe Food Distribution, Inc., as
initial Servicer (together with any successor Servicer), and the Trustee, as the
same may be amended, amended and restated, supplemented or otherwise modified
from time to time.
By executing this letter agreement, you: (i) acknowledge and agree to
the transfers, assignments, setting overs and conveyances of the Blocked Account
described above; (ii) acknowledge and agree to the existence of the Trustee's
right to dominion and control over the Blocked Account and its ownership of and
security interest in the Blocked Account, all moneys and instruments delivered
to the Blocked Account and the amounts from time to time on deposit therein; and
(iii) agree that, from and after the date hereof, you shall maintain the Blocked
Account and shall hold all such moneys and instruments and such amounts for the
benefit and subject to the interests of the Trustee (for the benefit of itself
and the Holders). You also acknowledge that your execution of this letter
agreement is a condition precedent to continued maintenance of the Blocked
Account with you. The Blocked Account is to be maintained in the name of
"Norwest Bank Minnesota, National Association, as Trustee."
page 1
<PAGE> 115
Company and Transferor hereby irrevocably instruct you, and the
Trustee, by its acknowledgment hereof, hereby instructs you, at all times from
and after the date hereof until your receipt of contrary and/or terminating
instructions from the Trustee, to remit, on a daily basis, in immediately
available funds, all available amounts deposited in the Blocked Account to the
following account (the "Master Collection Account") or such other account as the
Trustee or the Servicer may specify:
Norwest Bank Minnesota, National Association
Sixth & Marquette
Minneapolis, MN 55479-0070
ABA #091000019
Account #10-38-377
N/O: Corporate Trust Clearing Account
For further credit: AmeriServe Receivables Master Trust/
Master Collection Account #13339001
By executing this letter agreement, you irrevocably waive and agree not
to assert any right to setoff against, or otherwise deduct from, any items
collected from the Blocked Account or any funds from time to time therein or in
transit thereto; provided, however, that you may (i) debit the Blocked Account
for any items deposited in the Blocked Account that are returned or otherwise
not collected in accordance with your customary practices for the chargeback of
returned items, (ii) charge the Blocked Account for any erroneous crediting of
funds by you to such Blocked Account and (iii) apply funds in the Blocked
Account for reimbursement of any fees and expenses owed to you under the terms
of this letter agreement, to the extent that such fees and expenses are not paid
or reimbursed by Company.
All transfers referred to above shall be made by you irrespective of,
and without deduction for, any counterclaim, defense, recoupment or set-off
(except as expressly permitted otherwise by this letter agreement) and shall be
final, and you agree that you will not seek to recover any amount from the
Trustee, Transferor, or the Servicer for any reason once any payment or transfer
has been made.
Company shall pay, or reimburse you for, customary and reasonable fees
and expenses incurred by you in the maintenance and operation of the Blocked
Account in accordance with this letter agreement. The Trustee and Transferor
will have no liability to you or the Servicer for any costs, fees or charges
under your usual and customary procedures or this letter agreement. You hereby
agree
page 2
<PAGE> 116
to promptly notify the Trustee of your failure to receive timely payment of any
fee under this letter agreement.
The Trustee's instructions with respect to the Blocked Account may be
given through a "Servicer" that the Trustee may appoint from time to time and
will notify you thereof in writing, and you agree to follow the instructions of
such Servicer with the same effect as if such instructions were given by the
Trustee directly (subject to any limitations on such appointment imposed by the
Trustee that are communicated in writing to you) until such time as the Trustee
notifies you of the revocation of the Servicer's authority to act for the
Trustee. The initial Servicer is AmeriServe Food Distribution, Inc. The Trustee
and the Servicer shall each provide to you a list of their respective employees
authorized to issue instructions and give notices with respect to the Blocked
Account, which lists may be revised from time to time, and you shall be entitled
to rely on (and to assume) the authority of any employee of the Trustee or the
Servicer identified on such lists, and are hereby authorized to act on any
notice given on behalf of the Trustee or the Servicer by any such employee,
subject to any limitations on the appointment of the Servicer and the revocation
of the Servicer's authority as provided above.
Company and Transferor also hereby irrevocably notify you that, at all
times from and after the date hereof until your receipt of contrary and/or
terminating instructions from the Trustee, the Trustee shall be entitled
(subject to your rights set forth herein) to exercise in the place and stead of
Company and Transferor (or either of them) any and all rights of Company and
Transferor in respect of or in connection with this letter agreement and the
Blocked Account, including, without limitation (i) the right to specify that
payments are to be made out of or in connection with the Blocked Account to
different accounts or at different times than those specified above and (ii) the
right to require preparation of duplicate monthly bank statements on the Blocked
Account for mailing directly to an address specified by the Trustee.
By executing this letter agreement you acknowledge that you have not
heretofore received a notice, writ, order or any form of legal process from any
other person asserting, claiming or exercising, any right of set-off, banker's
lien or other purported form of claim with respect to the items collected from
the Blocked Account or any funds from time to time therein or in transit
thereto, and agree to promptly inform the Trustee in writing of any such action
in the future.
Except as otherwise provided herein, the Blocked Account shall be
subject to the customary terms and conditions adopted by you from time to time
and generally applicable to deposit accounts. Your duties and functions under
this letter agreement shall continue to be that of a debtor/creditor and you
shall not by reason of this letter agreement be deemed to have a fiduciary
obligation
page 3
<PAGE> 117
or relationship of trust in respect of Transferor or the Trustee. You shall not
be deemed to have knowledge of or liability under any agreements among the
parties to this letter agreement to which you are not a party.
You may terminate this letter agreement by canceling the Blocked
Account, which cancellation and termination shall become effective only upon
sixty days' prior written notice thereof from you to the Trustee. Upon the
termination of this letter agreement, you will close the Blocked Account and,
subject to your rights to charge the Blocked Account as set forth herein,
transfer any monies remaining therein to the Master Collection Account. You
agree that you shall forward all incoming mail addressed to the Blocked Account
and all wire transfers and deposits to the Blocked Account that you receive
after such cancellation in the form received to the Master Collection Account or
to such other address or account as the Trustee (or the Servicer on behalf of
the Trustee) shall specify, promptly after you discover that you have received
any such mail or transfers. This letter agreement may also be terminated upon
written notice to you by the Trustee. Except as expressly set forth in this
paragraph, this letter agreement may not be terminated or amended without the
prior written consent of the Trustee.
You will use due care in performing your duties and responsibilities
and shall only be responsible for any liability, loss, cost or expense which
Company, Transferor or the Trustee sustains to the extent that (i) such loss is
a direct result of your mishandling of a deposit or (ii) such loss is
proximately caused by your negligence or wilful misconduct. In no event shall
you be liable to Company, Transferor or the Trustee for liabilities, losses,
costs or expenses resulting from actions beyond your control or for any
consequential or special damages. Except to the extent of the liability assumed
by you, Company hereby agrees to indemnify and hold you harmless against any and
all reasonable costs, losses, liabilities or expenses including attorneys' fees
and disbursements, which may be imposed upon you in connection with your duties
hereunder. This paragraph shall survive termination of the Blocked Account, or
this letter agreement.
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including facsimile
communication) and shall be personally delivered or sent by certified mail,
postage prepaid, by facsimile or by overnight courier, to the intended person at
the address or facsimile number of such person set forth under its name on the
signature pages hereof or at such other address or facsimile number as shall be
designated by such person in a written notice to the other parties hereto given
in accordance
page 4
<PAGE> 118
with the requirements of this paragraph. All notices and other communications
hereunder shall also be provided to the Trustee and shall be addressed as
follows until you receive written notice from the Trustee to the contrary:
Norwest Bank Minnesota, National Association
Sixth & Marquette
Minneapolis, MN 55479-0070
Attention: Corporate Trust Services -
Asset Backed Administration
Telephone: 612/667-2410
Facsimile: 612/667-3539
All notices and communications provided for hereunder shall be
effective, (i) if personally delivered, when received, (ii) if sent by certified
mail, four business days after having been deposited in the mail, postage
prepaid and properly addressed, (iii) if transmitted by facsimile, when sent,
receipt confirmed by telephone or electronic means and (iv) if sent by overnight
courier, two business days after having been given to such courier unless sooner
received by the addressee.
This letter agreement shall be binding upon you and your successors and
assigns and shall inure to the benefit of Company, Transferor, and the Trustee
and their respective successors, transferees and assigns; provided, however,
that you may not assign your rights and duties under this letter agreement
without the prior written consent of the Trustee.
THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF [________], NOT INCLUDING THE CHOICE OF LAW RULES
THEREOF.
This letter agreement may be executed in any number of counterparts
(which may include facsimile) and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which together shall constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
page 5
<PAGE> 119
Please acknowledge your agreement to the terms set forth in this letter
agreement by signing five (5) copies of this letter agreement in the space
provided below and returning such copies to us at the address indicated below
for Company.
Very truly yours,
[NAME OF SELLER]
By:
-----------------------------------
Title:
-----------------------------
Address:
Attention:
Telephone:
Facsimile:
AMERISERVE FUNDING CORPORATION
By:
-----------------------------------
Title:
-----------------------------
Address: 14841 Dallas Parkway
Dallas, Texas 75240
Attention: President
page 6
<PAGE> 120
The undersigned hereby acknowledges and agrees to the foregoing letter
agreement as of the date of the letter agreement.
[NAME OF BLOCKED ACCOUNT BANK]
By:
-----------------------------------
Title:
-----------------------------
Address:
Attention
----------------------------
Telephone:
----------------------------
Facsimile:
----------------------------
page 7
<PAGE> 121
The undersigned hereby acknowledges and agrees to the foregoing letter
agreement as of the date of the letter agreement.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
-----------------------------------
Title:
----------------------------
page 8
<PAGE> 122
EXHIBIT C
to Pooling Agreement
FORM OF
MONTHLY SERVICER'S CERTIFICATE
TO: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
[Paying Agent]
AMERISERVE FUNDING CORPORATION
[Names of Rating Agencies]
AMERISERVE FOOD DISTRIBUTION, INC. (the "Servicer") hereby certifies
that:
(A) This Certificate is being delivered pursuant to Section 3.6 of the
Amended and Restated Pooling and Servicing Agreement, dated as of July 28, 1998
(as the same may be amended, amended and restated, supplemented or otherwise
modified from time to time, the "Pooling Agreement"), among Servicer, AMERISERVE
FUNDING CORPORATION, as Transferor, and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, as Trustee.
(B) As of the date of this Certificate, the Authorized Officer (as
defined in the Pooling Agreement) that is executing this Certificate is not
aware of the occurrence and continuance of any Early Amortization Event or
Unmatured Early Amortization Event (each as defined in the Pooling Agreement).
[If an Early Amortization Event or Unmatured Early Amortization Event has
occurred and is continuing, specify each such Early Amortization Event or
Unmatured Early Amortization Event (as applicable) of which the Authorized
Officer executing this Certificate is aware and the nature and status thereof
and further certify that such information is true and accurate in all material
respects.]
IN WITNESS WHEREOF, Servicer has caused this Certificate to be executed
by its duly authorized officer this __ day of _______________, 19__.
AMERISERVE FOOD DISTRIBUTION, INC.
By:
------------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE> 123
EXHIBIT D
to Pooling Agreement
ANNUAL AGREED UPON PROCEDURES
MONTHLY REPORTS
Select at random four Monthly Reports prepared during the fiscal year and:
1. Compare/reconcile the Monthly Report items specified in item 2
below with the Servicer's original source documents noted below
for five selected operating units, including PFS:
A. Monthly Sales Journal (or appropriate compilation thereof);
B. Cash Application Journal (or appropriate compilation
thereof);
C. Aged Trial Balance;
D. Journal entries and related support affecting cash
application or receivables;
E. Receivable Write-off Approval List (or comparable list);
F. Account Bank Statements and PC generated Account Bank
Reports; and
G. Credit Memo Report (or appropriate compilation thereof)
2. Recalculate and/or verify the following items on each Monthly
Report:
A. Net Eligible Receivables including estimates (if any);
B. Adjusted Eligible Receivables;
C. Excess Concentration Balances (if applicable);
D. Concentration Adjusted Eligible Receivables;
E. Carrying Cost Receivables Reserve:
1. Interest Payable
2. Servicing Fee
3. Accrued/Unpaid Expenses;
<PAGE> 124
F. Applicable Reserve Ratio:
1. Loss Reserve Ratio
2. Concentration Factor
3. Dilution Reserve Ratio;
G. Average Aged Receivables Ratio; and
H. Turnover Days.
3. Randomly select a total of five Write-Offs greater than $1000 and
obtain the Write-Off documentation and verify that each Write-Off
had been approved and each Write-Off was deleted from the Aged
Trial Balance Report.
DAILY REPORTS
Select at random ten Daily Reports prepared during the fiscal year (of which not
more than two shall relate to any single fiscal month) and:
1. Compare/reconcile the Daily Report items specified in item 2
below with the Servicer's original source documents noted below
for five selected operating units:
A. Monthly Sales Journal (or appropriate compilation thereof);
B. Cash Application Journal (or appropriate compilation
thereof);
C. Aged Trial Balance;
D. Journal entries and related support affecting cash
application or receivables;
E. Receivable Write-off Approval List (or comparable list);
F. Account Bank Statements and PC generated Account Bank
Reports; and
G. Credit Memo Report (or appropriate compilation thereof)
2. Recalculate and/or verify the following items on each Daily
Report.
A. Net Eligible Receivables including estimates (if any);
B. Adjusted Eligible Receivables;
-2-
<PAGE> 125
C. Excess Concentration Balances (if applicable);
D. Concentration Adjusted Eligible Receivables;
E. Carrying Cost Receivables Reserve:
1. Interest Payable
2. Servicing Fee
3. Accrued/Unpaid Expenses;
F. Applicable Reserve Ratio:
1. Loss Reserve Ratio
2. Concentration Factor
3. Dilution Reserve Ratio;
G. Average Aged Receivables Ratio; and
H. Turnover Days.
3. Randomly select a total of five Write-Offs greater than $1000 and
obtain the Write-Off documentation and verify that each Write-Off
had been approved and each Write-Off was deleted from the Aged
Trial Balance Report.
4. For each of the ten Daily Reports selected:
A. Invoices: Obtain the detail Aged Trial Balance Report for
five selected operating units and randomly select a total of
15 different invoices and verify the invoice date, amount
and customer name with a system generated copy of the
invoice;
B. Dilutions and Credits: Obtain the detail Aged Trial Balance
Report for five selected operating units and randomly select
a total of 15 different credit names and verify the credit
memo date, amount and customer name with a system generated
copy of the credit memo;
C. Cash Application: Randomly select a total of 15 individual
cash receipts comprising the cash collection amount and
verify the bank receipt date with the receipt date and
application amount on the Daily Report, adjusted for
available balances;
D. Ineligible Receivables: Obtain the Aged Trial Balance for
five selected operating units and randomly select a total of
ten customers that have balances over 120 days past original
invoice
-3-
<PAGE> 126
date and calculate the customer balances over 120 days past
original invoice date as a percentage of the customer's
total balance. If this calculated percentage is more than
25%, determine if any Receivables of the customer are
classified as part of the Eligible Receivables;
E. Aging Reports: Using the 15 invoices selected in paragraph A
above, find that the invoice is in the appropriate aging
category on the Aged Trial Balance; and
CREDIT DOCUMENTATION
Select at random two fiscal month ends during the fiscal year and:
1. Direct the Servicer to prepare a Credit File Contents Schedule
(the "Credit Schedule") that summarizes the contents of the
credit files for each customer the accountants select for
testing. The Credit Schedule will include the following
information as of the cut-off date selected: customer name,
customer account number, customer statement, approved credit
limit (if applicable), name and title of highest authority that
approved the credit limit, other supporting documentation in
support of extension of the credit limit (e.g., Dun & Bradstreet
report, customer financial statement and bank or trade
references), sales tax exemption and resale certificate; and
2. For each customer selected:
A. Compare the customer's account receivables balance with the
approved credit limit to verify that the balance is less
than or equal to the approved limit,
B. Compare the customer's account balance per the Credit
Schedule with the balance per the Account Receivable Aged
Trial Balance,
C. Note that at least one of the following items is included
with the credit documentation: Dun & Bradstreet Credit
Report or other credit report, bank or trade reference,
financial statements or a memorandum or workpapers regarding
credit evaluation/ justification.
-4-
<PAGE> 127
EXHIBIT E
to Pooling Agreement
FORM OF TRANSFEROR CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE
OR THE LAWS OF ANY FOREIGN COUNTRY. THIS CERTIFICATE MAY NOT BE RESOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SUCH RESALE, TRANSFER OR DISPOSITION
IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS AND FOREIGN LAWS. IN ADDITION TO THE
RESTRICTIONS SET FORTH ABOVE, RESALE, TRANSFER OR DISPOSITION OF THIS
CERTIFICATE IS PROHIBITED TO THE EXTENT SET FORTH IN THE POOLING AGREEMENT (AS
DEFINED BELOW).
AMERISERVE RECEIVABLES MASTER TRUST
TRANSFEROR CERTIFICATE
THIS CERTIFIES THAT AMERISERVE FUNDING CORPORATION is the registered
owner of an interest in the AmeriServe Receivables Master Trust (the "Trust"),
which was created pursuant to the Pooling and Servicing Agreement, dated as of
July 1, 1997 (as amended and restated as of July 28, 1998, and as the same may
be amended, amended and restated, supplemented or otherwise modified from time
to time, the "Pooling Agreement"), by and among AMERISERVE FUNDING CORPORATION,
a Delaware corporation, as Transferor ("Transferor"), AMERISERVE FOOD
DISTRIBUTION, INC., as initial Servicer (in such capacity, the "Servicer"), and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee (in such capacity,
together with its successors and assigns in such capacity, the "Trustee"). This
Certificate is the duly authorized Transferor Certificate designated and issued
under the Pooling Agreement. To the extent not otherwise defined herein,
capitalized terms have the meanings assigned to them in Appendix A to the
Pooling Agreement. This Certificate is subject to the terms, provisions and
conditions of, and is entitled to the benefits afforded by, the Pooling
Agreement, to which terms, provisions and conditions the holder of this
Certificate by virtue of the acceptance hereof assents and by which the holder
is bound.
This Certificate shall not bear interest.
<PAGE> 128
The Pooling Agreement may be amended and the rights and obligations of
the parties thereto and of the holder of this Certificate modified as set forth
in the Pooling Agreement.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly authorized
signatory, this Certificate shall not entitle the holder hereof to any benefit
under the Pooling Agreement or under any other Transaction Document or be valid
for any purpose.
This Certificate is limited in right of payment to the Transferred
Assets.
Transferor may not transfer, assign, exchange or otherwise convey or
pledge, hypothecate or otherwise grant a security interest in this Certificate
or any interest represented hereby except in compliance with the terms,
conditions and restrictions set forth in the Pooling Agreement. Any attempted
transfer of all or any part of this Certificate other than as permitted in the
Pooling Agreement shall be void and of no effect.
This Certificate shall be construed in accordance with the laws of the
State of Delaware, without reference to its conflict of laws principles, and all
obligations, rights and remedies under, or arising in connection with, this
Certificate shall be determined in accordance with the laws of the State of
Delaware.
-2-
<PAGE> 129
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
AMERISERVE FUNDING CORPORATION
By:
------------------------------------
Name:
----------------------------
Title:
----------------------------
-3-
<PAGE> 130
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Transferor Certificate referred to in the Pooling
Agreement.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
------------------------------------
Title:
----------------------------
Dated: July 11, 1997
-4-
<PAGE> 131
EXHIBIT F
to Pooling Agreement
FORM OF CERTIFICATE TO BE GIVEN BY CERTIFICATE OWNER
[Euroclear [Cedel, societe anonyme
151 Boulevard Jacqmain 67 Boulevard Grand-Duchesse Charlotte
B-1210 Brussels, Belgium] L-1331 Luxembourg]
Re: [Description of Certificates] issued pursuant to the Amended
and Restated Pooling and Servicing Agreement dated as of
July 28, 1998, among AMERISERVE FUNDING CORPORATION,
AMERISERVE FOOD DISTRIBUTION, INC. and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee, (the "Certificates").
This is to certify that as of the date hereof, and except as set
forth below, the beneficial interest in the Certificates held by you for our
account is owned by persons that are not U.S. persons (as defined in Rule 901
under the Securities Act of 1933, as amended).
The undersigned undertakes to advise you promptly by tested telex on
or prior to the date on which you intend to submit your certification relating
to the Certificates held by you in which the undersigned has acquired, or
intends to acquire, a beneficial interest in accordance with your operating
procedures if any applicable statement herein is not correct on such date. In
the absence of any such notification, it may be assumed that this certification
applies as of such date.
[This certification excepts beneficial interests in and does not
relate to U.S. $_________ principal amount of the Certificates appearing in your
books as being held for our account but that we have sold or as to which we are
not yet able to certify.]
We understand that this certification is required in connection with
certain securities laws in the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy thereof to any interested party in such
proceedings.
Dated: ,* By: ,
------------------ ------------------------------
Account Holder
- --------
* Certification must be dated on or after the 15th day before the date
of the Euroclear or Cedel certificate to which this certification
relates.
<PAGE> 132
EXHIBIT G
to Pooling Agreement
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR OR CEDEL
[Trustee and Transfer Agent and Registrar]
Re: [Description of Certificates] issued pursuant to the Amended
and Restated Pooling and Servicing Agreement dated as of
July 28, 1998 among AMERISERVE FUNDING CORPORATION, AMERISERVE
FOOD DISTRIBUTION, INC. and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee (the "Certificates").
This is to certify that, based solely on certifications we have
received in writing, by tested telex or by electronic transmission from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organizations") as of the date
hereof, $__________ principal amount of the Certificates is owned by persons (a)
that are not U.S. persons (as defined in Rule 901 under the Securities Act of
1933, as amended (the "Securities Act")) or (b) who purchased their Certificates
(or interests therein) in a transaction or transactions that did not require
registration under the Securities Act.
We further certify (a) that we are not making available herewith for
exchange any portion of the related Regulation S Temporary Book-Entry
Certificate excepted in such certifications and (b) that as of the date hereof
we have not received any notification from any of our Member Organizations to
the effect that the statements made by them with respect to any portion of the
part submitted herewith for exchange are no longer true and cannot be relied
upon as of the date hereof.
<PAGE> 133
We understand that this certification is required in connection with
certain securities laws of the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy hereof to any interested party in such proceedings.
Date: * Yours faithfully,
--------------
By:
----------------------------------
* To be dated no earlier [Morgan Guaranty Trust Company of
than the Effective Date. New York, Brussels Office, as
Operator of the Euroclear Clearance
System] [Cedel, societe anonyme]
-2-
<PAGE> 134
EXHIBIT H
to Pooling Agreement
FORM OF
CERTIFICATE TO BE GIVEN BY TRANSFEREE
OF BENEFICIAL INTEREST IN A REGULATION S
TEMPORARY BOOK-ENTRY CERTIFICATE
[Euroclear [Cedel, societe anonyme
151 Boulevard Jacqmain 67 Boulevard Grand-Duchesse Charlotte
B-1210 Brussels, Belgium] L-1331 Luxembourg]
Re: [Description of Certificates] issued pursuant to the Amended
and Restated Pooling and Servicing Agreement dated as of
July 28, 1998 among AMERISERVE FUNDING CORPORATION, AMERISERVE
FOOD DISTRIBUTION, INC. and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee (the "Certificates").
This is to certify that as of the date hereof, and except as set
forth below, for purposes of acquiring a beneficial interest in the
Certificates, the undersigned certifies that it is not a U.S. person (as defined
in Rule 901 under the Securities Act of 1933, as amended).
The undersigned undertakes to advise you promptly by tested telex on
or prior to the date on which you intend to submit your certification relating
to the Certificates held by you in which the undersigned intends to acquire a
beneficial interest in accordance with your operating procedures if any
applicable statement herein is not correct on such date. In the absence of any
such notification, it may be assumed that this certification applies as of such
date.
We understand that this certification is required in connection with
certain securities laws in the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy thereof to any interested party in such
proceedings.
Dated: , By:
-------------- ----------------------------
<PAGE> 135
EXHIBIT I
to Pooling Agreement
FORM OF
TRANSFER CERTIFICATE FOR EXCHANGE OR
TRANSFER FROM 144A BOOK-ENTRY CERTIFICATE
TO REGULATION S BOOK-ENTRY CERTIFICATE
[Trustee and Transfer Agent and Registrar]
Re: [Description of Certificates] issued pursuant to the Amended
and Restated Pooling and Servicing Agreement dated as of
July 28, 1998 (the "Agreement"), among AMERISERVE FUNDING
CORPORATION, AMERISERVE FOOD DISTRIBUTION, INC. and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
(the "Certificates").
Capitalized terms used but not defined herein shall have the meanings
given to them in the Agreement.
This letter relates to U.S. $___________ principal amount of
Certificates that are held as a beneficial interest in the 144A Book-Entry
Certificate (CUSIP No. _______) with DTC in the name of [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of the beneficial interest for an interest in the Regulation S
Book-Entry Certificate (CUSIP No. _______) to be held with [Euroclear] [Cedel]
through DTC.
In connection with the request and in receipt of the Certificates,
the Transferor does hereby certify that the exchange or transfer has been
effected in accordance with the transfer restrictions set forth in the Agreement
and the Certificates and:
(a) pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), and
accordingly the Transferor does hereby certify that:
(i) the offer of the Certificates was not made to a
person in the United States of America,
[(ii) at the time the buy order was originated, the
transferee was outside the United States of America or the
Transferor and any person acting on its behalf reasonably
believed that the transferee was outside the United States of
America,
<PAGE> 136
(ii) the transaction was executed in, on or through
the facilities of a designated offshore securities market and
neither the Transferor nor any person acting on its behalf
knows that the transaction was pre-arranged with a buyer in
the United States of America,]*
(iii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable,
(iv) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act,
and
(b) with respect to transfers made in reliance on Rule 144
under the Securities Act, the Transferor does hereby certify that the
Certificates are being transferred in a transaction permitted by Rule
144 under the Securities Act.
This certification and the statements contained herein are made for
your benefit and the benefit of the issuer and the [placement agent].
[Insert name of Transferor]
Dated: , By:
------------------ ------------------------------
Title:
-----------------------
- -------------
* Insert one of these two provisions, which come from the definition of
"offshore transactions" in Regulation S.
-2-
<PAGE> 137
EXHIBIT J
to Pooling Agreement
FORM OF
PLACEMENT AGENT EXCHANGE INSTRUCTIONS
Depository Trust Company
55 Water Street
50th Floor
New York, New York 10041
Re: [Description of Certificates] issued pursuant to the Amended
and Restated Pooling and Servicing Agreement dated as of
July 28, 1998 (the "Agreement"), among AMERISERVE FUNDING
CORPORATION, AMERISERVE FOOD DISTRIBUTION, INC. and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
(the "Certificates").
Pursuant to Section 6.11 of the Agreement, _______________________ (the
"Placement Agent") hereby requests that $____________ aggregate principal amount
of the Certificates held by you for our account and represented by the
Regulation S Temporary Book-Entry Certificate (CUSIP No. _______) (as defined in
the Agreement) be exchanged for an equal principal amount represented by the
144A Book-Entry Certificate (CUSIP No. _______) to be held by you for our
account.
Dated: [placement agent]
------------
By:
------------------------------
Title:
------------------------
<PAGE> 138
EXHIBIT K
to Pooling Agreement
FORM OF
ANNUAL STATEMENT AS TO COMPLIANCE
TO: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
[Name(s) of Rating Agencies]
AMERISERVE FOOD DISTRIBUTION, INC. (the "Servicer") hereby certifies
that:
(A) This Certificate is being delivered pursuant to Section 3.2(j) of
the Amended and Restated Pooling and Servicing Agreement, dated as of July 28,
1998(as the same may be amended, amended and restated, supplemented or otherwise
modified from time to time, the "Pooling Agreement"), among Servicer, AMERISERVE
FUNDING CORPORATION, as Transferor, and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, as Trustee.
(B) A review of the activities of Servicer during the calendar year
ended December 31, 199[ ] and of the performance by Servicer under the Pooling
Agreement during such calendar year has been made under the supervision of the
officer signing this Certificate.
(C) [To the best knowledge of the officer signing this Certificate,
based on such review, Servicer has fulfilled all its obligations under the
Pooling Agreement throughout such year.] [Alternately, if there has been a
default in the fulfillment of any such obligations, specify each such default
known to such officer and the nature and status thereof and remedies therefor
being pursued.]
IN WITNESS WHEREOF, Servicer has caused this Certificate to be executed
by its duly authorized officer this __ day of __________, 19__.
AMERISERVE FOOD DISTRIBUTION, INC.
By:
------------------------------------
Name:
-----------------------------
Title:
-----------------------------
<PAGE> 139
EXHIBIT L
to Pooling Agreement
DATA FIELDS
<TABLE>
<CAPTION>
Customer Information Fields Invoice Information Fields
- --------------------------- --------------------------
<S> <C>
Customer's Corporate Name Invoice Number
Customer Name Ship To Number
Customer Billing Address Bill To Number
Customer Shipping Address Invoice Date
Customer Phone Number Deliver Date
Customer Fax Number Due Date
Cross Reference Index Numbers Payment Terms
Collection Contact Name Number of Periods Past Due
Collection Contact Phone Number Gross Amount Due
Collection Contact Fax Number Net Amount Due
Any Special Collection Conditions/ Credit Memos (Reference to
Information Invoice Number)
Identify Prepay Accounts
Amount of Prepay Accounts
Is Personal Guarantee on File--
Yes or No Flag
</TABLE>
<PAGE> 1
EXHIBIT 10.11
EXECUTION COPY
TRICON RECEIVABLES
===============================================================================
SERIES 1998-1 SUPPLEMENT
TO POOLING AND SERVICING AGREEMENT
among
AMERISERVE FUNDING CORPORATION,
as Transferor,
AMERISERVE FOOD DISTRIBUTION, INC.,
as initial Servicer,
and
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
Dated as of July 28, 1998
AMERISERVE RECEIVABLES MASTER TRUST
FLOATING RATE VARIABLE FUNDING CERTIFICATES, SERIES 1998-1
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS; INCORPORATION OF TERMS
SECTION 1.1 Definitions..............................................................1
SECTION 1.2 Incorporation of Terms..................................................15
ARTICLE II DESIGNATION
SECTION 2.1 Designation.............................................................16
ARTICLE III CONDITIONS TO ISSUANCE; USE OF PROCEEDS
SECTION 3.1 Conditions to Issuance..................................................16
SECTION 3.2 Use of Proceeds.........................................................16
ARTICLE IV PAYMENTS AND ALLOCATIONS
SECTION 4.1 Interest; Additional Amounts............................................16
SECTION 4.2 Daily Calculations and Series Allocations...............................17
SECTION 4.3 Allocations of Daily Series Collections (Other Than
in an Amortization Period)..............................................17
SECTION 4.4 Allocations of Daily Series Collections During
an Amortization Period..................................................18
SECTION 4.5 Withdrawals from the Equalization Account...............................19
SECTION 4.6 [Reserved]..............................................................19
SECTION 4.7 Write-Offs and Recoveries...............................................20
SECTION 4.8 [Reserved]..............................................................20
SECTION 4.9 Tax Opinion.............................................................20
ARTICLE V DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions...........................................................20
SECTION 5.2 Payments in Respect of Transferor Certificate...........................22
SECTION 5.3 Daily Reports and Monthly Reports.......................................22
SECTION 5.4 Annual Tax Information..................................................23
SECTION 5.5 Periodic Perfection Certificate.........................................23
ARTICLE VI EARLY AMORTIZATION EVENTS
SECTION 6.1 Early Amortization Events...............................................24
SECTION 6.2 Early Amortization Period...............................................28
ARTICLE VII OPTIONAL REDEMPTION; INDEMNITIES
SECTION 7.1 Optional Redemption of Investor Interests...............................28
SECTION 7.2 Indemnification by Transferor...........................................29
SECTION 7.3 Indemnification by Servicer.............................................30
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Amendment, Waiver, Etc..................................................30
SECTION 8.2 Trustee.................................................................31
SECTION 8.3 Instructions in Writing.................................................31
SECTION 8.4 Rule 144A...............................................................31
SECTION 8.5 Supplemental Ratings Requirement........................................31
SECTION 8.6 Waiver..................................................................31
SECTION 8.7 Negotiations............................................................32
SECTION 8.8 Transfers of Series 1998-1 Certificates.................................32
SECTION 8.9 Incorporation by Reference..............................................32
SECTION 8.10 Survival of Agreement...................................................32
SECTION 8.11 Agent...................................................................32
SECTION 8.12 Notices to Rating Agencies..............................................32
EXHIBITS
EXHIBIT A Form of Series 1998-1 Certificate
EXHIBIT B Form of Daily Report
EXHIBIT C Form of Monthly Report
</TABLE>
- ii -
<PAGE> 4
This SERIES 1998-1 SUPPLEMENT, dated as of July 28, 1998 (this
"Supplement"), is made among AMERISERVE FUNDING CORPORATION, a Delaware
corporation, as Transferor, AMERISERVE FOOD DISTRIBUTION, INC., a Delaware
corporation, as initial Servicer, and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association, as Trustee.
PRELIMINARY STATEMENT
Pursuant to the Amended and Restated Pooling and Servicing Agreement,
dated as of July 28, 1998 (as it may be amended, amended and restated,
supplemented or otherwise modified from time to time, and as supplemented
hereby, the "Pooling Agreement"), among Transferor, Servicer and Trustee,
Transferor may from time to time direct Trustee to issue and authenticate, on
behalf of the Trust, one or more Series of Certificates. Certain terms
applicable to a Series are to be set forth in a Supplement. This Supplement is
a "Supplement" as that term is defined in the Pooling Agreement.
Pursuant to this Supplement, Transferor and Trustee shall create a
Series of Certificates ("Series 1998-1") and specify certain of the terms of
such Series.
ARTICLE I DEFINITIONS; INCORPORATION OF TERMS
SECTION 1.1 Definitions. (a) Capitalized terms used and not otherwise
defined herein are used as defined in Appendix A to the Pooling Agreement. This
Supplement shall be interpreted in accordance with the conventions set forth in
Part B of that Appendix A.
(b) Each reference in this Supplement to funds on deposit in the
Carrying Cost Account, the Equalization Account or the Principal Funding
Account (or similar phrase) refers only to funds in the administrative
sub-accounts of those accounts that are allocated to Series 1998-1. Unless the
context otherwise requires, in this Supplement and the Certificate Purchase
Agreement: (i) each reference to a "Daily Report" or "Monthly Report" refers to
a Daily Report or Monthly Report for the Series 1998-1 Certificates; (ii) each
reference to the "Servicing Fee" refers to the Servicing Fee allocable to
Series 1998-1; and (iii) each reference to the Transaction Documents shall
include a reference to the Certificate Purchase Agreement.
(c) Each capitalized term defined below relates only to the Series
1998-1 Certificates and to no other Series of Certificates. Whenever used in
this Supplement, the following words and phrases shall have the following
meanings:
<PAGE> 5
"ABR Tranche" means, at any time, any portion (which may be 100%) of
the Aggregate Invested Amount that is so designated by Transferor in accordance
with the Certificate Purchase Agreement.
"Additional Amounts" means amounts payable pursuant to Sections 4.2,
4.3, 4.5, 4.6 and 10.5 of the Certificate Purchase Agreement, whether or not
such sections refer to "Additional Amounts".
"Adjusted Eligible Receivables" means, on any Business Day, the result
of (a) the aggregate Unpaid Balance of Eligible Receivables on that day, minus
(b) the Unapplied Cash on that day, in each case as reflected in the Daily
Report for that Business Day, plus (c) the Aggregate Retained Balances.
"Agent" means Bank of America in its capacity as Agent under the
Certificate Purchase Agreement, together with its successors in that capacity.
The Agent is an "Agent" with respect to Series 1998-1 for purposes of the
Pooling Agreement.
"Aggregate Invested Amount" means, as of any date of determination,
the sum of the Invested Amounts of all Series 1998-1 Certificateholders.
"Aggregate Retained Balances" means, on any Business Day, the
aggregate of the balances relating to Tricon Receivables retained in Lockbox
Accounts or Blocked Accounts for items in the process of collection but for
which funds have not been made available by the related Lockbox Bank or Blocked
Account Bank, provided that (i) no notice of insufficient funds or similar
situation shall exist with respect thereto and (ii) the Unpaid Balance of
Tricon Receivables shall have been reduced by an amount equal to such balances.
"Alternate Base Rate" means, on any day, a fluctuating rate of
interest per annum equal to the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by Bank of America in San Francisco,
California, as its "reference rate", and
(b) the Federal Funds Rate.
The "reference rate" is a rate set by Bank of America based upon various
factors including Bank of America's costs and desired return, general economic
conditions and other factors, and is used as reference point for pricing some
loans, which may be priced at, above, or below such announced rate.
page 2
<PAGE> 6
Any change in the reference rate announced by Bank of America shall
take effect without prior notice to any Person at the opening of business on
the day specified in the public announcement of such change.
"AmeriServe Credit Agreement" means the Third Amended and Restated
Credit Agreement dated as of May 21, 1998 among AmeriServe, Bank of America, as
Administrative Agent and Letter of Credit Issuing Lender, Donaldson, Lufkin &
Jenrette Securities Corporation, as Documentation Agent, and the other
financial institutions party thereto.
"Amortization Period" means the period (x) beginning on the earliest
of (i) the date on which a Termination of Sale Notice is given pursuant to
Section 8.1 of the Purchase Agreement, (ii) the date which is the fifth
anniversary of the First Issuance Date and (iii) the date, if any, on which an
Early Amortization Period commences, and (y) ending on the earlier of (i) the
Final Scheduled Payment Date and (ii) the date on which this Supplement shall
have terminated pursuant to Section 8.10.
"Applicable Ratings Factor" means 2.0.
"Applicable Reserve Ratio" means, during any Distribution Period, the
greater of (a) the Minimum Required Reserve Ratio and (b) the Required Reserve
Ratio, in each case as calculated in the Monthly Report required to be
delivered on the Report Date immediately prior to the start of that
Distribution Period.
"Assignee" is defined in Section 10.3(c) of the Certificate Purchase
Agreement.
"Attorney Costs" has the meaning set forth in Appendix A to the
Pooling Agreement, except that such term also shall include the allocated cost
of internal legal services, and all disbursements of internal counsel, of each
Series 1998-1 Certificateholder and the Agent.
"Bank of America" means Bank of America National Trust and Savings
Association.
"Base Amount" means, on any Business Day, the result of the following
formula:
NER - ROCA
page 3
<PAGE> 7
where:
NER = the Net Eligible Receivables as reported in the Daily Report for
that Business Day; and
ROCA = the Required Overcollateralization Amount as reported in the Daily
Report for that Business Day.
"Carrying Cost Cash Reserve Amount" means an amount equal to the
Current Carrying Costs.
"Carrying Cost Receivables Reserve" means, on any Business Day, the
result of:
(a) the Current Carrying Costs; plus
(b) the product of (i) the Aggregate Invested Amount,
multiplied by (ii) (A) 1.5 times (B) the result of (x) the Certificate
Rate minus (y) the Commitment Fee Percentage, multiplied by (iii) a
fraction the numerator of which is the product of 2.0 and the number
of Turnover Days and the denominator of which is 360; plus
(c) the product of (i) the Commitment Fee Percentage,
multiplied by (ii) (A) 1.5 times (B) the aggregate Stated Amounts,
multiplied by (iii) a fraction the numerator of which is the product
of 2.0 and the number of Turnover Days and the denominator of which is
360; plus
(d) the product of (i) the aggregate Unpaid Balance of Tricon
Receivables on such Distribution Date, multiplied by (ii) 2%,
multiplied by (iii) a fraction the numerator of which is the product
of 2.0 and the number of Turnover Days and the denominator of which is
360; plus
(e) the product of (i) $50,000, multiplied by (ii) a
fraction, the numerator of which is the product of 1.5 times the
number of Turnover Days and the denominator of which is 360; minus
(f) the balance on deposit in the Carrying Cost Account at
the beginning of that Business Day.
"Certificate Purchase Agreement" means the Certificate Purchase
Agreement dated as of the Closing Date among Transferor, AmeriServe, the Series
1998-1 Certificateholders and Bank of America, as the Agent, as the same may be
amended, amended and restated or otherwise modified from time to time in
page 4
<PAGE> 8
accordance with its terms. The Certificate Purchase Agreement is hereby
designated a "Transaction Document".
"Certificate Rate" means, at any time, the weighted average of the
interest rates on all outstanding Tranches.
"Certificate Spread" means: (A) if Tricon has a senior public
unsecured debt rating from each of the Rating Agencies of at least "BBB" or
higher, the Certificate Spread shall be .750% per annum; (B) if Tricon has a
senior public unsecured debt rating from each of the Rating Agencies of "BBB-",
the Certificate Spread shall be 1.00% per annum; (C) if Tricon has a senior
public unsecured debt rating from each of the Rating Agencies of at least "BB"
but less than "BBB-", the Certificate Spread shall be 1.40% per annum; (D) if
Tricon has a senior public unsecured debt rating from each of the Rating
Agencies of "BB-", the Certificate Spread shall be 1.75% per annum; and (E) if
Tricon has a senior public unsecured debt rating from each of the Rating
Agencies of "B+" or has a senior public unsecured debt rating from any of the
Rating Agencies below "B+" or if Tricon does not have a senior public unsecured
debt rating from each of the Rating Agencies, the Certificate Spread shall be
2.00% per annum; provided, however that Trustee shall not be responsible for
determining the senior public unsecured debt rating of Tricon.
"Closing Date" means July 30, 1998.
"Commitment Fee" is defined in Section 4.2 of the Certificate Purchase
Agreement.
"Commitment Fee Percentage" means the percentage set forth in Section
4.2 of the Certificate Purchase Agreement.
"Commitment Fee Reserve Amount" means, for each Calculation Period,
the product of (a) the aggregate Stated Amounts, multiplied by (b) the
Commitment Fee Percentage, multiplied by (c) a fraction (i) the numerator of
which is the actual number of days in such Calculation Period and (ii) the
denominator of which is 360.
"Current Carrying Costs" means, during any Distribution Period, an
amount equal to the sum of (i) the amount of interest (including additional
interest pursuant to Section 4.1(d)) on the Series 1998-1 Certificates and the
amount of the Servicing Fee that shall be payable on the next Distribution
Date, plus (ii) accrued and unpaid expenses described in Section 7.2(l)(C) of
the Pooling Agreement, plus (iii) the Monthly Trustee Payment Amount, plus (iv)
accrued and unpaid Transition Costs, plus (v) the Commitment Fee Reserve
Amount.
page 5
<PAGE> 9
"Daily Series Collections" is defined in Section 4.2.
"Dilution Horizon Variable" means, at any time, a fraction having (a)
a numerator equal to the sum of the aggregate amounts payable pursuant to
invoices giving rise to Tricon Receivables and generated by the Sellers (other
than ProSource) during the Calculation Period ending on the most recent Cut-Off
Date (as of that Cut-Off Date) and (b) a denominator equal to the Net Eligible
Receivables as of such Cut-Off Date.
"Dilution Ratio" means, as calculated by the Servicer and provided in
each Monthly Report as of the most recent Cut-Off Date, a fraction (expressed
as a percentage) having (a) a numerator equal to the aggregate amount of
Dilution on the Tricon Receivables occurring during the Calculation Period
ending on the most recent Cut-Off Date, and (b) a denominator equal to the
aggregate amounts payable pursuant to invoices giving rise to Tricon
Receivables that were generated by the Sellers (other than ProSource) during
the Calculation Period ending on the second most recent Cut-Off Date.
"Dilution Reserve Ratio" means, as calculated by the Servicer and
provided in each Monthly Report, the result (expressed as a percentage)
calculated in accordance with the following formula:
{(ARF x ADR) + [(HDR-ADR) x (HDR/ADR)]} x DHV
where:
ADR = the average of the Dilution Ratios during the period of 12
consecutive Calculation Periods ending on the related Cut-Off
Date;
ARF = the Applicable Ratings Factor;
DHV = the Dilution Horizon Variable; and
HDR = the highest Dilution Ratio as of the end of any of the 12
consecutive Calculation Periods ending on the related Cut-Off
Date.
"Dilution Reserve Ratio (Z-value)" means, as calculated by the
Servicer and provided in each Monthly Report, the result (expressed as a
percentage) calculated in accordance with the following formula:
[(ARF x ADR) + (Z-value x SD)] x DHV
where:
ADR = the average of the Dilution Ratios during the period of 12
consecutive Calculation Periods ending on the related Cut-Off
Date;
page 6
<PAGE> 10
ARF = the Applicable Ratings Factor;
DHV = the Dilution Horizon Variable; and
SD = the sample standard deviation, during the period of 12
consecutive Calculation Periods ending on the related Cut-Off
Date, of the Dilution Ratio.
"Early Amortization Calculation Date" means the day before an Early
Amortization Period begins.
"Early Amortization Event" is defined in Section 6.1.
"Early Amortization Period" means the period beginning on the
applicable date determined in accordance with Section 6.2 and ending on the day
on which the Aggregate Invested Amount has been reduced to zero.
"Eligible Receivable" shall have the meaning set forth in Appendix A
to the Pooling Agreement, except that: (a) no Receivable shall be an Eligible
Receivable unless Tricon is the Obligor of such Receivable; (b) no Receivable
shall be an Eligible Receivable if (x) a State Tax Opinion Request (defined
below) has been made with respect to the related Servicing Jurisdiction
(defined below) and (y) the Agent shall not have notified the Servicer in
writing that the Agent is satisfied with the related State Tax Opinion (defined
below), it being understood that the Agent has the right in its sole discretion
to decide whether or not to give such notice (and whether or not to make any
State Tax Opinion Request), and the giving of any such notice shall not limit
the rights and remedies otherwise available to the Trustee, the Agent, the
Series 1998-1 Certificateholders, any Affected Party or any Indemnitee under
the Transaction Documents or applicable law; and (c) no ProSource Receivable
shall be an Eligible Receivable.
As used in the previous sentence:
"Servicing Jurisdiction" means a state in which the Servicer
or a Sub-Servicer conducts some or all of its servicing,
administration or collection operations in respect of Receivables, and
the "related" Servicing Jurisdiction with respect to a Receivable
means the Servicing Jurisdiction from which such Receivable is
serviced, administered or collected.
"State Tax Opinion" means a written opinion of counsel,
addressed to the Trustee, the Agent, the Rating Agencies and the
Series 1998-1 Certificateholders, and in form and substance (and from
counsel) satisfactory to the Agent and the Rating Agencies, to the
effect that, for purposes of state income and franchise tax purposes
in the relevant Servicing Jurisdiction, (i) the Trust shall not be
subject to any income,
page 7
<PAGE> 11
franchise or entity level tax, and (ii) the Series 1998-1 Certificates
shall be characterized as debt or partnership interests.
"State Tax Opinion Request" means a written request from the
Agent to the Servicer requesting the Servicer to cause a State Tax
Opinion to be rendered.
"Eurodollar Tranche" means, during any Interest Period, any portion of
the Aggregate Invested Amount that is so designated by Transferor in accordance
with the Certificate Purchase Agreement.
"Expected Final Payment Date" means the Distribution Date in August
2003.
"Exposure" is defined in Section 10.3 of the Certificate Purchase
Agreement.
"Federal Funds Rate" means, on any day, (a) the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if the day is not a Business Day, for the immediately preceding Business
Day) by the Federal Reserve Bank of New York, plus (b) 100 basis points;
provided that if the rate set forth in clause (a) above is not so published for
any Business Day, the rate for purposes of such clause (a) shall be the average
of the quotations for the day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by it.
"Final Scheduled Payment Date" means the Distribution Date in August
2004.
"Guarantor" means AmeriServe, in its capacity as the guarantor under
the Seller Guaranty.
"Holder" means a Holder (as defined in the Pooling Agreement) of a
Series 1998-1 Certificate.
"Increase" is defined in Section 2.2 of the Certificate Purchase
Agreement.
"Increase Amount" is defined in Section 2.2 of the Certificate
Purchase Agreement.
"Indemnitee" is defined in Section 10.5 of the Certificate Purchase
Agreement.
page 8
<PAGE> 12
"Initial Aggregate Invested Amount" means (a) at any time during the
Revolving Period, the Aggregate Invested Amount at that time and (b) at any
other time, the Aggregate Invested Amount at the end of the Revolving Period.
"Intercreditor Agreement" means the Intercreditor Agreement dated as
of July 11, 1997 between the Trustee and the Administrative Agent under the
AmeriServe Credit Agreement, as such Intercreditor Agreement may be amended,
amended and restated or otherwise modified from time to time in accordance with
its terms.
"Intercreditor Provisions" means the following provisions of the
AmeriServe Credit Agreement: Sections 5.5, 9.1(n), 9.2(g), 9.2(h), 9.3(d),
9.4(e), 9.4(f), 9.5(l), 9.6(a), 9.8(e), 9.16, 9.21 and the definitions of
"Intercreditor Agreement", "Joint Venture", "Pooling and Servicing Agreement",
"Purchase Money Note", "Qualified Receivables Transaction", "Receivable Stated
Amount", "Receivables", "Receivables Bridge Facilities", "Receivables
Documents", "Receivables Financing Costs", "Receivables Investor Instruments",
"Receivables Program Assets", "Receivables Program Obligations", "Receivables
Related Assets", "Receivables Seller", "Receivables Subsidiary", "Special
Purpose Vehicle", "Standard Securitization Undertakings", and "Subsidiary".
"Interest Period" means the period from the Closing Date to the first
subsequent Distribution Date and each Distribution Period thereafter.
"Invested Amount" means, at any time, with respect to a Series 1998-1
Certificateholder, the result of (a) the aggregate amount of increases in such
Series 1998-1 Certificateholder's Invested Amount pursuant to the Certificate
Purchase Agreement at or prior to such time, less (b) the aggregate amount of
all distributions that have been made to such Series 1998-1 Certificateholder
on account of principal (provided that the Invested Amount shall never be
reduced below zero); it being understood that a Series 1998-1 Certificateholder
may assign some or all of its Invested Amount in accordance with the terms of
the Certificate Purchase Agreement and that the Invested Amounts of the
assignor Series 1998-1 Certificateholder and the assignee Series 1998-1
Certificateholder shall be adjusted accordingly.
"Investor Allocation Percentage" means:
(a) on any Business Day falling in the Revolving Period, a
fraction (expressed as a percentage, which in any event may not exceed
100%) (i) the numerator of which is the Net Invested Amount as of that
Business Day, and (ii) the denominator of which is the Base Amount as
of that Business Day; and
page 9
<PAGE> 13
(b) on any Business Day falling in the Amortization Period or
an Early Amortization Period, a fraction (expressed as a percentage,
which in any event may not exceed 100%) (i) the numerator of which is
the Net Invested Amount as of the first day of the Amortization Period
or the Early Amortization Calculation Date, as applicable, and (ii)
the denominator of which is the Base Amount as of the first day of the
Amortization Period or the Early Amortization Calculation Date, as
applicable.
"Investor Repayment Amount" means, on any Business Day falling in the
Amortization Period or an Early Amortization Period, the sum of (a) the
Aggregate Invested Amount, plus (b) the aggregate amount of accrued and unpaid
interest (including additional interest contemplated by Section 4.1) in respect
of the Series 1998-1 Certificates, plus (c) any Additional Amounts and other
obligations known to be payable on or before the first Distribution Date
falling after that date.
"LIBOR Office" is defined in Section 4.3(a) of the Certificate
Purchase Agreement.
"Minimum Required Reserve Ratio" means 10%.
"Monthly Trustee Payment Amount" means the sum of (i) the dollar
amount specified in the fee schedule delivered by Trustee to the Servicer and
the Agent on or prior to the Closing Date, as modified from time to time with
the prior written consent of the Servicer and the Agent, plus (ii) any
reasonable and documented out-of-pocket expenses incurred by Trustee in the
administration of its duties hereunder; provided that the Monthly Trustee
Payment Amount shall not exceed $5,000 for any month.
"Net Eligible Receivables" means, at any time, the positive difference
of (a) the Adjusted Eligible Receivables, minus (b) the sum of (i) the
aggregate amount paid by Tricon to the Sellers in respect of any "cash in
advance" or "cash on account" arrangement and which has not been applied
against goods shipped to such Obligors, plus (ii) the PACA Amount with respect
to Tricon Receivables, plus (iii) the aggregate amount of sales tax included in
the Unpaid Balances of the Tricon Receivables, plus (iv) the aggregate amount
of royalties, advertising fees or marketing fees included in the calculation of
the Unpaid Balances of the Tricon Receivables, plus (v) the aggregate rebilled
amount of all Debit Memos included in the calculation of the Unpaid Balances of
the Tricon Receivables, plus (vi) the aggregate of amounts payable by Sellers
in respect of the "SmartSource" program.
"Net Invested Amount" means, on any Business Day, the positive
difference (if any) of (a) the Aggregate Invested Amount, minus (b) the
aggregate balance on deposit in the Equalization Account and the Principal
Funding Account.
page 10
<PAGE> 14
"One-Month LIBOR" means, for any Interest Period, the rate per annum,
determined by the Agent and notified in writing by the Agent to Trustee, which
is the arithmetic mean (rounded to the nearest 1/100 of 1%) of the offered
rates for dollar deposits having a maturity of one month commencing on the
first day of such Interest Period that appears on the Telerate British Bankers
Assoc. Interest Settlement Rates Page (defined below) at approximately 11:00
a.m., London time on the second full Business Day prior to such date; provided,
however, that if there shall at any time no longer exist a Telerate British
Bankers Assoc. Interest Settlement Rates Page, "One-Month LIBOR" shall mean the
rate per annum equal to the average rate at which the principal London office
of Bank of America is offered dollar deposits at or about 10:00 a.m., New York
City time, two Business Days prior to the first Business Day of such Interest
Period in the London eurodollar interbank market for delivery on the first day
of such Interest Period for one month and in a principal amount equal to an
amount of not less than $1,000,000. As used herein, "Telerate British Bankers
Assoc. Interest Settlement Rates Page" means the display designated as Page
3750 on the Telerate System Incorporated Service (or such other page as may
replace such page on such service for the purpose of displaying the rates at
which dollar deposits are offered by leading banks in the London interbank
deposit market), as reported by Bloomberg Financial Markets Commodities News
(or by another source selected by the Agent).
"PACA Amount" at any time means the aggregate amount of obligations
then owed by the Sellers to any Persons that may be entitled to make a claim
for payment thereof pursuant to PACA.
"Participants" is defined in Section 10.3 of the Certificate Purchase
Agreement.
"Payment Term" means, with respect to any Tricon Receivable, the
number of days between its invoice date and its due date.
"Payment Term Multiplier" means one.
"Percentage" is defined in Section 2.1 of the Certificate Purchase
Agreement.
"Permitted Transferee" is defined in Section 10.3(c) of the
Certificate Purchase Agreement.
"PFS" means the unincorporated food distribution business of PepsiCo,
Inc. known as PFS that AmeriServe acquired from PepsiCo, Inc. in July, 1997.
page 11
<PAGE> 15
"Principal Payment Date" means (i) any date on which the Aggregate
Invested Amount is to be reduced pursuant to Section 3.1 of the Certificate
Purchase Agreement, and (ii) any Distribution Date falling in an Amortization
Period with respect to Series 1998-1 (beginning with the Distribution Date
falling in the Calculation Period after the Calculation Period in which the
Amortization Period begins).
"ProSource" means ProSource Services Corporation, a Delaware
corporation.
"ProSource Receivable" means a Receivable that was originated by
ProSource. For the avoidance of doubt, no Receivable shall be a ProSource
Receivable if the Obligor of such Receivable is Tricon.
"Receivables Review" is defined in Section 8.1(d) of the Certificate
Purchase Agreement.
"Required Overcollateralization Amount" means, on any Business Day,
the result of the following formula:
RR - AIA + [CCRR x (1/1-ARR)]
where:
AIA = the Aggregate Invested Amount in effect for that Business Day;
ARR = the Applicable Reserve Ratio in effect for that Business Day;
CCRR = the Carrying Cost Receivables Reserve as reported in the Daily
Report for that Business Day; and
RR = the Required Receivables in effect for that Business Day.
"Required Receivables" means, on any Business Day, the result of the
following formula:
IA
-------
(1-ARR)
where:
ARR = the Applicable Reserve Ratio in effect for that Business Day;
and
IA = the Initial Aggregate Invested Amount.
page 12
<PAGE> 16
"Required Reserve Ratio" means, as calculated in each Monthly Report,
the greater of (a) the Dilution Reserve Ratio, and (b) the Dilution Reserve
Ratio (Z-value).
"Required Series Holders" means the Required Series 1998-1
Certificateholders.
"Required Series 1998-1 Certificateholders" is defined in Section 9.9
of the Certificate Purchase Agreement.
"Reserve-Adjusted Eurodollar Rate" means, for any Interest Period, the
rate per annum obtained by dividing (i) One-Month LIBOR for such Interest
Period by (ii) a percentage equal to 100%, minus the stated maximum rate of all
reserve requirements (including any marginal, emergency, supplemental, special
or other reserves) applicable on such second preceding Business Day to any
member bank of the Federal Reserve System in respect of "Eurocurrency
liabilities" as defined in Regulation D of the Federal Reserve Board (or any
successor category of liabilities under Regulation D).
"Revolving Period" means the period beginning (a) on the Closing Date
and (b) ending on the day before the first day of the Amortization Period.
"Series 1998-1" is defined in the preamble.
"Series 1998-1 Certificateholders" means the Holders of the Series
1998-1 Certificates.
"Series 1998-1 Certificates" means any of the Investor Certificates
issued pursuant to this Supplement, each of which shall be substantially in the
form of Exhibit A.
"Servicing Fee" with respect to Series 1998-1 shall be calculated as
follows:
At any time when any AmeriServe Person is Servicer, the Servicing Fee
for any Distribution Period shall be equal to one-twelfth of the product of (a)
2%, multiplied by (b) the aggregate Unpaid Balance of all Tricon Receivables,
as measured on the first Business Day of that Distribution Period.
The Servicing Fee for a Successor Servicer that is not an AmeriServe
Person shall be an amount equal to the greater of (i) the amount calculated
pursuant to the preceding sentence and (ii) an alternative amount specified by
such Servicer not exceeding the sum of (x) 110% of the aggregate reasonable
costs and
page 13
<PAGE> 17
expenses incurred by such Servicer during such Distribution Period in
connection with the performance of its obligations under the Transaction
Documents, and (y) the other costs and expenses that are to be paid out of the
Servicing Fee, as described in the Pooling Agreement; provided that the amount
provided for in clause (x) shall not exceed one-twelfth of 2% of the aggregate
Unpaid Balance of the Tricon Receivables as measured on the first Business Day
of the Distribution Period.
"Stated Amount" means as to any Series 1998-1 Certificate and any date
of determination, the maximum principal amount that may be required to be
funded as of such date by the Holder of such Series 1998-1 Certificate.
"Tax Opinion" is defined in Section 4.9.
"Taxes" is defined in Section 4.6 of the Certificate Purchase
Agreement.
"Tranche" means each of the ABR Tranche and each Eurodollar Tranche.
"Transferee" is defined in Section 10.3(d) of the Certificate Purchase
Agreement.
"Transferor Indemnified Losses" is defined in Section 7.2.
"Transferor Indemnified Party" is defined in Section 7.2.
"Transferor Payment Percentage" means, on any Business Day, the
difference of 100% minus the Investor Allocation Percentage on that Business
Day.
"Transition Costs" is defined in Section 10.2(b) of the Pooling
Agreement.
"Tricon" means Tricon Global Restaurants, Inc., a North Carolina
corporation.
"Tricon Collections" means all funds that are received by any Seller,
Transferor, Servicer or Trustee from or on behalf of Tricon in payment of any
amounts owed (including invoice prices, finance charges, interest and all other
charges, if any) in respect of any Tricon Receivable or any Related Asset
relating thereto, or any other funds otherwise applied to repay or discharge
any such Tricon Receivable (including insurance payments that any Seller,
Transferor or Servicer applies in the ordinary course of its business to
amounts owed in respect of such Tricon Receivable and net proceeds of sale or
other disposition of repossessed goods that were the subject of such Tricon
Receivable), in each case
page 14
<PAGE> 18
without regard to whether such funds are immediately available or evidenced by
checks or otherwise.
"Tricon Credit Agreement" means the Credit Agreement dated as of
October 2, 1997 among Tricon, the Lenders party thereto, The Chase Manhattan
Bank, as Administrative Agent, Chase Manhattan Bank Delaware, as Issuing Bank
and the Syndication Agents and Arrangers party thereto, as the same may be
amended, amended and restated or otherwise modified from time to time.
"Tricon Fixed Charge Coverage Ratio" means the "Fixed Charge Coverage
Ratio" as defined in the Tricon Credit Agreement.
"Tricon Leverage Ratio" means the "Leverage Ratio" as defined in the
Tricon Credit Agreement.
"Tricon Receivable" means a Receivable the Obligor of which is Tricon.
"Turnover Days" means, at any time, the greater of (a) thirty (30) and
(b) the quotient of:
(x) (i) the sum of the Unpaid Balances of Tricon Receivables
as of the Cut-Off Date for each of the two immediately preceding
Calculation Periods divided by 2, multiplied by (ii) 60; divided by
(y) the aggregate amount payable pursuant to invoices giving
rise to Tricon Receivables that were generated during the immediately
preceding two Calculation Periods.
"Unapplied Cash" means, on any Business Day, available funds received
in the Master Collection Account and reflected in the Daily Report for that
Business Day that have not been applied as Collections on a particular
Receivable on or prior to the time as of which that Daily Report is prepared.
"Unmatured Early Amortization Event" means an event or condition that,
upon the giving of notice or the passage of time, would become an Early
Amortization Event.
"Z-value" means 1.96.
SECTION 1.2 Incorporation of Terms. The terms of the Pooling Agreement
are incorporated in this Supplement as if set forth in full herein. As
supplemented by this Supplement, the Pooling Agreement is in all respects
ratified and confirmed and both together shall be read, taken and construed as
one and the
page 15
<PAGE> 19
same agreement. If the terms of this Supplement and the terms of the Pooling
Agreement conflict, the terms of this Supplement shall control with respect to
the Series 1998-1 Certificates.
ARTICLE II DESIGNATION
SECTION 2.1 Designation. There is hereby created a Series to be known
as the "Series 1998-1 Certificates" or the "Floating Rate Variable Funding
Certificates, Series 1998-1". Subject to the conditions set forth in Article
III, Trustee shall authenticate and deliver the Series 1998-1 Certificates to
or upon the order of Transferor in an aggregate Stated Amount equal to
$105,000,000, it being understood that the Stated Amount may decrease in the
circumstances contemplated by Section 2.3 of the Certificate Purchase
Agreement.
ARTICLE III CONDITIONS TO ISSUANCE; USE OF PROCEEDS
SECTION 3.1 Conditions to Issuance. Trustee shall not authenticate the
Series 1998-1 Certificates unless (i) all conditions to the issuance of the
Series 1998-1 Certificates under Section 6.10 of the Pooling Agreement shall
have been satisfied, (ii) Trustee shall have received a letter from AmeriServe
updating the letter previously delivered pursuant to the first sentence of
Section 5.1(o) of the Purchase Agreement, and (iii) all conditions set forth in
Section 7.1 of the Certificate Purchase Agreement shall have been satisfied.
SECTION 3.2 Use of Proceeds. The proceeds from the issuance of the
Series 1998-1 Certificates shall be used for general corporate purposes of
Transferor.
ARTICLE IV PAYMENTS AND ALLOCATIONS
SECTION 4.1 Interest; Additional Amounts. (a) Subject to Section 4.1
of the Certificate Purchase Agreement, Transferor may from time to time
allocate the Aggregate Invested Amount to the ABR Tranche and up to the number
of separate Eurodollar Tranches specified in Section 4.1(b) of the Certificate
Purchase Agreement; provided, however, that the Transferor shall not allocate
any of the Aggregate Invested Amount to the ABR Tranche unless the Agent can
not determine One-Month LIBOR with respect to the Eurodollar Tranches. Interest
on each Tranche shall be payable on each Distribution Date and shall be
calculated on the actual outstanding principal balance of the Series 1998-1
Certificates.
(b) Interest on a Eurodollar Tranche shall accrue during any Interest
Period at a rate per annum equal to the sum of (i) the Reserve Adjusted
Eurodollar
page 16
<PAGE> 20
Rate, plus (ii) the Certificate Spread and shall be calculated on the basis of
actual days over a year of 360 days.
(c) Interest on the ABR Tranche shall accrue at a rate per annum equal
to the sum of (i) the Alternate Base Rate in effect from time to time, plus
(ii) the Certificate Spread and shall be calculated on the basis of actual days
over a year of 365 or 366 days, as the case may be.
(d) Interest with respect to the Series 1998-1 Certificates due but
not paid on any Distribution Date shall be due on the next Distribution Date
with additional interest on the amount at 2% per annum above the Alternate Base
Rate to the extent permitted by law. To the extent permitted by law, interest
also shall accrue at the rate of 2% per annum above the Alternate Base Rate on
any other amounts due but not paid to the Agent, the Series 1998-1
Certificateholders, any Affected Party or any other Indemnitee pursuant to this
Supplement or the Pooling Agreement.
(e) Additional Amounts shall also be payable with respect to the
Series 1998-1 Certificates as specified in the Certificate Purchase Agreement
and, except in the case of Section 7.1, to the extent (but only to the extent)
that funds become available for such Additional Amounts in accordance with
Sections 4.2 or 4.3.
SECTION 4.2 Daily Calculations and Series Allocations. On each
Business Day, Servicer shall calculate the Carrying Cost Cash Reserve Amount
and the Base Amount. On each Business Day which is not in an Early Amortization
Period, Servicer shall also determine whether the Net Invested Amount is
greater than, equal to or less than the Base Amount.
On each Business Day, Servicer shall allocate to Series 1998-1 all
Tricon Collections received in the Master Collection Account since the
preceding Business Day. The funds allocated to Series 1998-1 in accordance with
the preceding sentence, together with any funds released from the Equalization
Account in accordance with Section 4.5 on that Business Day, are called the
"Daily Series Collections".
SECTION 4.3 Allocations of Daily Series Collections (Other Than in an
Amortization Period). On each Business Day (other than a Business Day falling
in an Amortization Period), (a) Servicer shall allocate to Series 1998-1 the
lesser of (i) the Investor Allocation Percentage of the Daily Series
Collections and (ii) the aggregate amount of Daily Series Collections required
to fund the items described in priorities first through fourth below to the
following purposes, in the priority indicated (and to the extent of Daily
Series Collections available), (b) Servicer shall indicate such allocation in
the Daily Report delivered on such Business Day, and
page 17
<PAGE> 21
(c) in accordance with such Daily Report, Trustee shall remit or hold funds as
follows:
first, to the Carrying Cost Account until the amount
allocated to the Carrying Cost Account equals an amount equal to the
Current Carrying Costs as of such day;
second, if Transferor shall have notified the Agent in
accordance with Section 3.1 of the Certificate Purchase Agreement that
it desires to reduce the Aggregate Invested Amount to the Principal
Funding Account until the funds on deposit in that account equal the
amount of such reduction;
third, if the Net Invested Amount is greater than the Base
Amount, to the Equalization Account in an amount sufficient to reduce
the Net Invested Amount to an amount equal to the Base Amount; and
fourth, to move from the Master Collection Account, into a
separate administrative subaccount, the amount necessary to pay on the
next Distribution Date all amounts payable in respect of Additional
Amounts.
On such Business Day, Servicer shall allocate the remainder
of the Daily Series Collections to purchase additional Tricon Assets
from the Transferor to the extent available or, if a sufficient level
of Tricon Assets are not then available, as a distribution on the
Transferor Certificate.
If, on any day, the amount of Daily Series Collections that is then
allocated to the Carrying Cost Account is less than the amount of Daily Series
Collections that is then required to be allocated to the Carrying Cost Account,
Servicer shall reallocate such Daily Series Collections on such day first to
the Monthly Trustee Payment Amount and Transition Costs, if any, and then to
one or more of the obligations described in priorities second through fourth of
the preceding sentence, in the order of priority set forth therein.
In addition, if, on any day, funds on deposit in the Master Collection
Account and available for allocation under priority fourth are less than the
amount of the obligations described therein, then the available Collections
shall be allocated by Servicer to the holders of such obligations pro rata
according to the respective amounts of such obligations held by them.
SECTION 4.4 Allocations of Daily Series Collections During an
Amortization Period. On each Business Day falling in an Amortization Period,
page 18
<PAGE> 22
(a) Servicer shall allocate the Daily Series Collections to Series 1998-1 for
the following purposes, in the priority indicated (and to the extent of Daily
Series Collections available), (b) Servicer shall indicate such allocation in
the Daily Report delivered on such Business Day, and (c) in accordance with
such Daily Report, Trustee shall remit or hold funds as follows:
first, to the Carrying Cost Account to the extent that the
balance therein is less than the amount of Current Carrying Costs
(other than any Servicing Fee payable to any AmeriServe Person)
payable on the Distribution Date relating to the Calculation Period
during which such Business Day falls;
second, to the Principal Funding Account, an amount equal to
the excess of the Daily Series Collections over the amount allocated
on that Business Day pursuant to priority first, provided that the
aggregate amount so deposited shall in no event exceed the Aggregate
Invested Amount for Series 1998-1;
third, to move from the Master Collection Account, into a
separate administrative subaccount, the amount necessary to pay on the
next Distribution Date all amounts payable in respect of Additional
Amounts;
fourth, to the Carrying Cost Account to the extent that the
balance therein is less than the amount of Current Carrying Costs
(including any Servicing Fee payable to any AmeriServe Person); and
fifth, the balance to Transferor.
If, on any day, funds on deposit in the Master Collection Account and
available for allocation under priority third are less than the amount of the
obligations described therein, then the available Collections shall be
allocated by Servicer to the holders of such obligations pro rata according to
the respective amounts of such obligations held by them.
SECTION 4.5 Withdrawals from the Equalization Account. On any Business
Day during the Revolving Period on which no Early Amortization Event (or
Unmatured Early Amortization Event) exists, Servicer may instruct Trustee in
writing to withdraw (and upon receipt of such instruction Trustee shall
withdraw) funds from the Equalization Account with respect to Series 1998-1 and
apply such funds as Daily Series Collections, so long as the Net Invested
Amount would not exceed the Base Amount after giving effect to such transfer
and application. On the first day of the Amortization Period, Servicer shall
instruct Trustee to transfer
page 19
<PAGE> 23
(and Trustee shall transfer) the entire balance in the Equalization Account to
the Principal Funding Account.
SECTION 4.6 [Reserved].
SECTION 4.7 Write-Offs and Recoveries. The allocation of Write-Offs
and Dilutions referred to in Section 4.3(b) of the Pooling Agreement shall not
apply to Series 1998-1.
SECTION 4.8 [Reserved].
SECTION 4.9 Tax Opinion. If any "Tax Opinion" is required to be
delivered in connection with the Series 1998-1 Certificates, the term "Tax
Opinion" shall have the meaning specified below:
"Tax Opinion" means, with respect to any action, an Opinion
of Counsel to the effect that, for Federal income tax and applicable
state income and franchise tax purposes, (a) such action shall not
adversely affect the characterization of the Investor Certificates of
Series 1998-1 as debt or partnership interests, (b) following such
action the Trust would not be treated as an association (or publicly
traded partnership) taxable as a corporation, (c) such action would
not be treated as a taxable event to any Series 1998-1 Investor
Certificateholder or Certificate Owner.
ARTICLE V DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions. On each Distribution Date and (with respect
to clause sixth below) each Principal Payment Date, Trustee shall, in
accordance with instructions set out in the applicable Daily Report and to the
extent funds are available for such payment in the Carrying Cost Account (and,
in the case of clause eighth, in the Master Collection Account), distribute
such funds in the following priority:
first, to itself, the Monthly Trustee Payment Amount;
second, to the Servicer, so long as the Servicer is not an
AmeriServe Person, the Servicing Fee for the preceding Distribution
Period and to any Successor Servicer, the amount of any Transition
Costs;
third, to the Series 1998-1 Certificateholders, accrued and
unpaid interest on each Tranche;
page 20
<PAGE> 24
fourth, to the Series 1998-1 Certificateholders, any
additional interest payable pursuant to Section 4.1;
fifth, to the Series 1998-1 Certificateholders, an amount
equal to any Commitment Fee then payable in accordance with Section
4.2 of the Certificate Purchase Agreement;
sixth, on each Principal Payment Date, all funds deposited in
the Principal Funding Account on or prior to the most recent Cut-Off
Date (but in no event in excess of the Aggregate Invested Amount)
shall be distributed to the Series 1998-1 Certificateholders in
reduction of the Aggregate Invested Amount;
seventh, if on the Expected Final Payment Date or any
Distribution Date falling in an Early Amortization Period, the funds
on deposit in the Carrying Cost Account (less any Servicing Fee
payable on that day to any Person other than an AmeriServe Person)
shall be equal to or greater than the Aggregate Invested Amount (after
giving effect to the distribution required by clause sixth), then an
amount equal to such remaining Aggregate Invested Amount shall be
withdrawn from the Carrying Cost Account and distributed to the Series
1998-1 Certificateholders in reduction of the Aggregate Invested
Amount;
eighth, to the Persons entitled thereto, any Additional
Amounts then payable to the extent that funds have been allocated for
those Additional Amounts pursuant to priority fourth of Section 4.3 or
priority third of Section 4.4;
ninth, to the Rating Agencies, any fees owing by Transferor
or Servicer to the Rating Agencies for rating or monitoring Series
1998-1;
tenth, to the Servicer (if the Servicer is an AmeriServe
Person), the Servicing Fee for the preceding Distribution Period; and
eleventh, the balance (if any) to the Transferor.
Notwithstanding any other provision of this Supplement, if any Person
other than a Holder shall be entitled to receive Additional Amounts, such
Person shall not be prejudiced in its ability to recover such Additional
Amounts in accordance with the terms of the Transaction Documents on account of
references in this Supplement to Additional Amounts being distributed to the
Holders (it being understood that Holders shall not retain Additional Amounts
beyond those to which such Holders are entitled).
page 21
<PAGE> 25
All amounts payable to any Series 1998-1 Certificateholder hereunder
or with respect to its Series 1998-1 Certificate shall be made to such Series
1998-1 Certificateholder by wire transfer of immediately available funds in
Dollars not later than 2:00 p.m., New York City time, on the date due. Any
funds received after that time shall be deemed to have been received on the
next Business Day.
SECTION 5.2 Payments in Respect of Transferor Certificate. On each day
on which funds are allocated for this purpose pursuant to Sections 4.3 and 4.4,
Trustee shall, in accordance with instructions set out in the applicable Daily
Report, distribute to Transferor all funds allocated for that purpose in
accordance with those Sections. In addition, after the Aggregate Invested
Amount has been repaid in full and all interest and Additional Amounts have
been paid, any additional funds on deposit in the Carrying Cost Account, the
Equalization Account or the Principal Funding Account shall similarly be paid
to Transferor in respect of the Transferor Certificate.
SECTION 5.3 Daily Reports and Monthly Reports. (a) Each Daily Report
and Monthly Report shall be substantially in the applicable form set out in
Exhibit B or C or in such other form as may be satisfactory to both Servicer
and the Agent and consistent with the terms of this Supplement and the Pooling
Agreement. Copies of each Monthly Report shall be provided free of charge on
each Report Date by the Servicer to the Holders of Series 1998-1 Certificates.
Each Daily Report and each Monthly Report shall report the required information
for all outstanding Series. In addition, such reports shall provide information
with respect to (i) accrued interest on each Tranche and (ii) the Commitment
Fee Reserve Amount.
(b) Notwithstanding any other provision of this Supplement:
(i) In the event that a calculation or determination to be
made with respect to periods prior to the Closing Date refers to a
Daily Report or Monthly Report, such calculation or determination
shall be made even though Daily Reports and Monthly Reports were not
required to be delivered pursuant to this Supplement prior to the
Closing Date. By way of example, the "ADR" referred to in the
definition of Dilution Reserve Ratio shall be calculated for purposes
of periods prior to the Closing Date even though the definition of
Dilution Ratio refers to a calculation in a Monthly Report.
(ii) Any calculation or determination which relates to a
Cut-Off Date and Tricon Receivables and which is to be made with
respect to periods or dates prior to the Cut-Off Date occurring in May
1998 shall be made instead with respect to Unmodified End Dates
relating to such
page 22
<PAGE> 26
periods or dates. "Unmodified End Date" means, to the extent relevant,
the end of "Periods" historically used by AmeriServe in connection
with its servicing operations relating to Tricon Receivables.
(iii) Servicer at all times shall use its best efforts to
estimate the items described in clause (b) of the definition of Net
Eligible Receivables; provided that the fact that Servicer is
permitted to make such estimates shall not limit the effect of any
indemnification or other provision in any Transaction Document.
(iv) Servicer shall not be required to report an Early
Amortization Event pursuant to Sections 6.1(o), 6.1(p), 6.1(q), 6.1(r)
or 6.1(s) until the Servicer becomes aware of the same; provided,
however, that Servicer agrees it shall take affirmative steps to
determine whether an Early Amortization Event has occurred with
respect to Section 6.1(p) not less than once every two weeks.
This Section 5.3 shall not limit the obligation of Servicer to make the
allocations and calculations required by this Supplement on a daily basis.
SECTION 5.4 Annual Tax Information. During January (and on or before
January 31) of each calendar year, Servicer, on behalf of Trustee, shall
furnish or cause to be furnished to each Person who at any time during the
preceding calendar year was a Holder the information for the preceding calendar
year, or the applicable portion thereof during which the Person was a Holder,
as is required to be provided by an issuer of indebtedness under the Internal
Revenue Code to the holders of the issuer's indebtedness and such other
customary information as is necessary to enable such Holders to prepare their
federal income tax returns. Notwithstanding anything to the contrary contained
in this Agreement, Trustee shall, to the extent required by applicable law,
from time to time furnish to the appropriate Persons, at least five Business
Days prior to the end of the period required by applicable law, the information
required to complete a Form 1099-INT.
SECTION 5.5 Periodic Perfection Certificate. (a) During December (and
on or before December 31) of each calendar year, Servicer, on behalf of Trustee,
shall furnish or cause to be furnished to Trustee and the Agent an Officer's
Certificate setting forth a list of all changes in (i) the name, identity or
corporate structure of Transferor or any Seller and (ii) the chief executive
office of Transferor or any Seller (or in the place of business of Transferor or
any Seller that has only one place of business) that have taken place since the
date of the Officer's Certificate most recently delivered pursuant to this
Section 5.5, or indicating that no such events have taken place, and stating in
each case what filings of UCC
page 23
<PAGE> 27
financing statements, or amendments thereto, relating to the Transaction
Documents have been made in connection with each such event (identifying the
date and filing index numbers for each). Any financing statement identified in
such an Officer's Certificate delivered to Trustee shall be deemed to have been
identified to Trustee in writing for purposes of subsection 11.1(c)(v) of the
Pooling Agreement. If any such new UCC financing statements are filed, Servicer
shall cause Trustee to be named as secured party (in the case of any filing
against Transferor) or assignee of the secured party (in the case of any filing
against a Seller).
(b) Notwithstanding the foregoing, if any "Default" or "Event of
Default" under (and as defined in) the AmeriServe Credit Agreement occurs,
Servicer shall deliver an Officer's Certificate covering the matters described
in clause (a) above to Trustee and Agent not later than 10 days after the
occurrence of such "Default" or "Event of Default" and for so long as any such
"Default" or "Event of Default" remains outstanding Servicer shall deliver such
an Officer's Certificate on the last Business Day falling in each of March,
June, September and December.
ARTICLE VI EARLY AMORTIZATION EVENTS
SECTION 6.1 Early Amortization Events. Each of the following shall
constitute an "Early Amortization Event":
(a) (i) failure of any interest, Commitment Fee or principal
payable to the Series 1998-1 Certificateholders on any date to be paid
to the Series 1998-1 Certificateholders on such date; or (ii) failure
on the part of Transferor or Servicer to make any deposit or any other
payment required by the terms of any Transaction Document on or before
one Business Day after the date such deposit or payment is required to
be made; or (iii) failure on the part of any Seller to duly observe or
perform Section 6.1(f), 6.1(h), 6.1(i), 6.1(j), 6.2, 6.3(a), 6.3(b),
6.3(c) or 6.3(e) of the Purchase Agreement or Transferor to duly
observe or perform Section 7.2(c), 7.2(d), 7.2(e), 7.2(f), 7.2(g),
7.2(h), 7.2(i), 7.2(j), 7.2(k), 7.2(m), 7.2(n), 7.2(q) or 7.2(r) of the
Pooling Agreement, which failure continues unremedied for a period of
five Business Days; or (iv) failure on the part of Transferor,
Servicer, any Seller or Guarantor duly to observe or perform any other
covenant or agreement set forth in any Transaction Document, which
failure continues unremedied for a period of 30 days; or (v) Guarantor
gives notice of termination of the Seller Guaranty (or otherwise
purports to disaffirm or contest the Seller Guaranty);
page 24
<PAGE> 28
(b) any representation or warranty made by a Seller in
Section 5.1(d), 5.1(k), 5.1(o) or 5.1(r) of the Purchase Agreement or
by Transferor in Section 2.3(a)(i), 2.3(a)(ii) or 7.1(i) of the
Pooling Agreement shall prove to have been incorrect in any material
respect when made, and continues to be incorrect in any material
respect for a period of five Business Days, or any other
representation or warranty made by Transferor, Servicer, any Seller or
Guarantor in any Transaction Document shall prove to have been
incorrect in any material respect when made, and continues to be
incorrect in any material respect for a period of 30 days; provided
that a representation and warranty with respect to a Receivable set
forth in Section 5.1(k), 5.1(l) or 5.3(b) of the Purchase Agreement
shall not constitute an Early Amortization Event unless and until the
applicable Seller has failed to make the cash payments (if any) owed
under Sections 3.1 and 3.5 of the Purchase Agreement in respect of
such mistake or breach (it being understood that certain of such
mistakes or breaches may result in a non-cash adjustment under the
Purchase Agreement);
(c) a Bankruptcy Event shall occur with respect to
Transferor, Servicer, Guarantor or any Seller, or Transferor shall
become unable, for any reason, to transfer Receivables or other
Transferred Assets to Trustee in accordance with the provisions of
this Supplement and the Pooling Agreement; provided that if, at the
time any event that would, with the passage of time, become a
Bankruptcy Event occurs as a result of a bankruptcy proceeding being
filed against Transferor or any Seller, then, on and after the day on
which the bankruptcy proceeding is filed until the earlier to occur of
the dismissal of the proceeding and the Early Amortization
Commencement Date, Transferor shall not purchase Receivables and
Related Assets from the affected Seller or, if Transferor is the
subject of the proceeding, transfer Receivables and Related
Transferred Assets to the Trustee;
(d) the Trust or Transferor shall become an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(e) the Net Invested Amount exceeds the Base Amount for a
period of five or more consecutive Business Days;
(f) a Servicer Default occurs;
(g) AmeriServe shall cease to directly own 100% of the issued
and outstanding capital stock of Transferor;
page 25
<PAGE> 29
(h) the Internal Revenue Service or the PBGC shall have filed
one or more Tax or ERISA Liens against the assets of Transferor or any
Seller (including Receivables);
(i) the cessation of, or the failure to create, a valid
first-priority perfected ownership or security interest in favor of
Trustee in the Receivables or the rights of Transferor under the
Purchase Agreement;
(j) the Aggregate Invested Amount is not paid in full on the
Expected Final Payment Date;
(k) the Transferor Net Worth shall be less than the greater
of (i) 10% of the aggregate Unpaid Balance of the Receivables held by
the Transferor and the Trust and (ii) $25,000,000, and in either case
such condition shall continue for more than five consecutive Business
Days;
(l) any foreclosure or similar proceeding in respect of any
Adverse Claim on any Buyer Note or the Transferor's common stock shall
have been commenced; or title to any Buyer Note or Transferor's common
stock shall pass to the holders of such Adverse Claim, it being
understood that the grant of a security interest in the stock of
Transferor or any Buyer Note pursuant to the AmeriServe Credit
Agreement to a creditor of a Seller that is party to an Intercreditor
Agreement shall not be an Early Amortization Event;
(m) the Intercreditor Provisions shall be amended, waived,
modified or breached without the prior written consent of the Agent,
it being understood and agreed that Transferor shall notify the Rating
Agencies of any such written consent;
(n) NEHC, AmeriServe, or any Subsidiary (other than a
Receivables Subsidiary) (i) fails to make any payment (including any
mandatory prepayment or redemption) in respect of any Indebtedness or
Contingent Obligation having an aggregate principal amount (including
undrawn committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit arrangement) of
more than $5,000,000 when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) or (ii) fails to
perform or observe any other condition or covenant, or any other event
shall occur or condition exist, under any agreement or instrument
relating to any such Indebtedness or Contingent Obligation, and, in
the case of each of clause (i) or clause (ii), as the case may be,
such failure continues after the applicable grace or notice period, if
any, specified in the relevant document
page 26
<PAGE> 30
on the date of such failure if the effect of such failure, event or
condition is to cause such Indebtedness to be declared to be due and
payable prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded
(capitalized terms (other than AmeriServe) used in this clause (n)
shall have the meanings set forth in the AmeriServe Credit Agreement,
except that for purposes of this clause (n), any reference in the
AmeriServe Credit Agreement to "the Company" shall be deemed to refer
to NEHC or AmeriServe, as the case may be);
(o) Tricon (i) fails to make any payment (including any
mandatory prepayment or redemption) in respect of any Indebtedness or
Contingent Obligation having an aggregate principal amount (including
undrawn committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit arrangement) of
more than $10,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) or (ii) fails
to perform or observe any other condition or covenant, or any other
event shall occur or condition exist, under any agreement or
instrument relating to any such Indebtedness or Contingent Obligation,
and, in the case of each of clause (i) or clause (ii), as the case may
be, such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such
failure, in each case, regardless of whether the effect of such
failure, event or condition is to cause such Indebtedness to be
declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in respect
thereof to be demanded (capitalized terms (other than Tricon) used in
this clause (o) shall have the meanings set forth in the AmeriServe
Credit Agreement, except that for purposes of this clause (o), any
reference in the AmeriServe Credit Agreement to "the Company" shall be
deemed to refer instead to Tricon); provided, however, that any
consent, waiver, forbearance or amendment which would waive, cure or
make irrelevant any such failure, event or condition relating to any
such Indebtedness or Contingent Obligation shall have no effect for
purposes of this clause (o);
(p) Tricon shall fail to have a long-term unsecured public
debt rating from all of the Rating Agencies of at least "B+";
(q) the Tricon Leverage Ratio as of any date during any
period set forth below (inclusive of the specified first and last day
of such period) is in excess of the ratio set forth below opposite
such period:
page 27
<PAGE> 31
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Until December 26, 1998 4.00 to 1.00
December 27, 1998-December 25, 1999 3.50 to 1.00
December 26, 1999-December 30, 2000 3.25 to 1.00
After December 30, 2000 3.00 to 1.00
</TABLE>
(r) the Tricon Fixed Charge Coverage Ratio for any period of
four consecutive fiscal quarters ending during any period set forth
below (inclusive of the specified first and last day of such period)
is less than the ratio set forth below opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Until December 25, 1999 1.25 to 1.00
December 26, 1999-December 30, 2000 1.35 to 1.00
After December 30, 2000 1.50 to 1.00
</TABLE>
(s) Tricon (or any Person acting for or on behalf of Tricon)
provides any collateral for any of its obligations under the Tricon
Credit Agreement, or the Tricon Credit Agreement otherwise becomes in
any respect a secured facility; or
(t) the aggregate Unpaid Balance of Tricon Receivables aged
more than 120 days past their respective original invoice dates
exceeds fifty percent (50%) of the aggregate Unpaid Balance of all
Tricon Receivables.
SECTION 6.2 Early Amortization Period. Upon the occurrence and
continuance of any Early Amortization Event described in subsection 6.1(c),
(d), (e), (i), (j) or (k) an Early Amortization Period shall commence
immediately on the date of such occurrence without any notice or other action
on the part of any Person. Upon the occurrence and during the continuance of
any other Early Amortization Event, if so directed in writing by the Agent
(acting on behalf of Series 1998-1 Certificateholders), Trustee shall, by
notice given in writing to Transferor and Servicer as soon as possible after
Trustee's receipt of such written direction from the Agent (acting on behalf of
Series 1998-1 Certificateholders), declare that an Early Amortization Period
has commenced (and the Early Amortization Period shall commence immediately as
of the date Trustee sends such notice). On the date such notice is sent,
Trustee shall provide the Agent with
page 28
<PAGE> 32
a copy of such notice in accordance with Section 10.7 of the Certificate
Purchase Agreement.
ARTICLE VII OPTIONAL REDEMPTION; INDEMNITIES
SECTION 7.1 Optional Redemption of Investor Interests. On any
Distribution Date occurring during an Early Amortization Period with respect to
the Series 1998-1 Certificates on or after the date that the aggregate Unpaid
Balance of the Tricon Receivables is reduced to ten percent (10%) or less of
the aggregate Unpaid Balance of the Tricon Receivables as of the commencement
of such Early Amortization Period, Transferor shall have the option to redeem
the Series 1998-1 Series Interest. The purchase price shall be an amount equal
to the sum of (a) the Aggregate Invested Amount, plus (b) accrued and unpaid
interest on the Series 1998-1 Certificates (and accrued and unpaid interest
with respect to interest that was due but not paid on any prior Distribution
Date) through the day preceding such Distribution Date in accordance with
Section 4.1, plus (c) any Additional Amounts then due. Upon the tender of the
outstanding Series 1998-1 Certificates, Trustee shall distribute the amounts,
together with all funds on deposit in the Principal Funding Account that are
allocable to the Series 1998-1 Certificates, to the Series 1998-1
Certificateholders on the next Distribution Date in repayment of the principal
amount and accrued and unpaid interest owing to the Series 1998-1
Certificateholders. Following any redemption, the Series 1998-1
Certificateholders shall have no further rights with respect to the
Receivables, subject to Section 8.10. In the event that Transferor fails for
any reason to deposit in the Principal Funding Account the aggregate purchase
price for the Series 1998-1 Certificates, payments shall continue to be made to
the Series 1998-1 Certificateholders in accordance with the terms of the
Pooling Agreement and this Supplement.
SECTION 7.2 Indemnification by Transferor. Transferor hereby agrees to
indemnify the Trust, Trustee, the Agent, each Holder of a Series 1998-1
Certificate and each of the successors, permitted transferees and assigns of
any such Person and all officers, directors, shareholders, controlling Persons,
employees, affiliates and agents of any of the foregoing (each of the foregoing
Persons (other than the Transferor) individually being called a "Transferor
Indemnified Party"), forthwith on demand, from and against any and all damages,
losses, claims (whether on account of settlements or otherwise, and whether or
not the relevant Transferor Indemnified Party is a party to any action or
proceeding that gives rise to any Transferor Indemnified Losses (as defined
below)), judgments, liabilities and related reasonable costs and expenses
(including reasonable Attorney Costs) (all of the foregoing collectively being
called "Transferor Indemnified Losses") awarded against or incurred by any of
them that arise out of or relate to this Agreement, any
page 29
<PAGE> 33
other Transaction Document or any of the transactions contemplated herein or
therein or the use of proceeds herefrom or therefrom (including without
limitation any Transferor Indemnified Losses relating to any Adverse Claim,
without regard to whether such Adverse Claim was a Permitted Adverse Claim).
Notwithstanding the foregoing, in no event shall any Transferor
Indemnified Party be indemnified for any Transferor Indemnified Losses (i)
resulting from gross negligence or willful misconduct on the part of such
Transferor Indemnified Party (or the gross negligence or willful misconduct on
the part of any of its officers, directors, employees, affiliates or agents),
(ii) to the extent they include Transferor Indemnified Losses in respect of
Receivables and reimbursement therefor that would constitute credit recourse to
Transferor for the amount of any Receivable or Related Transferred Asset not
paid by the related Obligor, or (iii) to the extent they are or result from
taxes (including interest and penalties thereon) asserted with respect to (A)
distributions on the Series 1998-1 Certificates, (B) franchise or withholding
taxes imposed on any Transferor Indemnified Party other than the Trust or
Trustee in its capacity as Trustee, or (C) federal or other income taxes on or
measured by the net income of such Transferor Indemnified Party and costs and
expenses in defending against the same.
If for any reason the indemnification provided in this section is
unavailable to a Transferor Indemnified Party or is insufficient to hold a
Transferor Indemnified Party harmless, then Transferor shall contribute to the
amount paid by the Transferor Indemnified Party as a result of any loss, claim,
damage or liability in such proportion as is appropriate to reflect not only
the relative benefits received by the Transferor Indemnified Party on the one
hand and Transferor on the other hand, but also the relative fault (if any) of
the Transferor Indemnified Party and Transferor and any other relevant
equitable considerations.
Notwithstanding any provisions contained in any Transaction Document
to the contrary, Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section unless funds are allocated for such payment
pursuant to Article IV of this Supplement. Any amount which Transferor does not
pay pursuant to the operation of the preceding sentence shall not constitute a
claim (as defined in Section 101 of the Bankruptcy Code) against or corporate
obligation of Transferor for any such insufficiency.
SECTION 7.3 Indemnification by Servicer. Servicer agrees that each of
the Agent, each Holder of a Series 1998-1 Certificate and each other Transferor
Indemnified Party shall be an "Indemnified Party" for purposes of the Pooling
Agreement.
page 30
<PAGE> 34
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Amendment, Waiver, Etc. (a) Neither this Supplement nor
any other Transaction Document shall be amended, modified or waived except in
accordance with Section 10.1 of the Certificate Purchase Agreement and, to the
extent applicable, Section 13.1 of the Pooling Agreement, and the terms of
those sections shall apply to any such amendment, modification or waiver. In
addition, no waiver of an Early Amortization Event described in Section 6.1(h)
shall be effective unless the Modification Condition shall have been satisfied.
(b) No reference to the AmeriServe Credit Agreement in the Transaction
Documents shall include any amendments, amendments and restatements or other
modifications of the AmeriServe Credit Agreement unless the Pooling Agreement
and this Supplement, if applicable, have been amended to reflect the same, and
all references to the AmeriServe Credit Agreement in the Transaction Documents
shall survive termination of the AmeriServe Credit Agreement. Without limiting
the foregoing, any amendment of the Pooling Agreement contemplated by the
preceding sentence shall be subject to Section 10.1 of the Certificate Purchase
Agreement.
SECTION 8.2 Trustee. Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplement
or for or in respect of the recitals contained herein, all of which recitals
are made solely by Transferor and Servicer.
SECTION 8.3 Instructions in Writing. All instructions given by
Servicer to Trustee pursuant to this Supplement shall be in writing, and may be
included in a Daily Report or Monthly Report.
SECTION 8.4 Rule 144A. So long as any of the Series 1998-1
Certificates are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, Transferor shall, unless it becomes subject to and
complies with the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, or rule 12g3-2(b) thereunder,
provide to any Holder of such restricted securities, or to any prospective
purchaser of such restricted securities designated by a Holder, upon the
request of such Holder or prospective purchaser, any information required to be
provided by Rule 144A(d)(4) under the Securities Act.
SECTION 8.5 Supplemental Ratings Requirement. So long as any of the
Series 1998-1 Certificates are outstanding, if any provision of the Purchase
Agreement, the Pooling Agreement, this Supplement or the Certificate Purchase
Agreement requires a Person or investment to have a certain rating from S&P,
and
page 31
<PAGE> 35
such Person or investment is also rated by DCR, then, unless the context
otherwise requires, such provision shall be read to also require a rating from
DCR that is equivalent to the required rating from S&P.
SECTION 8.6 Waiver. Each of Trustee, the Certificateholders and the
Certificate Owners agrees and acknowledges that Mayer, Brown & Platt represents
Bank of America and Affiliates of Bank of America in connection with the
Transaction Documents and waives any conflict of interest relating thereto.
Mayer, Brown & Platt is entitled to rely on this Section 8.6.
SECTION 8.7 Negotiations. This Supplement and the other Transaction
Documents are the result of negotiations among and have been reviewed by
counsel to the Transferor, the AmeriServe Persons and the other parties, and
are the products of all parties. Accordingly, they shall not be construed
against the Agent or the Series 1998-1 Certificateholders merely because of the
Agent's or the Series 1998-1 Certificateholders' involvement in their
preparation.
SECTION 8.8 Transfers of Series 1998-1 Certificates. Section 6.3 of
the Pooling Agreement shall be subject to Section 10.3 of the Certificate
Purchase Agreement.
SECTION 8.9 Incorporation by Reference. Without limiting the effect of
other provisions of the Pooling Agreement that otherwise apply to Series
1998-1, and without limiting the fact that this Supplement is a Transaction
Document, Sections 13.5, 13.6, 13.7, 13.9, 13.10, 13.11, 13.17 and 13.18 of the
Pooling Agreement are hereby incorporated into this Supplement by this
reference, with the references in such provisions to the Pooling Agreement or
any other Transaction Documents applying instead with equal force to this
Supplement.
SECTION 8.10 Survival of Agreement. All covenants, agreements,
representations and warranties made herein and in the Series 1998-1
Certificates delivered pursuant hereto shall survive the making and the
repayment of increases in the Aggregate Invested Amount and the execution and
delivery of this Supplement and the Series 1998-1 Certificates and shall
continue in full force and effect, and this Supplement shall not terminate,
until the Aggregate Invested Amount shall have been reduced to zero, all other
obligations owed to the Agent or the Series 1998-1 Certificateholders or
otherwise in respect of the Series 1998-1 Certificates have been paid and
performed in full (including all obligations under this Supplement and under
the Certificate Purchase Agreement) and all commitments of the Series 1998-1
Certificateholders under the Certificate Purchase Agreement have been
terminated. In addition, this Section 8.10 and Sections 7.2, 7.3, 8.6, 8.7,
8.8, 8.9 and 8.11 shall survive termination of this Supplement.
page 32
<PAGE> 36
SECTION 8.11 Agent. References in this Supplement to the Agent or to
the Agent acting on behalf of Series 1998-1 Certificateholders shall not be
deemed to amend or otherwise modify the Certificate Purchase Agreement.
SECTION 8.12 Notices to Rating Agencies. All notices, reports,
instructions and other communications with respect to the Rating Agencies
hereunder or under the Pooling Agreement shall, unless otherwise stated herein
or therein, be in writing (including facsimile communication) and shall be
personally delivered or sent by certified mail, postage prepaid, by facsimile
or by overnight courier, to the intended Rating Agency to its address set forth
below (or, as to any Rating Agency, to such other address or facsimile number
as shall be designated by such Rating Agency in a written notice to the parties
to this Supplement given in accordance with the Pooling Agreement):
If to DCR:
DUFF & PHELPS CREDIT RATING CO.
55 East Monroe Street
Suite 3500
Chicago, IL 60603
Attention: Jeffrey J. Orr
Telephone: 312-368-3335
Facsimile: 312-368-2069
If to S&P:
STANDARD & POOR'S STRUCTURED FINANCE
26 Broadway
15th Floor
New York, NY 10004
Attention: Peter Danna
(or in the case of Monthly Reports,
Attention: Asset-Backed Surveillance)
Telephone: 212-208-8288
Facsimile: 212-208-0027
page 33
<PAGE> 37
IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
AMERISERVE FUNDING CORPORATION,
as Transferor
By:
Name:
Title:
AMERISERVE FOOD DISTRIBUTION, INC.,
as initial Servicer
By:
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Name: Gary L. Nelson
Title: Assistant Vice President
page 34
<PAGE> 38
EXHIBIT A
to the Series 1998-1 Supplement
FORM OF SERIES 1998-1 CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN CONTRAVENTION OF THAT
ACT. THIS CERTIFICATE SHALL BE NOT ACCEPTED FOR REGISTRATION OF TRANSFER EXCEPT
UPON PRESENTATION OF EVIDENCE SATISFACTORY TO THE REGISTRAR AND TRANSFER AGENT
THAT THE RESTRICTIONS ON TRANSFER SET FORTH IN THE POOLING AGREEMENT HAVE BEEN
COMPLIED WITH.
EACH SERIES 1998-1 CERTIFICATEHOLDER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
AMERISERVE FUNDING CORPORATION THAT SUCH SERIES 1998-1 CERTIFICATEHOLDER IS NOT
AND SHALL NOT BECOME A PARTNERSHIP, SUBCHAPTER S CORPORATION OR GRANTOR TRUST
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. [IF THIS REPRESENTATION CANNOT BE
MADE, TRANSFEROR, SERVICER OR THE TRUSTEE MAY REQUIRE THE LEGEND TO CONTAIN
ADDITIONAL REPRESENTATIONS.]
AMERISERVE RECEIVABLES MASTER TRUST
FLOATING RATE VARIABLE FUNDING CERTIFICATE,
SERIES 1998-1
Maximum Principal Amount:
First Distribution Date: August 15, 1998 $[ ]
THIS CERTIFIES that _________________ is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in the AmeriServe
Receivables Master Trust (the "Trust") that was created pursuant to (a) the
Amended and Restated Pooling and Servicing Agreement, dated as of July 28 1998
(as the same may be amended, amended and restated, supplemented or otherwise
modified from time to time, the "Pooling Agreement"), among AMERISERVE FUNDING
CORPORATION, a Delaware corporation ("Transferor"), AMERISERVE FOOD
DISTRIBUTION, INC., a Delaware corporation ("Servicer"), and
page 1
<PAGE> 39
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association,
as trustee (together with its successors and assigns in such capacity,
"Trustee") and (b) the Series 1998-1 Supplement dated as of July 28, 1998
relating to the Series 1998-1 Certificates (as the same may be amended, amended
and restated or otherwise modified from time to time, the "Supplement"). This
Certificate is one of the duly authorized Series 1998-1 Certificates designated
and issued under the Pooling Agreement and the Supplement. Except as otherwise
defined herein or in the Supplement, terms defined in Appendix A to the Pooling
Agreement have the meanings which such Appendix A assigns to them. This
Certificate is subject to the terms, provisions and conditions of, and is
entitled to the benefits afforded by, the Pooling Agreement and the Supplement,
to which terms, provisions and conditions the Holder of this Certificate by
virtue of the acceptance hereof assents and by which the Holder is bound.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly
authorized signatory, this Certificate shall not entitle the Holder hereof to
any benefit under the Transaction Documents or be valid for any purpose.
This Certificate does not represent a recourse obligation of, or an
interest in, Transferor, any Seller, Servicer, Trustee or any Affiliate of any
of them. This Certificate is limited in right of payment to the Transferred
Assets.
By its acceptance of this Certificate, each Holder hereof (a)
acknowledges that it is the intent of Transferor, and agrees that it is the
intent of the Holder that, for Federal, state and local income and franchise
tax purposes and other taxes measured by or imposed on income, the Series
1998-1 Certificates (including this Certificate) shall be treated as evidence
of indebtedness secured by the Transferred Assets and the Trust not be
characterized as an association taxable as a corporation, (b) agrees to treat
this Certificate for Federal, state and local income and franchise tax purposes
and other taxes measured by or imposed on income as indebtedness and (c) agrees
that the provisions of the Transaction Documents shall be construed to further
these intentions of the parties.
This Certificate shall be construed in accordance with the laws of the
State of Delaware without regard to its conflict of laws principles, and all
obligations, rights and remedies under or arising in connection with this
Certificate shall be determined in accordance with the laws of the State of
Delaware.
page 2
<PAGE> 40
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
AMERISERVE FUNDING CORPORATION
By:
Title:
page 3
<PAGE> 41
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series 1998-1 Certificates referred to in the
Pooling Agreement, as supplemented by the Supplement.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Title:
Dated:
page 4
<PAGE> 42
INCREASES AND DECREASES
<TABLE>
<CAPTION>
Amount of Increase Amount of Decrease Outstanding Stated
in Invested Amount in Invested Amount Invested Amount Amount
- -------------------- --------------------- --------------------- ------
ABR Eurodollar ABR Eurodollar ABR Eurodollar
Tranche Tranche Tranche Tranche Tranche Tranche
- ------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
page 5
<PAGE> 43
EXHIBIT B
to the Series 1998-1 Supplement
FORM OF DAILY REPORT
<PAGE> 44
EXHIBIT C
to the Series 1998-1 Supplement
FORM OF MONTHLY REPORT
<PAGE> 1
EXHIBIT 10.12
================================================================================
SERIES 1998-3 SUPPLEMENT
TO POOLING AND SERVICING AGREEMENT
among
AMERISERVE FUNDING CORPORATION,
as Transferor,
AMERISERVE FOOD DISTRIBUTION, INC.,
as initial Servicer,
and
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
Dated as of December 18, 1998
AMERISERVE RECEIVABLES MASTER TRUST
FLOATING RATE CLASS A TERM CERTIFICATES, SERIES 1998-3
FLOATING RATE CLASS B TERM CERTIFICATES, SERIES 1998-3
FLOATING RATE CLASS C TERM CERTIFICATES, SERIES 1998-3
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS; INCORPORATION OF TERMS
SECTION 1.1 Definitions.................................................................... 1
SECTION 1.2 Incorporation of Terms........................................................ 22
ARTICLE II DESIGNATION; AUTHENTICATION AND DELIVERY
SECTION 2.1 Designation................................................................... 23
SECTION 2.2 Authentication and Delivery................................................... 23
ARTICLE III CONDITIONS TO ISSUANCE; USE OF PROCEEDS
SECTION 3.1 Conditions to Issuance........................................................ 23
SECTION 3.2 Use of Proceeds............................................................... 24
ARTICLE IV PAYMENTS AND ALLOCATIONS
SECTION 4.1 Interest...................................................................... 24
SECTION 4.2 Daily Calculations and Series Allocations..................................... 24
SECTION 4.3 Allocations of Daily Series Collections (Other Than in an
Amortization Period).......................................................... 25
SECTION 4.4 Allocations of Daily Series Collections During an Amortization
Period........................................................................ 26
SECTION 4.5 Withdrawals from the Equalization Account..................................... 27
SECTION 4.6 Available Subordinated Amount................................................. 27
SECTION 4.7 Write-Offs and Recoveries..................................................... 28
SECTION 4.8 Certain Dilution in an Amortization Period.................................... 28
SECTION 4.9 Optional Termination; Prepayment Premium...................................... 29
SECTION 4.10 Tax Opinion................................................................... 30
ARTICLE V DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions................................................................. 31
SECTION 5.2 Payments in Respect of Transferor Certificate................................. 33
SECTION 5.3 Daily Reports and Monthly Reports............................................. 33
SECTION 5.4 Annual Tax Information........................................................ 34
SECTION 5.5 Periodic Perfection Certificate............................................... 34
ARTICLE VI EARLY AMORTIZATION EVENTS
SECTION 6.1 Early Amortization Events..................................................... 35
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 6.2 Early Amortization Period..................................................... 37
ARTICLE VII OPTIONAL REDEMPTION; INDEMNITIES
SECTION 7.1 Optional Redemption of Investor Interests..................................... 37
SECTION 7.2 Indemnification by Transferor................................................. 37
SECTION 7.3 Indemnification by Servicer................................................... 38
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Amendment, Waiver, Etc........................................................ 39
SECTION 8.2 Trustee....................................................................... 39
SECTION 8.3 Instructions in Writing....................................................... 39
SECTION 8.4 Rule 144A..................................................................... 39
SECTION 8.5 Supplemental Ratings Requirement.............................................. 39
SECTION 8.6 Waiver........................................................................ 40
SECTION 8.7 Restrictions on Transfer...................................................... 40
SECTION 8.8 Incorporation by Reference.................................................... 47
SECTION 8.9 Survival of Agreement......................................................... 47
SECTION 8.10 Lockbox Accounts.............................................................. 47
SECTION 8.11 Servicing in Florida.......................................................... 47
SECTION 8.12 Regulation S Matters.......................................................... 47
</TABLE>
- ii -
<PAGE> 4
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Class A Certificate
EXHIBIT B Form of Class B Certificate
EXHIBIT C Form of Class C Certificate
EXHIBIT D Form of Daily Report
EXHIBIT E Form of Monthly Report
EXHIBIT F Form of Purchaser Letter
EXHIBIT G Form of Tax Statement (for transfer of Class C Certificates)
EXHIBIT H Form of Certificate to be Given by Certificate Owner
EXHIBIT I Form of Certificate to be Given by Euroclear or Cedel
EXHIBIT J Form of Certificate to be Given by Transferee of Beneficial
Interest in a Regulation S Temporary Book-Entry Certificate
EXHIBIT K Form of Transfer Certificate for Exchange of Transfer From
144A Book-Entry Certificate to Regulation S Book-Entry
Certificate
EXHIBIT L Form of Placement Agent Exchange Instructions
</TABLE>
- iii -
<PAGE> 5
This SERIES 1998-3 SUPPLEMENT, dated as of December 18, 1998 (this
"Supplement"), is made among AMERISERVE FUNDING CORPORATION, a Delaware
corporation, as Transferor, AMERISERVE FOOD DISTRIBUTION, INC., a Delaware
corporation, as initial Servicer, and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association, as Trustee.
PRELIMINARY STATEMENT
Pursuant to the Amended and Restated Pooling and Servicing Agreement,
dated as of July 28, 1998 (as it may be amended, amended and restated,
supplemented or otherwise modified from time to time, and as supplemented
hereby, the "Pooling Agreement"), among Transferor, Servicer and Trustee,
Transferor may from time to time direct Trustee to issue and authenticate, on
behalf of the Trust, one or more Series of Certificates. Certain terms
applicable to a Series are to be set forth in a Supplement. This Supplement is a
"Supplement" as that term is defined in the Pooling Agreement.
Pursuant to this Supplement, Transferor and Trustee shall create a
Series of Certificates ("Series 1998-3").
ARTICLE I DEFINITIONS; INCORPORATION OF TERMS
SECTION 1.1 Definitions. (a) Capitalized terms used and not otherwise
defined herein are used as defined in Appendix A to the Pooling Agreement. This
Supplement shall be interpreted in accordance with the conventions set forth in
Part B of that Appendix A.
(b) Each reference in this Supplement to funds on deposit in the
Carrying Cost Account, the Equalization Account or the Principal Funding Account
(or similar phrase) refers only to funds in the administrative sub-accounts of
those accounts that are allocated to Series 1998-3. Unless the context otherwise
requires, in this Supplement: (i) each reference to a "Daily Report" or "Monthly
Report" refers to a Daily Report or Monthly Report for the Series 1998-3
Certificates; (ii) each reference to the "Servicing Fee" refers to the Servicing
Fee allocable to Series 1998-3; (iii) each reference to the "Series Collection
Allocation Percentage" refers to the Series Collection Allocation Percentage for
the Series 1998-3 Certificates; and (iv) each reference to the Transaction
Documents shall be deemed to include a reference to the Certificate Purchase
Agreement.
(c) Each capitalized term defined below relates only to the Series
1998-3 Certificates and to no other Series of Certificates. Whenever used in
this Supplement, the following words and phrases shall have the following
meanings:
"Adjusted Carrying Cost Reserve" means the product of (a) the Carrying
Cost Receivables Reserve multiplied by (b) a fraction, the numerator of which is
one (1), and the denominator of which is the result of one (1) minus the
Weighted Average Reserve Ratio.
<PAGE> 6
"Adjusted Eligible Receivables" means, on any Business Day, the result,
in each case as reflected in the Daily Report for that Business Day, of (a) the
aggregate Unpaid Balance of Eligible Receivables on that day, minus (b) the
Unapplied Cash on that day, plus (c) the Aggregate Retained Balances on that
day.
"Aged Receivables Ratio" means, as calculated in each Monthly Report as
of the Cut-Off Date for the most recently ended Calculation Period, a fraction
(expressed as a percentage) (a) the numerator of which is the sum of (i) the
aggregate Unpaid Balance of Receivables (other than Tricon Receivables) that
remained outstanding 91 to 120 days after their respective original invoice
dates, as determined as of such Cut-Off Date, plus without duplication (ii) the
aggregate Unpaid Balance of Receivables (other than Tricon Receivables) that
were written off as uncollectible during such Calculation Period and that, if
not so written off, would have been outstanding not more than 90 days after
their respective original invoice dates, as determined as of such Cut-Off Date
and (b) the denominator of which is the aggregate amount payable pursuant to
invoices relating to Receivables (other than Tricon Receivables) originated
during the Calculation Period that occurred three Calculation Periods prior to
the most recently ended Calculation Period, as determined as of such Cut-Off
Date.
"Aggregate Retained Balances" means, on any Business Day, the aggregate
of the balances relating to Receivables other than Tricon Receivables retained
in Lockbox Accounts or Blocked Accounts for items in the process of collection
but for which funds have not been made available by the related Lockbox Bank or
Blocked Account Bank, provided that (i) no notice of insufficient funds or
similar situation shall exist with respect thereto and (ii) the Unpaid Balance
of Receivables (other than Tricon Receivables) shall have been reduced by an
amount equal to such balances.
"Allocated NER" means the product of (a) the Series Collection
Allocation Percentage multiplied by (b) the Net Eligible Receivables.
"Alternate Base Rate" means, on any day, a fluctuating rate of interest
per annum equal to the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by Bank of America in San Francisco,
California, as its "reference rate", and
(b) the Federal Funds Rate.
The "reference rate" is a rate set by Bank of America based upon various factors
including Bank of America's costs and desired return, general economic
conditions and other factors, and is used as reference point for pricing some
loans, which may be priced at, above, or below such announced rate.
page 2
<PAGE> 7
Any change in the reference rate announced by Bank of America shall
take effect without prior notice to any Person at the opening of business on the
day specified in the public announcement of such change.
"Amortization Period" means the period (x) beginning on the earliest of
(i) the Termination of Sale Notice Date, (ii) the Expected Revolving Period
Termination Date, (iii) the Optional Termination Date, and (iv) the date, if
any, on which an Early Amortization Period commences, and (y) ending on the
earlier of (i) the Final Scheduled Payment Date and (ii) the date on which this
Supplement shall have terminated pursuant to Section 8.9.
"Amortization Period Calculation Date" means the day before an
Amortization Period begins.
"Applicable Ratings Factor" means the Class A Ratings Factor, the Class
B Ratings Factor or the Class C Ratings Factor, as specified in each calculation
where the Applicable Ratings Factor is used.
"ASA Measuring Period" means with respect to each Cut-Off Date and each
Calculation Period falling in an Amortization Period, the Calculation Period
ending on such Cut-Off Date (or the portion of such Calculation Period falling
after the Amortization Period Calculation Date, in the case of the first Cut-Off
Date falling in the Amortization Period).
"Available Subordinated Amount" means, at any time during the
Amortization Period, the amount calculated pursuant to Section 4.6.
"Bank of America" means Bank of America National Trust and Savings
Association and its successors.
"Base Amount" means, on any Business Day, the result of the following
formula:
Allocated NER - ROCA
where:
Allocated NER = the Allocated NER as reported in the Daily Report for
that Business Day; and
ROCA = the Required Overcollateralization Amount as reported
in the Daily Report for that Business Day.
"Carrying Cost Cash Reserve Amount" means an amount equal to the
Current Carrying Costs.
"Carrying Cost Receivables Reserve" means, on any Business Day, the
result of:
page 3
<PAGE> 8
(a) the Current Carrying Costs; plus
(b) the product of (i) the Outstanding Principal Balances of
the Series 1998-3 Certificates, multiplied by (ii) (A) 1.5 times (B)
the Series 1998-3 Weighted Average Certificate Rate, multiplied by
(iii) a fraction the numerator of which is the product of 2.0 and the
number of Turnover Days and the denominator of which is 360; plus
(c) the product of (i) the Series Collection Allocation
Percentage on the preceding Distribution Date, multiplied by (ii) the
aggregate Unpaid Balance of Receivables (other than Tricon Receivables)
on such Distribution Date, multiplied by (iii) 2%, multiplied by (iv) a
fraction the numerator of which is the product of 2.0 and the number of
Turnover Days and the denominator of which is 360; plus
(d) the product of (i) $50,000, multiplied by (ii) a fraction,
the numerator of which is the product of 2.0 times the number of
Turnover Days and the denominator of which is 360; minus
(e) the balance on deposit in the Carrying Cost Account at the
beginning of that Business Day.
"Certificate Purchase Agreement" means the Certificate Purchase
Agreement dated December 16, 1998 among Transferor, AmeriServe, ProSource and
the Initial Purchasers, as the same may be amended, amended and restated or
otherwise modified from time to time in accordance with its terms. The
Certificate Purchase Agreement is hereby designated a "Transaction Document".
"Certificate Spread" means:
(a) for Class A Certificates, fifty-two one-hundredths of one
percent (0.52 %) per annum;
(b) for Class B Certificates, one and one-quarter percent
(1.25%) per annum; and
(c) for Class C Certificates, two and one-half percent (2.5%)
per annum.
"Class A Adjusted Invested Amount" means, on any Business Day, the
result of (a) the Class A Initial Invested Amount minus (b) the aggregate amount
of deposits made on or prior to such Business Day in the Principal Funding
Account with respect to Series 1998-3.
"Class A Certificates" is defined in Section 2.1. Each Class A
Certificate shall be substantially in the form of Exhibit A.
page 4
<PAGE> 9
"Class A Certificate Rate" means a rate per annum equal to One-Month
LIBOR plus the Certificate Spread for the Class A Certificates.
"Class A Certificateholder" means a Holder of a Class A Certificate.
"Class A Initial Invested Amount" means (a) at any time during the
Revolving Period, the Class A Invested Amount at that time and (b) at any other
time, the Class A Invested Amount at the end of the Revolving Period.
"Class A Invested Amount" means, at any time, (a) the initial aggregate
Outstanding Principal Balances of the Class A Certificates, less (b) the
aggregate amount of all distributions that have been made to the Holders of the
Class A Certificates on account of principal, and the amount of all Investor
Write-Offs that have been applied to reduce the Class A Invested Amount
(provided that, notwithstanding the foregoing, the Class A Invested Amount shall
never be reduced below zero), plus (c) Investor Allocable Recoveries and
Investor Allocable Dilution Adjustments that have been applied to reinstate the
Class A Invested Amount.
"Class A Minimum Required Reserve Ratio" means the sum, as of any
Cut-Off Date, of (a) 18% plus (b) the product of the average of the Dilution
Ratios for the period of 12 preceding Calculation Periods ending on that Cut-Off
Date, multiplied by the Dilution Horizon Variable for that Cut-Off Date.
"Class A Ratings Factor" means 2.5.
"Class A Required Overcollateralization Amount" means, on any Business
Day, the result of:
(a) if the Allocated NER exceeds or is equal to the Targeted
NER, the sum of (i) the Adjusted Carrying Cost Reserve plus (ii) the
excess, if any, of (x) the product of the Class A Required Receivables
multiplied by the Class A Reserve Ratio over (y) the sum of the Class B
Adjusted Invested Amount plus the Class C Adjusted Invested Amount; or
(b) if the Allocated NER is less than the Targeted NER, the
sum of (i) the Adjusted Carrying Cost Reserve plus (ii) the excess, if
any, of (x) the Allocated NER multiplied by the Class A Reserve Ratio
over (y) the sum of the Class B Adjusted Invested Amount plus the Class
C Adjusted Invested Amount.
"Class A Required Receivables" means, at any time, the product of (a)
the Class A Adjusted Invested Amount as set forth in the most recent Daily
Report received by the Trustee, multiplied by (b) a fraction, the numerator of
which is one (1) and the denominator of which is one (1) minus the Class A
Reserve Ratio.
page 5
<PAGE> 10
"Class A Required Reserve Ratio" means, as calculated in each Monthly
Report, the greater of (a) the Loss Reserve Ratio plus the Dilution Reserve
Ratio, each calculated using the Class A Ratings Factor, and (b) the Loss
Reserve Ratio (Z-value) plus the Dilution Reserve Ratio (Z-value), each
calculated using the Class A Ratings Factor and the Class A Z-value, as
applicable.
"Class A Reserve Ratio" means, during any Distribution Period, the
greater of (a) the Class A Minimum Required Reserve Ratio and (b) the Class A
Required Reserve Ratio, each as calculated in the Monthly Report required to be
delivered on the Report Date immediately prior to the start of that Distribution
Period; provided that during the period from the Closing Date to the first
Distribution Date thereafter the Class A Reserve Ratio shall be 19.56%.
"Class A Z-value" means 2.58.
"Class B Adjusted Invested Amount" means, on any Business Day, the
result of (a) the Class B Initial Invested Amount minus (b) the excess, if any,
of (i) the aggregate amount of deposits made on or prior to such Business Day in
the Principal Funding Account with respect to Series 1998-3 over (ii) the Class
A Initial Invested Amount.
"Class B Certificates" is defined in Section 2.1. Each Class B
Certificate shall be substantially in the form of Exhibit B.
"Class B Certificate Rate" means a rate per annum equal to One-Month
LIBOR plus the Certificate Spread for the Class B Certificates.
"Class B Certificateholder" means a Holder of a Class B Certificate.
"Class B Initial Invested Amount" means (a) at any time during the
Revolving Period, the Class B Invested Amount at that time and (b) at any other
time, the Class B Invested Amount at the end of the Revolving Period.
"Class B Invested Amount" means, at any time, the result of (a) the
initial aggregate Outstanding Principal Balances of the Class B Certificates,
less (b) the aggregate amount of all distributions that have been made to the
Holders of the Class B Certificates on account of principal, and the amount of
all Investor Write-Offs that have been applied to reduce the Class B Invested
Amount (provided that, notwithstanding the foregoing, the Class B Invested
Amount shall never be reduced below zero), plus (c) Investor Allocable
Recoveries and Investor Allocable Dilution Adjustments that have been applied to
reinstate the Class B Invested Amount.
"Class B Minimum Required Reserve Ratio" means the sum, as of any
Cut-Off Date, of (a) 12% plus (b) the product of the average of the Dilution
Ratios for the period of 12 preceding Calculation Periods ending on that Cut-Off
Date, multiplied by the Dilution Horizon Variable for that Cut-Off Date.
page 6
<PAGE> 11
"Class B Ratings Factor" means 2.0.
"Class B Required Overcollateralization Amount" means, on any Business
Day:
(a) if the Allocated NER exceeds or is equal to the Targeted
NER, the sum of (i) the Adjusted Carrying Cost Reserve plus (ii) the
excess, if any, of (x) the product of the Class B Required Receivables
multiplied by the Class B Reserve Ratio over (y) the Class C Adjusted
Invested Amount; or
(b) if the Allocated NER is less than the Targeted NER, the
sum of (i) the Adjusted Carrying Cost Reserve plus (ii) the excess, if
any, of (x) the product of the Allocated NER multiplied by the Class B
Reserve Ratio over (y) the Class C Adjusted Invested Amount.
"Class B Required Receivables" means, at any time, the product of (a)
the sum of (x) the Class B Adjusted Invested Amount as set forth in the most
recent Daily Report received by the Trustee plus the Class A Adjusted Invested
Amount as set forth in the most recent Daily Report received by the Trustee,
multiplied by (b) a fraction, the numerator of which is one (1) and the
denominator of which is one (1) minus the Class B Reserve Ratio.
"Class B Required Reserve Ratio" means, as calculated in each Monthly
Report, the greater of (a) the Loss Reserve Ratio plus the Dilution Reserve
Ratio, each calculated using the Class B Ratings Factor, and (b) the Loss
Reserve Ratio (Z-value) plus the Dilution Reserve Ratio (Z-value), each
calculated using the Class B Ratings Factor and the Class B Z-value, as
applicable.
"Class B Reserve Ratio" means, during any Distribution Period, the
greater of (a) the Class B Minimum Required Reserve Ratio and (b) the Class B
Required Reserve Ratio, each as calculated in the Monthly Report required to be
delivered on the Report Date immediately prior to the start of that Distribution
Period, provided that during the period from the Closing Date to the first
Distribution Date thereafter the Class B Reserve Ratio shall be 15.13%.
"Class B Z-value" means 1.96.
"Class C Adjusted Invested Amount" means, on any Business Day, the
result of (a) the Class C Initial Invested Amount minus (b) the excess, if any,
of (i) the aggregate amount of deposits made on or prior to such Business Day in
the Principal Funding Account with respect to Series 1998-3 over (ii) the sum of
the Class A Initial Invested Amount plus the Class B Initial Invested Amount.
"Class C Certificates" is defined in Section 2.1. Each Class C
Certificate shall be substantially in the form of Exhibit C.
page 7
<PAGE> 12
"Class C Certificate Rate" means a rate per annum equal to One-Month
LIBOR plus the Certificate Spread for the Class C Certificates.
"Class C Certificateholder" means a Holder of a Class C Certificate.
"Class C Initial Invested Amount" means (a) at any time during the
Revolving Period, the Class C Invested Amount at that time and (b) at any other
time, the Class C Invested Amount at the end of the Revolving Period.
"Class C Invested Amount" means, at any time, the result of (a) the
initial aggregate Outstanding Principal Balances of the Class C Certificates,
less (b) the aggregate amount of all distributions that have been made to the
Holders of the Class C Certificates on account of principal, and the amount of
all Investor Write-Offs that have been applied to reduce the Class C Invested
Amount (provided that, notwithstanding the foregoing, the Class C Invested
Amount shall never be reduced below zero), plus (c) Investor Allocable
Recoveries and Investor Allocable Dilution Adjustments that have been applied to
reinstate the Class C Invested Amount.
"Class C Minimum Required Reserve Ratio" means the sum, as of any
Cut-Off Date, of (a) 9% plus (b) the product of the average of the Dilution
Ratios for the period of 12 preceding Calculation Periods ending on that Cut-Off
Date, multiplied by the Dilution Horizon Variable for that Cut-Off Date.
"Class C Ratings Factor" means 1.5.
"Class C Required Overcollateralization Amount" means, on any Business
Day:
(a) if the Allocated NER exceeds or is equal to the Targeted
NER, the sum of (i) the Adjusted Carrying Cost Reserve plus (ii) the
product of the Class C Required Receivables multiplied by the Class C
Reserve Ratio; or
(b) if the Allocated NER is less than the Targeted NER, the
sum of (i) the Adjusted Carrying Cost Reserve plus (ii) the product of
the Allocated NER multiplied by the Class C Reserve Ratio.
"Class C Required Receivables" means, at any time, the product of (a)
the Series 1998-3 Adjusted Invested Amount as set forth in the most recent Daily
Report received by the Trustee, multiplied by (b) a fraction, the numerator of
which is one (1) and the denominator of which is one (1) minus the Class C
Reserve Ratio.
"Class C Required Reserve Ratio" means, as calculated in each Monthly
Report, the greater of (a) the Loss Reserve Ratio plus the Dilution Reserve
Ratio, each calculated using the Class C Ratings Factor, and (b) the Loss
Reserve Ratio
page 8
<PAGE> 13
(Z-value) plus the Dilution Reserve Ratio (Z-value), each calculated using the
Class C Ratings Factor and the Class C Z-value, as applicable.
"Class C Reserve Ratio" means, during any Distribution Period, the
greater of (a) the Class C Minimum Required Reserve Ratio and (b) the Class C
Required Reserve Ratio, each as calculated in the Monthly Report required to be
delivered on the Report Date immediately prior to the start of that Distribution
Period, provided that during the period from the Closing Date to the first
Distribution Date thereafter the Class C Reserve Ratio shall be 11.69%.
"Class C Z-value" means 1.96.
"Closing Date" means December 18, 1998.
"Code" means the Internal Revenue Code.
"Concentration Adjusted Eligible Receivables" means, at any time, the
positive difference of (a) the Adjusted Eligible Receivables, minus (b) the then
aggregate amount of all Excess Concentration Balances with respect to all
Obligors.
"Concentration Percentage" means:
(i) for any Obligor (other than a Special Obligor), the applicable
percentage set forth below:
(a) 21.0% for any Tier-1 Obligor;
(b) 15.0% for any Tier-2 Obligor;
(c) 7.5% for any Tier-3 Obligor;
(d) 4.5% for any Tier-4 Obligor;
(e) 3.0% for any Tier-5 Obligor; and
(ii) for each Special Obligor, such percentage as has been so
designated in writing from time to time by Transferor to the Trustee (and any
percentage previously designated in accordance with this clause (ii) may be
increased or decreased to a percentage designated in writing by Transferor from
time to time to the Trustee), provided that the designation of any percentage
(or any increase in such percentage) contemplated by this clause (ii) shall not
be effective unless the Modification Condition shall have been satisfied with
respect to the designation of such percentage (or any such increased
percentage).
page 9
<PAGE> 14
All Obligors that are known or should have been known to the Servicer
as being Affiliates of each other shall be deemed to be a single Obligor for
purposes of calculating the related Concentration Percentage and the Excess
Concentration Balances. For the purposes of determining which Concentration
Percentage should apply to such affiliated Obligors, only the short-term
unsecured debt rating or long-term unsecured debt rating, as applicable, of the
lowest rated Obligor of such affiliated Obligors shall be considered.
"Current Carrying Costs" means, during any Distribution Period, an
amount equal to the sum of (i) the amount of interest (including additional
interest pursuant to Section 4.1(d)) on the Series 1998-3 Certificates and the
amount of the Servicing Fee that shall be payable on the next Distribution Date,
plus (ii) accrued and unpaid expenses described in Section 7.2(l)(C) of the
Pooling Agreement, plus (iii) the Monthly Trustee Payment Amount, plus (iv)
accrued and unpaid Transition Costs.
"Daily Series Collections" is defined in Section 4.2.
"DCR" means Duff & Phelps Credit Rating Co., and any successor thereto
which is a nationally recognized rating agency.
"Dilution Horizon Variable" means, at any time, a fraction having (a) a
numerator equal to the sum of the aggregate amounts payable pursuant to invoices
giving rise to Receivables (other than Tricon Receivables) and generated by the
Sellers during the Calculation Period ending on the most recent Cut-Off Date (as
of that Cut-Off Date) and (b) a denominator equal to the Net Eligible
Receivables as of such Cut-Off Date.
"Dilution Ratio" means, as calculated by the Servicer and provided in
each Monthly Report as of the most recent Cut-Off Date, a fraction (expressed as
a percentage) having (a) a numerator equal to the aggregate amount of Dilution
on the Receivables (other than Tricon Receivables) occurring during the
Calculation Period ending on the most recent Cut-Off Date, and (b) a denominator
equal to the aggregate amounts payable pursuant to invoices giving rise to
Receivables (other than Tricon Receivables) that were generated by the Sellers
during the Calculation Period ending on the second most recent Cut-Off Date.
"Dilution Reserve Ratio" means, as calculated by the Servicer and
provided in each Monthly Report, the result (expressed as a percentage)
calculated in accordance with the following formula:
{(ARF x ADR) + [(HDR-ADR) x (HDR/ADR)]} x DHV
where:
ADR = the average of the Dilution Ratios during the period of 12
consecutive Calculation Periods ending on the related Cut-Off
Date;
page 10
<PAGE> 15
ARF = the Applicable Ratings Factor;
DHV = the Dilution Horizon Variable; and
HDR = the highest Dilution Ratio as of the end of any of the 12
consecutive Calculation Periods ending on the related Cut-Off
Date.
"Dilution Reserve Ratio (Z-value)" means, as calculated by the Servicer
and provided in each Monthly Report, the result (expressed as a percentage)
calculated in accordance with the following formula:
[(ARF x ADR) + (Z-value x SD)] x DHV
where:
ADR = the average of the Dilution Ratios during the period of 12
consecutive Calculation Periods ending on the related Cut-Off
Date;
ARF = the Applicable Ratings Factor;
DHV = the Dilution Horizon Variable; and
SD = the sample standard deviation, during the period of 12
consecutive Calculation Periods ending on the related Cut-Off
Date, of the Dilution Ratio.
"Distribution Period" means each period from one Distribution Date to
the next Distribution Date; provided that the first Distribution Period will be
the period from the Closing Date to the Distribution Date occurring in the month
following the month in which the Closing Date occurs.
"Distribution Shortfall" means, on any Business Day:
(a) with respect to Series 1998-3, that the funds available for
allocation to the Carrying Cost Account, the Principal Funding Account and the
Equalization Account on such Business Day pursuant to Section 4.3 or Section
4.4, as the case may be, are less than the amounts, if any, required to be
deposited in such accounts on such Business Day pursuant to Section 4.3 or
Section 4.4, as the case may be; and
(b) with respect to any Series (other than Series 1998-1 and Series
1998-3), that the funds available for allocation to the Carrying Cost Account,
the Principal Funding Account and the Equalization Account on such Business Day
pursuant to the Supplement for such Series are less than the amounts, if any,
required to be deposited in such accounts on such Business Day pursuant to such
Supplement.
"Domestic Person" means any Person that has a place of business located
in the United States or Puerto Rico.
page 11
<PAGE> 16
"Early Amortization Event" is defined in Section 6.1.
"Early Amortization Period" means the period beginning on the
applicable date determined in accordance with Section 6.2 and ending on the day
on which the Series 1998-3 Invested Amount has been reduced to zero.
"Eligible Deposit Account" means (a) a segregated trust account
maintained at a national bank with a long-term unsecured debt rating of at least
"A" or the equivalent thereof by the Rating Agencies, (b) a deposit account
maintained with a bank that has a long-term unsecured debt rating of not less
than "AA-" (or, in the case of a Bank Account, "BBB") or the equivalent thereof
by the Rating Agencies, or a short-term unsecured debt rating of not less than
"A-1+" or "D-1," or the equivalent thereof, by the Rating Agencies or (c)
another deposit account as to which the Modification Condition has been
satisfied.
"Eligible Obligor" means, at any time, an Obligor that satisfies the
following criteria:
(a) it is a Domestic Person and is not (i) the United States government
or any of its agencies or instrumentalities or (ii) a state or local government
or any agency or instrumentality thereof, provided that not more than 3% of the
aggregate Unpaid Balances of the Eligible Receivables may be owed by Obligors
which are not Domestic Persons if (x) such Receivables are otherwise Eligible
Receivables, (y) the payment of such Receivables is fully supported by an
irrevocable Dollar-denominated letter of credit issued by a Rated Bank in favor
of the applicable Seller or other irrevocable Dollar-denominated credit support
issued by a Rated Bank in favor of the applicable Seller and (z) such letter of
credit or other credit support is assignable to Transferor and can be enforced
by the Servicer (including any successor Servicer) or Trustee;
(b) it is not an Affiliate of AmeriServe and, without limiting the
foregoing, is not a direct or indirect Subsidiary of AmeriServe or any other
Person with respect to which AmeriServe or any of its Subsidiaries owns,
directly or indirectly, more than 50% of the Person's equity interests;
(c) with respect to which no Bankruptcy Event had occurred and was
continuing as of the end of the most recent Calculation Period and is
continuing;
(d) as of the end of the most recent Calculation Period, no more than
25% of the aggregate Unpaid Balance of all Receivables of the Obligor were (for
reasons other than disputes) aged more than 120 days past their respective
original invoice dates; and
(e) as of the end of the most recent Calculation Period, none of the
Receivables of the Obligor was evidenced by promissory notes.
"Eligible Receivable" shall have the meaning set forth in Appendix A to
the Pooling Agreement, except that for purposes of this Supplement: (i) no
Receivable shall be an Eligible Receivable if (x) a State Tax Opinion Request
(defined below) has been made with respect to the
page 12
<PAGE> 17
related Servicing Jurisdiction (defined below) and (y) the Modification
Condition has not been satisfied; (ii) no Tricon Receivable shall be an Eligible
Receivable; (iii) clause (b) of the definition of Eligible Receivable in such
Appendix A shall be deemed to read as follows: "(b) that represents a bona fide
obligation resulting from a sale of goods that have been shipped or services
that have been performed and for which an invoice has been sent to the
applicable Obligor, and that is due and payable not more than 45 days after the
original date of such invoice, provided that not more than 1% of the aggregate
Unpaid Balances of the Eligible Receivables may be due and payable up to 60 days
after the original dates of the related invoices"; and (iv) clause (c) of the
definition of Eligible Receivable in such Appendix A shall be deemed to read as
follows: "(c) that, as of that time, is not aged more than 60 days past its
original invoice date".
As used in the previous sentence:
"Servicing Jurisdiction" means a state in which the Servicer
or a Sub-Servicer conducts some or all of its servicing, administration
or collection operations in respect of Receivables, and the "related"
Servicing Jurisdiction with respect to a Receivable means the Servicing
Jurisdiction from which such Receivable is serviced, administered or
collected.
"State Tax Opinion" means a written opinion of counsel,
addressed to the Trustee and the Rating Agencies, and in form and
substance (and from counsel) satisfactory to the Rating Agencies, to
the effect that, for purposes of state income and franchise tax
purposes in the relevant Servicing Jurisdiction, (i) the Trust shall
not be subject to any income, franchise or entity level tax, (ii) the
Class A Certificates and the Class B Certificates shall be
characterized as debt and (iii) the Class C Certificates shall be
characterized as debt or partnership interests.
"State Tax Opinion Request" means a written request from the
Trustee or a Rating Agency to the Servicer requesting the Servicer to
cause a State Tax Opinion to be rendered.
"Excess Concentration Balances" means, on any day with respect to any
Obligor, the excess, if any, of (a) the aggregate Unpaid Balances of Eligible
Receivables it owes, over (b) the result of (i) the Adjusted Eligible
Receivables multiplied by (ii) the Concentration Percentage for such Obligor.
"Expected Revolving Period Termination Date" means the Distribution
Date in December 2001.
"Federal Funds Rate" means, on any day, (a) the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if the day is not a Business Day, for the immediately preceding Business Day) by
the Federal Reserve Bank of New York, plus (b) 100
page 13
<PAGE> 18
basis points; provided that if the rate set forth in clause (a) above is not so
published for any Business Day, the rate for purposes of such clause (a) shall
be the average of the quotations for the day on such transactions received by
the Servicer from three Federal funds brokers of recognized standing selected by
it.
"Final Scheduled Payment Date" means the Distribution Date in December
2002.
"Guarantor" means AmeriServe, in its capacity as the guarantor under
the Seller Guaranty.
"Holder" means a Holder (as defined in the Pooling Agreement) of a
Series 1998-3 Certificate.
"Initial Invested Amount" means (a) at any time during the Revolving
Period, the Series 1998-3 Invested Amount at that time and (b) at any other
time, the Series 1998-3 Invested Amount at the end of the Revolving Period.
"Initial Purchasers" means, collectively, (i) NationsBanc Montgomery
Securities LLC, and any successor thereto, (ii) BT Alex. Brown Incorporated, and
any successor thereto, and (iii) Donaldson, Lufkin & Jenrette Securities
Corporation, and any successor thereto.
"Initial Series 1998-3 Invested Amount" means (a) at any time during
the Revolving Period, the Series 1998-3 Invested Amount at that time and (b) at
any other time, the Series 1998-3 Invested Amount at the end of the Revolving
Period.
"Institutional Accredited Investor" is defined in Section 8.7(a).
"Intercreditor Agreement" means the Intercreditor Agreement dated as of
July 11, 1997 between the Trustee and the Administrative Agent under the
AmeriServe Credit Agreement, as such Intercreditor Agreement may be amended,
amended and restated or otherwise modified from time to time in accordance with
its terms.
"Intercreditor Provisions" means the following provisions of the
AmeriServe Credit Agreement: Sections 5.5, 9.1(n), 9.2(g), 9.2(h), 9.3(d),
9.4(e), 9.4(f), 9.5(l), 9.6(a), 9.8(e), 9.16, 9.21 and the definitions of
"Intercreditor Agreement", "Joint Venture", "Pooling and Servicing Agreement",
"Purchase Money Note", "Qualified Receivables Transaction", "Receivable Stated
Amount", "Receivables", "Receivables Bridge Facilities", "Receivables
Documents", "Receivables Financing Costs", "Receivables Investor Instruments",
"Receivables Program Assets", "Receivables Program Obligations", "Receivables
Related Assets", "Receivables Seller", "Receivables Subsidiary", "Special
Purpose Vehicle", "Standard Securitization Undertakings", and "Subsidiary".
"Interest Period" means a Distribution Period.
page 14
<PAGE> 19
"Investor Allocable Dilution" means, for any ASA Measuring Period, the
product of the aggregate amount of Dilution for that ASA Measuring Period as to
which neither the applicable Seller nor the Guarantor has made payment, if
required by Section 3.1(d) or Section 3.1(e) of the Purchase Agreement, on
account of Seller Dilution Adjustments, multiplied by the Investor Allocation
Percentage as of the first Business Day of that ASA Measuring Period.
"Investor Allocable Dilution Adjustments" is defined in Section 4.8.
"Investor Allocable Loss Amount" means, for any ASA Measuring Period,
the product of the Loss Amount for that ASA Measuring Period, multiplied by the
Investor Allocation Percentage as of the first Business Day of that ASA
Measuring Period.
"Investor Allocable Recoveries" means, for any ASA Measuring Period,
the product of the Net Recoveries for that ASA Measuring Period, multiplied by
the Investor Allocation Percentage as of the first Business Day of that ASA
Measuring Period.
"Investor Allocation Percentage" means:
(a) on any Business Day falling in the Revolving Period, a
fraction (expressed as a percentage, which in any event may not exceed
100%) (i) the numerator of which is the Net Invested Amount as of that
Business Day, and (ii) the denominator of which is the Base Amount as
of that Business Day; and
(b) on any Business Day falling in the Amortization Period, a
fraction (expressed as a percentage, which in any event may not exceed
100%) (i) the numerator of which is the Net Invested Amount as of the
Amortization Period Calculation Date, and (ii) the denominator of which
is the Base Amount as of the Amortization Period Calculation Date.
"Investor Write-Offs" means, as calculated in any Monthly Report
relating to a Calculation Period falling completely or partially in an
Amortization Period:
(a) if the Available Subordinated Amount is greater than zero
at the end of the related ASA Measuring Period, zero; and
(b) if the Available Subordinated Amount is zero at the end of
the related ASA Measuring Period (taking into account any reduction in the
Available Subordinated Amount shown in such Monthly Report), the excess (if any)
of (x) the result of (A) the Investor Allocable Loss Amount, plus (B) the
Investor Allocable Dilution, minus (C) Investor Allocable Recoveries and minus
(D) Investor Allocable Dilution Adjustments for the related ASA Measuring
Period, over (y) the Available Subordinated Amount as of the first Business Day
of that ASA Measuring Period.
page 15
<PAGE> 20
"Loss Amount" means, with respect to any ASA Measuring Period, an
amount equal to the positive difference (if any) of (a) the amount of
Receivables held by the Trust that became Write-Offs during that ASA Measuring
Period, minus (b) the amount of Recoveries received during that ASA Measuring
Period.
"Loss Reserve Ratio" means, as calculated by the Servicer and provided
in each Monthly Report, the result (expressed as a percentage) of (a) the
Applicable Ratings Factor, multiplied by (b) the highest average of the Aged
Receivables Ratio for any three consecutive Calculation Periods that occurred
during the preceding 12 consecutive Calculation Periods ending on the most
recent Cut-Off Date, multiplied by (c) a fraction having (i) a numerator equal
to the sum of the aggregate amounts payable pursuant to invoices giving rise to
Receivables (other than Tricon Receivables) generated by the Sellers during the
two Calculation Periods preceding or ending on the most recent Cut-Off Date, and
(ii) a denominator equal to the Net Eligible Receivables, as of the most recent
Cut-Off Date, multiplied by (d) the Payment Term Multiplier.
"Loss Reserve Ratio (Z-value)" means, as calculated by the Servicer and
provided in each Monthly Report, the result (expressed as a percentage) of (a)
the Loss Reserve Ratio, plus (b) the product of (i) the Z-value, multiplied by
(ii) the sample standard deviation of the Aged Receivables Ratio during the
preceding 12 consecutive Calculation Periods ending on the most recent Cut-Off
Date, multiplied by (iii) the Payment Term Multiplier.
"Monthly Trustee Payment Amount" means the sum of (i) the dollar amount
specified in the fee schedule delivered by Trustee to the Servicer on or prior
to the Closing Date, as modified from time to time with the prior written
consent of the Servicer, plus (ii) any reasonable and documented out-of-pocket
expenses incurred by Trustee in the administration of its duties hereunder;
provided that the Monthly Trustee Payment Amount shall not exceed $5,000 for any
month.
"Moody's" means Moody's Investors Service, Inc., and any successor
thereto which is a nationally recognized rating agency.
"Net Eligible Receivables" means, at any time, the positive difference
of (a) the Concentration Adjusted Eligible Receivables, minus (b) the sum of (i)
the aggregate amount paid by Obligors to the Sellers in respect of any "cash in
advance" or "cash on account" arrangement included in the calculation of the
Concentration Adjusted Eligible Receivables and which has not been applied
against goods shipped to such Obligors, plus (ii) the PACA Amount with respect
to Receivables other than Tricon Receivables, plus (iii) the aggregate amount of
sales tax included in the calculation of the Concentration Adjusted Eligible
Receivables, plus (iv) the aggregate amount of royalties, advertising fees or
marketing fees included in the calculation of the Concentration Adjusted
Eligible Receivables, plus (v) the aggregate rebilled amount of all Debit Memos
included in the calculation of the Concentration Adjusted Eligible Receivables.
page 16
<PAGE> 21
"Net Invested Amount" means, on any Business Day, the positive
difference (if any) of (a) the Series 1998-3 Invested Amount, minus (b) the
aggregate balance on deposit in the Equalization Account and the Principal
Funding Account.
"Net Recoveries" means, with respect to any ASA Measuring Period, an
amount equal to the positive difference (if any) of (a) the amount of Recoveries
received in that ASA Measuring Period minus (b) the amount of Receivables that
became Write-Offs in that ASA Measuring Period.
"New Issuance Proceeds" means some or all (as determined by the
Transferor) of the proceeds of one or more New Issuances occurring after the
Closing Date.
"One-Month LIBOR" means, for any Interest Period, the rate per annum,
determined by the Trustee and notified in writing by the Trustee to the
Servicer, which is the arithmetic mean (rounded to the nearest 1/100 of 1%) of
the offered rates for dollar deposits having a maturity of one month commencing
on the first day of such Interest Period that appears on the Telerate British
Bankers Assoc. Interest Settlement Rates Page (defined below) at approximately
11:00 a.m., London time on the second full Business Day prior to such date;
provided, however, that if there shall at any time no longer exist a Telerate
British Bankers Assoc. Interest Settlement Rates Page, "One-Month LIBOR" shall
mean the rate per annum equal to the average rate at which the principal London
offices of Bank of America, Citibank N.A. and J.P. Morgan are offered dollar
deposits at or about 10:00 a.m., New York City time, two Business Days prior to
the first Business Day of such Interest Period in the London eurodollar
interbank market for delivery on the first day of such Interest Period for one
month and in a principal amount equal to an amount of not less than $1,000,000.
As used herein, "Telerate British Bankers Assoc. Interest Settlement Rates Page"
means the display designated as Page 3750 on the Telerate System Incorporated
Service (or such other page as may replace such page on such service for the
purpose of displaying the rates at which dollar deposits are offered by leading
banks in the London interbank deposit market), as reported by Bloomberg
Financial Markets Commodities News (or by another source selected by the Trustee
and notified by the Trustee to the Servicer).
"Optional Termination Date" is defined in Section 4.9.
"Optional Termination Notice" is defined in Section 4.9.
"Outstanding Principal Balance" means, (i) with respect to any Class A
Certificate, the actual outstanding principal balance of such Class A
Certificate, taking into effect payments on account of principal (but no other
payments) with respect to such Class A Certificate, but without taking into
effect any changes in the Class A Invested Amount relating to Investor
Write-Offs, Investor Allocable Recoveries or Investor Allocable Dilution
Adjustments, (ii) with respect to any Class B Certificate, the actual
outstanding principal balance of such Class B Certificate, taking into effect
payments on account of principal (but no other payments) with respect to such
Class B Certificate, but without taking into effect any changes in the Class B
Invested Amount relating to
page 17
<PAGE> 22
Investor Write-Offs, Investor Allocable Recoveries or Investor Allocable
Dilution Adjustments, (iii) with respect to any Class C Certificate, the actual
outstanding principal balance of such Class C Certificate, taking into effect
payments on account of principal (but no other payments) with respect to such
Class C Certificate, but without taking into effect any changes in the Class C
Invested Amount relating to Investor Write-Offs, Investor Allocable Recoveries
or Investor Allocable Dilution Adjustments, and (iv) with respect to the Series
1998-3 Certificates, the sum of the Outstanding Principal Balances of the Class
A Certificates, the Class B Certificates and the Class C Certificates.
"PACA Amount" at any time means the aggregate amount of obligations
then owed by the Sellers to any Persons that may be entitled to make a claim for
payment thereof pursuant to PACA.
"Payment Term" means, with respect to any Receivable, the number of
days between its invoice date and its due date.
"Payment Term Multiplier" means one.
"PFS" means the unincorporated food distribution business of PepsiCo,
Inc. known as PFS that AmeriServe acquired from PepsiCo, Inc. in July, 1997.
"Plans" means employee benefit plans (as defined in Section 3(3) of
ERISA) and other retirement plans and arrangements described in Section
4975(e)(l) of the Code, including individual retirement accounts, individual
retirement annuities and Keogh plans and insurance company separate accounts and
bank collective investment funds, in which such plans, accounts, annuities or
arrangements are invested.
"Prepayment Premium" means the Transferor Optional Termination
Prepayment Premium or the Termination of Sale Notice Prepayment Premium, as such
terms are defined in Section 4.9.
"Principal Payment Date" means any Distribution Date falling in the
Amortization Period with respect to Series 1998-3.
"PTCE" means a U.S. Department of Labor "Prohibited Transaction Class
Exemption."
"Purchaser Letter" means a letter substantially in the form of Exhibit
F.
"Qualified Institutional Buyer" is defined in Section 8.7(b).
"Rated Bank" means a bank which (a) is organized under the laws of the
United States or any state thereof and (b) has either (x) a long-term unsecured
debt rating of at least "A" from a Rating Agency or (y) a short-term unsecured
debt rating of at least "A-1" or "D-1" from a Rating Agency.
page 18
<PAGE> 23
"Rating Agencies" has the meaning set forth in Appendix A to the
Pooling Agreement, except that with respect to any Obligor, unless the context
otherwise requires, Rating Agencies means: (a) if both DCR and S&P rate such
Obligor, DCR and S&P; (b) if S&P rates such Obligor, but DCR does not, S&P; and
(c) if DCR rates such Obligor, but S&P does not, DCR.
"Recoveries" means all Collections received by the Trustee in respect
of Write-Offs.
"Regulation S" is defined in Section 8.7(a).
"Required Overcollateralization Amount" means, on any Business Day, the
greatest of the Class A Required Overcollateralization Amount, the Class B
Required Overcollateralization Amount and the Class C Required
Overcollateralization Amount.
"Required Receivables" means, on any Business Day, the greatest of the
Class A Required Receivables, the Class B Required Receivables and the Class C
Required Receivables.
"Required Series Holders" or "Required Series 1998-3
Certificateholders" means Holders whose Series 1998-3 Certificates evidence at
least 66 2/3% of the Series 1998-3 Invested Amount.
"Revolving Period" means the period beginning (a) on the Closing Date
and (b) ending on the day before the first day of the Amortization Period.
"Rule 144A" is defined in Section 8.7(a).
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., and any successor thereto which is a nationally recognized rating agency.
"Series Collection Allocation Percentage" at any time means a fraction
(expressed as a percentage), (a) the numerator of which is the Targeted NER and
(b) the denominator of which is the sum for all Series (other than Series
1998-1) of the "Targeted NER" as defined in the Supplements for such Series
(other than Series 1998-1).
"Series 1997-1" means the Floating Rate Variable Funding Certificates,
Series 1997-1, issued by the Trust.
"Series 1998-1" means the Floating Rate Variable Funding Certificates
Series 1998-1, issued by the Trust.
"Series 1998-2" means the Floating Rate Variable Funding Certificates,
Series 1998-2, issued by the Trust.
"Series 1998-3" is defined in the Preliminary Statement to this
Supplement.
page 19
<PAGE> 24
"Series 1998-3 Adjusted Invested Amount" means the sum of the Class A
Adjusted Invested Amount plus the Class B Adjusted Invested Amount plus the
Class C Adjusted Invested Amount.
"Series 1998-3 Certificateholders" means the Holders of the Series
1998-3 Certificates.
"Series 1998-3 Certificates" means the Class A Certificates, the Class
B Certificates and the Class C Certificates.
"Series 1998-3 Invested Amount" means, at any time, the sum of the
Class A Invested Amount plus the Class B Invested Amount plus the Class C
Invested Amount. The Series 1998-3 Invested Amount shall be the "Invested
Amount" of Series 1998-3 for purposes of the Pooling Agreement.
"Series 1998-3 Weighted Average Certificate Rate" means, at any time,
the sum of (a) the product of (i) the Class A Certificate Rate multiplied by
(ii) a fraction, the numerator of which is the Outstanding Principal Balances of
the Class A Certificates and the denominator of which is the Outstanding
Principal Balances of the Series 1998-3 Certificates, plus (b) the product of
(i) the Class B Certificate Rate multiplied by (ii) a fraction, the numerator of
which is the Outstanding Principal Balances of the Class B Certificates and the
denominator of which is the Outstanding Principal Balances of the Series 1998-3
Certificates plus (c) the product of (i) the Class C Certificate Rate multiplied
by (ii) a fraction, the numerator of which is the Outstanding Principal Balances
of the Class C Certificates and the denominator of which is the Outstanding
Principal Balances of the Series 1998-3 Certificates.
"Series Allocable Dilution Adjustments" means, for any ASA Measuring
Period, the product of (a) the aggregate amount of payments pursuant to or in
respect of Section 3.1(d) or Section 3.1(e) of the Purchase Agreement on account
of Seller Dilution Adjustments received during that ASA Measuring Period
relating to Dilution that occurred prior to that ASA Measuring Period multiplied
by (b) the Investor Allocation Percentage as of the first Business Day of that
ASA Measuring Period.
"Servicing Fee" with respect to Series 1998-3 shall be calculated as
follows:
At any time when any AmeriServe Person is Servicer, the Servicing Fee
for any Distribution Period shall be equal to one-twelfth of the product of (a)
2%, multiplied by (b) the product of, as measured on the first Business Day of
that Distribution Period, (x) the aggregate Unpaid Balance of all Receivables
(other than Tricon Receivables), multiplied by (y) the Series Collection
Allocation Percentage as of the first day of such Distribution Period.
The Servicing Fee for a Successor Servicer that is not an AmeriServe
Person shall be an amount equal to the greater of (i) the amount calculated
pursuant to the preceding sentence and (ii) an alternative amount specified by
such Servicer not exceeding the sum of (x) 110% of the
page 20
<PAGE> 25
aggregate reasonable costs and expenses incurred by such Servicer during such
Distribution Period in connection with the performance of its obligations under
the Transaction Documents, and (y) the other costs and expenses that are to be
paid out of the Servicing Fee, as described in the Pooling Agreement; provided
that the amount provided for in clause (x) shall not exceed one-twelfth of 2% of
the aggregate Unpaid Balance of the Receivables (other than Tricon Receivables)
as measured on the first Business Day of the Distribution Period and (ii) the
allocation to Series 1998-3 of amounts described in clauses (x) and (y) of this
sentence shall be based on the Series Collection Allocation Percentage for
Series 1998-3 as of the first day of such Distribution Period.
"Special Obligor" means any Obligor that may be designated as a
"Special Obligor" from time to time in writing by Transferor to the Trustee,
provided that the designation of any Obligor as a Special Obligor shall not be
effective unless the Modification Condition shall have been satisfied with
respect to the designation of such Special Obligor.
"Specified Rating Agencies" means, as to any Obligor: (a) if both DCR
and S&P rate such Obligor, DCR and S&P; (b) if S&P rates such Obligor, but DCR
does not, S&P; and (c) if DCR rates such Obligor, but S&P does not, DCR.
"Targeted NER" means the sum of (a) the Required Receivables plus (b)
the Adjusted Carrying Cost Reserve.
"Tax Opinion" is defined in Section 4.10.
"Termination of Sale Notice Date" means the date on which a Termination
of Sale Notice is given pursuant to Section 8.1 of the Purchase Agreement.
"Tier-1 Obligor" means, subject to Section 8.5(b), any Obligor that (a)
has a short-term unsecured debt rating from each Rating Agency of at least
"A-1+" and "D-1+", if such Obligor's short-term unsecured debt is rated by such
Rating Agency, or (b) (x) has no short-term unsecured debt rating from any
Rating Agency and (y) has a long-term unsecured debt rating from each Rating
Agency of at least "AAA", if such Obligor's long-term unsecured debt is rated by
such Rating Agency.
"Tier-2 Obligor" means, subject to Section 8.5(b), any Obligor (other
than a Tier-1 Obligor) that (a) has a short-term unsecured debt rating from each
Rating Agency of at least "A-1" and "D-1", if such Obligor's short-term
unsecured debt is rated by such Rating Agency, or (b) (x) has no short-term
unsecured debt rating from any Rating Agency and (y) has a long-term unsecured
debt rating from each Rating Agency of at least "AA-", if such Obligor's
long-term unsecured debt is rated by such Rating Agency.
"Tier-3 Obligor" means, subject to Section 8.5(b), any Obligor (other
than a Tier-1 Obligor or a Tier-2 Obligor) that (a) has a short-term unsecured
debt rating from each Rating
page 21
<PAGE> 26
Agency of at least "A-2" and "D-2", if such Obligor's short-term unsecured debt
is rated by such Rating Agency, or (b) (x) has no short-term unsecured debt
rating from any Rating Agency and (y) has a long-term unsecured debt rating from
each Rating Agency of at least "A-", if such Obligor's long-term unsecured debt
is rated by such Rating Agency.
"Tier-4 Obligor" means, subject to Section 8.5(b), any Obligor (other
than a Tier-1 Obligor, a Tier-2 Obligor or a Tier-3 Obligor) that (a) has a
short-term unsecured debt rating from each Rating Agency of at least "A-3" or
"D-3", if such Obligor's short-term unsecured debt is rated by such Rating
Agency, or (b) (x) has no short-term unsecured debt rating from any Rating
Agency and (y) has a long-term unsecured debt rating from each Rating Agency of
at least "BBB-", if such Obligor's long-term unsecured debt is rated by such
Rating Agency.
"Tier-5 Obligor" means any Obligor other than a Tier-1 Obligor, a
Tier-2 Obligor, a Tier-3 Obligor or a Tier-4 Obligor.
"Transferor Indemnified Losses" is defined in Section 7.2.
"Transferor Indemnified Party" is defined in Section 7.2.
"Transition Costs" is defined in Section 10.2(b) of the Pooling
Agreement.
"Turnover Days" means, at any time, the quotient of:
(x) (i) the sum of the Unpaid Balances of Receivables (other
than Tricon Receivables) as of the Cut-Off Date for each of the two
immediately preceding Calculation Periods divided by 2, multiplied by
(ii) 60; divided by
(y) the aggregate amount payable pursuant to invoices giving
rise to Receivables (other than Tricon Receivables) that were generated
during the immediately preceding two Calculation Periods.
"Unapplied Cash" means, on any Business Day, available funds (other
than Tricon Collections) received in the Master Collection Account and reflected
in the Daily Report for that Business Day that have not been applied as
Collections on a particular Receivable on or prior to the time as of which that
Daily Report is prepared.
"Unmatured Early Amortization Event" means an event or condition that,
upon the giving of notice or the passage of time, would become an Early
Amortization Event.
"Weighted Average Reserve Ratio" means, at any time, the sum of (a) the
product of (i) the Class A Reserve Ratio multiplied by (ii) a fraction, the
numerator of which is the Class A Adjusted Invested Amount and the denominator
of which is the Series 1998-3 Adjusted Invested Amount plus (b) the product of
(i) the Class B Reserve Ratio multiplied by (ii) a fraction, the
page 22
<PAGE> 27
numerator of which is the Class B Adjusted Invested Amount and the denominator
of which is the Series 1998-3 Adjusted Invested Amount, plus (c) the product of
(i) the Class C Reserve Ratio multiplied by (ii) a fraction, the numerator of
which is the Class C Adjusted Invested Amount and the denominator of which is
the Series 1998-3 Adjusted Invested Amount.
"Write-Off" means any Receivable (other than a Tricon Receivable) that,
consistent with the Credit and Collection Policy, has been written off as
uncollectible.
"Z-value" means the Class A Z-value, the Class B Z-value, or the Class
C Z-value, as specified in each calculation where the Z-value is used.
SECTION 1.2 Incorporation of Terms. The terms of the Pooling Agreement
are incorporated in this Supplement as if set forth in full herein. As
supplemented by this Supplement, the Pooling Agreement is in all respects
ratified and confirmed and both together shall be read, taken and construed as
one and the same agreement. If the terms of this Supplement and the terms of the
Pooling Agreement conflict, the terms of this Supplement shall control with
respect to the Series 1998-3 Certificates.
ARTICLE II DESIGNATION; AUTHENTICATION AND DELIVERY
SECTION 2.1 Designation. There is hereby created a Series to be known
as the "Series 1998-3 Certificates", consisting of three classes: the
$250,000,000 Floating Rate Class A Term Certificates, Series 1998-3 (the "Class
A Certificates"); the $20,000,000 Floating Rate Class B Term Certificates,
Series 1998-3 (the "Class B Certificates"); and the $10,000,000 Floating Rate
Class C Term Certificates, Series 1998-3 (the "Class C Certificates").
SECTION 2.2 Authentication and Delivery.
(a) On the Closing Date, Transferor shall sign, and shall direct the
Trustee in writing pursuant to Section 6.2 of the Pooling Agreement to duly
authenticate, and the Trustee, upon receiving such direction, (i) shall
authenticate, subject to Section 3.1, the Series 1998-3 Certificates in
accordance with such written directions, and (ii) subject to Section 2.2(b),
shall deliver such Series 1998-3 Certificates to the Initial Purchasers in
accordance with such written directions.
(b) The Class A Certificates and the Class B Certificates shall be
Book-Entry Certificates, and shall be issued to Cede & Co., as nominee of The
Depository Trust Company ("DTC"), pursuant to a Letter of Representations. DTC
will be the initial "Clearing Agency" for purposes of the Pooling Agreement. The
Class C Certificates shall be Definitive Certificates.
(c) In accordance with Section 6.11 of the Pooling Agreement: (i) Class
A Certificates sold in reliance on Rule 144A shall be represented by one or more
144A Book-Entry Certificates; (ii) Class A Certificates sold in reliance on
Regulation S shall be represented by one or more
page 23
<PAGE> 28
Regulation S Book-Entry Certificates; (ii) Class B Certificates sold in reliance
on Rule 144A shall be represented by a 144A Book-Entry Certificate; and (iv)
Class B Certificates sold in reliance on Regulation S shall be represented by
one or more Regulation S Book-Entry Certificates.
(d) The Class A Certificates, Class B Certificates and Class C
Certificates shall be executed by manual or facsimile signature on behalf of
Transferor by any officer of Transferor.
(e) The Series 1998-3 Certificates shall be issued in minimum
denominations of $500,000 and in integral multiples of $100,000 in excess
thereof.
ARTICLE III CONDITIONS TO ISSUANCE; USE OF PROCEEDS
SECTION 3.1 Conditions to Issuance. Trustee shall not authenticate the
Series 1998-3 Certificates unless (i) all conditions to the issuance of the
Series 1998-3 Certificates under Section 6.10 of the Pooling Agreement shall
have been satisfied, (ii) Trustee shall have received a letter from AmeriServe
updating the letter previously delivered pursuant to the first sentence of
Section 5.1(o) of the Purchase Agreement, and (iii) AmeriServe shall have
delivered a certificate to Trustee to the effect that all conditions set forth
in Section 7 of the Certificate Purchase Agreement shall have been satisfied.
SECTION 3.2 Use of Proceeds. The proceeds from the issuance of the
Series 1998-3 Certificates shall be used solely (together with the net proceeds
of the issuance of Series 1998-4), to repay Series 1997-1 and Series 1998-2 in
full.
ARTICLE IV PAYMENTS AND ALLOCATIONS
SECTION 4.1 Interest.
(a) Interest on each Class A Certificate shall (i) accrue during each
Interest Period at a rate per annum equal to One-Month LIBOR plus the
Certificate Spread applicable to the Class A Certificates, (ii) be calculated on
the basis of actual days over a year of 360 days, (iii) be due and payable on
each Distribution Date and (iv) be calculated based on the Outstanding Principal
Balance of such Class A Certificate.
(b) Interest on each Class B Certificate shall (i) accrue during each
Interest Period at a rate per annum equal to One-Month LIBOR plus the
Certificate Spread applicable to the Class B Certificates, (ii) be calculated on
the basis of actual days over a year of 360 days, (iii) be due and payable on
each Distribution Date and (iv) be calculated based on the Outstanding Principal
Balance of such Class B Certificate.
(c) Interest on each Class C Certificate shall (i) accrue during each
Interest Period at a rate per annum equal to One-Month LIBOR plus the
Certificate Spread applicable to the Class C Certificates, (ii) be calculated on
the basis of actual days over a year of 360 days, (iii) be due and
page 24
<PAGE> 29
payable on each Distribution Date and (iv) be calculated based on the
Outstanding Principal Balance of such Class C Certificate.
(d) Interest with respect to the Series 1998-3 Certificates due but not
paid on any Distribution Date shall be due on the next Distribution Date with
additional interest on the amount at 2% per annum above the Alternate Base Rate
to the extent permitted by law.
SECTION 4.2 Daily Calculations and Series Allocations. On each Business
Day, Servicer shall calculate the Series Collection Allocation Percentage for
Series 1998-3, the Carrying Cost Cash Reserve Amount and the Base Amount. On
each Business Day which is not in an Early Amortization Period, Servicer shall
also determine whether the Net Invested Amount is greater than, equal to or less
than the Base Amount.
On each Business Day, Servicer shall allocate to Series 1998-3 the
Series Collection Allocation Percentage of available funds (other than available
funds constituting Tricon Collections) received in the Master Collection Account
since the preceding Business Day. The funds allocated to Series 1998-3 in
accordance with the preceding sentence, together with any funds released from
the Equalization Account in accordance with Section 4.5 on that Business Day,
are called the "Daily Series Collections."
SECTION 4.3 Allocations of Daily Series Collections (Other Than in an
Amortization Period). On each Business Day (other than a Business Day falling in
an Amortization Period), (a) Servicer shall allocate to Series 1998-3 (i) the
aggregate amount of Daily Series Collections required to fund the items
described in priorities first and second below, in the priority indicated (and
to the extent of Daily Series Collections available), (ii) the amount of funds
then available on account of a Distribution Shortfall (with respect to Series
1998-3) pursuant to the Supplements for any other Series (other than Series
1998-1) to the extent needed to fund the items described in priorities first and
second below, in the priority indicated, and (iii) at the option of Transferor,
any New Issuance Proceeds specified in writing by Transferor to Servicer and
Trustee (provided that such New Issuance Proceeds shall be paid directly to
Trustee by one or more placement agents, underwriters or initial Investor
Certificateholders, as the case may be, of the new Series), (b) Servicer shall
indicate such allocation in the Daily Report delivered on such Business Day, and
(c) in accordance with such Daily Report, Trustee shall remit or hold funds as
follows:
first, to the Carrying Cost Account until the amount allocated
to the Carrying Cost Account equals an amount equal to the Current
Carrying Costs for the Distribution Period in which such Business Day
occurs;
second, if the Net Invested Amount is greater than the Base
Amount, to the Equalization Account in an amount sufficient to reduce
the Net Invested Amount to an amount equal to the Base Amount; and
page 25
<PAGE> 30
third, if there is a Distribution Shortfall with respect to
any Series (other than Series 1998-1 and Series 1998-3) on such
Business Day, to Trustee, for distribution to the applicable accounts
or Persons specified in the Supplement with respect to such Series, the
lesser of (x) the amount of such Distribution Shortfall and (y) the
amount of funds available pursuant to this clause third, it being
understood that if the Distribution Shortfalls for all Series (other
than Series 1998-1 and Series 1998-3) exceed the amount of funds
available pursuant to this clause third, then such funds shall be
allocated to such Series pro rata based on their respective Series
Collection Allocation Percentages (as defined in the Supplements for
such Series).
On such Business Day, Servicer shall allocate the remainder of
the Daily Series Collections to Transferor.
If, on any day, the amount of Daily Series Collections that is then
allocated to the Carrying Cost Account is less than the amount of Daily Series
Collections that is then required to be allocated to the Carrying Cost Account,
Servicer shall reallocate such Daily Series Collections on such day first to the
Monthly Trustee Payment Amount and Transition Costs, if any, and then to one or
more of the obligations contemplated by priority first of the second preceding
sentence.
SECTION 4.4 Allocations of Daily Series Collections During an
Amortization Period. On each Business Day falling in an Amortization Period, (a)
Servicer shall allocate to Series 1998-3 (i) the Daily Series Collections, (ii)
the amount of funds then available on account of a Distribution Shortfall (with
respect to Series 1998-3) pursuant to the Supplements for any other Series
(other than Series 1998-1) for the following purposes, in the priority indicated
(and to the extent of Daily Series Collections and such other funds available),
and (iii) at the option of Transferor, any New Issuance Proceeds specified in
writing by Transferor to Servicer and Trustee (provided that such New Issuance
Proceeds shall be paid directly to Trustee by one or more placement agents,
underwriters or initial Investor Certificateholders, as the case may be, of the
new Series), (b) Servicer shall indicate such allocation in the Daily Report
delivered on such Business Day, and (c) in accordance with such Daily Report,
Trustee shall remit or hold funds as follows:
first, to the Carrying Cost Account to the extent that the
balance therein is less than the amount of Current Carrying Costs
(other than any Servicing Fee payable to any AmeriServe Person) payable
on the Distribution Date relating to the Calculation Period during
which such Business Day falls;
second, to the Principal Funding Account, (i) if neither
Section 4.9 nor Section 7.1 applies, an amount equal to the excess, if
any, of (x) the Series 1998-3 Invested Amount over (y) the balance of
the Principal Funding Account, (ii) if Section 4.9 applies, an amount
equal to the excess, if any, of (x) the sum of the Outstanding
Principal Balances of the Series 1998-3 Certificates plus the
applicable Prepayment Premium, over (y) the balance of the Principal
Funding Account, and (iii) if Section 7.1 applies, an amount equal
page 26
<PAGE> 31
to the excess, if any, of (x) the Outstanding Principal Balances of the
Series 1998-3 Certificates over (y) the balance of the Principal
Funding Account;
third, to the Carrying Cost Account to the extent that the
balance therein is less than the amount of Current Carrying Costs
(including any Servicing Fee payable to any AmeriServe Person);
fourth, if there is a Distribution Shortfall with respect to
any Series (other than Series 1998-1 and Series 1998-3) on such
Business Day, to Trustee, for distribution to the applicable accounts
or Persons specified in the Supplement with respect to such Series, the
lesser of (x) the amount of such Distribution Shortfall and (y) the
amount of funds available pursuant to this clause fourth, it being
understood that if the Distribution Shortfalls for all Series (other
than Series 1998-1 and Series 1998-3) exceed the amount of funds
available pursuant to this clause fourth, then such funds shall be
allocated to such Series pro rata based on their respective Series
Collection Allocation Percentages; and
fifth, the balance to Transferor.
SECTION 4.5 Withdrawals from the Equalization Account.
(a) On any Business Day during the Revolving Period on which no Early
Amortization Event (or Unmatured Early Amortization Event) exists, Servicer may
instruct Trustee in writing to withdraw (and upon receipt of such instruction
Trustee shall withdraw) funds from the Equalization Account with respect to
Series 1998-3 and apply such funds as Daily Series Collections, so long as the
Net Invested Amount would not exceed the Base Amount after giving effect to such
transfer and application.
(b) On the first day of the Amortization Period, Servicer shall
instruct Trustee to transfer (and Trustee shall transfer) the entire balance in
the Equalization Account to the Principal Funding Account.
SECTION 4.6 Available Subordinated Amount. (a) If an Amortization
Period begins, Servicer shall promptly calculate the Available Subordinated
Amount as of the Amortization Period Calculation Date and report such amount in
the Daily Report for the first day in the Amortization Period. Servicer shall
also calculate the Available Subordinated Amount as of each Cut-Off Date falling
in the Amortization Period, such calculation to be reflected in the related
Monthly Report.
page 27
<PAGE> 32
(b) The Available Subordinated Amount as of the Amortization Period
Calculation Date shall equal the product of (x) the Investor Allocation
Percentage, multiplied by (y) the result of:
(i) the product of the Net Eligible Receivables at the opening
of business on the Amortization Period Calculation Date, multiplied by
the Series Collection Allocation Percentage on that date; minus
(ii) the sum of (i) the lesser of (A) the Base Amount plus the
amount, if any, on deposit in the Equalization Account and the
Principal Funding Account, and (B) the Net Invested Amount and (ii) the
Carrying Cost Receivables Reserve at the opening of business on the
Amortization Period Calculation Date.
(c) The Available Subordinated Amount, as of any Cut-Off Date in the
Amortization Period, shall equal the result of:
(i) the Available Subordinated Amount as of the preceding
Cut-Off Date (or as of the Amortization Period Calculation Date, in the
case of the first Cut-Off Date falling in the Amortization Period);
minus
(ii) the Investor Allocable Loss Amount with respect to the
ASA Measuring Period ending on that Cut-Off Date; minus
(iii) any Investor Allocable Dilution with respect to the ASA
Measuring Period ending on that Cut-Off Date; plus
(iv) subject to Sections 4.7 and 4.8, the Investor Allocable
Recoveries and Investor Allocable Dilution Adjustments with respect to
the ASA Measuring Period ending on that Cut-Off Date.
(d) Notwithstanding the foregoing, in no event shall the Available
Subordinated Amount at any time be less than zero or greater than the initial
Available Subordinated Amount calculated pursuant to subsection (b).
SECTION 4.7 Write-Offs and Recoveries. (a) In each Monthly Report
required to be delivered during the Amortization Period, Servicer shall
calculate the Investor Write-Offs and the Investor Allocable Recoveries for the
most recently ended ASA Measuring Period.
(b) If the Investor Write-Offs calculated in any Monthly Report exceed
zero, the Series 1998-3 Invested Amount shall be reduced by the amount of the
Investor Write-Offs with effect from the related Distribution Date. Any such
reduction shall be allocated first to the Class C Invested Amount until the
Class C Invested Amount has been reduced to zero, second to the Class B Invested
Amount until the Class B Invested Amount has been reduced to zero, and third to
the Class A Invested Amount until the Class A Invested Amount has been reduced
to zero.
page 28
<PAGE> 33
(c) If the Series 1998-3 Invested Amount has been reduced on account of
any Investor Write-Offs, then any Investor Allocable Recoveries with respect to
any Calculation Period ending after the reduction takes place shall be applied
to reinstate the Series 1998-3 Invested Amount, to the extent of such prior
reductions that have not previously been reinstated, with effect from the
related Distribution Date. Any such reinstatement shall be allocated first to
the Class A Invested Amount until all prior reductions to the Class A Invested
Amount on account of Investor Write-Offs have been reinstated, second to the
Class B Invested Amount until all prior reductions to the Class B Invested
Amount on account of Investor Write-Offs have been reinstated, and third to the
Class C Invested Amount until all prior reductions to the Class C Invested
Amount have been reinstated.
(d) If Investor Allocable Recoveries are applied pursuant to subsection
(c) to reinstate the Series 1998-3 Invested Amount on any Distribution Date,
then Investor Allocable Recoveries shall be applied to increase the Available
Subordinated Amount on the same Distribution Date only to the extent of the
excess, if any, of the Investor Allocable Recoveries, minus the amount of
Investor Allocable Recoveries so applied.
SECTION 4.8 Certain Dilution in an Amortization Period. (a) In each
Monthly Report required to be delivered during the Amortization Period, Servicer
shall calculate the Investor Allocable Dilution and the Series Allocable
Dilution Adjustments for the most recently ended ASA Measuring Period.
(b) If the Available Subordinated Amount or the Series 1998-3 Invested
Amount has been reduced on account of any Investor Allocable Dilution, then any
Series Allocable Dilution Adjustments with respect to any Calculation Period
ending after the reduction takes place (the "Investor Allocable Dilution
Adjustments") shall be allocated (x) first, to reinstate the Series 1998-3
Invested Amount (with the same allocation among Series 1998-3 Certificateholders
as is described in subsection 4.7(c)), and (y) second, to reinstate the
Available Subordinated Amount, in each case to the extent not previously
reinstated. Any funds so allocated on any day shall be distributed in accordance
with the priorities set forth in Section 4.4.
SECTION 4.9 Optional Termination; Prepayment Premium. (a) On any
Business Day falling in the Revolving Period, Transferor shall have the right to
deliver an irrevocable written notice (an "Optional Termination Notice") to
Trustee and Servicer in which Transferor declares that the Revolving Period
shall terminate on the Distribution Date (the "Optional Termination Date") set
forth in such notice (which Distribution Date, in any event, shall be a date
which is (i) at least thirty days from the date on which such notice is
delivered and (ii) prior to the Expected Revolving Period Termination Date). It
shall be a condition precedent to the occurrence of the Optional Termination
Date that the Transferor shall have provided to Trustee and the Rating Agencies
a legal opinion, reasonably satisfactory in form and substance to Trustee and
the Rating Agencies, to the effect that the payments contemplated by this
Section 4.9 would not constitute a fraudulent conveyance. On the Business Day
prior to the Optional Termination Date, to the extent that sufficient funds are
not available pursuant to Section 5.1 in the Carrying
page 29
<PAGE> 34
Cost Account and the Principal Funding Account for the purpose of repaying the
Outstanding Principal Balances of the Series 1998-3 Certificates in full and
paying all accrued but unpaid interest thereon and paying the Transferor
Optional Prepayment Premium (defined below), Transferor shall pay to the Trustee
for distribution to the Series 1998-3 Certificateholders (solely from funds
available to Transferor which are not otherwise needed to be applied to the
payment of any amounts by Transferor pursuant to the Pooling Agreement or any
Supplement), an amount equal to the sum of: (i) the Outstanding Principal
Balances of the Series 1998-3 Certificates; plus (ii) all accrued but unpaid
interest thereon plus (iii) an amount calculated by Transferor equal to the
present value of a series of payments equal to the sum of (x) the product of (A)
the Outstanding Principal Balances of the Class A Certificates and (B) the
Certificate Spread for the Class A Certificates, payable monthly on each
Distribution Date in arrears from the Optional Termination Date through the
second anniversary of the Closing Date and discounted at a rate equal to
One-Month LIBOR being used to calculate the Class A Certificate Rate on the
Optional Termination Date, plus (y) the product of (A) the Outstanding Principal
Balances of the Class B Certificates and (B) the Certificate Spread for the
Class B Certificates, payable monthly on each Distribution Date in arrears from
the Optional Termination Date through the Expected Revolving Period Termination
Date and discounted at a rate equal to One-Month LIBOR being used to calculate
the Class B Certificate Rate on the Optional Termination Date, plus (z) the
product of (A) the Outstanding Principal Balances of the Class C Certificates
and (B) the Certificate Spread for the Class C Certificates, payable monthly on
each Distribution Date in arrears from the Optional Termination Date through the
Expected Revolving Period Termination Date and discounted at a rate equal to
One-Month LIBOR being used to calculate the Class C Certificate Rate on the
Optional Termination Date (the sum of clauses (x), (y) and (z) of this sentence
being referred to as the "Transferor Optional Termination Prepayment Premium").
(b) Trustee shall give prompt written notice of its receipt of the
Optional Termination Notice or the Termination of Sale Notice to the Series
1998-3 Certificateholders and each Rating Agency.
(c) On each Distribution Date in an Amortization Period resulting from
the delivery of a Termination of Sale Notice, the Series 1998-3
Certificateholders shall be entitled to receive, in addition to the other
amounts payable under this Supplement (to the extent not previously paid
pursuant to Section 5.1), an amount calculated by Transferor equal to the
present value of a series of payments equal to the sum of (x) the product of (A)
the Outstanding Principal Balances of the Class A Certificates and (B) the
Certificate Spread for the Class A Certificates, payable monthly on each
Distribution Date in arrears from the first Distribution Date following the
delivery of the Termination of Sale Notice through the Expected Revolving Period
Termination Date and discounted at a rate equal to One-Month LIBOR being used to
calculate the Class A Certificate Rate on the first Distribution Date following
the delivery of the Termination of Sale Notice, plus (y) the product of (A) the
Outstanding Principal Balances of the Class B Certificates and (B) the
Certificate Spread for the Class B Certificates, payable monthly on each
Distribution Date in arrears from the first Distribution Date following the
delivery of the Termination of Sale Notice through the Expected Revolving Period
Termination Date and discounted at a rate equal to One-
page 30
<PAGE> 35
Month LIBOR being used to calculate the Class B Certificate Rate on the first
Distribution Date following the delivery of the Termination of Sale Notice, plus
(z) the product of (A) the Outstanding Principal Balances of the Class C
Certificates and (B) the Certificate Spread for the Class C Certificates,
payable monthly on each Distribution Date in arrears from the first Distribution
Date following the delivery of the Termination of Sale Notice through the
Expected Revolving Period Termination Date and discounted at a rate equal to
One-Month LIBOR being used to calculate the Class C Certificate Rate on the
first Distribution Date following the delivery of the Termination of Sale Notice
(the sum of clauses (x), (y) and (z) of this sentence being referred to as the
"Termination of Sale Notice Prepayment Premium").
SECTION 4.10 Tax Opinion. If any "Tax Opinion" is required to be
delivered in connection with the Series 1998-3 Certificates, the term "Tax
Opinion" shall have the meaning specified below:
"Tax Opinion" means, with respect to any action, an Opinion of
Counsel to the effect that, for Federal income tax and applicable state
income and franchise tax purposes, (a) such action shall not adversely
affect the characterization of the Class A Certificates or Class B
Certificates as debt and the Class C Certificates as debt or
partnership interests, (b) following such action the Trust would not be
treated as an association (or publicly traded partnership) taxable as a
corporation, (c) such action would not be treated as a taxable event to
any Series 1998-3 Investor Certificateholder or Certificate Owner.
ARTICLE V DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions. On each Distribution Date and (with respect
to clauses ninth, tenth and eleventh below) each Principal Payment Date, Trustee
shall, in accordance with instructions set out in the applicable Daily Report
and to the extent funds are available for such payment in the Carrying Cost
Account (and, in the case of clauses ninth, tenth and eleventh, in the Principal
Funding Account), distribute such funds in the following priority:
first, to itself, the Monthly Trustee Payment Amount;
second, to the Servicer, so long as the Servicer is not an
AmeriServe Person, the Servicing Fee for the preceding Distribution
Period and to any Successor Servicer, the amount of any Transition
Costs;
third, to the Class A Certificateholders, accrued and unpaid
interest on the Class A Certificates (other than amounts referred to in
clause fourth below);
fourth, to the Class A Certificateholders, any additional
interest payable pursuant to Section 4.1;
page 31
<PAGE> 36
fifth, to the Class B Certificateholders, accrued and unpaid
interest on the Class B Certificates (other than amounts referred to in
clause sixth below);
sixth, to the Class B Certificateholders, any additional
interest payable pursuant to Section 4.1;
seventh, to the Class C Certificateholders, accrued and unpaid
interest on the Class C Certificates (other than amounts referred to in
clause eighth below);
eighth, to the Class C Certificateholders, any additional
interest payable pursuant to Section 4.1;
ninth, on each Principal Payment Date, all funds deposited in
the Principal Funding Account prior to the most recent Report Date
shall be distributed to the Class A Certificateholders (i) in reduction
of the Class A Invested Amount (but not in excess of the Class A
Invested Amount), if neither Section 4.9 nor Section 7.1 is then
applicable to such distribution, or (ii) in reduction of the
Outstanding Principal Balance of the Class A Certificates (but not in
excess of the Outstanding Principal Balance of the Class A
Certificates), if either Section 4.9 or Section 7.1 is then applicable
to such distribution);
tenth, on each Principal Payment Date, all funds deposited in
the Principal Funding Account prior to the most recent Report Date,
after giving effect to the distribution pursuant to clause ninth, shall
be distributed to the Class B Certificateholders (i) in reduction of
the Class B Invested Amount (but not in excess of the Class B Invested
Amount), if neither Section 4.9 nor Section 7.1 is then applicable to
such distribution, or (ii) in reduction of the Outstanding Principal
Balance of the Class B Certificates (but not in excess of the
Outstanding Principal Balance of the Class B Certificates), if either
Section 4.9 or Section 7.1 is then applicable to such distribution;
eleventh, on each Principal Payment Date, all funds deposited
in the Principal Funding Account prior to the most recent Report Date,
after giving effect to the distributions pursuant to clause ninth and
clause tenth, shall be distributed to the Class C Certificateholders
(i) in reduction of the Class C Invested Amount (but not in excess of
the Class C Invested Amount), if neither Section 4.9 nor Section 7.1 is
then applicable to such distribution, or (ii) in reduction of the
Outstanding Principal Balance of the Class C Certificates (but not in
excess of the Outstanding Balance of the Class C Certificates), if
either Section 4.9 or Section 7.1 is then applicable to such
distribution;
twelfth, if on any Principal Payment Date the funds on deposit
in the Carrying Cost Account (less any Servicing Fee payable on that
day to any Person other than an AmeriServe Person) shall be equal to or
greater than the Series 1998-3 Invested Amount (after giving effect to
distributions required by clauses ninth, tenth and eleventh), then an
amount equal to such remaining Series 1998-3 Invested Amount shall be
withdrawn from
page 32
<PAGE> 37
the Carrying Cost Account and distributed as follows: (i) if the Class
A Invested Amount exceeds zero, to the Class A Certificateholders in
reduction of the Class A Invested Amount, (ii) if the Class A Invested
Amount has been reduced to zero, to the Class B Certificateholders in
reduction of the Class B Invested Amount, and (iii) if the Class B
Invested Amount has been reduced to zero, to the Class C
Certificateholders in reduction of the Class C Invested Amount;
thirteenth, if any Prepayment Premium is then payable to the
Series 1998-3 Certificateholders then funds in an amount equal to such
Prepayment Premium shall be paid, first, to the Class A
Certificateholders (but not in excess of the portion of the Prepayment
Premium calculated by reference to the Class A Certificate Rate),
second, to the Class B Certificateholders (but not in excess of the
portion of the Prepayment Premium calculated by reference to the Class
B Certificate Rate), and third to the Class C Certificateholders (but
not in excess of the portion of the Prepayment Premium calculated by
reference to the Class C Certificate Rate);
fourteenth, to the Rating Agencies, any fees owing by
Transferor or Servicer to the Rating Agencies for rating or monitoring
Series 1998-3;
fifteenth, to the Servicer (if the Servicer is an AmeriServe
Person), the Servicing Fee for the preceding Distribution Period; and
sixteenth, the balance (if any) to the Transferor.
The Trustee shall send distributions to each Series 1998-3
Certificateholder by 1:00 p.m., New York City time on each Distribution Date by
wire transfer of immediately available funds to an account maintained by such
Series 1998-3 Certificateholder with a bank in the United States (or, in the
case of any Series 1998-3 Certificates which are represented by Book-Entry
Certificates, at such earlier time as may be required to guarantee that the
Clearing Agency will receive payment in same-day funds by 2:30 p.m. New York
City time on such Distribution Date); provided that such Holder notified the
Trustee (if not the Trustee) in writing as to such account at least five
Business Days prior to such Distribution Date (such notice to remain effective
with respect to a Holder until different instructions are received by the
Trustee). Distributions to Series 1998-3 Certificateholders which do not qualify
under the preceding sentence will be made by check mailed to such Series 1998-3
Certificateholders. All distributions to Class A Certificateholders shall be
made on a pro rata basis (based on the Outstanding Principal Balances of the
Class A Certificates). All distributions to the Class B Certificateholders shall
be made on a pro rata basis (based on the Outstanding Principal Balances of the
Class B Certificates). All distributions to the Class C Certificateholders shall
be made on a pro rata basis (based on the Outstanding Principal Balances of the
Class C Certificates). For purposes of distributions to Series 1998-3
Certificateholders on a Distribution Date, the status of a Person as a Series
1998-3 Certificateholder shall be determined as of the preceding Record Date.
page 33
<PAGE> 38
SECTION 5.2 Payments in Respect of Transferor Certificate. On each day
on which funds are allocated for this purpose pursuant to Sections 4.3 and 4.4,
Trustee shall, in accordance with instructions set out in the applicable Daily
Report, distribute to Transferor all funds allocated for that purpose in
accordance with those Sections. In addition, upon termination of this Supplement
in accordance with Section 8.9, any additional funds on deposit in the Carrying
Cost Account, the Equalization Account or the Principal Funding Account shall
similarly be paid to Transferor in respect of the Transferor Certificate.
SECTION 5.3 Daily Reports and Monthly Reports. (a) Each Daily Report
and Monthly Report shall be substantially in the applicable form set out in
Exhibit D or E or in such other form as may be consistent with the terms of this
Supplement and the Pooling Agreement. Copies of each Monthly Report shall be
provided free of charge on each Report Date by the Servicer to the Holders of
Series 1998-3 Certificates. Each Daily Report shall report the required
information for all outstanding Series.
(b) Notwithstanding any other provision of this Supplement:
(i) In the event that a calculation or determination to be
made with respect to periods prior to the Closing Date refers to a
Daily Report or Monthly Report, such calculation or determination shall
be made even though Daily Reports and Monthly Reports were not required
to be delivered pursuant to this Supplement prior to the Closing Date.
By way of example, the "ADR" referred to in the definition of Dilution
Reserve Ratio shall be calculated for purposes of periods prior to the
Closing Date even though the definition of Dilution Ratio refers to a
calculation in a Monthly Report.
(ii) Any calculation or determination which relates to a
Cut-Off Date and which is to be made with respect to periods or dates
prior to the Cut-Off Date occurring in September 1997 (with respect to
AmeriServe) or February 1998 (with respect to ProSource) shall be made
instead with respect to Unmodified End Dates relating to such periods
or dates. "Unmodified End Date" means the end of a fiscal month of a
Seller and, to the extent relevant, the end of "Periods" historically
used by PFS in connection with its servicing operations.
(iii) Servicer at all times shall use its best efforts to
estimate the items described in clause (b) of the definition of Net
Eligible Receivables; provided that the fact that Servicer is permitted
to make such estimates shall not limit the effect of any
indemnification or other provision in any Transaction Document.
This Section 5.3 shall not limit the obligation of Servicer to make the
allocations and calculations required by this Supplement on a daily basis.
SECTION 5.4 Annual Tax Information. During January (and on or before
January 31) of each calendar year, Servicer, on behalf of Trustee, shall furnish
or cause to be furnished to each
page 34
<PAGE> 39
Person who at any time during the preceding calendar year was a Holder the
information for the preceding calendar year, or the applicable portion thereof
during which the Person was a Holder, as is required to be provided by an issuer
of indebtedness under the Internal Revenue Code to the holders of the issuer's
indebtedness and such other customary information as is necessary to enable such
Holders to prepare their federal income tax returns. Notwithstanding anything to
the contrary contained in this Agreement, Trustee shall, to the extent required
by applicable law, from time to time furnish to the appropriate Persons, at
least five Business Days prior to the end of the period required by applicable
law, the information required to complete a Form 1099-INT.
SECTION 5.5 Periodic Perfection Certificate. During December (and on or
before December 31) of each calendar year, Servicer, on behalf of Trustee, shall
furnish or cause to be furnished to Trustee and the Agent an Officer's
Certificate setting forth a list of all changes in (i) the name, identity or
corporate structure of Transferor or any Seller and (ii) the chief executive
office of Transferor or any Seller (or in the place of business of Transferor or
any Seller that has only one place of business) that have taken place since the
date of the Officer's Certificate most recently delivered pursuant to this
Section 5.5, or indicating that no such events have taken place, and stating in
each case what filings of UCC financing statements, or amendments thereto,
relating to the Transaction Documents have been made in connection with each
such event (identifying the date and filing index numbers for each). Any
financing statement identified in such an Officer's Certificate delivered to
Trustee shall be deemed to have been identified to Trustee in writing for
purposes of subsection 11.1(c)(v) of the Pooling Agreement. If any such new UCC
financing statements are filed, Servicer shall cause Trustee to be named as
secured party (in the case of any filing against Transferor) or assignee of the
secured party (in the case of any filing against a Seller).
ARTICLE VI EARLY AMORTIZATION EVENTS
SECTION 6.1 Early Amortization Events. Each of the following shall
constitute an "Early Amortization Event":
(a) (i) failure of any interest or principal payable to the
Series 1998-3 Certificateholders on any date to be paid to the Series
1998-3 Certificateholders on such date; or (ii) failure on the part of
Transferor or Servicer to make any deposit or any other payment
required by the terms of any Transaction Document on or before one
Business Day after the date such deposit or payment is required to be
made; or (iii) failure on the part of any Seller to duly observe or
perform Section 6.1(f), 6.1(h), 6.1(i), 6.1(j), 6.2, 6.3(a), 6.3(b),
6.3(c) or 6.3(e) of the Purchase Agreement or Transferor to duly
observe or perform Section 7.2(c), 7.2(d), 7.2(e), 7.2(f), 7.2(g),
7.2(h), 7.2(i), 7.2(j), 7.2(k), 7.2(m), 7.2(n), 7.2(q) or 7.2(r) of the
Pooling Agreement, which failure continues unremedied for a period of
five Business Days; or (iv) failure on the part of Transferor,
Servicer, any Seller or Guarantor duly to observe or perform any other
covenant or agreement set forth in any Transaction Document, which
failure continues unremedied for
page 35
<PAGE> 40
a period of 30 days; or (v) Guarantor gives notice of termination of
the Seller Guaranty (or otherwise purports to disaffirm or contest the
Seller Guaranty);
(b) any representation or warranty made by a Seller in Section
5.1(d), 5.1(k), 5.1(o) or 5.1(r) of the Purchase Agreement or by
Transferor in Section 2.3(a)(i), 2.3(a)(ii) or 7.1(i) of the Pooling
Agreement shall prove to have been incorrect in any material respect
when made, and continues to be incorrect in any material respect for a
period of five Business Days, or any other representation or warranty
made by Transferor, Servicer, any Seller or Guarantor in any
Transaction Document shall prove to have been incorrect in any material
respect when made, and continues to be incorrect in any material
respect for a period of 30 days; provided that a representation and
warranty with respect to a Receivable set forth in Section 5.1(k),
5.1(l) or 5.3(b) of the Purchase Agreement shall not constitute an
Early Amortization Event unless and until the applicable Seller has
failed to make the cash payments (if any) owed under Sections 3.1 and
3.5 of the Purchase Agreement in respect of such mistake or breach (it
being understood that certain of such mistakes or breaches may result
in a non-cash adjustment under the Purchase Agreement);
(c) a Bankruptcy Event shall occur with respect to Transferor,
Servicer, Guarantor or any Seller, or Transferor shall become unable,
for any reason, to transfer Receivables or other Transferred Assets to
Trustee in accordance with the provisions of this Supplement and the
Pooling Agreement; provided that if, at the time any event that would,
with the passage of time, become a Bankruptcy Event occurs as a result
of a bankruptcy proceeding being filed against Transferor or any
Seller, then, on and after the day on which the bankruptcy proceeding
is filed until the earlier to occur of the dismissal of the proceeding
and the Early Amortization Commencement Date, Transferor shall not
purchase Receivables and Related Assets from the affected Seller or, if
Transferor is the subject of the proceeding, transfer Receivables and
Related Transferred Assets to the Trustee;
(d) the Trust or Transferor shall become an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(e) the Net Invested Amount exceeds the Base Amount for a
period of five or more consecutive Business Days;
(f) a Servicer Default shall occur (whether or not
contemplated by clause (c) above or by any other language in this
Section 6.1), or AmeriServe shall resign, be removed or not be the
Servicer for any reason;
(g) AmeriServe shall cease to directly own 100% of the issued
and outstanding capital stock of Transferor;
page 36
<PAGE> 41
(h) the Internal Revenue Service or the PBGC shall have filed
a notice of one or more Tax or ERISA Liens against the assets of
Transferor, any Seller or the Trust (including Receivables);
(i) the cessation of, or the failure to create, a valid
first-priority perfected ownership or security interest in favor of
Trustee in the Receivables or the rights of Transferor under the
Purchase Agreement;
(j) the Outstanding Principal Balances of the Series 1998-3
Certificates are not paid in full on the Expected Revolving Period
Termination Date;
(k) the Transferor Net Worth shall be less than the greater of
(i) 10% of the aggregate Unpaid Balance of the Receivables owned by the
Transferor and the Trust and (ii) $25,000,000, and in either case such
condition shall continue for more than five consecutive Business Days;
(l) any foreclosure or similar proceeding in respect of any
Adverse Claim on any Buyer Note or the Transferor's common stock shall
have been commenced; or title to any Buyer Note or Transferor's common
stock shall pass to the holders of such Adverse Claim, it being
understood that the grant of a security interest in the stock of
Transferor or any Buyer Note pursuant to the AmeriServe Credit
Agreement to a creditor of a Seller that is party to an Intercreditor
Agreement shall not be an Early Amortization Event;
(m) the Intercreditor Provisions shall be amended, waived or
modified in a way which has an adverse effect on Series 1998-3, or the
Intercreditor Provisions shall be breached, without the Modification
Condition having been satisfied with respect thereto; or
(n) any of the Class A Certificates, the Class B Certificates
or the Class C Certificates shall cease to be rated by either S&P or
DCR for any reason.
SECTION 6.2 Early Amortization Period. Upon the occurrence and
continuance of any Early Amortization Event described in subsection 6.1(c), (d),
(e), (i), (j) or (k), an Early Amortization Period shall commence immediately on
the date of such occurrence without any notice or other action on the part of
any Person. Upon the occurrence and during the continuance of any other Early
Amortization Event, Trustee may (and, if so directed in writing by the Required
Series 1998-3 Certificateholders, Trustee shall promptly), by notice given in
writing to Transferor and Servicer, declare that an Early Amortization Period
has commenced (and the Early Amortization Period shall commence immediately as
of the date Trustee sends such notice).
page 37
<PAGE> 42
ARTICLE VII OPTIONAL REDEMPTION; INDEMNITIES
SECTION 7.1 Optional Redemption of Investor Interests. On any
Distribution Date occurring during the Amortization Period with respect to the
Series 1998-3 Certificates on or after the date that the Outstanding Principal
Balance of the Series 1998-3 Certificates is reduced to ten percent (10%) or
less of the Outstanding Principal Balance of the Series 1998-3 Certificates as
of the commencement of the Amortization Period, Transferor shall have the option
to redeem the Series 1998-3 Series Interest, provided that, on or prior to such
Distribution Date, Transferor shall have furnished to Trustee and the Rating
Agencies a legal opinion, in form and substance reasonably satisfactory to
Trustee and the Rating Agencies, to the effect that the payment of such
redemption price does not constitute a fraudulent conveyance. The redemption
price shall be an amount equal to the sum of (a) the Outstanding Principal
Balances of the Series 1998-3 Certificates, plus (b) accrued and unpaid interest
on the Series 1998-3 Certificates (and accrued and unpaid interest with respect
to interest that was due but not paid on any prior Distribution Date) through
the day preceding such Distribution Date in accordance with Section 4.1. Upon
the tender of the outstanding Series 1998-3 Certificates, Trustee shall
distribute such amounts, together with all funds on deposit in the Principal
Funding Account that are allocable to the Series 1998-3 Certificates, to the
Series 1998-3 Certificateholders on the next Distribution Date in repayment of
the principal amount and accrued and unpaid interest owing to the Series 1998-3
Certificateholders. Following any redemption, the Series 1998-3
Certificateholders shall have no further rights with respect to the Receivables,
subject to Section 8.9. In the event that Transferor fails for any reason to
deposit such redemption price in the Principal Funding Account, payments shall
continue to be made to the Series 1998-3 Certificateholders in accordance with
the terms of the Pooling Agreement and this Supplement.
SECTION 7.2 Indemnification by Transferor. Transferor hereby agrees to
indemnify the Trust, Trustee, the Initial Purchasers, each Holder of a Series
1998-3 Certificate and each of the successors, permitted transferees and assigns
of any such Person and all officers, directors, shareholders, controlling
Persons, employees, affiliates and agents of any of the foregoing (each of the
foregoing Persons (other than the Transferor) individually being called a
"Transferor Indemnified Party"), forthwith on demand, from and against any and
all damages, losses, claims (whether on account of settlements or otherwise, and
whether or not the relevant Transferor Indemnified Party is a party to any
action or proceeding that gives rise to any Transferor Indemnified Losses (as
defined below)), judgments, liabilities and related reasonable costs and
expenses (including reasonable Attorney Costs) (all of the foregoing
collectively being called "Transferor Indemnified Losses") awarded against or
incurred by any of them that arise out of or relate to this Agreement, any other
Transaction Document or any of the transactions contemplated herein or therein
or the use of proceeds herefrom or therefrom (including without limitation any
Transferor Indemnified Losses relating to any Adverse Claim, without regard to
whether such Adverse Claim was a Permitted Adverse Claim).
Notwithstanding the foregoing, in no event shall any Transferor
Indemnified Party be indemnified for any Transferor Indemnified Losses (i)
resulting from gross negligence or willful
page 38
<PAGE> 43
misconduct on the part of such Transferor Indemnified Party (or the gross
negligence or willful misconduct on the part of any of its officers, directors,
employees, affiliates or agents), (ii) to the extent they include Transferor
Indemnified Losses in respect of Receivables and reimbursement therefor that
would constitute credit recourse to Transferor for the amount of any Receivable
or Related Transferred Asset not paid by the related Obligor, or (iii) to the
extent they are or result from taxes (including interest and penalties thereon)
asserted with respect to (A) distributions on the Series 1998-3 Certificates,
(B) franchise or withholding taxes imposed on any Transferor Indemnified Party
other than the Trust or Trustee in its capacity as Trustee, or (C) federal or
other income taxes on or measured by the net income of such Transferor
Indemnified Party and costs and expenses in defending against the same.
If for any reason the indemnification provided in this section is
unavailable to a Transferor Indemnified Party or is insufficient to hold a
Transferor Indemnified Party harmless, then Transferor shall contribute to the
amount paid by the Transferor Indemnified Party as a result of any loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the Transferor Indemnified Party on the one hand
and Transferor on the other hand, but also the relative fault (if any) of the
Transferor Indemnified Party and Transferor and any other relevant equitable
considerations.
Notwithstanding any provisions contained in any Transaction Document to
the contrary, Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section unless funds are allocated for such payment
pursuant to Article IV of this Supplement. Any amount which Transferor does not
pay pursuant to the operation of the preceding sentence shall not constitute a
claim (as defined in SECTION101 of the Bankruptcy Code) against or corporate
obligation of Transferor for any such insufficiency.
SECTION 7.3 Indemnification by Servicer. Servicer agrees that each of
the Initial Purchasers, each Holder of a Series 1998-3 Certificate and each
other Transferor Indemnified Party shall be an "Indemnified Party" for purposes
of the Pooling Agreement.
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Amendment, Waiver, Etc. This Supplement shall not be
amended, modified or waived except in accordance with Section 13.1 of the
Pooling Agreement.
SECTION 8.2 Trustee. Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplement
or for or in respect of the recitals contained herein, all of which recitals are
made solely by Transferor and Servicer.
SECTION 8.3 Instructions in Writing. All instructions given by Servicer
to Trustee pursuant to this Supplement shall be in writing, and may be included
in a Daily Report or Monthly Report.
page 39
<PAGE> 44
SECTION 8.4 Rule 144A. So long as any of the Series 1998-3 Certificates
are "restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, Transferor shall, unless it becomes subject to and complies with
the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, or rule 12g3-2(b) thereunder, provide to any Certificate or
Certificate Owner of such restricted securities, or to any prospective
Certificate or Certificate Owner of such restricted securities designated by a
Certificate or Certificate Owner, upon the request of such Certificate or
Certificate Owner or prospective Certificateholder or Certificate Owner, any
information required to be provided by Rule 144A(d)(4) under the Securities Act.
SECTION 8.5 Supplemental Ratings Requirement. (a) So long as any of the
Series 1998-3 Certificates are outstanding, if any provision of the Purchase
Agreement, the Pooling Agreement, this Supplement or the Certificate Purchase
Agreement requires a Person or investment to have a certain rating from S&P, and
such Person or investment is also rated by DCR, then, unless the context
otherwise requires, such provision shall be read to also require a rating from
DCR that is equivalent to the required rating from S&P.
(b) With respect to the definitions of Tier-1 Obligor, Tier-2 Obligor,
Tier-3 Obligor, Tier-4 Obligor and Tier-5 Obligor (the "Tier Definitions"), if
an Obligor has no short-term or long-term unsecured debt rating from S&P, and
such Obligor does have a short-term or long-term unsecured debt rating from
Moody's, then: (x) Moody's shall be deemed to be a Rating Agency with respect to
such Obligor for purposes of the short-term and long-term unsecured debt ratings
set forth in the Tier Definitions, (y) (1) if the short-term unsecured
indebtedness of such Obligor is rated "P-1" by Moody's, then the short-term
unsecured debt rating relating to S&P set forth in the Tier Definitions shall be
deemed to be not less than "A-1" by S&P, and (2) except as provided in clause
(1), any short-term or long-term unsecured debt rating category relating to S&P
set forth in the Tier Definitions shall be deemed to be a corresponding rating
from Moody's which is one subcategory below the applicable short-term or
long-term unsecured rating category relating to S&P, and (z) such Obligor shall
in no case be considered to be a Tier- 1 Obligor.
SECTION 8.6 Waiver. Each of Trustee, the Certificateholders and the
Certificate Owners agrees and acknowledges that Mayer, Brown & Platt represents
the Initial Purchasers, Bank of America and Affiliates of Bank of America in
connection with the Transaction Documents and waives any conflict of interest
relating thereto. Mayer, Brown & Platt is entitled to rely on this Section 8.6.
SECTION 8.7 Restrictions on Transfer. (a) On the Closing Date, the
Transferor shall sell the Series 1998-3 Certificates to the Initial Purchasers
pursuant to the Certificate Purchase Agreement and deliver such Series 1998-3
Certificates in accordance herewith and therewith. Thereafter, no Series 1998-3
Certificate may be sold, transferred or otherwise disposed of except as follows:
page 40
<PAGE> 45
(A) to Persons that the transferring Person reasonably
believes are Qualified Institutional Buyers in reliance on the
exemption from the registration requirements of the Securities Act
provided by Rule 144A promulgated thereunder ("Rule 144A");
(B) in offshore transactions in reliance on Regulation S under
the Securities Act ("Regulation S");
(C) to institutional "accredited investors" within the meaning
of Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act ("Institutional Accredited Investors") that take delivery of such
Series 1998-3 Certificate in an amount of at least $500,000 and that
deliver a Purchaser Letter to the Trustee; or
(D) to a Person who is taking delivery of such Series 1998-3
Certificate pursuant to a transaction that is otherwise exempt from the
registration requirements of the Securities Act, as confirmed in an
opinion of counsel addressed to the Trustee and the Transferor which
counsel and opinion are satisfactory to the Trustee and the Transferor.
The Trustee shall have no obligations or duties with respect to determining
whether any transfers of the Series 1998-3 Certificates are made in accordance
with the Securities Act or any other law; provided that with respect to
Definitive Certificates, the Trustee shall enforce such transfer restrictions in
accordance with the terms set forth on the related Series 1998-3 Certificate and
the provisions of this Supplement.
(b) Each purchaser (other than the Initial Purchasers) of the Series
1998-3 Certificates (including any purchaser, other than the Initial Purchasers,
of an interest in the Series 1998-3 Certificates which are Book-Entry
Certificates) shall be deemed to have acknowledged and agreed as follows:
(i) It is (A) a qualified institutional buyer as defined in
Rule 144A ("Qualified Institutional Buyer") and is acquiring such
Series 1998-3 Certificates for its own institutional account or for the
account or accounts of a Qualified Institutional Buyer or (B)
purchasing such Series 1998-3 Certificates in a transaction exempt from
registration under the Securities Act and in compliance with the
provisions of this Supplement and in compliance with the legend set
forth in clause (vi) below or (C) not a U.S. Person and is acquiring
such Series 1998-3 Certificates outside of the United States.
(ii) It is purchasing one or more Series 1998-3 Certificates
in an amount of at least $500,000 and it understands that such Series
1998-3 Certificates may be resold, pledged or otherwise transferred
only in an amount of at least $500,000.
(iii) As to Class A Certificates and Class B Certificates, it
represents and warrants to the Initial Purchasers, the Transferor, the
Trustee, the Servicer and any successor Servicer that one or any
combination of the following statements is an accurate
page 41
<PAGE> 46
representation as to all sources of funds to be used by such purchaser
to pay the purchase price of the Class A Certificates and the Class B
Certificates: (i) if the purchaser is an insurance company, the source
of funds to be used by such purchaser is an "insurance company general
account" within the meaning of PTCE 95-60 (issued July 12, 1995) and
there is no Plan with respect to which the amount of the general
account reserves and liabilities for all contracts held by or on behalf
of such Plan, exceed ten percent (10%) of the total reserves and
liabilities of such general account (exclusive of separate account
liabilities) plus surplus, as set forth in the NAIC Annual Statement
(within the meaning of PTCE 95-60) filed by such purchaser with such
purchaser's state of domicile; (ii) such funds constitute assets of one
or more insurance company pooled separate accounts within the meaning
of PTCE 90-1 (issued January 29, 1990) maintained by such purchaser,
and there is no Plan whose assets in such separate account exceed 10%
of the total assets of such separate account as of the date of such
purchase; (iii) such funds constitute assets of a bank collective
investment fund within the meaning of PTCE 91-38 (issued June 12, 1991)
maintained by such purchaser, and there is no employee benefit plan
whose assets in such collective investment fund exceed 10% of the total
assets of such collective investment fund as of the date of such
purchase; (iv) such purchaser is acquiring Series 1998-3 Certificates
for the account of one or more pension funds, trust funds or agency
accounts, each of which is a "governmental plan" as defined in Section
3(32) of ERISA and the purchase and holding of the Series 1998-3
Certificates by such purchaser will not violate any state or other law
relating to such governmental plan; (v) the source of funds is managed
by a "qualified professional asset manager" or "QPAM" (as defined in
Part V of PTCE 84-14, issued March 13, 1984), or an "INHAM" (as defined
in part V of PTCE 96-23, issued April 10, 1996) and the purchase and
holding of the Series 1998-3 Certificates is exempt from the prohibited
transaction rules of Section 4975(c) of the Code and section 406(a) of
ERISA under PTCE 84-14 or PTCE 96-23; (vi) the purchaser is an
insurance company general account and the purchase and holding of the
Series 1998-3 Certificates by such purchaser is exempt from the
prohibited transaction rules of section 4975(c) of the Code and Section
406(a) of ERISA and under section 401(c) of ERISA, the conditions of
which are met and such purchaser will transfer its interest in the
Series 1998-3 Certificates if and at such time as such representation
is no longer true and correct; (vii) the proposed acquisition or
transfer will qualify for a statutory or administrative prohibited
transaction exemption under ERISA and the Code or will not give rise to
a transaction described in Section 406(a) of ERISA or Section
4975(c)(1) of the Code for which a statutory or administrative
exemption is unavailable; or (viii) such funds consists of funds which
do not constitute "plan assets" within the meaning of Department of
Labor Regulation 29 C.F.R. SECTION 2510.3-101.
(iv) For Class C Certificates, which are expected to be issued
and transferred in fully registered, certificated form and to the
extent that Definitive Certificates are issued with respect to the
Class A Certificates or the Class B Certificates, it understands that
transfers to a Plan, to a trustee or other person acting on behalf of
any Plan, or to any other person using the assets of any Plan to effect
such acquisition will not be registered
page 42
<PAGE> 47
by the Trustee unless the transferee provides the Initial Purchasers,
AmeriServe, the Trustee, the Servicer and any successor Servicer with a
representation that one or any combination of statements (i) through
(viii) in the preceding paragraph is an accurate representation as to
all sources of funds to be used by the transferee to pay the purchase
price of the Series 1998-3 Certificates.
(v) It understands that the Series 1998-3 Certificates are
being transferred to it in a transaction not involving any public
offering within the meaning of the Securities Act, and that, if in the
future it decides to resell, pledge or otherwise transfer any Series
1998-3 Certificates, such Series 1998-3 Certificates may be resold,
pledged or transferred only in accordance with applicable state
securities laws and (1) in a transaction meeting the requirements of
Rule 144A, to a Person that the seller reasonably believes is a
Qualified Institutional Buyer that purchases for its own account (or
for the account or accounts of a Qualified Institutional Buyer) and to
whom notice is given that the resale, pledge or transfer is being made
in reliance on Rule 144A, or (2) (A) to a Person that is an
Institutional Accredited Investor, is taking delivery of such Series
1998-3 Certificate in an amount of at least $500,000, and delivers a
Purchaser Letter to the Trustee or (B) to a Person that is taking
delivery of such Series 1998-3 Certificate pursuant to a transaction
that is otherwise exempt from the registration requirements of the
Securities Act, as confirmed in an opinion of counsel addressed to the
Trustee and the Transferor, which counsel and opinion are satisfactory
to the Trustee and the Transferor, or (3) in an offshore transaction in
accordance with Rule 903 or Rule 904 of Regulation S.
(vi) It understands that each Series 1998-3 Certificate shall
bear a legend substantially to the following effect:
[FOR BOOK-ENTRY CERTIFICATES ONLY: UNLESS THIS SERIES 1998-3
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRANSFEROR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY SERIES 1998-3 CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR THE USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THIS SERIES 1998-3 CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1993, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING THIS SERIES 1998-3
page 43
<PAGE> 48
CERTIFICATE, AGREES THAT SUCH SERIES 1998-3 CERTIFICATE MAY BE RESOLD,
PLEDGED OR TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS AND (1) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON THAT THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT
PURCHASES FOR ITS OWN ACCOUNT (OR FOR THE ACCOUNT OR ACCOUNTS OF A
QUALIFIED INSTITUTIONAL BUYER) AND TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, OR (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE
904 OF REGULATION S UNDER THE SECURITIES ACT OR (3) TO A PERSON (A)
THAT IS AN INSTITUTIONAL "ACCREDITED INVESTOR", WITHIN THE MEANING OF
RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT, IS TAKING DELIVERY OF SUCH SERIES 1998-3 CERTIFICATE IN AN AMOUNT
OF AT LEAST $500,000 AND DELIVERS A PURCHASER LETTER TO THE TRUSTEE IN
THE FORM ATTACHED TO THE SERIES 1998-3 SUPPLEMENT OR (B) THAT IS TAKING
DELIVERY OF SUCH SERIES 1998-3 CERTIFICATE PURSUANT TO A TRANSACTION
THAT IS OTHERWISE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, AS CONFIRMED IN AN OPINION OF COUNSEL ADDRESSED TO THE
TRUSTEE AND THE TRANSFEROR, WHICH COUNSEL AND OPINION ARE SATISFACTORY
TO THE TRANSFEROR AND THE TRUSTEE.
EACH PURCHASER OF A SERIES 1998-3 CERTIFICATE SHALL BE DEEMED TO
REPRESENT AND WARRANT TO THE INITIAL PURCHASERS, AMERISERVE FUNDING
CORPORATION, THE TRUSTEE, THE SERVICER AND ANY SUCCESSOR SERVICER THAT
ONE OR ANY COMBINATION OF THE FOLLOWING STATEMENTS IS AN ACCURATE
REPRESENTATION AS TO ALL SOURCES OF FUNDS TO BE USED BY SUCH PURCHASER
TO PAY THE PURCHASE PRICE OF THE SERIES 1998-3 CERTIFICATES: (I) IF THE
PURCHASER IS AN INSURANCE COMPANY, THE SOURCE OF FUNDS TO BE USED BY
SUCH PURCHASER IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE
MEANING OF DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION
("PTCE") 95-60 (ISSUED JULY 12, 1995) AND THERE IS NO PLAN WITH RESPECT
TO WHICH THE AMOUNT OF THE GENERAL ACCOUNT RESERVES AND LIABILITIES FOR
ALL CONTRACTS HELD BY OR ON BEHALF OF SUCH PLAN, EXCEED TEN PERCENT
(10%) OF THE TOTAL RESERVES AND LIABILITIES OF SUCH GENERAL ACCOUNT
(EXCLUSIVE OF SEPARATE ACCOUNT LIABILITIES) PLUS SURPLUS, AS SET FORTH
IN THE NAIC ANNUAL STATEMENT (WITHIN THE MEANING OF PTCE 95-60) FILED
BY SUCH PURCHASER
page 44
<PAGE> 49
WITH SUCH PURCHASER'S STATE OF DOMICILE; (II) SUCH FUNDS CONSTITUTE
ASSETS OF ONE OR MORE INSURANCE COMPANY POOLED SEPARATE ACCOUNTS WITHIN
THE MEANING OF PTCE 90-1 (ISSUED JANUARY 29, 1990) MAINTAINED BY SUCH
PURCHASER, AND THERE IS NO PLAN WHOSE ASSETS IN SUCH SEPARATE ACCOUNT
EXCEED 10% OF THE TOTAL ASSETS OF SUCH SEPARATE ACCOUNT AS OF THE DATE
OF SUCH PURCHASE; (III) SUCH FUNDS CONSTITUTE ASSETS OF A BANK
COLLECTIVE INVESTMENT FUND WITHIN THE MEANING OF PTCE 91-38 (ISSUED
JUNE 12, 1991) MAINTAINED BY SUCH PURCHASER, AND THERE IS NO EMPLOYEE
BENEFIT PLAN WHOSE ASSETS IN SUCH COLLECTIVE INVESTMENT FUND EXCEED 10%
OF THE TOTAL ASSETS OF SUCH COLLECTIVE INVESTMENT FUND AS OF THE DATE
OF SUCH PURCHASE; (IV) SUCH PURCHASER IS ACQUIRING THE SERIES 1998-3
CERTIFICATES FOR THE ACCOUNT OF ONE OR MORE PENSION FUNDS, TRUST FUNDS
OR AGENCY ACCOUNTS, EACH OF WHICH IS A "GOVERNMENTAL PLAN" AS DEFINED
IN SECTION 3(32) OF ERISA AND THE PURCHASE AND HOLDING OF THE SERIES
1998-3 CERTIFICATES BY SUCH PURCHASER WILL NOT VIOLATE ANY STATE OR
OTHER LAW RELATING TO SUCH GOVERNMENTAL PLAN; (V) THE SOURCE OF FUNDS
IS MANAGED BY A "QUALIFIED PROFESSIONAL ASSET MANAGER" OR "QPAM" (AS
DEFINED IN PART V OF PTCE 84-14, ISSUED MARCH 13, 1984), OR AN "INHAM"
(AS DEFINED IN PART V OF PTCE 96-23, ISSUED APRIL 10, 1996) AND THE
PURCHASE AND HOLDING OF THE SERIES 1998-3 CERTIFICATES BY SUCH
PURCHASER IS EXEMPT FROM THE PROHIBITED TRANSACTION RULES OF SECTION
4975(C) OF THE CODE AND SECTION 406(A) OF ERISA UNDER PTCE 84-14 OR
PTCE 96-23; (VI) THE PURCHASER IS AN INSURANCE COMPANY GENERAL ACCOUNT
AND THE PURCHASE AND HOLDING OF THE SERIES 1998-3 CERTIFICATES BY SUCH
PURCHASER IS EXEMPT FROM THE PROHIBITED TRANSACTION RULES OF SECTION
4975(C) OF THE CODE AND SECTION 406(A) OF ERISA AND UNDER SECTION
401(C) OF ERISA, THE CONDITIONS OF WHICH ARE MET AND SUCH PURCHASER
WILL TRANSFER ITS INTEREST IN THE SERIES 1998-3 CERTIFICATES IF AND AT
SUCH TIME AS SUCH REPRESENTATION IS NO LONGER TRUE AND CORRECT; (VII)
THE PROPOSED ACQUISITION OR TRANSFER WILL QUALIFY FOR A STATUTORY OR
ADMINISTRATIVE PROHIBITED TRANSACTION EXEMPTION UNDER ERISA AND THE
CODE OR WILL NOT GIVE RISE TO A TRANSACTION DESCRIBED IN SECTION 406(A)
OF ERISA OR SECTION 4975(C)(1) OF THE CODE FOR WHICH A STATUTORY OR
ADMINISTRATIVE EXEMPTION IS UNAVAILABLE; OR (VIII) SUCH FUNDS CONSIST
OF FUNDS WHICH DO NOT CONSTITUTE "PLAN ASSETS" WITHIN THE MEANING OF
DEPARTMENT OF LABOR REGULATION 29 C.F.R. SECTION 2510.3-101.
page 45
<PAGE> 50
THIS SERIES 1998-3 CERTIFICATE IS NOT GUARANTEED OR INSURED BY
ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON.
[FOR CLASS B CERTIFICATES ONLY: THE CLASS B CERTIFICATES ARE
SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES AS PROVIDED IN THE SERIES 1998-3 SUPPLEMENT.]
[FOR CLASS C CERTIFICATES ONLY: THIS CLASS C CERTIFICATE MAY NOT BE
SOLD, ASSIGNED, PLEDGED, PARTICIPATED, SUBDIVIDED OR OTHERWISE
TRANSFERRED UNLESS (I) SUCH TRANSFEREE IS A "UNITED STATES PERSON" AS
DEFINED IN SECTION 7701(A)(30) OF THE CODE; (II) (A) SUCH TRANSFEREE IS
NOT A TRUST, PARTNERSHIP OR "S CORPORATION" (WITHIN THE MEANING OF
SECTION 1361(A) OF THE CODE) FOR UNITED STATES FEDERAL INCOME TAX
PURPOSES OR (B) SUCH TRANSFEREE IS A TRUST, PARTNERSHIP OR "S
CORPORATION" (WITHIN THE MEANING OF SECTION 1361(A) OF THE CODE) FOR
UNITED STATES FEDERAL INCOME TAX PURPOSES, BUT AFTER GIVING EFFECT TO
SUCH TRANSFER, SUBSTANTIALLY ALL OF THE VALUE OF THE INTEREST OF AN
OWNER OF THE TRANSFEREE IN THE TRANSFEREE WILL NOT BE ATTRIBUTABLE TO
THE TRANSFEREE'S OWNERSHIP INTEREST (DIRECT OR INDIRECT) IN
CERTIFICATES ISSUED BY THE TRUST OTHER THAN THE CLASS A AND CLASS B
CERTIFICATES OR THE SERIES 1998-4 CERTIFICATES; AND (III) FOR THE
PURPOSES OF SECTION 7704 OF THE CODE AND THE TREASURY REGULATIONS
PROMULGATED THEREUNDER, AFTER SUCH TRANSFER THE CLASS C CERTIFICATES
WOULD NOT BE TREATED AS OWNED BY MORE THAN 20 PERSONS AND THE TRUST
WOULD NOT BE TREATED AS HAVING MORE THAN 100 PARTNERS.
THE CLASS C CERTIFICATES ARE SUBORDINATED IN RIGHT OF
PAYMENT TO THE CLASS A CERTIFICATES AND THE CLASS B
CERTIFICATES AS PROVIDED IN THE SERIES 1998-3 SUPPLEMENT.]
(vii) Each investor described in subclause (i)(C) above
understand that the Class A and Class B Certificates have not and will
not be registered under the Securities Act, that any offers, sales or
deliveries of the Class A or Class B Certificates purchased by it in
the United States or to U.S. Persons prior to the date that is 40 days
after the later of (i) the commencement of the distribution of the
Series 1998-3 Certificates and (ii) the Closing Date, may constitute a
violation of United States law, and that distributions of principal and
interest will be made in respect of such Certificates only following
the delivery by the holder of a certification of non-U.S. beneficial
ownership or the exchange of beneficial interest in Regulation S
Temporary Book-Entry Certificates for beneficial interests in the
page 46
<PAGE> 51
related Unrestricted Book-Entry Certificates (which in each case will
itself require a certification of non-U.S. beneficial ownership), at
the times and in the manner set forth in the Pooling Agreement.
(viii) The Regulation S Temporary Book-Entry Certificates
representing the Class A and Class B Certificates sold to each investor
described in subclause (i)(C) above will bear a legend to the following
effect, unless the Transferor determines otherwise consistent with
applicable law:
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
AND, PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE LATER OF (I) THE
COMPLETION OF THE DISTRIBUTION OF THE SERIES 1998-3 CERTIFICATES AND
(II) THE CLOSING DATE, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE UNITED STATES OR TO A U.S. PERSON EXCEPT PURSUANT TO
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
(ix) The Transfer Agent and Registrar shall not permit the
transfer of any Series 1998-3 Certificates unless such transfer
complies with the terms of the foregoing legends and, in the case of a
transfer (i) to an Institutional Accredited Investor (other than a
Qualified Institutional Buyer), the transferee delivers a completed
Purchaser Letter to the Trustee, or (ii) to a person other than a
Qualified Institutional Buyer or an Institutional Accredited Investor,
upon delivery of an opinion of counsel satisfactory to the Trustee and
the Transferor, to the effect that the transferee is taking delivery of
the Series 1998-3 Certificates in a transaction that is otherwise
exempt from the registration requirements of the Securities Act.
(c) No initial or subsequent sale or other transfer of a Class
C Certificate may be made (other than to an Initial Purchaser) unless
such sale or transfer (i) is accompanied by delivery of a tax statement
in the form of Exhibit G, (ii) is made to a "United States Person" as
defined in Section 7701(a)(30) of the Code, as certified in such tax
statement, and (iii) will not cause the Trust to be treated as a
publicly traded partnership for United States federal income tax
purposes. Any attempted transfer, assignment, conveyance, participation
or subdivision in contravention of the preceding sentence of this
clause (c) shall be void ab initio and the purported transferor, seller
or subdivider of such Class C Certificate shall continue to be treated
as the Class C Certificateholder of such Class C Certificate for all
purposes of the Pooling Agreement and this Supplement.
SECTION 8.8 Incorporation by Reference. Without limiting the
effect of other provisions of the Pooling Agreement that otherwise
apply to Series 1998-3, and without limiting the fact that this
Supplement is a Transaction Document, Sections 13.5, 13.6,
page 47
<PAGE> 52
13.7, 13.9, 13.10, 13.11, 13.17 and 13.18 of the Pooling Agreement are
hereby incorporated into this Supplement by this reference, with the
references in such provisions to the Pooling Agreement or any other
Transaction Documents applying instead with equal force to this
Supplement.
SECTION 8.9 Survival of Agreement. All covenants, agreements,
representations and warranties made herein and in the Series 1998-3
Certificates delivered pursuant hereto shall survive the execution and
delivery of this Supplement and the Series 1998-3 Certificates and
shall continue in full force and effect, and this Supplement shall not
terminate, until the Outstanding Principal Balances of the Series
1998-3 Certificates shall have been reduced to zero, all accrued and
unpaid interest thereon shall have been paid in full, and all other
obligations owed in respect of the Series 1998-3 Certificates have been
paid and performed in full. In addition, this Section 8.9 and Sections
7.2, 7.3, 8.6, 8.7 and 8.8 shall survive termination of this
Supplement.
SECTION 8.10 Lockbox Accounts. Notwithstanding Section
3.3(c)(iii) of the Pooling Agreement, Transferor and Servicer shall not
establish alternative collection procedures contemplated by such
Section 3.3(c)(iii).
SECTION 8.11 Servicing in Florida. In addition to the
provisions of Section 8.6 of the Pooling Agreement, Servicer hereby
agrees not to utilize any Sub-Servicer (including ProSource) that would
subject the Receivables or the Trust to any intangibles tax under
Florida Law.
SECTION 8.12 Regulation S Matters. Exhibits F, G, H, I and J
to the Pooling Agreement are hereby amended to read as set forth in
Exhibits H, I, J, K and L to this Supplement.
[SIGNATURES FOLLOW]
page 48
<PAGE> 53
IN WITNESS WHEREOF, Transferor, Servicer and Trustee have
caused this Supplement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above written.
AMERISERVE FUNDING CORPORATION,
as Transferor
By:
Name:
Title:
AMERISERVE FOOD
DISTRIBUTION, INC.,
as initial Servicer
By:
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Bruce C. Wandersee
Assistant Vice President
<PAGE> 54
EXHIBIT A
to the Series 1998-3 Supplement
FORM OF CLASS A CERTIFICATE
[FOR BOOK-ENTRY CERTIFICATES ONLY: UNLESS THIS SERIES 1998-3
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRANSFEROR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY SERIES 1998-3 CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR THE USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
[FOR REGULATION S BOOK-ENTRY CERTIFICATES ONLY: THIS CERTIFICATE HAS
NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, PRIOR TO THE DATE
THAT IS 40 DAYS AFTER THE LATER OF (I) THE COMPLETION OF THE
DISTRIBUTION OF THE SERIES 1998-3 CERTIFICATES AND (II) THE CLOSING
DATE, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE
UNITED STATES OR TO A U.S. PERSON EXCEPT PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.]
THIS SERIES 1998-3 CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING THIS SERIES 1998-3 CERTIFICATE, AGREES THAT SUCH
SERIES 1998-3 CERTIFICATE MAY BE RESOLD, PLEDGED OR TRANSFERRED ONLY IN
ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS AND (1) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT (OR
FOR THE ACCOUNT OR ACCOUNTS OF A QUALIFIED INSTITUTIONAL BUYER) AND TO
WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A OR (2) IN AN OFFSHORE TRANSACTION
<PAGE> 55
COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER
THE SECURITIES ACT OR (3) TO A PERSON (A) THAT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR", WITHIN THE MEANING OF RULE 501(A)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT, IS TAKING DELIVERY OF
SUCH SERIES 1998-3 CERTIFICATE IN AN AMOUNT OF AT LEAST $500,000 AND
DELIVERS A PURCHASER LETTER TO THE TRUSTEE IN THE FORM ATTACHED TO THE
SERIES 1998-3 SUPPLEMENT OR (B) THAT IS TAKING DELIVERY OF SUCH SERIES
1998-3 CERTIFICATE PURSUANT TO A TRANSACTION THAT IS OTHERWISE EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AS CONFIRMED
IN AN OPINION OF COUNSEL ADDRESSED TO THE TRUSTEE AND THE TRANSFEROR,
WHICH COUNSEL AND OPINION ARE SATISFACTORY TO THE TRANSFEROR AND THE
TRUSTEE.
EACH PURCHASER OF A SERIES 1998-3 CERTIFICATE SHALL BE DEEMED TO
REPRESENT AND WARRANT TO THE INITIAL PURCHASERS, AMERISERVE FUNDING
CORPORATION, THE TRUSTEE, THE SERVICER AND ANY SUCCESSOR SERVICER THAT
ONE OR ANY COMBINATION OF THE FOLLOWING STATEMENTS IS AN ACCURATE
REPRESENTATION AS TO ALL SOURCES OF FUNDS TO BE USED BY SUCH PURCHASER
TO PAY THE PURCHASE PRICE OF THE SERIES 1998-3 CERTIFICATES: (I) IF THE
PURCHASER IS AN INSURANCE COMPANY, THE SOURCE OF FUNDS TO BE USED BY
SUCH PURCHASER IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE
MEANING OF DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION
("PTCE") 95-60 (ISSUED JULY 12, 1995) AND THERE IS NO PLAN WITH RESPECT
TO WHICH THE AMOUNT OF THE GENERAL ACCOUNT RESERVES AND LIABILITIES FOR
ALL CONTRACTS HELD BY OR ON BEHALF OF SUCH PLAN, EXCEED TEN PERCENT
(10%) OF THE TOTAL RESERVES AND LIABILITIES OF SUCH GENERAL ACCOUNT
(EXCLUSIVE OF SEPARATE ACCOUNT LIABILITIES) PLUS SURPLUS, AS SET FORTH
IN THE NAIC ANNUAL STATEMENT (WITHIN THE MEANING OF PTCE 95-60) FILED
BY SUCH PURCHASER WITH SUCH PURCHASER'S STATE OF DOMICILE; (II) SUCH
FUNDS CONSTITUTE ASSETS OF ONE OR MORE INSURANCE COMPANY POOLED
SEPARATE ACCOUNTS WITHIN THE MEANING OF PTCE 90-1 (ISSUED JANUARY 29,
1990) MAINTAINED BY SUCH PURCHASER, AND THERE IS NO PLAN WHOSE ASSETS
IN SUCH SEPARATE ACCOUNT EXCEED 10% OF THE TOTAL ASSETS OF SUCH
SEPARATE ACCOUNT AS OF THE DATE OF SUCH PURCHASE; (III) SUCH FUNDS
CONSTITUTE ASSETS OF A BANK COLLECTIVE INVESTMENT FUND WITHIN THE
MEANING OF PTCE 91-38 (ISSUED JUNE 12, 1991) MAINTAINED BY SUCH
PURCHASER, AND THERE IS NO EMPLOYEE BENEFIT PLAN WHOSE ASSETS IN SUCH
COLLECTIVE
page 2
<PAGE> 56
INVESTMENT FUND EXCEED 10% OF THE TOTAL ASSETS OF SUCH COLLECTIVE
INVESTMENT FUND AS OF THE DATE OF SUCH PURCHASE; (IV) SUCH PURCHASER IS
ACQUIRING THE SERIES 1998-3 CERTIFICATES FOR THE ACCOUNT OF ONE OR MORE
PENSION FUNDS, TRUST FUNDS OR AGENCY ACCOUNTS, EACH OF WHICH IS A
"GOVERNMENTAL PLAN" AS DEFINED IN SECTION 3(32) OF ERISA AND THE
PURCHASE AND HOLDING OF THE SERIES 1998-3 CERTIFICATES BY SUCH
PURCHASER WILL NOT VIOLATE ANY STATE OR OTHER LAW RELATING TO SUCH
GOVERNMENTAL PLAN; (V) THE SOURCE OF FUNDS IS MANAGED BY A "QUALIFIED
PROFESSIONAL ASSET MANAGER" OR "QPAM" (AS DEFINED IN PART V OF PTCE
84-14, ISSUED MARCH 13, 1984), OR AN "INHAM" (AS DEFINED IN PART V OF
PTCE 96-23, ISSUED APRIL 10, 1996) AND THE PURCHASE AND HOLDING OF THE
SERIES 1998-3 CERTIFICATES BY SUCH PURCHASER IS EXEMPT FROM THE
PROHIBITED TRANSACTION RULES OF SECTION 4975(C) OF THE CODE AND SECTION
406(A) OF ERISA UNDER PTCE 84-14 OR PTCE 96-23; (VI) THE PURCHASER IS
AN INSURANCE COMPANY GENERAL ACCOUNT AND THE PURCHASE AND HOLDING OF
THE SERIES 1998-3 CERTIFICATES BY SUCH PURCHASER IS EXEMPT FROM THE
PROHIBITED TRANSACTION RULES OF SECTION 4975(C) OF THE CODE AND SECTION
406(A) OF ERISA AND UNDER SECTION 401(C) OF ERISA, THE CONDITIONS OF
WHICH ARE MET AND SUCH PURCHASER WILL TRANSFER ITS INTEREST IN THE
SERIES 1998-3 CERTIFICATES IF AND AT SUCH TIME AS SUCH REPRESENTATION
IS NO LONGER TRUE AND CORRECT; (VII) THE PROPOSED ACQUISITION OR
TRANSFER WILL QUALIFY FOR A STATUTORY OR ADMINISTRATIVE PROHIBITED
TRANSACTION EXEMPTION UNDER ERISA AND THE CODE OR WILL NOT GIVE RISE TO
A TRANSACTION DESCRIBED IN SECTION 406(A) OF ERISA OR SECTION
4975(C)(1) OF THE CODE FOR WHICH A STATUTORY OR ADMINISTRATIVE
EXEMPTION IS UNAVAILABLE; OR (VIII) SUCH FUNDS CONSIST OF FUNDS WHICH
DO NOT CONSTITUTE "PLAN ASSETS" WITHIN THE MEANING OF DEPARTMENT OF
LABOR REGULATION 29 C.F.R. SECTION 2510.3-101.
THIS SERIES 1998-3 CERTIFICATE IS NOT GUARANTEED OR INSURED BY
ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
OTHER PERSON.
page 3
<PAGE> 57
AMERISERVE RECEIVABLES MASTER TRUST
FLOATING RATE CLASS A TERM CERTIFICATE,
SERIES 1998-3
Certificate Number:
CUSIP Number: 03072L AA 8 $_______________
ISIN Number: US03072LAA89
THIS CERTIFIES THAT _________________ is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in certain assets of
the AmeriServe Receivables Master Trust (the "Trust") that was created pursuant
to (a) the Pooling and Servicing Agreement, dated as of July 1, 1997 (as amended
and restated as of July 28, 1998, and as the same may be further amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Pooling Agreement"), among AMERISERVE FUNDING CORPORATION, a Delaware
corporation ("Transferor"), AMERISERVE FOOD DISTRIBUTION, INC., a Delaware
corporation ("Servicer"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as trustee (together with its successors and
assigns in such capacity, "Trustee") and (b) the Series 1998-3 Supplement dated
as of December 18, 1998 relating to the Series 1998-3 Certificates (as the same
may be amended, amended and restated or otherwise modified from time to time,
the "Series 1998-3 Supplement"). This Certificate is one of the duly authorized
Floating Rate Class A Term Certificates, Series 1998-3, designated and issued
under the Pooling Agreement and the Series 1998-3 Supplement. Except as
otherwise defined herein or in the Series 1998-3 Supplement, terms defined in
Appendix A to the Pooling Agreement have the meanings which such Appendix A
assigns to them. This Certificate is subject to the terms, provisions and
conditions of, and is entitled to the benefits afforded by, the Pooling
Agreement and the Series 1998-3 Supplement, to which terms, provisions and
conditions the Holder of this Certificate by virtue of the acceptance hereof
assents and by which the Holder is bound.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly authorized
signatory, this Certificate shall not entitle the Holder hereof to any benefit
under the Transaction Documents or be valid for any purpose.
This Certificate does not represent a recourse obligation of, or an
interest in, Transferor, any Seller, Servicer, Trustee or any Affiliate of any
of them.
By its acceptance of this Certificate, each Holder hereof (a)
acknowledges that it is the intent of Transferor, and agrees that it is the
intent of the Holder that, for Federal,
page 4
<PAGE> 58
state and local income and franchise tax purposes and other taxes measured by or
imposed on income, the Series 1998-3 Certificates (including this Certificate)
shall be treated as evidence of indebtedness secured by the Transferred Assets
and the Trust not be characterized as an association taxable as a corporation,
(b) agrees to treat this Certificate for Federal, state and local income and
franchise tax purposes and other taxes measured by or imposed on income as
indebtedness and (c) agrees that the provisions of the Transaction Documents
shall be construed to further these intentions of the parties.
This Certificate shall be construed in accordance with the laws of the
State of Delaware, without regard to its conflict of laws principles, and all
obligations, rights and remedies under or arising in connection with this
Certificate shall be determined in accordance with the laws of the State of
Delaware.
page 5
<PAGE> 59
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
AMERISERVE FUNDING
CORPORATION
By:
Title:
<PAGE> 60
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Floating Rate Class A Term Certificates, Series
1998-3, referred to in the Pooling Agreement, as supplemented by the Series
1998-3 Supplement.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Trustee
By:
Title:
Dated:
<PAGE> 61
EXHIBIT B
to the Series 1998-3 Supplement
FORM OF CLASS B CERTIFICATE
[FOR BOOK-ENTRY CERTIFICATES ONLY: UNLESS THIS SERIES 1998-3 CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE TRANSFEROR OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY SERIES 1998-3 CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR THE USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]
[FOR REGULATION S BOOK-ENTRY CERTIFICATES ONLY: THIS CERTIFICATE HAS NOT BEEN
AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND, PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE
LATER OF (I) THE COMPLETION OF THE DISTRIBUTION OF THE SERIES 1998-3
CERTIFICATES AND (II) THE CLOSING DATE, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A U.S. PERSON EXCEPT PURSUANT
TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.]
THIS SERIES 1998-3 CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SERIES 1998-3 CERTIFICATE, AGREES THAT SUCH SERIES 1998-3 CERTIFICATE MAY
BE RESOLD, PLEDGED OR TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS AND (1) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON THAT THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT
(OR FOR THE ACCOUNT OR ACCOUNTS OF A QUALIFIED INSTITUTIONAL BUYER) AND TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903
OR RULE 904 OF REGULATION S UNDER
<PAGE> 62
THE SECURITIES ACT OR (3) TO A PERSON (A) THAT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR", WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D
UNDER THE SECURITIES ACT, IS TAKING DELIVERY OF SUCH SERIES 1998-3 CERTIFICATE
IN AN AMOUNT OF AT LEAST $500,000 AND DELIVERS A PURCHASER LETTER TO THE TRUSTEE
IN THE FORM ATTACHED TO THE SERIES 1998-3 SUPPLEMENT OR (B) THAT IS TAKING
DELIVERY OF SUCH SERIES 1998-3 CERTIFICATE PURSUANT TO A TRANSACTION THAT IS
OTHERWISE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AS
CONFIRMED IN AN OPINION OF COUNSEL ADDRESSED TO THE TRUSTEE AND THE TRANSFEROR,
WHICH SUCH COUNSEL AND OPINION ARE SATISFACTORY TO THE TRANSFEROR AND THE
TRUSTEE.
EACH PURCHASER OF A SERIES 1998-3 CERTIFICATE SHALL BE DEEMED TO REPRESENT AND
WARRANT TO THE INITIAL PURCHASERS, AMERISERVE FUNDING CORPORATION, THE TRUSTEE,
THE SERVICER AND ANY SUCCESSOR SERVICER THAT ONE OR ANY COMBINATION OF THE
FOLLOWING STATEMENTS IS AN ACCURATE REPRESENTATION AS TO ALL SOURCES OF FUNDS TO
BE USED BY SUCH PURCHASER TO PAY THE PURCHASE PRICE OF THE SERIES 1998-3
CERTIFICATES: (I) IF THE PURCHASER IS AN INSURANCE COMPANY, THE SOURCE OF FUNDS
TO BE USED BY SUCH PURCHASER IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN
THE MEANING OF DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION
("PTCE") 95-60 (ISSUED JULY 12, 1995) AND THERE IS NO PLAN WITH RESPECT TO WHICH
THE AMOUNT OF THE GENERAL ACCOUNT RESERVES AND LIABILITIES FOR ALL CONTRACTS
HELD BY OR ON BEHALF OF SUCH PLAN, EXCEED TEN PERCENT (10%) OF THE TOTAL
RESERVES AND LIABILITIES OF SUCH GENERAL ACCOUNT (EXCLUSIVE OF SEPARATE ACCOUNT
LIABILITIES) PLUS SURPLUS, AS SET FORTH IN THE NAIC ANNUAL STATEMENT (WITHIN THE
MEANING OF PTCE 95-60) FILED BY SUCH PURCHASER WITH SUCH PURCHASER'S STATE OF
DOMICILE; (II) SUCH FUNDS CONSTITUTE ASSETS OF ONE OR MORE INSURANCE COMPANY
POOLED SEPARATE ACCOUNTS WITHIN THE MEANING OF PTCE 90-1 (ISSUED JANUARY 29,
1990) MAINTAINED BY SUCH PURCHASER, AND THERE IS NO PLAN WHOSE ASSETS IN SUCH
SEPARATE ACCOUNT EXCEED 10% OF THE TOTAL ASSETS OF SUCH SEPARATE ACCOUNT AS OF
THE DATE OF SUCH PURCHASE; (III) SUCH FUNDS CONSTITUTE ASSETS OF A BANK
COLLECTIVE INVESTMENT FUND WITHIN THE MEANING OF PTCE 91-38 (ISSUED JUNE 12,
1991) MAINTAINED BY SUCH PURCHASER, AND THERE IS NO EMPLOYEE BENEFIT PLAN WHOSE
ASSETS IN SUCH COLLECTIVE INVESTMENT FUND EXCEED 10% OF THE TOTAL ASSETS OF SUCH
COLLECTIVE INVESTMENT
page 2
<PAGE> 63
FUND AS OF THE DATE OF SUCH PURCHASE; (IV) SUCH PURCHASER IS ACQUIRING THE
SERIES 1998-3 CERTIFICATES FOR THE ACCOUNT OF ONE OR MORE PENSION FUNDS, TRUST
FUNDS OR AGENCY ACCOUNTS, EACH OF WHICH IS A "GOVERNMENTAL PLAN" AS DEFINED IN
SECTION 3(32) OF ERISA AND THE PURCHASE AND HOLDING OF THE SERIES 1998-3
CERTIFICATES BY SUCH PURCHASER WILL NOT VIOLATE ANY STATE OR OTHER LAW RELATING
TO SUCH GOVERNMENTAL PLAN; (V) THE SOURCE OF FUNDS IS MANAGED BY A "QUALIFIED
PROFESSIONAL ASSET MANAGER" OR "QPAM" (AS DEFINED IN PART V OF PTCE 84-14,
ISSUED MARCH 13, 1984), OR AN "INHAM" (AS DEFINED IN PART V OF PTCE 96-23,
ISSUED APRIL 10, 1996) AND THE PURCHASE AND HOLDING OF THE SERIES 1998-3
CERTIFICATES BY SUCH PURCHASER IS EXEMPT FROM THE PROHIBITED TRANSACTION RULES
OF SECTION 4975(C) OF THE CODE AND SECTION 406(A) OF ERISA UNDER PTCE 84-14 OR
PTCE 96-23; (VI) THE PURCHASER IS AN INSURANCE COMPANY GENERAL ACCOUNT AND THE
PURCHASE AND HOLDING OF THE SERIES 1998-3 CERTIFICATES BY SUCH PURCHASER IS
EXEMPT FROM THE PROHIBITED TRANSACTION RULES OF SECTION 4975(C) OF THE CODE AND
SECTION 406(A) OF ERISA AND UNDER SECTION 401(C) OF ERISA, THE CONDITIONS OF
WHICH ARE MET AND SUCH PURCHASER WILL TRANSFER ITS INTEREST IN THE SERIES 1998-3
CERTIFICATES IF AND AT SUCH TIME AS SUCH REPRESENTATION IS NO LONGER TRUE AND
CORRECT; (VII) THE PROPOSED ACQUISITION OR TRANSFER WILL QUALIFY FOR A STATUTORY
OR ADMINISTRATIVE PROHIBITED TRANSACTION EXEMPTION UNDER ERISA AND THE CODE OR
WILL NOT GIVE RISE TO A TRANSACTION DESCRIBED IN SECTION 406(A) OF ERISA OR
SECTION 4975(C)(1) OF THE CODE FOR WHICH A STATUTORY OR ADMINISTRATIVE EXEMPTION
IS UNAVAILABLE; OR (VIII) SUCH FUNDS CONSIST OF FUNDS WHICH DO NOT CONSTITUTE
"PLAN ASSETS" WITHIN THE MEANING OF DEPARTMENT OF LABOR REGULATION 29 C.F.R.
SECTION 2510.3-101.
THIS SERIES 1998-3 CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON.
THE CLASS B CERTIFICATES ARE SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES AS PROVIDED IN THE SERIES 1998-3 SUPPLEMENT.
page 3
<PAGE> 64
AMERISERVE RECEIVABLES MASTER TRUST
FLOATING RATE CLASS B TERM CERTIFICATE,
SERIES 1998-3
Certificate Number: $_______________
CUSIP Number: 03072L AB6
ISIN Number: US03072LAB62
THIS CERTIFIES THAT _________________ is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in certain assets of
the AmeriServe Receivables Master Trust (the "Trust") that was created pursuant
to (a) the Pooling and Servicing Agreement, dated as of July 1, 1997 (as amended
and restated as of July 28, 1998, and as the same may be further amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Pooling Agreement"), among AMERISERVE FUNDING CORPORATION, a Delaware
corporation ("Transferor"), AMERISERVE FOOD DISTRIBUTION, INC., a Delaware
corporation ("Servicer"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as trustee (together with its successors and
assigns in such capacity, "Trustee") and (b) the Supplement dated as of December
18, 1998 relating to the Series 1998-3 Certificates (as amended, amended and
restated or otherwise modified from time to time, the "Series 1998-3
Supplement"). This Certificate is one of the duly authorized Floating Rate Class
B Term Certificates, Series 1998-3, designated and issued under the Pooling
Agreement and the Series 1998-3 Supplement. Except as otherwise defined herein
or in the Series 1998-3 Supplement, terms defined in Appendix A to the Pooling
Agreement have the meanings which such Appendix A assigns to them. This
Certificate is subject to the terms, provisions and conditions of, and is
entitled to the benefits afforded by, the Pooling Agreement and the Series
1998-3 Supplement, to which terms, provisions and conditions the Holder of this
Certificate by virtue of the acceptance hereof assents and by which the Holder
is bound.
The Floating Rate Class B Term Certificates, Series 1998-3 are
subordinated to the Floating Rate Class A Term Certificates, Series 1998-3, as
provided in the Series 1998-3 Supplement.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly authorized
signatory, this Certificate shall not entitle the Holder hereof to any benefit
under the Transaction Documents or be valid for any purpose.
page 4
<PAGE> 65
This Certificate does not represent a recourse obligation of, or an
interest in, Transferor, any Seller, Servicer, Trustee or any Affiliate of any
of them.
By its acceptance of this Certificate, each Holder hereof (a)
acknowledges that it is the intent of Transferor, and agrees that it is the
intent of the Holder that, for Federal, state and local income and franchise tax
purposes and other taxes measured by or imposed on income, the Series 1998-3
Certificates (including this Certificate) shall be treated as evidence of
indebtedness secured by the Transferred Assets and the Trust not be
characterized as an association taxable as a corporation, (b) agrees to treat
this Certificate for Federal, state and local income and franchise tax purposes
and other taxes measured by or imposed on income as indebtedness and (c) agrees
that the provisions of the Transaction Documents shall be construed to further
these intentions of the parties.
This Certificate shall be construed in accordance with the laws of the
State of Delaware, without regard to its conflict of laws principles, and all
obligations, rights and remedies under or arising in connection with this
Certificate shall be determined in accordance with the laws of the State of
Delaware.
page 5
<PAGE> 66
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
AMERISERVE FUNDING
CORPORATION
By:
Title:
<PAGE> 67
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Floating Rate Class B Term Certificates, Series
1998-3, referred to in the Pooling Agreement, as supplemented by the Series
1998-3 Supplement.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Trustee
By:
Title:
Dated:
<PAGE> 68
EXHIBIT C
to the Series 1998-3 Supplement
FORM OF CLASS C CERTIFICATE
THIS SERIES 1998-3 CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SERIES 1998-3 CERTIFICATE, AGREES THAT SUCH SERIES 1998-3 CERTIFICATE MAY
BE RESOLD, PLEDGED OR TRANSFERRED ONLY IN ACCORDANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS AND (1) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON THAT THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT
(OR FOR THE ACCOUNT OR ACCOUNTS OF A QUALIFIED INSTITUTIONAL BUYER) AND TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903
OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (3) TO A PERSON (A) THAT
IS AN INSTITUTIONAL "ACCREDITED INVESTOR", WITHIN THE MEANING OF RULE 501(A)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT, IS TAKING DELIVERY OF
SUCH SERIES 1998-3 CERTIFICATE IN AN AMOUNT OF AT LEAST $500,000 AND DELIVERS A
PURCHASER LETTER TO THE TRUSTEE IN THE FORM ATTACHED TO THE SERIES 1998-3
SUPPLEMENT OR (B) THAT IS TAKING DELIVERY OF SUCH SERIES 1998-3 CERTIFICATE
PURSUANT TO A TRANSACTION THAT IS OTHERWISE EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, AS CONFIRMED IN AN OPINION OF COUNSEL
ADDRESSED TO THE TRUSTEE AND THE TRANSFEROR, WHICH SUCH COUNSEL AND OPINION ARE
SATISFACTORY TO THE TRANSFEROR AND THE TRUSTEE.
EACH PURCHASER OF A SERIES 1998-3 CERTIFICATE SHALL BE DEEMED TO REPRESENT AND
WARRANT TO THE INITIAL PURCHASERS, AMERISERVE FUNDING CORPORATION, THE TRUSTEE,
THE SERVICER AND ANY SUCCESSOR SERVICER THAT ONE OR ANY COMBINATION OF THE
FOLLOWING STATEMENTS IS AN ACCURATE REPRESENTATION AS TO ALL SOURCES OF FUNDS TO
BE USED BY SUCH PURCHASER TO PAY THE PURCHASE PRICE OF THE SERIES 1998-3
CERTIFICATES: (I) IF THE PURCHASER IS AN INSURANCE COMPANY, THE SOURCE OF FUNDS
TO BE
page 1
<PAGE> 69
USED BY SUCH PURCHASER IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE
MEANING OF DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE")
95-60 (ISSUED JULY 12, 1995) AND THERE IS NO PLAN WITH RESPECT TO WHICH THE
AMOUNT OF THE GENERAL ACCOUNT RESERVES AND LIABILITIES FOR ALL CONTRACTS HELD BY
OR ON BEHALF OF SUCH PLAN, EXCEED TEN PERCENT (10%) OF THE TOTAL RESERVES AND
LIABILITIES OF SUCH GENERAL ACCOUNT (EXCLUSIVE OF SEPARATE ACCOUNT LIABILITIES)
PLUS SURPLUS, AS SET FORTH IN THE NAIC ANNUAL STATEMENT (WITHIN THE MEANING OF
PTCE 95-60) FILED BY SUCH PURCHASER WITH SUCH PURCHASER'S STATE OF DOMICILE;
(II) SUCH FUNDS CONSTITUTE ASSETS OF ONE OR MORE INSURANCE COMPANY POOLED
SEPARATE ACCOUNTS WITHIN THE MEANING OF PTCE 90-1 (ISSUED JANUARY 29, 1990)
MAINTAINED BY SUCH PURCHASER, AND THERE IS NO PLAN WHOSE ASSETS IN SUCH SEPARATE
ACCOUNT EXCEED 10% OF THE TOTAL ASSETS OF SUCH SEPARATE ACCOUNT AS OF THE DATE
OF SUCH PURCHASE; (III) SUCH FUNDS CONSTITUTE ASSETS OF A BANK COLLECTIVE
INVESTMENT FUND WITHIN THE MEANING OF PTCE 91-38 (ISSUED JUNE 12, 1991)
MAINTAINED BY SUCH PURCHASER, AND THERE IS NO EMPLOYEE BENEFIT PLAN WHOSE ASSETS
IN SUCH COLLECTIVE INVESTMENT FUND EXCEED 10% OF THE TOTAL ASSETS OF SUCH
COLLECTIVE INVESTMENT FUND AS OF THE DATE OF SUCH PURCHASE; (IV) SUCH PURCHASER
IS ACQUIRING THE SERIES 1998-3 CERTIFICATES FOR THE ACCOUNT OF ONE OR MORE
PENSION FUNDS, TRUST FUNDS OR AGENCY ACCOUNTS, EACH OF WHICH IS A "GOVERNMENTAL
PLAN" AS DEFINED IN SECTION 3(32) OF ERISA AND THE PURCHASE AND HOLDING OF THE
SERIES 1998-3 CERTIFICATES BY SUCH PURCHASER WILL NOT VIOLATE ANY STATE OR OTHER
LAW RELATING TO SUCH GOVERNMENTAL PLAN; (V) THE SOURCE OF FUNDS IS MANAGED BY A
"QUALIFIED PROFESSIONAL ASSET MANAGER" OR "QPAM" (AS DEFINED IN PART V OF PTCE
84-14, ISSUED MARCH 13, 1984), OR AN "INHAM" (AS DEFINED IN PART V OF PTCE
96-23, ISSUED APRIL 10, 1996) AND THE PURCHASE AND HOLDING OF THE SERIES 1998-3
CERTIFICATES BY SUCH PURCHASER IS EXEMPT FROM THE PROHIBITED TRANSACTION RULES
OF SECTION 4975(C) OF THE CODE AND SECTION 406(A) OF ERISA UNDER PTCE 84-14 OR
PTCE 96-23; (VI) THE PURCHASER IS AN INSURANCE COMPANY GENERAL ACCOUNT AND THE
PURCHASE AND HOLDING OF THE SERIES 1998-3 CERTIFICATES BY SUCH PURCHASER IS
EXEMPT FROM THE PROHIBITED TRANSACTION RULES OF SECTION 4975(C) OF THE CODE AND
SECTION 406(A) OF ERISA AND UNDER SECTION 401(C) OF ERISA, THE CONDITIONS OF
WHICH ARE MET AND SUCH PURCHASER WILL TRANSFER ITS INTEREST IN THE SERIES 1998-3
CERTIFICATES IF AND AT SUCH TIME AS SUCH REPRESENTATION IS NO LONGER TRUE AND
CORRECT; (VII) THE PROPOSED ACQUISITION OR
page 2
<PAGE> 70
TRANSFER WILL QUALIFY FOR A STATUTORY OR ADMINISTRATIVE PROHIBITED TRANSACTION
EXEMPTION UNDER ERISA AND THE CODE OR WILL NOT GIVE RISE TO A TRANSACTION
DESCRIBED IN SECTION 406(A) OF ERISA OR SECTION 4975(C)(1) OF THE CODE FOR WHICH
A STATUTORY OR ADMINISTRATIVE EXEMPTION IS UNAVAILABLE; OR (VIII) SUCH FUNDS
CONSIST OF FUNDS WHICH DO NOT CONSTITUTE "PLAN ASSETS" WITHIN THE MEANING OF
DEPARTMENT OF LABOR REGULATION 29 C.F.R. SECTION 2510.3-101.
THIS SERIES 1998-3 CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON.
THIS CLASS C CERTIFICATE MAY NOT BE SOLD, ASSIGNED, PLEDGED, PARTICIPATED,
SUBDIVIDED OR OTHERWISE TRANSFERRED UNLESS (I) SUCH TRANSFEREE IS A "UNITED
STATES PERSON" AS DEFINED IN SECTION 7701(A)(30) OF THE CODE; (II) (A) SUCH
TRANSFEREE IS NOT A TRUST, PARTNERSHIP OR "S CORPORATION" (WITHIN THE MEANING OF
SECTION 1361(A) OF THE CODE) FOR UNITED STATES FEDERAL INCOME TAX PURPOSES OR
(B) SUCH TRANSFEREE IS A TRUST, PARTNERSHIP OR "S CORPORATION" (WITHIN THE
MEANING OF SECTION 1361(A) OF THE CODE) FOR UNITED STATES FEDERAL INCOME TAX
PURPOSES, BUT AFTER GIVING EFFECT TO SUCH TRANSFER SUBSTANTIALLY ALL OF THE
VALUE OF THE INTEREST OF AN OWNER OF THE TRANSFEREE IN THE TRANSFEREE WILL NOT
BE ATTRIBUTABLE TO THE TRANSFEREE'S OWNERSHIP INTEREST (DIRECT OR INDIRECT) IN
CERTIFICATES ISSUED BY THE TRUST OTHER THAN THE CLASS A AND CLASS B CERTIFICATES
OR THE SERIES 1998-4 CERTIFICATES; AND (III) FOR THE PURPOSES OF SECTION 7704 OF
THE CODE AND THE TREASURY REGULATIONS PROMULGATED THEREUNDER, AFTER SUCH
TRANSFER THE CLASS C CERTIFICATES WOULD NOT BE TREATED AS OWNED BY MORE THAN 20
PERSONS AND THE TRUST WOULD NOT BE TREATED AS HAVING MORE THAN 100 PARTNERS.
THE CLASS C CERTIFICATES ARE SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES AND THE CLASS B CERTIFICATES AS PROVIDED IN THE SERIES 1998-3
SUPPLEMENT.
page 3
<PAGE> 71
AMERISERVE RECEIVABLES MASTER TRUST
FLOATING RATE CLASS C TERM CERTIFICATE,
SERIES 1998-3
Certificate Number: $_______________
CUSIP Number: 03072LAC4
ISIN Number: US03072LAC46
THIS CERTIFIES THAT _________________ is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in certain assets of
the AmeriServe Receivables Master Trust (the "Trust") that was created pursuant
to (a) the Pooling and Servicing Agreement, dated as of July 1, 1997 (as amended
and restated as of July 28, 1998, and as the same may be further amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Pooling Agreement"), among AMERISERVE FUNDING CORPORATION, a Delaware
corporation ("Transferor"), AMERISERVE FOOD DISTRIBUTION, INC., a Delaware
corporation ("Servicer"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as trustee (together with its successors and
assigns in such capacity, "Trustee") and (b) the Supplement dated as of December
18, 1998 relating to the Series 1998-3 Certificates (as amended, amended and
restated or otherwise modified from time to time, the "Series 1998-3
Supplement"). This Certificate is one of the duly authorized Floating Rate Class
C Term Certificates, Series 1998-3, designated and issued under the Pooling
Agreement and the Series 1998-3 Supplement. Except as otherwise defined herein
or in the Series 1998-3 Supplement, terms defined in Appendix A to the Pooling
Agreement have the meanings which such Appendix A assigns to them. This
Certificate is subject to the terms, provisions and conditions of, and is
entitled to the benefits afforded by, the Pooling Agreement and the Series
1998-3 Supplement, to which terms, provisions and conditions the Holder of this
Certificate by virtue of the acceptance hereof assents and by which the Holder
is bound.
The Floating Rate Class C Term Certificates, Series 1998-3 are
subordinated to the Floating Rate Class A Term Certificates, Series 1998-3 and
the Floating Rate Class B Term Certificates, Series 1998-3, as provided in the
Series 1998-3 Supplement.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly authorized
signatory, this Certificate
page 4
<PAGE> 72
shall not entitle the Holder hereof to any benefit under the Transaction
Documents or be valid for any purpose.
This Certificate does not represent a recourse obligation of, or an
interest in, Transferor, any Seller, Servicer, Trustee or any Affiliate of any
of them.
By its acceptance of this Certificate, each Holder hereof (a)
acknowledges that it is the intent of Transferor, and agrees that it is the
intent of the Holder that, for Federal, state and local income and franchise tax
purposes and other taxes measured by or imposed on income, the Series 1998-3
Certificates (including this Certificate) shall be treated as evidence of
indebtedness secured by the Transferred Assets and the Trust not be
characterized as an association taxable as a corporation, (b) agrees to treat
this Certificate for Federal, state and local income and franchise tax purposes
and other taxes measured by or imposed on income as indebtedness and (c) agrees
that the provisions of the Transaction Documents shall be construed to further
these intentions of the parties.
This Certificate shall be construed in accordance with the laws of the
State of Delaware, without regard to its conflict of laws principles, and all
obligations, rights and remedies under or arising in connection with this
Certificate shall be determined in accordance with the laws of the State of
Delaware.
page 5
<PAGE> 73
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
AMERISERVE FUNDING
CORPORATION
By:
----------------------------------
Title:
------------------------------
<PAGE> 74
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Floating Rate Class C Term Certificates, Series
1998-3, referred to in the Pooling Agreement, as supplemented by the Series
1998-3 Supplement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
-----------------------------
Title:
-------------------------
Dated:
<PAGE> 75
EXHIBIT D
to the Series 1998-3 Supplement
FORM OF DAILY REPORT
<PAGE> 76
EXHIBIT E
to the Series 1998-3 Supplement
FORM OF MONTHLY REPORT
<PAGE> 77
EXHIBIT F
to the Series 1998-3 Supplement
FORM OF PURCHASER LETTER
<TABLE>
<S> <C>
AmeriServe Funding Corporation Donaldson, Lufkin & Jenrette
15305 Dallas Parkway Securities Corporation
Addison, Texas 75001 277 Park Avenue
Attention: President New York, New York 10172
Attention: Asset Securitization
Group
Norwest Bank Minnesota, National Association
Sixth & Marquette BT Alex. Brown Incorporated
Minneapolis, Minnesota 55479-0070 130 Liberty Street
Attention: Corporate Trust Services/ New York, New York 10006
Asset-Backed Administration Attention: Asset Securitization
Group
NationsBanc Montgomery Securities LLC
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Asset Securitization Group
</TABLE>
Ladies and Gentlemen:
We are delivering this letter in connection with the transfer of
$__________ of the Floating Rate [Class A] [Class B] [Class C] Term
Certificates, Series 1998-3 (the "Certificates") issued by the AmeriServe
Receivables Master Trust (the "Trust") created under the Pooling and Servicing
Agreement, dated as of July 1, 1997, as amended and restated as of July 28, 1998
(as the same may be further amended, amended and restated or otherwise modified
from time to time, the "Pooling Agreement"), among AmeriServe Funding
Corporation, a Delaware corporation (the "Transferor"), AmeriServe Food
Distribution, Inc., a Delaware corporation, as servicer (the "Servicer"), and
Norwest Bank Minnesota, National Association, a national banking association, as
trustee (the "Trustee"), and the Series 1998-3 Supplement, dated as of December
18, 1998 (as the same may be amended, amended and restated or otherwise modified
from time to time, the "Series 1998-3 Supplement"), to the Pooling Agreement
among the Transferor, the Servicer and the Trustee. Capitalized terms used
herein without definition shall have the meanings assigned thereto in the Series
1998-3 Supplement.
We hereby confirm that:
<PAGE> 78
(i) we are an institutional "accredited investor" (an
"Institutional Accredited Investor") within the meaning of Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of
1933, as amended (the "Securities Act");
(ii) we are purchasing the Certificates for our own account
or for the account of one or more other Institutional Accredited
Investors;
(iii) we are taking delivery of Certificates in an amount of
at least $500,000 for our own account or for each separate account for
which we are acting;
(iv) we have such knowledge and experience in financial and
business matters, we are capable of evaluating the merits and risks of
purchasing Certificates and we, or the account for which we are
purchasing Certificates, can bear the economic risks of investing in
the Certificates for an indefinite period of time;
(v) we are acquiring Certificates for investment and not
with a view to any distribution thereof in a transaction that would
violate the Securities Act or the securities laws of any state of the
United States or any other applicable jurisdiction; provided that the
disposition of our property and the property of any accounts for which
we are acting as fiduciary shall remain at all times within our
control; and
(vi) we represent to the Initial Purchasers, the Transferor,
the Trustee, the Servicer and any successor Servicer that one or any
combination of the following statements is an accurate representation
as to all sources of funds to be used to pay the purchase price of the
Certificates: (i) if we are an insurance company, the source of funds
to be used by us is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Class Exemption
("PTCE") 95-60 (issued July 12, 1995) and there is no Plan with respect
to which the amount of the general account reserves and liabilities for
all contracts held by or on behalf of such Plan, exceed ten percent
(10%) of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth
in the NAIC Annual Statement (within the meaning of PTCE 95-60) filed
by us with our state of domicile; (ii) such funds constitute assets of
one or more insurance company pooled separate accounts within the
meaning of PTCE 90-1 (issued January 29, 1990) maintained by us and
there is no Plan whose assets in such separate account exceed 10% of
the total assets of such separate account as of the date of such
purchase; (iii) such funds constitute assets of a bank collective
investment fund within the meaning of PTCE 91-38 (issued June 12, 1991)
maintained by us, and there is no employee benefit plan whose assets in
such collective investment fund exceed 10% of the total assets of such
collective investment fund as of the date of such purchase; (iv) we are
acquiring
page 2
<PAGE> 79
the Series 1998-3 Certificates for the account of one or more pension
funds, trust funds or agency accounts, each of which is a "governmental
plan" as defined in Section 3(32) of ERISA and the purchase and holding
of the Series 1998-3 Certificates by us will not violate any state or
other law relating to such governmental plan; (v) the source of funds
is managed by a "qualified professional asset manager" or "QPAM" (as
defined in Part V of PTCE 84-14, issued March 13, 1984), or an "INHAM"
(as defined in part V of PTCE 96-23, issued April 10, 1996) and the
purchase and holding of the Series 1998-3 Certificates by us is exempt
from the prohibited transaction rules of Section 4975(c) of the Code
and section 406(a) of ERISA under PTCE 84-14 or PTCE 96-23; (vi) we are
an insurance company general account and our purchase and holding of
the Series 1998-3 Certificates is exempt from the prohibited
transaction rules of section 4975(c) of the Code and Section 406(a) of
ERISA under section 401(c) of ERISA, the conditions of which are met
and we will transfer our interest in the Series 1998-3 Certificates if
and at such time as such representation is no longer true and correct;
(vii) the proposed acquisition or transfer will qualify for a statutory
or administrative prohibited transaction exemption under ERISA and the
Code or will not give rise to a transaction described in Section 406(a)
of ERISA or Section 4975(c)(1) of the Code for which a statutory or
administrative exemption is unavailable; or (viii) such funds consist
of funds which do not constitute "plan assets" within the meaning of
Department of Labor Regulation 29 C.F.R. Section 2510.3-101.
We understand that the Certificates are being offered in a transaction
not involving any public offering within the meaning of the Securities Act and
that the Certificates have not been registered under the Securities Act, and we
agree, on our own behalf and on behalf of each account for which we acquire any
Certificates, that such Certificates may be resold, pledged or transferred only
(i) in a transaction meeting the requirements of Rule 144A ("Rule 144A") under
the Securities Act, to a person that we reasonably believe is a "qualified
institutional buyer" (as defined in Rule 144A) that purchases for its own
account (or for the account or accounts of a qualified institutional buyer) and
to whom notice is given that the resale, pledge or other transfer is being made
in reliance on Rule 144A or (ii) to a person that (A) is an Institutional
Accredited Investor, is taking delivery of such Certificates in an amount of at
least $500,000 and delivers a letter to you, in substantially the form of this
letter, or (B) is taking delivery of such Certificates pursuant to a transaction
that is otherwise exempt from the registration requirements of the Securities
Act, as confirmed in an opinion of counsel addressed to the Trustee and the
Transferor, which opinion and counsel must be satisfactory to the Trustee and
the Transferor.
We understand that the Transfer Agent and Registrar will not be
required to accept for registration of transfer any Certificates, except upon
presentation of evidence satisfactory to the Transferor that the foregoing
restrictions on transfer have been complied with.
page 3
<PAGE> 80
We understand that the Certificates will bear a legend substantially to
the following effect:
[FOR BOOK-ENTRY CERTIFICATES ONLY: UNLESS THIS SERIES 1998-3
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRANSFEROR OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY SERIES 1998-3 CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR THE USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. ]
THIS SERIES 1998-3 CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING THIS SERIES 1998-3 CERTIFICATE, AGREES THAT SUCH
SERIES 1998-3 CERTIFICATE MAY BE RESOLD, PLEDGED OR TRANSFERRED ONLY IN
ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS AND (1) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT (OR
FOR THE ACCOUNT OR ACCOUNTS OF A QUALIFIED INSTITUTIONAL BUYER) AND TO
WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, OR (2) IN AN OFFSHORE TRANSACTION
COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT OR (3) TO A PERSON (A) THAT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR", WITHIN THE MEANING OF RULE 501(A)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT, IS TAKING DELIVERY OF
SUCH SERIES 1998-3 CERTIFICATE IN AN AMOUNT OF AT LEAST $500,000 AND
DELIVERS A PURCHASER LETTER TO THE TRUSTEE IN THE FORM ATTACHED TO THE
SERIES 1998-3 SUPPLEMENT OR (B) THAT IS TAKING DELIVERY OF SUCH SERIES
1998-3 CERTIFICATE PURSUANT TO A TRANSACTION THAT IS OTHERWISE EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AS CONFIRMED
IN AN OPINION OF
page 4
<PAGE> 81
COUNSEL ADDRESSED TO THE TRUSTEE AND THE TRANSFEROR, WHICH COUNSEL AND
OPINION ARE SATISFACTORY TO THE TRANSFEROR AND THE TRUSTEE.
EACH PURCHASER OF A SERIES 1998-3 CERTIFICATE SHALL BE DEEMED TO
REPRESENT AND WARRANT TO THE INITIAL PURCHASERS, AMERISERVE FUNDING
CORPORATION, THE TRUSTEE, THE SERVICER AND ANY SUCCESSOR SERVICER THAT
ONE OR ANY COMBINATION OF THE FOLLOWING STATEMENTS IS AN ACCURATE
REPRESENTATION AS TO ALL SOURCES OF FUNDS TO BE USED BY SUCH PURCHASER
TO PAY THE PURCHASE PRICE OF THE SERIES 1998-3 CERTIFICATES: (I) IF THE
PURCHASER IS AN INSURANCE COMPANY, THE SOURCE OF FUNDS TO BE USED BY
SUCH PURCHASER IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE
MEANING OF DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION
("PTCE") 95-60 (ISSUED JULY 12, 1995) AND THERE IS NO PLAN WITH RESPECT
TO WHICH THE AMOUNT OF THE GENERAL ACCOUNT RESERVES AND LIABILITIES FOR
ALL CONTRACTS HELD BY OR ON BEHALF OF SUCH PLAN, EXCEED TEN PERCENT
(10%) OF THE TOTAL RESERVES AND LIABILITIES OF SUCH GENERAL ACCOUNT
(EXCLUSIVE OF SEPARATE ACCOUNT LIABILITIES) PLUS SURPLUS, AS SET FORTH
IN THE NAIC ANNUAL STATEMENT (WITHIN THE MEANING OF PTCE 95-60) FILED
BY SUCH PURCHASER WITH SUCH PURCHASER'S STATE OF DOMICILE; (II) SUCH
FUNDS CONSTITUTE ASSETS OF ONE OR MORE INSURANCE COMPANY POOLED
SEPARATE ACCOUNTS WITHIN THE MEANING OF PTCE 90-1 (ISSUED JANUARY 29,
1990) MAINTAINED BY SUCH PURCHASER, AND THERE IS NO PLAN WHOSE ASSETS
IN SUCH SEPARATE ACCOUNT EXCEED 10% OF THE TOTAL ASSETS OF SUCH
SEPARATE ACCOUNT AS OF THE DATE OF SUCH PURCHASE; (III) SUCH FUNDS
CONSTITUTE ASSETS OF A BANK COLLECTIVE INVESTMENT FUND WITHIN THE
MEANING OF PTCE 91-38 (ISSUED JUNE 12, 1991) MAINTAINED BY SUCH
PURCHASER, AND THERE IS NO EMPLOYEE BENEFIT PLAN WHOSE ASSETS IN SUCH
COLLECTIVE INVESTMENT FUND EXCEED 10% OF THE TOTAL ASSETS OF SUCH
COLLECTIVE INVESTMENT FUND AS OF THE DATE OF SUCH PURCHASE; (IV) SUCH
PURCHASER IS ACQUIRING THE SERIES 1998-3 CERTIFICATES FOR THE ACCOUNT
OF ONE OR MORE PENSION FUNDS, TRUST FUNDS OR AGENCY ACCOUNTS, EACH OF
WHICH IS A "GOVERNMENTAL PLAN" AS DEFINED IN SECTION 3(32) OF ERISA AND
THE PURCHASE AND HOLDING OF THE SERIES 1998-3 CERTIFICATES BY SUCH
PURCHASER WILL
page 5
<PAGE> 82
NOT VIOLATE ANY STATE OR OTHER LAW RELATING TO SUCH GOVERNMENTAL PLAN;
(V) THE SOURCE OF FUNDS IS MANAGED BY A "QUALIFIED PROFESSIONAL ASSET
MANAGER" OR "QPAM" (AS DEFINED IN PART V OF PTCE 84-14, ISSUED MARCH
13, 1984), OR AN "INHAM" (AS DEFINED IN PART V OF PTCE 96-23, ISSUED
APRIL 10, 1996) AND THE PURCHASE AND HOLDING OF THE SERIES 1998-3
CERTIFICATES BY SUCH PURCHASER IS EXEMPT FROM THE PROHIBITED
TRANSACTION RULES OF SECTION 4975(C) OF THE CODE AND SECTION 406(A) OF
ERISA UNDER PTCE 84-14 OR PTCE 96-23; (VI) THE PURCHASER IS AN
INSURANCE COMPANY GENERAL ACCOUNT AND THE PURCHASE AND HOLDING OF THE
SERIES 1998-3 CERTIFICATES BY SUCH PURCHASER IS EXEMPT FROM THE
PROHIBITED TRANSACTION RULES OF SECTION 4975(C) OF THE CODE AND SECTION
406(A) OF ERISA AND UNDER SECTION 401(C) OF ERISA, THE CONDITIONS OF
WHICH ARE MET AND SUCH PURCHASER WILL TRANSFER ITS INTEREST IN THE
SERIES 1998-3 CERTIFICATES IF AND AT SUCH TIME AS SUCH REPRESENTATION
IS NO LONGER TRUE AND CORRECT; (VII) THE PROPOSED ACQUISITION OR
TRANSFER WILL QUALIFY FOR A STATUTORY OR ADMINISTRATIVE PROHIBITED
TRANSACTION EXEMPTION UNDER ERISA AND THE CODE OR WILL NOT GIVE RISE TO
A TRANSACTION DESCRIBED IN SECTION 406(A) OF ERISA OR SECTION
4975(C)(1) OF THE CODE FOR WHICH A STATUTORY OR ADMINISTRATIVE
EXEMPTION IS UNAVAILABLE; OR (VIII) SUCH FUNDS CONSIST OF FUNDS WHICH
DO NOT CONSTITUTE "PLAN ASSETS" WITHIN THE MEANING OF DEPARTMENT OF
LABOR REGULATION 29 C.F.R. SECTION 2510.3-101.
THIS SERIES 1998-3 CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON.
[FOR CLASS B CERTIFICATES ONLY: THE CLASS B CERTIFICATES ARE
SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES AS
PROVIDED IN THE SERIES 1998-3 SUPPLEMENT.]
[FOR CLASS C CERTIFICATES ONLY: THIS CLASS C CERTIFICATE MAY NOT BE
SOLD, ASSIGNED, PLEDGED, PARTICIPATED, SUBDIVIDED OR OTHERWISE
TRANSFERRED UNLESS (I) SUCH TRANSFEREE IS A "UNITED STATES PERSON" AS
DEFINED IN SECTION 7701(a)(30) OF THE CODE; (II) (A) SUCH TRANSFEREE IS
NOT A TRUST, PARTNERSHIP OR "S CORPORATION" (WITHIN THE MEANING OF
SECTION 1361(A) OF THE CODE) FOR UNITED STATES FEDERAL INCOME TAX
PURPOSES OR (B) SUCH TRANSFEREE IS A TRUST,
page 6
<PAGE> 83
PARTNERSHIP OR "S CORPORATION" (WITHIN THE MEANING OF SECTION 1361(A)
OF THE CODE) FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, BUT AFTER
GIVING EFFECT TO SUCH TRANSFER SUBSTANTIALLY ALL OF THE VALUE OF THE
INTEREST OF AN OWNER OF THE TRANSFEREE IN THE TRANSFEREE WILL NOT BE
ATTRIBUTABLE TO THE TRANSFEREE'S OWNERSHIP INTEREST (DIRECT OR
INDIRECT) IN CERTIFICATES ISSUED BY THE TRUST OTHER THAN THE CLASS A
AND CLASS B CERTIFICATES OR THE SERIES 1998-4 CERTIFICATES; AND (iii)
FOR THE PURPOSES OF SECTION 7704 OF THE CODE AND THE TREASURY
REGULATIONS PROMULGATED THEREUNDER, AFTER SUCH TRANSFER THE CLASS C
CERTIFICATES WOULD NOT BE TREATED AS OWNED BY MORE THAN 20 PERSONS AND
THE TRUST WOULD NOT BE TREATED AS HAVING MORE THAN 100 PARTNERS.
THE CLASS C CERTIFICATES ARE SUBORDINATED IN RIGHT OF PAYMENT TO THE
CLASS A CERTIFICATES AND THE CLASS B CERTIFICATES AS PROVIDED IN THE
SERIES 1998-3 SUPPLEMENT.]
[FOR REGULATION S BOOK-ENTRY CERTIFICATES ONLY: THIS CERTIFICATE HAS
NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, PRIOR TO THE DATE
THAT IS 40 DAYS AFTER THE LATER OF (I) THE COMPLETION OF THE
DISTRIBUTION OF THE SERIES 1998-3 CERTIFICATES AND (II) THE CLOSING
DATE, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE
UNITED STATES OR TO A U.S. PERSON EXCEPT PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.]
We understand that this letter is required in connection with certain
securities laws. If administrative or other proceedings are commenced in
connection with which this letter is or would be relevant, we irrevocably
authorize you to produce this letter or a copy of this letter to any interested
party in such proceedings.
page 7
<PAGE> 84
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF DELAWARE.
-------------------------------------
(Name of Purchaser)
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Address:
<PAGE> 85
EXHIBIT G
to the Series 1998-3 Supplement
FORM OF TAX STATEMENT
(for transfer of Class C Certificates)
<TABLE>
<S> <C>
AmeriServe Funding Corporation Donaldson, Lufkin & Jenrette
15305 Dallas Parkway Securities Corporation
Addison, Texas 75001 277 Park Avenue
Attention: President New York, New York 10172
Attention: Asset Securitization
Norwest Bank Minnesota, National Association Group
Sixth & Marquette
Minneapolis, Minnesota 55479-0070 BT Alex. Brown Incorporated
Attention: Corporate Trust Services/ 130 Liberty Street
Asset-Backed Administration New York, New York 10006
Attention: Asset Securitization
Group
NationsBanc Montgomery Securities LLC
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Asset Securitization Group
</TABLE>
Ladies and Gentlemen:
We are delivering this letter in connection with the transfer of
$__________ of the Floating Rate Class C Term Certificates, Series 1998-3 (the
"Class C Certificates") issued by the AmeriServe Receivables Master Trust (the
"Trust") created under the Pooling and Servicing Agreement, dated as of July 1,
1997, as amended and restated as of July 28, 1998 (as the same may be further
amended, amended and restated or otherwise modified from time to time, the
"Pooling Agreement"), among AmeriServe Funding Corporation, a Delaware
corporation (the "Transferor"), AmeriServe Food Distribution, Inc., a Delaware
corporation, as servicer (the "Servicer"), and Norwest Bank Minnesota, National
Association, a national banking association, as trustee (the "Trustee"), and the
Series 1998-3 Supplement, dated as of December 18, 1998 (as the same may be
amended, amended and restated or otherwise modified from time to time, the
"Series 1998-3 Supplement"), to the Pooling Agreement among the Transferor, the
Servicer and the Trustee. Capitalized terms used herein without definition shall
have the meanings assigned thereto in the Series 1998-3 Supplement.
We hereby represent, warrant and agree that: (1) (a) we are purchasing
the Class C Certificates for our own account and are the sole beneficial owner
of such Class C Certificates, (b) either (i) we are not, for federal income tax
purposes, a partnership, trust,
G-1
<PAGE> 86
estate or "S Corporation" (as defined in the Code) (each a "Pass-Through
Entity") or (ii) we are, for federal income tax purposes, a Pass-Through Entity,
but after giving effect to our purchase of such Class C Certificates,
substantially all of the value of the assets of the Pass-Through Entity is not
attributable to the Pass-Through Entity's ownership interest in Certificates
issued by the Trust other than the Class A and Class B Certificates or the
Series 1998-4 Certificates, and (c) such Class C Certificates have not been
transferred through an "established securities market" within the meaning of
Section 7704(b) of the Code and such transfer, including a sale, pledge,
assignment, participation or subdivision, will not cause the Trust to be treated
as a publicly traded partnership for United States federal income tax purposes;
(2) if we are a Pass-Through Entity, we covenant that at all times,
substantially all of the value of the assets of the Pass-Through Entity will not
be attributable to the Pass-Through Entity's ownership interest in Certificates
issued by the Trust other than the Class A or Class B Certificates or the Series
1998-4 Certificates; (3) we are a "United States Person" as defined in Section
7701(a)(30) of the Code; (4) after such transfer, including a sale, pledge,
assignment, participation or subdivision, for purposes of Section 7704 of the
Code and the regulations promulgated thereunder, the Class C Certificates will
not be treated as owned by more than 20 Persons and the Trust will not be
treated as having more than 100 partners; and (5) if we transfer (including a
transfer constituting a sale, pledge, assignment, participation or subdivision)
any of the Class C Certificates, we will obtain from each purchaser or
transferee taking from us a letter containing the same representations and
agreements as set forth herein.
We understand and agree that no initial or subsequent sale or other
transfer of a Class C Certificate may be made unless such sale or transfer (i)
is accompanied by delivery of a tax statement in the form of this letter, (ii)
is made to a "United States Person" as defined in Section 7701(a)(30) of the
Code, as certified in such tax statement, and (iii) will not cause the Trust to
be treated as a publicly traded partnership for United States federal income tax
purposes. Any attempted transfer, assignment, conveyance, participation or
subdivision in contravention of the preceding sentence shall be void ab initio
and the purported transferor, seller or subdivider of such Class C Certificate
shall continue to be treated as the Holder of such Class C Certificate for all
purposes of the Pooling Agreement and the Series 1998-3 Supplement.
We represent to the Initial Purchasers, AmeriServe, the Trustee, the
Servicer and any successor Servicer that one or any combination of the following
statements is an accurate representation as to all sources of funds to be used
to pay the purchase price of the Class C Certificates: (i) if we are an
insurance company, the source of funds to be used by us is an "insurance company
general account" within the meaning of Department of Labor Prohibited
Transaction Class Exemption ("PTCE") 95-60 (issued July 12, 1995) and there is
no Plan with respect to which the amount of the general account reserves and
liabilities for all contracts held by or on behalf of such plan, exceed ten
percent (10%) of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth in the
NAIC Annual Statement (within the meaning of PTCE 95-60) filed by us with our
state of domicile; (ii) such funds constitute assets of one
G-2
<PAGE> 87
or more insurance company pooled separate accounts within the meaning of PTCE
90-1 (issued January 29, 1990) maintained by us and there is no Plan whose
assets in such separate account exceed 10% of the total assets as of the date of
such purchase; (iii) such funds constitute assets of a bank collective
investment fund within the meaning of PTCE 91-38 (issued June 12, 1991)
maintained by us, and there is no employee benefit plan whose assets in such
collective investment fund exceed 10% of the total assets as of the date of such
purchase; (iv) we are acquiring the Series 1998-3 Certificates for the account
of one or more pension funds, trust funds or agency accounts, each of which is a
"governmental plan" as defined in Section 3(32) of ERISA and the purchase and
holding of the Series 1998-3 Certificates will not violate any state or other
law relating to such governmental plan; (v) the source of funds is managed by a
"qualified professional asset manager" or "QPAM" (as defined in Part V of PTCE
84-14, issued March 13, 1984), or an "INHAM" (as defined in part V of PTCE
96-23, issued April 10, 1996) and the purchase and holding of the Series 1998-3
Certificates is exempt from the prohibited transaction rules of Section 4975(c)
of the Code and section 406(a) of ERISA under PTCE 84-14 or PTCE 96-23; (vi) the
transferee is an insurance company general account and the purchase and holding
of the Series 1998-3 Certificates is exempt from the prohibited transaction
rules of section 4975(c) of the Code and Section 406(a) of ERISA under section
401(c) of ERISA, the conditions of which are met and we will transfer our
interest in the Series 1998-3 Certificates if and at such time as such
representation is no longer true and correct; (vii) the proposed acquisition or
transfer will qualify for a statutory or administrative prohibited transaction
exemption under ERISA and the Code or will not give rise to a transaction
described in Section 406(a) of ERISA or Section 4975(c)(1) of the Code for which
a statutory or administrative exemption is unavailable; or (viii) such funds
consist of funds which do not constitute "plan assets" within the meaning of
Department of Labor Regulation 29 C.F.R. Section 2510.3-101.
We understand that this letter is required in connection with certain
laws. If administrative or other proceedings are commenced in connection with
which this letter is or would be relevant, we irrevocably authorize you to
produce this letter or a copy of this letter to any interested party in such
proceedings.
G-3
<PAGE> 88
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF DELAWARE.
-------------------------------------
(Name of Purchaser)
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Address:
G-4
<PAGE> 89
EXHIBIT H
to the Series 1998-3 Supplement
FORM OF CERTIFICATE TO BE GIVEN BY CERTIFICATE OWNER
[Euroclear [Cedel, societe anonyme
151 Boulevard Jacqmain 67 Boulevard Grand-Duchesse Charlotte
B-1210 Brussels, Belgium] L-1331 Luxembourg]
Re: Floating Rate [Class A] [Class B] Term Certificates, Series
1998-3, issued pursuant to the Amended and Restated Pooling
and Servicing Agreement dated as of July 28, 1998 among
AmeriServe Funding Corporation, AmeriServe Food
Distribution, Inc. and Norwest Bank Minnesota, National
Association, as Trustee (the "Certificates").
This is to certify that as of the date hereof, and except as set forth
below, the beneficial interest in the Certificates held by you for our account
is owned by persons that are not U.S. persons (as defined in Rule 902 under the
Securities Act of 1933, as amended).
The undersigned undertakes to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the Certificates held by you in which the undersigned has acquired, or intends
to acquire, a beneficial interest in accordance with your operating procedures
if any applicable statement herein is not correct on such date. In the absence
of any such notification, it may be assumed that this certification applies as
of such date.
[This certification excepts beneficial interests in and does not relate to
U.S. $_________ principal amount of the Certificates appearing in your books as
being held for our account but that we have sold or as to which we are not yet
able to certify.]
We understand that this certification is required in connection with
certain securities laws in the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy thereof to any interested party in such
proceedings.
Dated: , By:
-------------- -----------------------------
Account Holder
H-1
<PAGE> 90
EXHIBIT I
to the Series 1998-3 Supplement
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR OR CEDEL
Norwest Bank Minnesota, National Association
Sixth & Marquette
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services/Asset-Backed Administration
Re: Floating Rate [Class A] [Class B] Term Certificates, Series
1998-3, issued pursuant to the Amended and Restated Pooling
and Servicing Agreement dated as of July 28, 1998 among
AmeriServe Funding Corporation, AmeriServe Food
Distribution, Inc. and Norwest Bank Minnesota, National
Association, as Trustee (the "Certificates").
This is to certify that, based solely on certifications we have received in
writing, by tested telex or by electronic transmission from member organizations
appearing in our records as persons being entitled to a portion of the principal
amount set forth below (our "Member Organizations") as of the date hereof,
$__________ principal amount of the Certificates is owned by persons (a) that
are not U.S. persons (as defined in Rule 902 under the Securities Act of 1933,
as amended (the "Securities Act")) or (b) who purchased their Certificates (or
interests therein) in a transaction or transactions that did not require
registration under the Securities Act.
We further certify (a) that we are not making available herewith for
exchange any portion of the related Regulation S Temporary Book-Entry
Certificate excepted in such certifications and (b) that as of the date hereof
we have not received any notification from any of our Member Organizations to
the effect that the statements made by them with respect to any portion of the
part submitted herewith for exchange are no longer true and cannot be relied
upon as of the date hereof.
We understand that this certification is required in connection with
certain securities laws of the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy hereof to any interested party in such proceedings.
Date: Yours faithfully,
---------------
By:
----------------------------------------
[Morgan Guaranty Trust Company of New
York, Brussels Office, as Operator of the
Euroclear Clearance System] [Cedel, societe
anonyme]
I-1
<PAGE> 91
EXHIBIT J
to the Series 1998-3 Supplement
FORM OF CERTIFICATE TO BE GIVEN BY TRANSFEREE
OF BENEFICIAL INTEREST IN A REGULATION S
TEMPORARY BOOK-ENTRY CERTIFICATE
[Euroclear [Cedel, societe anonyme
151 Boulevard Jacqmain 67 Boulevard Grand-Duchesse Charlotte
B-1210 Brussels, Belgium] L-1331 Luxembourg]
Re: Floating Rate [Class A] [Class B] Term Certificates, Series
1998-3, issued pursuant to the Amended and Restated Pooling
and Servicing Agreement dated as of July 28, 1998 among
AmeriServe Funding Corporation, AmeriServe Food
Distribution, Inc. and Norwest Bank Minnesota, National
Association, as Trustee (the "Certificates").
This is to certify that as of the date hereof, and except as set forth
below, for purposes of acquiring a beneficial interest in the Certificates, the
undersigned certifies that it is not a U.S. person (as defined in Rule 902 under
the Securities Act of 1933, as amended).
The undersigned undertakes to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the Certificates held by you in which the undersigned intends to acquire a
beneficial interest in accordance with your operating procedures if any
applicable statement herein is not correct on such date. In the absence of any
such notification, it may be assumed that this certification applies as of such
date.
We understand that this certification is required in connection with
certain securities laws in the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy thereof to any interested party in such
proceedings.
Dated: , By:
J-1
<PAGE> 92
EXHIBIT K
to the Series 1998-3 Supplement
FORM OF TRANSFER CERTIFICATE FOR EXCHANGE OR
TRANSFER FROM 144A BOOK-ENTRY CERTIFICATE
TO REGULATION S BOOK-ENTRY CERTIFICATE
Norwest Bank Minnesota, National Association
Sixth & Marquette
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Services/Asset-Backed Administration
Re: Floating Rate [Class A] [Class B] Term Certificates, Series
1998-3, issued pursuant to the Amended and Restated Pooling
and Servicing Agreement dated as of July 28, 1998 (the
"Agreement"), among AmeriServe Funding Corporation,
AmeriServe Food Distribution, Inc. and Norwest Bank
Minnesota, National Association, as Trustee (the
"Certificates").
Capitalized terms used but not defined herein shall have the meanings
given to them in the Agreement.
This letter relates to U.S. $___________ principal amount of
Certificates that are held as a beneficial interest in the 144A Book-Entry
Certificate (CUSIP No. _______) with DTC in the name of [insert name of
transferor] (the "Transferor"). The Transferor has requested an exchange or
transfer of the beneficial interest for an interest in the Regulation S
Book-Entry Certificate (CUSIP No. _______) to be held with [Euroclear] [Cedel]
through DTC.
In connection with the request and in receipt of the Certificates, the
Transferor does hereby certify that the exchange or transfer has been effected
in accordance with the transfer restrictions set forth in the Agreement and the
Certificates and pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), and accordingly the
Transferor does hereby certify that:
(i) the offer of the Certificates was not made to a person in the
United States of America,
(ii) either (A) at the time the buy order was originated, the
transferee was outside the United States of America or the Transferor and any
person acting on its behalf reasonably believed that the transferee was outside
the United States of America, or (B) the transaction was executed in, on or
through the facilities of a designated offshore securities market and neither
the Transferor nor any person acting on its behalf knows that the transaction
was pre-arranged with a buyer in the United States of America,
(iii) no directed selling efforts have been made in contravention of
the requirements of Rule 903 or 904 of Regulation S, as applicable, and the
other conditions of Rule 903 or Rule 904 of Regulation S, as applicable, have
been satisfied and
(iv) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
This certification and the statements contained herein are made for
your benefit and the benefit of the issuer and NationsBanc Montgomery Securities
LLC, BT Alex. Brown Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation.
[Insert name of Transferor]
Dated: By:
Title:
K-1
<PAGE> 93
EXHIBIT L
to the Series 1998-3 Supplement
FORM OF PLACEMENT AGENT EXCHANGE INSTRUCTIONS
Depository Trust Company
55 Water Street
50th Floor
New York, New York 10041
Re: Floating Rate [Class A] [Class B] Term Certificates, Series
1998-3, issued pursuant to the Amended and Restated Pooling
and Servicing Agreement dated as of July 28, 1998 (the
"Agreement"), among AmeriServe Funding Corporation,
AmeriServe Food Distribution, Inc. and Norwest Bank
Minnesota, National Association, as Trustee (the
"Certificates").
Pursuant to Section 6.11 of the Agreement, _______________________ (the
"Placement Agent") hereby requests that $____________ aggregate principal amount
of the Certificates held by you for our account and represented by the
Regulation S Temporary Book-Entry Certificate (CUSIP No. _______) (as defined in
the Agreement) be exchanged for an equal principal amount represented by the
144A Book-Entry Certificate (CUSIP No. _______) to be held by you for our
account.
Dated: [placement agent]
By:
Title:
L-1
<PAGE> 1
EXHIBIT 10.13
================================================================================
SERIES 1998-4 SUPPLEMENT
TO POOLING AND SERVICING AGREEMENT
among
AMERISERVE FUNDING CORPORATION,
as Transferor,
AMERISERVE FOOD DISTRIBUTION, INC.,
as initial Servicer,
and
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
Dated as of December 18, 1998
AMERISERVE RECEIVABLES MASTER TRUST
FLOATING RATE VARIABLE FUNDING CERTIFICATES, SERIES 1998-4
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS; INCORPORATION OF TERMS
SECTION 1.1 Definitions.................................................................................1
SECTION 1.2 Incorporation of Terms.....................................................................19
ARTICLE II DESIGNATION
SECTION 2.1 Designation................................................................................19
ARTICLE III CONDITIONS TO ISSUANCE; USE OF PROCEEDS
SECTION 3.1 Conditions to Issuance.....................................................................19
SECTION 3.2 Use of Proceeds............................................................................19
ARTICLE IV PAYMENTS AND ALLOCATIONS
SECTION 4.1 Interest; Additional Amounts...............................................................20
SECTION 4.2 Daily Calculations and Series Allocations..................................................20
SECTION 4.3 Allocations of Daily Series Collections
(Other Than in an Amortization Period.............................................21
SECTION 4.4 Allocations of Daily Series Collections
During an Amortization Period.....................................................22
SECTION 4.5 Withdrawals from the Equalization Account..................................................23
SECTION 4.6 [Reserved].................................................................................23
SECTION 4.7 Write-Offs and Recoveries..................................................................23
SECTION 4.8 [Reserved].................................................................................23
SECTION 4.9 Tax Opinion................................................................................23
ARTICLE V DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions..............................................................................24
SECTION 5.2 Payments in Respect of Transferor Certificate..............................................25
SECTION 5.3 Daily Reports and Monthly Reports..........................................................26
SECTION 5.4 Annual Tax Information.....................................................................26
SECTION 5.5 Periodic Perfection Certificate............................................................27
ARTICLE VI EARLY AMORTIZATION EVENTS
SECTION 6.1 Early Amortization Events..................................................................27
SECTION 6.2 Early Amortization Period..................................................................30
ARTICLE VII OPTIONAL REDEMPTION; INDEMNITIES
SECTION 7.1 Optional Redemption of Investor Interests..................................................30
SECTION 7.2 Indemnification by Transferor..............................................................31
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 7.3 Indemnification by Servicer..............................................................32
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Amendment, Waiver, Etc...................................................................32
SECTION 8.2 Trustee..................................................................................32
SECTION 8.3 Instructions in Writing..................................................................32
SECTION 8.4 Rule 144A................................................................................32
SECTION 8.5 Supplemental Ratings Requirement.........................................................32
SECTION 8.6 Waiver...................................................................................33
SECTION 8.7 Negotiations.............................................................................33
SECTION 8.8 Transfers of Series 1998-4 Certificates..................................................33
SECTION 8.9 Incorporation by Reference...............................................................33
SECTION 8.10 Survival of Agreement....................................................................33
SECTION 8.11 Agent....................................................................................34
SECTION 8.12 Lockbox Accounts.........................................................................34
SECTION 8.13 Servicing in Florida.....................................................................34
</TABLE>
EXHIBITS
EXHIBIT A Form of Series 1998-4 Certificate
EXHIBIT B Form of Daily Report
EXHIBIT C Form of Monthly Report
- ii -
<PAGE> 4
This SERIES 1998-4 SUPPLEMENT, dated as of December 18 , 1998 (this
"Supplement"), is made among AmeriServe Funding Corporation, a Delaware
corporation, as Transferor, AmeriServe Food Distribution, Inc., a Delaware
corporation, as initial Servicer, and Norwest Bank Minnesota, National
Association, a national banking association, as Trustee.
PRELIMINARY STATEMENT
Pursuant to the Amended and Restated Pooling and Servicing Agreement,
dated as of July 28, 1998 (as it may be amended, amended and restated,
supplemented or otherwise modified from time to time, and as supplemented
hereby, the "Pooling Agreement"), among Transferor, Servicer and Trustee,
Transferor may from time to time direct Trustee to issue and authenticate, on
behalf of the Trust, one or more Series of Certificates. Certain terms
applicable to a Series are to be set forth in a Supplement. This Supplement is a
"Supplement" as that term is defined in the Pooling Agreement.
Pursuant to this Supplement, Transferor and Trustee shall create a
Series of Certificates ("Series 1998-4").
ARTICLE I DEFINITIONS; INCORPORATION OF TERMS
SECTION 1.1 Definitions. (a) Capitalized terms used and not otherwise
defined herein are used as defined in Appendix A to the Pooling Agreement. This
Supplement shall be interpreted in accordance with the conventions set forth in
Part B of that Appendix A.
(b) Each reference in this Supplement to funds on deposit in the
Carrying Cost Account, the Equalization Account or the Principal Funding Account
(or similar phrase) refers only to funds in the administrative sub-accounts of
those accounts that are allocated to Series 1998-4. Unless the context otherwise
requires, in this Supplement and the Certificate Purchase Agreement: (i) each
reference to a "Daily Report" or "Monthly Report" refers to a Daily Report or
Monthly Report for the Series 1998-4 Certificates; (ii) each reference to the
"Servicing Fee" refers to the Servicing Fee allocable to Series 1998-4; (iii)
each reference to the "Series Collection Allocation Percentage" refers to the
Series Collection Allocation Percentage for the Series 1998-4 Certificates; and
(iv) each reference to the Transaction Documents shall be deemed to include a
reference to the Certificate Purchase Agreement.
(c) Each capitalized term defined below relates only to the Series
1998-4 Certificates and to no other Series of Certificates. Whenever used in
this Supplement, the following words and phrases shall have the following
meanings:
"ABR Tranche" means, at any time, any portion (which may be 100%) of
the Aggregate Invested Amount that is so designated in accordance with the
Certificate Purchase Agreement.
page 1
<PAGE> 5
"Additional Amounts" means amounts payable pursuant to Sections 4.2,
4.3, 4.5, 4.6 and 10.5 of the Certificate Purchase Agreement, whether or not
such sections refer to "Additional Amounts".
"Adjusted Carrying Cost Reserve" means the product of (a) Carrying Cost
Receivables Reserve multiplied by (b) a fraction, the numerator of which is one
(1) and the denominator of which is the result of one (1) minus the Applicable
Reserve Ratio.
"Adjusted Eligible Receivables" means, on any Business Day, the result,
in each case as reflected in the Daily Report for that Business Day, of (a) the
aggregate Unpaid Balance of Eligible Receivables on that day, minus (b) the
Unapplied Cash on that day, plus (c) the Aggregate Retained Balances on that
day.
"Adjusted Invested Amount" means, on any Business Day, the result of
(a) the Aggregate Invested Amount minus (b) the amount on deposit in the
Principal Funding Account with respect to Series 1998-4.
"Aged Receivables Ratio" means, as calculated in each Monthly Report as
of the Cut-Off Date for the most recently ended Calculation Period, a fraction
(expressed as a percentage) (a) the numerator of which is the sum of (i) the
aggregate Unpaid Balance of Receivables (other than Tricon Receivables) that
remained outstanding 91 to 120 days after their respective original invoice
dates, as determined as of such Cut-Off Date, plus without duplication (ii) the
aggregate Unpaid Balance of Receivables (other than Tricon Receivables) that
were written off as uncollectible during such Calculation Period and that, if
not so written off, would have been outstanding not more than 90 days after
their respective original invoice dates, as determined as of such Cut-Off Date
and (b) the denominator of which is the aggregate amount payable pursuant to
invoices relating to Receivables (other than Tricon Receivables) originated
during the Calculation Period that occurred three Calculation Periods prior to
the most recently ended Calculation Period, as determined as of such Cut-Off
Date.
"Agent" means Bank of America in its capacity as Agent under the
Certificate Purchase Agreement, together with its successors in that capacity.
The Agent is an "Agent" with respect to Series 1998-4 for purposes of the
Pooling Agreement.
"Aggregate Invested Amount" means, as of any date of determination, the
sum of the Invested Amounts of all Series 1998-4 Certificateholders. The
Aggregate Invested Amount shall be the "Invested Amount" of Series 1998-4 for
purposes of the Pooling Agreement.
"Aggregate Retained Balances" means, on any Business Day, the aggregate
of the balances relating to Receivables other than Tricon Receivables retained
in Lockbox Accounts or Blocked Accounts for items in the process of collection
but for which funds have not been made available by the related Lockbox Bank or
Blocked Account Bank, provided that (i) no notice of insufficient funds or
similar situation shall exist with respect thereto and (ii) the Unpaid Balance
of
page 2
<PAGE> 6
Receivables (other than Tricon Receivables) shall have been reduced by an amount
equal to such balances.
"Allocated NER" means the product of (a) the Series Collection
Allocation Percentage multiplied by (b) the Net Eligible Receivables.
"Alternate Base Rate" means, on any day, a fluctuating rate of interest
per annum equal to the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by Bank of America in San Francisco,
California, as its "reference rate", and
(b) the Federal Funds Rate.
The "reference rate" is a rate set by Bank of America based upon various factors
including Bank of America's costs and desired return, general economic
conditions and other factors, and is used as reference point for pricing some
loans, which may be priced at, above, or below such announced rate.
Any change in the reference rate announced by Bank of America shall
take effect without prior notice to any Person at the opening of business on the
day specified in the public announcement of such change.
"AmeriServe Credit Agreement" means the Third Amended and Restated
Credit Agreement dated as of May 21, 1998 among AmeriServe, Bank of America, as
Administrative Agent and Letter of Credit Issuing Lender, Donaldson, Lufkin &
Jenrette Securities Corporation, as Documentation Agent, and the other financial
institutions party thereto.
"Amortization Period" means the period (x) beginning on the earliest of
(i) the Termination of Sale Notice Date, (ii) the Expected Revolving Period
Termination Date and (iii) the date, if any, on which an Early Amortization
Period commences, and (y) ending on the earlier of (i) the Final Scheduled
Payment Date and (ii) the date on which this Supplement shall have terminated
pursuant to Section 8.10.
"Amortization Period Calculation Date" means the day before an
Amortization Period begins.
"Applicable Ratings Factor" means 2.0.
"Applicable Reserve Ratio" means, during any Distribution Period, the
greater of (a) the Minimum Required Reserve Ratio and (b) the Required Reserve
Ratio, in each case as calculated in the Monthly Report required to be delivered
on the Report Date immediately prior to the start of that Distribution Period.
page 3
<PAGE> 7
"Assignee" is defined in Section 10.3(c) of the Certificate Purchase
Agreement.
"Attorney Costs" has the meaning set forth in Appendix A to the Pooling
Agreement, except that such term also shall include the allocated cost of
internal legal services, and all disbursements of internal counsel, of each
Series 1998-4 Certificateholder and the Agent.
"Bank of America" means Bank of America National Trust and Savings
Association and its successors.
"Base Amount" means, on any Business Day, the result of the following
formula:
Allocated NER - ROCA
where:
Allocated NER = the Allocated NER as reported in the Daily Report for that
Business Day; and
ROCA = the Required Overcollateralization Amount as reported in
the Daily Report for that Business Day.
"Carrying Cost Cash Reserve Amount" means an amount equal to the
Current Carrying Costs.
"Carrying Cost Receivables Reserve" means, on any Business Day, the
result of:
(a) the Current Carrying Costs; plus
(b) the product of (i) the Aggregate Invested Amount,
multiplied by (ii) (A) 1.5 times (B) the result of (x) (i) One-Month
LIBOR plus the Certificate Spread relating thereto (if no portion of
the Aggregate Invested Amount is allocated to the ABR Tranche) or (ii)
the greater of (A) the Alternate Base Rate and (B) One-Month LIBOR plus
the Certificate Spread relating thereto (if any portion of the
Aggregate Invested Amount is allocated to the ABR Tranche), minus (y)
the Commitment Fee Percentage, multiplied by (iii) a fraction the
numerator of which is the product of 2.0 and the number of Turnover
Days and the denominator of which is 360; plus
(c) the product of (i) the Commitment Fee Percentage,
multiplied by (ii) (A) 1.5 times (B) the aggregate Stated Amounts,
multiplied by (iii) a fraction the numerator of which is the product of
2.0 and the number of Turnover Days and the denominator of which is
360; plus
(d) the product of (i) the Series Collection Allocation
Percentage on the preceding Distribution Date, multiplied by (ii) the
aggregate Unpaid Balance of Receivables (other
page 4
<PAGE> 8
than Tricon Receivables) on such Distribution Date, multiplied by (iii)
2%, multiplied by (iv) a fraction the numerator of which is the product
of 2.0 and the number of Turnover Days and the denominator of which is
360; plus
(e) the product of (i) $50,000, multiplied by (ii) a fraction,
the numerator of which is the product of 2.0 times the number of
Turnover Days and the denominator of which is 360; minus
(f) the balance on deposit in the Carrying Cost Account at the
beginning of that Business Day.
"Certificate Purchase Agreement" means the Certificate Purchase
Agreement, dated as of December 18, 1998, among Transferor, AmeriServe, the
Series 1998-4 Certificateholders, Bank of America, individually and as the
Agent, and the Trustee, as the same may be amended, amended and restated or
otherwise modified from time to time in accordance with its terms. The
Certificate Purchase Agreement is hereby designated a "Transaction Document".
"Certificate Rate" means, at any time, the weighted average of the
interest rates on all outstanding Tranches.
"Certificate Spread" means (a) with respect to any Eurodollar Tranche,
eighty-seven and one-half basis points (0.875%) per annum, (b) with respect to
any CP Tranche, seventy-five basis points (0.75%) per annum, and (c) with
respect to the ABR Tranche, zero basis points (0%) per annum.
"Closing Date" means December 18, 1998.
"Commitment Fee" is defined in Section 4.2 of the Certificate Purchase
Agreement.
"Commitment Fee Percentage" means the percentage set forth in Section
4.2 of the Certificate Purchase Agreement.
"Commitment Fee Reserve Amount" means, for each Distribution Period,
the product of (a) the aggregate Stated Amounts as of the first day of such
Distribution Period, multiplied by (b) the Commitment Fee Percentage, multiplied
by (c) a fraction (i) the numerator of which is the actual number of days in
such Distribution Period and (ii) the denominator of which is 360.
"Concentration Adjusted Eligible Receivables" means, at any time, the
positive difference of (a) the Adjusted Eligible Receivables, minus (b) the then
aggregate amount of all Excess Concentration Balances with respect to all
Obligors.
"Concentration Percentage" means:
page 5
<PAGE> 9
(i) for any Obligor (other than a Special Obligor), the applicable
percentage set forth below:
(a) 21.0% for any Tier-1 Obligor;
(b) 15.0% for any Tier-2 Obligor;
(c) 7.5% for any Tier-3 Obligor;
(d) 4.5% for any Tier-4 Obligor;
(e) 3.0% for any Tier-5 Obligor; and
(ii) for each Special Obligor, such percentage as has been so
designated in writing from time to time by Transferor to the Trustee but only
with the prior written consent of the Agent (and any percentage previously
designated in accordance with this clause (ii) may be increased or decreased to
a percentage designated in writing by Transferor from time to time to the
Trustee but only with the prior written consent of the Agent), provided that the
designation of any percentage (or any increase in such percentage) contemplated
by this clause (ii) shall not be effective unless the Modification Condition
shall have been satisfied with respect to the designation of such percentage (or
any such increased percentage).
All Obligors that are known or should have been known to the Servicer
as being Affiliates of each other shall be deemed to be a single Obligor for
purposes of calculating the related Concentration Percentage and the Excess
Concentration Balances. For the purposes of determining which Concentration
Percentage should apply to such affiliated Obligors, only the short-term
unsecured debt rating or long-term unsecured debt rating, as applicable, of the
lowest rated Obligor of such affiliated Obligors shall be considered.
"CP Disruption" means the inability of QCC, at any time, whether as a
result of a prohibition or any other event or circumstance whatsoever, to raise
funds through the issuance of its commercial paper notes in the United States
commercial paper market.
"CP Rate" means, for any Interest Period, the per annum rate equivalent
to the "weighted average cost" (as defined below) related to the issuance of
Notes that are allocated, in whole or in part, by QCC or the Agent to fund or
maintain some or all of the Invested Amount of QCC (and which may also be
allocated in part to other assets of QCC); provided that if any component of
such rate is a discount rate, in calculating the "CP Rate" for such Interest
Period, such component shall reflect the rate resulting from converting such
discount rate to an interest bearing equivalent rate per annum. As used in this
definition, the "weighted average cost" shall consist of (w) the actual interest
rate (or discount) paid to purchasers of the Notes, together with the
commissions of placement agents and dealers in respect of such Notes to the
extent such commissions are allocated, in whole or in part, to such Notes by QCC
or the Agent, (x) certain documentation and
page 6
<PAGE> 10
transaction costs associated with the issuance of such Notes, (y) any
incremental carrying costs incurred with respect to Notes maturing on dates
other than those on which corresponding funds are received by QCC, and (z) other
borrowings by QCC, including borrowings to fund small or odd dollar amounts that
are not easily accommodated in the commercial paper market.
"CP Tranche" means, at any time, any portion (which may be 100%) of the
Aggregate Invested Amount that is so designated in accordance with the
Certificate Purchase Agreement.
"Current Carrying Costs" means, during any Distribution Period, an
amount equal to the sum of (i) the amount of interest (including additional
interest pursuant to Section 4.1(d)) on the Series 1998-4 Certificates and the
amount of the Servicing Fee that shall be payable on the next Distribution Date,
plus (ii) accrued and unpaid expenses described in Section 7.2(l)(C) of the
Pooling Agreement, plus (iii) the Monthly Trustee Payment Amount, plus (iv)
accrued and unpaid Transition Costs, plus (v) the Commitment Fee Reserve Amount.
"Daily Series Collections" is defined in Section 4.2.
"DCR" means Duff & Phelps Credit Rating Co., and any successor thereto
which is a nationally recognized rating agency.
"Dilution Horizon Variable" means, at any time, a fraction having (a) a
numerator equal to the sum of the aggregate amounts payable pursuant to invoices
giving rise to Receivables (other than Tricon Receivables) and generated by the
Sellers during the Calculation Period ending on the most recent Cut-Off Date (as
of that Cut-Off Date) and (b) a denominator equal to the Net Eligible
Receivables as of such Cut-Off Date.
"Dilution Ratio" means, as calculated by the Servicer and provided in
each Monthly Report as of the most recent Cut-Off Date, a fraction (expressed as
a percentage) having (a) a numerator equal to the aggregate amount of Dilution
on the Receivables (other than Tricon Receivables) occurring during the
Calculation Period ending on the most recent Cut-Off Date, and (b) a denominator
equal to the aggregate amounts payable pursuant to invoices giving rise to
Receivables (other than Tricon Receivables) that were generated by the Sellers
during the Calculation Period ending on the second most recent Cut-Off Date.
"Dilution Reserve Ratio" means, as calculated by the Servicer and
provided in each Monthly Report, the result (expressed as a percentage)
calculated in accordance with the following formula:
{(ARF x ADR) + [(HDR-ADR) x (HDR/ADR)]} x DHV
page 7
<PAGE> 11
where:
ADR = the average of the Dilution Ratios during the period of 12
consecutive Calculation Periods ending on the related Cut-Off
Date;
ARF = the Applicable Ratings Factor;
DHV = the Dilution Horizon Variable; and
HDR = the highest Dilution Ratio as of the end of any of the 12
consecutive Calculation Periods ending on the related Cut-Off
Date.
"Dilution Reserve Ratio (Z-value)" means, as calculated by the Servicer
and provided in each Monthly Report, the result (expressed as a percentage)
calculated in accordance with the following formula:
[(ARF x ADR) + (Z-value x SD)] x DHV
where:
ADR = the average of the Dilution Ratios during the period of 12
consecutive Calculation Periods ending on the related Cut-Off
Date;
ARF = the Applicable Ratings Factor;
DHV = the Dilution Horizon Variable; and
SD = the sample standard deviation, during the period of 12
consecutive Calculation Periods ending on the related Cut-Off
Date, of the Dilution Ratio.
"Distribution Period" means each period from one Distribution Date to
the next Distribution Date; provided that the first Distribution Period will be
the period from the Closing Date to the Distribution Date occurring in the month
following the month in which the Closing Date occurs.
"Distribution Shortfall" means, on any Business Day:
(a) with respect to Series 1998-4, that the funds available for
allocation to the Carrying Cost Account, the Principal Funding Account and the
Equalization Account on such Business Day pursuant to Section 4.3 or Section
4.4, as the case may be, are less than the amounts, if any, required to be
deposited in such accounts on such Business Day pursuant to Section 4.3 or
Section 4.4, as the case may be; and
(b) with respect to any Series (other than Series 1998-1 and Series
1998-4), that the funds available for allocation to the Carrying Cost Account,
the Principal Funding Account and the Equalization Account on such Business Day
pursuant to the Supplement for such Series are less than the amounts, if any,
required to be deposited in such accounts on such Business Day pursuant to such
Supplement.
page 8
<PAGE> 12
"Domestic Person" means any Person that has a place of business located
in the United States or Puerto Rico.
"Early Amortization Calculation Date" means the day before an Early
Amortization Period begins.
"Early Amortization Event" is defined in Section 6.1.
"Early Amortization Period" means the period beginning on the
applicable date determined in accordance with Section 6.2 and ending on the day
on which the Aggregate Invested Amount has been reduced to zero.
"Eligible Deposit Account" means (a) a segregated trust account
maintained at a national bank with a long-term unsecured debt rating of at least
"A" or the equivalent thereof by the Rating Agencies, (b) a deposit account
maintained with a bank that has a long-term unsecured debt rating of not less
than "AA-" (or, in the case of a Bank Account, "BBB") or the equivalent thereof
by the Rating Agencies, or a short-term unsecured debt rating of not less than
"A-1+" or "D-1," or the equivalent thereof, by the Rating Agencies or (c)
another deposit account as to which the Modification Condition has been
satisfied.
"Eligible Obligor" means, at any time, an Obligor that satisfies the
following criteria:
(a) it is a Domestic Person and is not (i) the United States government
or any of its agencies or instrumentalities or (ii) a state or local government
or any agency or instrumentality thereof, provided that not more than 3% of the
aggregate Unpaid Balances of the Eligible Receivables may be owed by Obligors
which are not Domestic Persons if (x) such Receivables are otherwise Eligible
Receivables, (y) the payment of such Receivables is fully supported by an
irrevocable Dollar-denominated letter of credit issued by a Rated Bank in favor
of the applicable Seller or other irrevocable Dollar-denominated credit support
issued by a Rated Bank in favor of the applicable Seller and (z) such letter of
credit or other credit support is assignable to Transferor and can be enforced
by the Servicer (including any successor Servicer) or Trustee;
(b) it is not an Affiliate of AmeriServe and, without limiting the
foregoing, is not a direct or indirect Subsidiary of AmeriServe or any other
Person with respect to which AmeriServe or any of its Subsidiaries owns,
directly or indirectly, more than 50% of the Person's equity interests;
(c) with respect to which no Bankruptcy Event had occurred and was
continuing as of the end of the most recent Calculation Period and is
continuing;
(d) as of the end of the most recent Calculation Period, no more than
25% of the aggregate Unpaid Balance of all Receivables of the Obligor were (for
reasons other than disputes) aged more than 120 days past their respective
original invoice dates; and
page 9
<PAGE> 13
(e) as of the end of the most recent Calculation Period, none of the
Receivables of the Obligor was evidenced by promissory notes.
"Eligible Receivable" shall have the meaning set forth in Appendix A to
the Pooling Agreement, except that for purposes of this Supplement: (i) no
Receivable shall be an Eligible Receivable if (x) a State Tax Opinion Request
(defined below) has been made with respect to the related Servicing Jurisdiction
(defined below) and (y) the Agent shall not have notified the Servicer in
writing that the Agent is satisfied with the related State Tax Opinion (defined
below), it being understood that the Agent has the right in its sole discretion
to decide whether or not to give such notice (and whether or not to make any
State Tax Opinion Request), and the giving of any such notice shall not limit
the rights and remedies otherwise available to the Trustee, the Agent, the
Series 1998-4 Certificateholders, any Affected Party or any Indemnitee under the
Transaction Documents or applicable law; (ii) no Tricon Receivable shall be an
Eligible Receivable; (iii) clause (b) of the definition of Eligible Receivable
in such Appendix A shall be deemed to read as follows: "(b) that represents a
bona fide obligation resulting from a sale of goods that have been shipped or
services that have been performed and for which an invoice has been sent to the
applicable Obligor, and that is due and payable not more than 45 days after the
original date of such invoice, provided that not more than 1% of the aggregate
Unpaid Balances of the Eligible Receivables may be due and payable up to 60 days
after the original dates of the related invoices"; and (iv) clause (c) of the
definition of Eligible Receivable in such Appendix A shall be deemed to read as
follows: "(c) that, as of that time, is not aged more than 60 days past its
original invoice date".
As used in the previous sentence:
"Servicing Jurisdiction" means a state in which the Servicer
or a Sub-Servicer conducts some or all of its servicing, administration
or collection operations in respect of Receivables, and the "related"
Servicing Jurisdiction with respect to a Receivable means the Servicing
Jurisdiction from which such Receivable is serviced, administered or
collected.
"State Tax Opinion" means a written opinion of counsel,
addressed to the Trustee, the Rating Agencies, the Agent and the Series
1998-4 Certificateholders, and in form and substance (and from counsel)
satisfactory to the Agent and the Rating Agencies, to the effect that,
for purposes of state income and franchise tax purposes in the relevant
Servicing Jurisdiction, (i) the Trust shall not be subject to any
income, franchise or entity level tax, and (ii) the Series 1998-4
Certificates shall be characterized as debt.
"State Tax Opinion Request" means a written request from the
Agent or a Rating Agency to the Servicer requesting the Servicer to
cause a State Tax Opinion to be rendered.
page 10
<PAGE> 14
"Eurodollar Tranche" means, at any time, any portion (which may be
100%) of the Aggregate Invested Amount that is so designated in accordance with
the Certificate Purchase Agreement.
"Excess Concentration Balances" means, on any day with respect to any
Obligor, the excess, if any, of (a) the aggregate Unpaid Balances of Eligible
Receivables it owes, over (b) the result of (i) the Adjusted Eligible
Receivables multiplied by (ii) the Concentration Percentage for such Obligor.
"Expected Revolving Period Termination Date" means the Distribution
Date in December 2001.
"Exposure" is defined in Section 10.3 of the Certificate Purchase
Agreement.
"Federal Funds Rate" means, on any day, (a) the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if the day is not a Business Day, for the immediately preceding Business Day) by
the Federal Reserve Bank of New York, plus (b) 100 basis points; provided that
if the rate set forth in clause (a) above is not so published for any Business
Day, the rate for purposes of such clause (a) shall be the average of the
quotations for the day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it.
"Final Scheduled Payment Date" means the Distribution Date in December
2002.
"Guarantor" means AmeriServe, in its capacity as the guarantor under
the Seller Guaranty.
"Holder" means a Holder (as defined in the Pooling Agreement) of a
Series 1998-4 Certificate.
"Increase" is defined in Section 2.2 of the Certificate Purchase
Agreement.
"Increase Amount" is defined in Section 2.2 of the Certificate Purchase
Agreement.
"Increase/Decrease Date" means (a) any Distribution Date and (b) the
last Business Day of any calendar month.
"Indemnitee" is defined in Section 10.5 of the Certificate Purchase
Agreement.
"Initial Aggregate Invested Amount" means (a) at any time during the
Revolving Period, the Aggregate Invested Amount at that time and (b) at any
other time, the Aggregate Invested Amount at the end of the Revolving Period.
page 11
<PAGE> 15
"Intercreditor Agreement" means the Intercreditor Agreement dated as of
July 11, 1997 between the Trustee and the Administrative Agent under the
AmeriServe Credit Agreement, as such Intercreditor Agreement may be amended,
amended and restated or otherwise modified from time to time in accordance with
its terms.
"Intercreditor Provisions" means the following provisions of the
AmeriServe Credit Agreement: Sections 5.5, 9.1(n), 9.2(g), 9.2(h), 9.3(d),
9.4(e), 9.4(f), 9.5(l), 9.6(a), 9.8(e), 9.16, 9.21 and the definitions of
"Intercreditor Agreement", "Joint Venture", "Pooling and Servicing Agreement",
"Purchase Money Note", "Qualified Receivables Transaction", "Receivable Stated
Amount", "Receivables", "Receivables Bridge Facilities", "Receivables
Documents", "Receivables Financing Costs", "Receivables Investor Instruments",
"Receivables Program Assets", "Receivables Program Obligations", "Receivables
Related Assets", "Receivables Seller", "Receivables Subsidiary", "Special
Purpose Vehicle", "Standard Securitization Undertakings", and "Subsidiary".
"Interest Period" means a Distribution Period.
"Invested Amount" means, at any time, with respect to a Series 1998-4
Certificateholder, the result of (a) the aggregate amount of increases in such
Series 1998-4 Certificateholder's Invested Amount pursuant to the Certificate
Purchase Agreement at or prior to such time, less (b) the aggregate amount of
all distributions that have been made to such Series 1998-4 Certificateholder on
account of principal (provided that the Invested Amount shall never be reduced
to below zero); it being understood that a Series 1998-4 Certificateholder may
assign some or all of its Invested Amount in accordance with the terms of the
Certificate Purchase Agreement and that the Invested Amounts of the assignor
Series 1998-4 Certificateholder and the assignee Series 1998-4 Certificateholder
shall be adjusted accordingly.
"Investor Repayment Amount" means, on any Business Day falling in the
Amortization Period or an Early Amortization Period, the sum of (a) the
Aggregate Invested Amount, plus (b) the aggregate amount of accrued and unpaid
interest (including additional interest contemplated by Section 4.1) in respect
of the Series 1998-4 Certificates, plus (c) any Additional Amounts and other
obligations known to be payable on or before the first Distribution Date falling
after that date.
"LIBOR Office" is defined in Section 4.3(a) of the Certificate Purchase
Agreement.
"Loss Reserve Ratio" means, as calculated by the Servicer and provided
in each Monthly Report, the result (expressed as a percentage) of (a) the
Applicable Ratings Factor, multiplied by (b) the highest average of the Aged
Receivables Ratio for any three consecutive Calculation Periods that occurred
during the preceding 12 consecutive Calculation Periods ending on the most
recent Cut-Off Date, multiplied by (c) a fraction having (i) a numerator equal
to the sum of the aggregate amounts payable pursuant to invoices giving rise to
Receivables (other than Tricon Receivables) generated by the Sellers during the
two Calculation Periods preceding or ending on
page 12
<PAGE> 16
the most recent Cut-Off Date and (ii) a denominator equal to the Net Eligible
Receivables, as of the most recent Cut-Off Date, multiplied by (d) the Payment
Term Multiplier.
"Loss Reserve Ratio (Z-value)" means, as calculated by the Servicer and
provided in each Monthly Report, the result (expressed as a percentage) of (a)
the Loss Reserve Ratio, plus (b) the product of (i) the Z-value, multiplied by
(ii) the sample standard deviation of the Aged Receivables Ratio during the
preceding 12 consecutive Calculation Periods ending on the most recent Cut-Off
Date, multiplied by (iii) the Payment Term Multiplier.
"Minimum Required Reserve Ratio" means the sum, as of any Cut-Off Date,
of (a) 12%, plus (b) the product of (i) the average of the Dilution Ratios for
the period of 12 preceding Calculation Periods ending on such Cut-Off Date,
multiplied by (ii) the Dilution Horizon Variable for such Cut-Off Date;
provided, however, that at no time shall the Minimum Required Reserve Ratio be
less than 15%.
"Monthly Trustee Payment Amount" means the sum of (i) the dollar amount
specified in the fee schedule delivered by Trustee to the Servicer and the Agent
on or prior to the Closing Date, as modified from time to time with the prior
written consent of the Servicer and the Agent, plus (ii) any reasonable and
documented out-of-pocket expenses incurred by Trustee in the administration of
its duties hereunder; provided that the Monthly Trustee Payment Amount shall not
exceed $5,000 for any month.
"Moody's" means Moody's Investors Service, Inc., and any successor
thereto which is a nationally recognized rating agency.
"Net Eligible Receivables" means, at any time, the positive difference
of (a) the Concentration Adjusted Eligible Receivables, minus (b) the sum of (i)
the aggregate amount paid by Obligors to the Sellers in respect of any "cash in
advance" or "cash on account" arrangement included in the calculation of the
Concentration Adjusted Eligible Receivables and which has not been applied
against goods shipped to such Obligors, plus (ii) the PACA Amount with respect
to Receivables other than Tricon Receivables, plus (iii) the aggregate amount of
sales tax included in the calculation of the Concentration Adjusted Eligible
Receivables, plus (iv) the aggregate amount of royalties, advertising fees or
marketing fees included in the calculation of the Concentration Adjusted
Eligible Receivables, plus (v) the aggregate rebilled amount of all Debit Memos
included in the calculation of the Concentration Adjusted Eligible Receivables.
"Net Invested Amount" means, on any Business Day, the positive
difference (if any) of (a) the Aggregate Invested Amount, minus (b) the
aggregate balance on deposit in the Equalization Account and the Principal
Funding Account.
"Notes" means short-term promissory notes issued or to be issued by QCC
to fund its investments in accounts receivable or other financial assets.
page 13
<PAGE> 17
"One-Month LIBOR" means, for any Interest Period, the rate per annum,
determined by the Trustee and notified in writing by the Trustee to the Servicer
and the Agent, which is the arithmetic mean (rounded to the nearest 1/100 of 1%)
of the offered rates for dollar deposits having a maturity of one month
commencing on the first day of such Interest Period that appears on the Telerate
British Bankers Assoc. Interest Settlement Rates Page (defined below) at
approximately 11:00 a.m., London time on the second full Business Day prior to
such date; provided, however, that if there shall at any time no longer exist a
Telerate British Bankers Assoc. Interest Settlement Rates Page, "One-Month
LIBOR" shall mean the rate per annum equal to the average rate at which the
principal London offices of Bank of America, Citibank, N.A. and J.P. Morgan are
offered dollar deposits at or about 10:00 a.m., New York City time, two Business
Days prior to the first Business Day of such Interest Period in the London
eurodollar interbank market for delivery on the first day of such Interest
Period for one month and in a principal amount equal to an amount of not less
than $1,000,000. As used herein, "Telerate British Bankers Assoc. Interest
Settlement Rates Page" means the display designated as Page 3750 on the Telerate
System Incorporated Service (or such other page as may replace such page on such
service for the purpose of displaying the rates at which dollar deposits are
offered by leading banks in the London interbank deposit market), as reported by
Bloomberg Financial Markets Commodities News (or by another source selected by
the Trustee and notified by the Trustee to the Agent and the Servicer).
"PACA Amount" at any time means the aggregate amount of obligations
then owed by the Sellers to any Persons that may be entitled to make a claim for
payment thereof pursuant to PACA.
"Participants" is defined in Section 10.3 of the Certificate Purchase
Agreement.
"Payment Term Multiplier" means one.
"Percentage" is defined in Section 2.1 of the Certificate Purchase
Agreement.
"Permitted Transferee" is defined in Section 10.3(c) of the Certificate
Purchase Agreement.
"PFS" means the unincorporated food distribution business of PepsiCo,
Inc. known as PFS that AmeriServe acquired from PepsiCo, Inc. in July, 1997.
"Principal Payment Date" means (i) any Increase/Decrease Date on which
the Aggregate Invested Amount is to be increased pursuant to Section 2.2 of the
Certificate Purchase Agreement or reduced pursuant to Section 3.1 of the
Certificate Purchase Agreement, and (ii) any Distribution Date falling in an
Amortization Period with respect to Series 1998-4.
"Rated Bank" means a bank which (a) is organized under the laws of the
United States or any state thereof and (b) has either (x) a long-term unsecured
debt rating of at least "A" from a
page 14
<PAGE> 18
Rating Agency or (y) a short-term unsecured debt rating of at least "A-1" or
"D-1" from a Rating Agency.
"Rating Agencies" has the meaning set forth in Appendix A to the
Pooling Agreement, except that with respect to any Obligor, unless the context
otherwise requires, Rating Agencies means: (a) if both DCR and S&P rate such
Obligor, DCR and S&P; (b) if S&P rates such Obligor, but DCR does not, S&P; and
(c) if DCR rates such Obligor, but S&P does not, DCR.
"QCC" means Quincy Capital Corporation, a Delaware corporation.
"QCC Trigger Event" is defined in Section 2.1 of the Certificate
Purchase Agreement.
"Receivables Review" is defined in Section 8.1(d) of the Certificate
Purchase Agreement.
"Required Overcollateralization Amount" means, on any Business Day, the
result of:
(a) if the Allocated NER exceeds or is equal to the Targeted NER, the
sum of (i) the Adjusted Carrying Cost Reserve plus (ii) the product of the
Required Receivables multiplied by the Applicable Reserve Ratio; or
(b) if the Allocated NER is less than the Targeted NER, the sum of (i)
the Adjusted Carrying Cost Reserve plus (ii) the product of the Allocated NER
multiplied by the Applicable Reserve Ratio.
"Required Receivables" means, on any Business Day, the result of the
following formula:
AIA
---------
(1 - ARR)
where:
ARR = the Applicable Reserve Ratio in effect for that Business Day;
and
AIA = the Adjusted Invested Amount in effect for that Business Day.
"Required Reserve Ratio" means, as calculated in each Monthly Report,
the greater of (a) the sum of (i) the Loss Reserve Ratio, plus (ii) the Dilution
Reserve Ratio, and (b) the sum of (i) the Loss Reserve Ratio (Z-value), plus
(ii) the Dilution Reserve Ratio (Z-value).
"Required Series Holders" means the Required Series 1998-4
Certificateholders.
"Required Series 1998-4 Certificateholders" is defined in Section 9.9
of the Certificate Purchase Agreement.
page 15
<PAGE> 19
"Reserve-Adjusted Eurodollar Rate" means, for any Interest Period, the
rate per annum obtained by dividing (i) One-Month LIBOR for such Interest Period
by (ii) a percentage equal to 100%, minus the stated maximum rate of all reserve
requirements (including any marginal, emergency, supplemental, special or other
reserves) applicable on such second preceding Business Day to any member bank of
the Federal Reserve System in respect of "Eurocurrency liabilities" as defined
in Regulation D of the Federal Reserve Board (or any successor category of
liabilities under Regulation D); provided that Trustee shall rely upon
notification from the Agent, in accordance with Section 10.14 of the Certificate
Purchase Agreement, as to the applicable stated maximum rate contemplated by
clause (ii).
"Revolving Period" means the period beginning (a) on the Closing Date
and (b) ending on the day before the first day of the Amortization Period.
"S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., and any successor thereto which is a nationally recognized rating agency.
"Series Collection Allocation Percentage" at any time means a fraction
(expressed as a percentage), (a) the numerator of which the Targeted NER and (b)
the denominator of which is the sum for all Series (other than Series 1998-1) of
the "Targeted NER" as defined in the Supplements for such Series (other than
Series 1998-1).
"Series 1997-1" means the Floating Rate Variable Funding Certificates,
Series 1997-1, issued by the Trust.
"Series 1997-1/Series 1998-2 Repayment and Termination Agreement" means
the Series 1997-1/Series 1998-2 Repayment and Termination Agreement dated as of
December 18, 1998 among AmeriServe, the Transferor, QCC, Receivables Capital
Corporation and Bank of America, individually and as Agent.
"Series 1998-1" or "Series 1998-1 Certificates" means the Floating Rate
Variable Funding Certificates, Series 1998-1, issued by the Trust.
"Series 1998-2" means the Floating Rate Variable Funding Certificates,
Series 1998-2, issued by the Trust.
"Series 1998-3" or "Series 1998-3 Certificates" means the Series
comprised of the Floating Rate Class A Term Certificates, Series 1998-3, the
Floating Rate Class B Term Certificates, Series 1998-3, and the Floating Rate
Class C Term Certificates, Series 1998-3, issued by the Trust.
"Series 1998-3 Supplement" means the Supplement pursuant to which
Series 1998-3 was issued, without giving effect to any amendment, amendment and
restatement or other
page 16
<PAGE> 20
modification to such Supplement (unless such amendment, amendment and
restatement or other modification has been consented to in writing by the
Required Series 1998-4 Certificateholders).
"Series 1998-4" is defined in the Preliminary Statement to this
Supplement.
"Series 1998-4 Certificateholders" means the Holders of the Series
1998-4 Certificates.
"Series 1998-4 Certificates" means any of the Investor Certificates
issued pursuant to this Supplement, each of which shall be substantially in the
form of Exhibit A.
"Servicing Fee" with respect to Series 1998-4 shall be calculated as
follows:
At any time when any AmeriServe Person is Servicer, the Servicing Fee
for any Distribution Period shall be equal to one-twelfth of the product of (a)
2%, multiplied by (b) the product of, as measured on the first Business Day of
that Distribution Period, (x) the aggregate Unpaid Balance of all Receivables
(other than Tricon Receivables), multiplied by (y) the Series Collection
Allocation Percentage as of the first day of such Distribution Period.
The Servicing Fee for a Successor Servicer that is not an AmeriServe
Person shall be an amount equal to the greater of (i) the amount calculated
pursuant to the preceding sentence and (ii) an alternative amount specified by
such Servicer not exceeding the sum of (x) 110% of the aggregate reasonable
costs and expenses incurred by such Servicer during such Distribution Period in
connection with the performance of its obligations under the Transaction
Documents, and (y) the other costs and expenses that are to be paid out of the
Servicing Fee, as described in the Pooling Agreement; provided that the amount
provided for in clause (x) shall not exceed one-twelfth of 2% of the aggregate
Unpaid Balance of the Receivables (other than Tricon Receivables) as measured on
the first Business Day of the Distribution Period and (ii) the allocation to
Series 1998-4 of amounts described in clauses (x) and (y) of this sentence shall
be based on the Series Collection Allocation Percentage for Series 1998-4 as of
the first day of such Distribution Period.
"Special Obligor" means any Obligor that may be designated as a
"Special Obligor" from time to time in writing by Transferor to the Trustee but
only with the written consent of the Agent, provided that the designation of any
Obligor as a Special Obligor shall not be effective unless (i) the Modification
Condition shall have been satisfied with respect to the designation of such
Special Obligor and (ii) the Required Series 1998-4 Certificateholders shall
have consented to the designation of such Special Obligor.
"Stated Amount" means as to any Series 1998-4 Certificate and any date
of determination, the maximum principal amount that may be required to be funded
as of such date by the Holder of such Series 1998-4 Certificate, as such amount
may be reduced pursuant to Section 2.3 of the Certificate Purchase Agreement. As
of the Closing Date, the Stated Amount of
page 17
<PAGE> 21
the initial Series 1998-4 Certificate held by the initial Series 1998-4
Certificateholder is set forth in Schedule I to the Certificate Purchase
Agreement.
"Targeted NER" means the sum of (a) the Required Receivables plus (b)
the Adjusted Carrying Cost Reserve.
"Tax Opinion" is defined in Section 4.9.
"Taxes" is defined in Section 4.6 of the Certificate Purchase
Agreement.
"Termination of Sale Notice Date" means the date on which a Termination
of Sale Notice is given pursuant to Section 8.1 of the Purchase Agreement.
"Tier-1 Obligor" means, subject to Section 8.5(b), any Obligor that (a)
has a short-term unsecured debt rating from each Rating Agency of at least
"A-1+" and "D-1+", if such Obligor's short-term unsecured debt is rated by such
Rating Agency, or (b) (x) has no short-term unsecured debt rating from any
Rating Agency and (y) has a long-term unsecured debt rating from each Rating
Agency of at least "AAA", if such Obligor's long-term unsecured debt is rated by
such Rating Agency.
"Tier-2 Obligor" means, subject to Section 8.5(b), any Obligor (other
than a Tier-1 Obligor) that (a) has a short-term unsecured debt rating from each
Rating Agency of at least "A-1" and "D-1", if such Obligor's short-term
unsecured debt is rated by such Rating Agency, or (b) (x) has no short-term
unsecured debt rating from any Rating Agency and (y) has a long-term unsecured
debt rating from each Rating Agency of at least "AA-", if such Obligor's
long-term unsecured debt is rated by such Rating Agency.
"Tier-3 Obligor" means, subject to Section 8.5(b), any Obligor (other
than a Tier-1 Obligor or a Tier-2 Obligor) that (a) has a short-term unsecured
debt rating from each Rating Agency of at least "A-2" and "D-2", if such
Obligor's short-term unsecured debt is rated by such Rating Agency, or (b) (x)
has no short-term unsecured debt rating from any Rating Agency and (y) has a
long-term unsecured debt rating from each Rating Agency of at least "A-", if
such Obligor's long-term unsecured debt is rated by such Rating Agency.
"Tier-4 Obligor" means, subject to Section 8.5(b), any Obligor (other
than a Tier-1 Obligor, a Tier-2 Obligor or a Tier-3 Obligor) that (a) has a
short-term unsecured debt rating from each Rating Agency of at least "A-3" or
"D-3", if such Obligor's short-term unsecured debt is rated by such Rating
Agency, or (b) (x) has no short-term unsecured debt rating from any Rating
Agency and (y) has a long-term unsecured debt rating from each Rating Agency of
at least "BBB-", if such Obligor's long-term unsecured debt is rated by such
Rating Agency.
"Tier-5 Obligor" means any Obligor other than a Tier-1 Obligor, a
Tier-2 Obligor, a Tier-3 Obligor or a Tier-4 Obligor.
page 18
<PAGE> 22
"Tranche" means each of the ABR Tranche, each CP Tranche and each
Eurodollar Tranche.
"Transferee" is defined in Section 10.3(d) of the Certificate Purchase
Agreement.
"Transferor Indemnified Losses" is defined in Section 7.2.
"Transferor Indemnified Party" is defined in Section 7.2.
"Transition Costs" is defined in Section 10.2(b) of the Pooling
Agreement.
"Turnover Days" means, at any time, the greater of (A) thirty (30) and
(B) the quotient of:
(x) (i) the sum of the Unpaid Balances of Receivables (other
than Tricon Receivables) as of the Cut-Off Date for each of the two
immediately preceding Calculation Periods divided by 2, multiplied by
(ii) 60; divided by
(y) the aggregate amount payable pursuant to invoices giving
rise to Receivables (other than Tricon Receivables) that were generated
during the immediately preceding two Calculation Periods.
"Unapplied Cash" means, on any Business Day, available funds (other
than Tricon Collections) received in the Master Collection Account and reflected
in the Daily Report for that Business Day that have not been applied as
Collections on a particular Receivable on or prior to the time as of which that
Daily Report is prepared.
"Unmatured Early Amortization Event" means an event or condition that,
upon the giving of notice or the passage of time, would become an Early
Amortization Event.
"Z-value" means 1.96.
SECTION 1.2 Incorporation of Terms. The terms of the Pooling Agreement
are incorporated in this Supplement as if set forth in full herein. As
supplemented by this Supplement, the Pooling Agreement is in all respects
ratified and confirmed and both together shall be read, taken and construed as
one and the same agreement. If the terms of this Supplement and the terms of the
Pooling Agreement conflict, the terms of this Supplement shall control with
respect to the Series 1998-4 Certificates.
ARTICLE II DESIGNATION
SECTION 2.1 Designation. There is hereby created a Series to be known
as the "Series 1998-4 Certificates" or the "Floating Rate Variable Funding
Certificates, Series 1998-4". Subject
page 19
<PAGE> 23
to the conditions set forth in Article III, Trustee shall authenticate and
deliver the Series 1998-4 Certificates to or upon the order of Transferor.
ARTICLE III CONDITIONS TO ISSUANCE; USE OF PROCEEDS
SECTION 3.1 Conditions to Issuance. Trustee shall not authenticate the
Series 1998-4 Certificates unless (i) all conditions to the issuance of the
Series 1998-4 Certificates under Section 6.10 of the Pooling Agreement shall
have been satisfied, (ii) Trustee shall have received a letter from AmeriServe
updating the letter previously delivered pursuant to the first sentence of
Section 5.1(o) of the Purchase Agreement, and (iii) AmeriServe shall have
delivered a certificate to Trustee to the effect that all conditions set forth
in Section 7.1 of the Certificate Purchase Agreement shall have been satisfied.
SECTION 3.2 Use of Proceeds. After giving effect to Section 2.1 of the
Certificate Purchase Agreement and to the Series 1997-1/Series 1998-2 Repayment
and Termination Agreement, the net proceeds from the issuance of the Series
1998-4 Certificates received by the Transferor shall be used for general
corporate purposes of Transferor.
ARTICLE IV PAYMENTS AND ALLOCATIONS
SECTION 4.1 Interest; Additional Amounts. (a) Subject to Section 4.1 of
the Certificate Purchase Agreement, Transferor may from time to time allocate
the Aggregate Invested Amount to the ABR Tranche and up to the number of
separate CP Tranches and Eurodollar Tranches specified in Section 4.1(b) of the
Certificate Purchase Agreement. Interest on each Tranche shall be due and
payable on each Distribution Date and shall be calculated on the actual
outstanding principal balances of the Series 1998-4 Certificates.
(b) Interest on a CP Tranche shall accrue during any Interest Period at
a rate per annum equal to the sum of (i) the CP Rate plus (ii) the Certificate
Spread, and shall be calculated on the basis of actual days over a year of 360
days. Interest on a Eurodollar Tranche shall accrue during any Interest Period
at a rate per annum equal to the sum of (i) the Reserve Adjusted Eurodollar
Rate, plus (ii) the Certificate Spread, and shall be calculated on the basis of
actual days over a year of 360 days. Interest on the ABR Tranche shall accrue at
a rate per annum equal to the sum of (i) the Alternate Base Rate in effect from
time to time plus (ii) the Certificate Spread, and shall be calculated on the
basis of actual days over a year of 365 or 366 days, as the case may be.
(c) [Reserved]
(d) Interest with respect to the Series 1998-4 Certificates due but not
paid on any Distribution Date shall be due on the next Distribution Date with
additional interest on the amount at 2% per annum above the Alternate Base Rate
to the extent permitted by law. To the extent permitted by law, interest also
shall accrue at the rate of 2% per annum above the Alternate Base Rate on any
other amounts due but not paid to the Agent, the Series 1998-4
Certificateholders,
page 20
<PAGE> 24
any Affected Party or any other Indemnitee pursuant to this Supplement or the
Pooling Agreement.
(e) Additional Amounts shall also be payable with respect to the Series
1998-4 Certificates as specified in the Certificate Purchase Agreement and,
except in the case of Section 7.1, to the extent (but only to the extent) that
funds become available for such Additional Amounts in accordance with this
Agreement.
SECTION 4.2 Daily Calculations and Series Allocations. On each Business
Day, Servicer shall calculate the Series Collection Allocation Percentage for
Series 1998-4, the Carrying Cost Cash Reserve Amount and the Base Amount. On
each Business Day which is not in an Early Amortization Period, Servicer shall
also determine whether the Net Invested Amount is greater than, equal to or less
than the Base Amount.
On each Business Day, Servicer shall allocate to Series 1998-4, the
Series Collection Allocation Percentage of available funds (other than available
funds constituting Tricon Collections) received in the Master Collection Account
since the preceding Business Day. The funds allocated to Series 1998-4 in
accordance with the preceding sentence, together with any funds released from
the Equalization Account in accordance with Section 4.5 on that Business Day,
are called the "Daily Series Collections".
SECTION 4.3 Allocations of Daily Series Collections (Other Than in an
Amortization Period). On each Business Day (other than a Business Day falling in
an Amortization Period) (a) Servicer shall allocate to Series 1998-4 (i) the
Daily Series Collections required to fund the items described in priorities
first through fourth below, in the priority indicated (and to the extent of
Daily Series Collections available), and (ii) the amount of funds then available
on account of a Distribution Shortfall (with respect to Series 1998-4) pursuant
to the Supplements for any other Series (other than Series 1998-1) to the extent
needed to fund the items described in priorities first and third below, in the
priority indicated, (b) Servicer shall indicate such allocation in the Daily
Report delivered on such Business Day, and (c) in accordance with such Daily
Report, Trustee shall remit or hold funds as follows:
first, to the Carrying Cost Account until the amount allocated
to the Carrying Cost Account equals an amount equal to the Current
Carrying Costs for the Distribution Period in which such Business Day
occurs;
second, if Transferor shall have notified Trustee (with a copy
to the Agent) in accordance with Section 3.1 of the Certificate
Purchase Agreement that it desires to reduce the Aggregate Invested
Amount, to the Principal Funding Account in an amount necessary to
cause the funds on deposit in the Principal Funding Account to equal
the amount of such reduction;
page 21
<PAGE> 25
third, if the Net Invested Amount is greater than the Base
Amount, to the Equalization Account in an amount sufficient to reduce
the Net Invested Amount to an amount equal to the Base Amount;
fourth, to move from the Master Collection Account, into a
separate administrative subaccount, the amount necessary to pay on the
next Distribution Date all amounts payable in respect of Additional
Amounts; and
fifth, if there is a Distribution Shortfall with respect to
any Series (other than Series 1998-1 and Series 1998-4) on such
Business Day, to Trustee, for distribution to the applicable accounts
or Persons specified in the Supplement with respect to such Series, the
lesser of (x) the amount of such Distribution Shortfall and (y) the
amount of funds available pursuant to this clause fifth, it being
understood that if the Distribution Shortfalls for all Series (other
than Series 1998-1 and Series 1998-4) exceed the amount of funds
available pursuant to this clause fifth, then such funds shall be
allocated to such Series pro rata based on their respective Series
Collection Allocation Percentages (as defined in the Supplements for
such Series).
On such Business Day, Servicer shall allocate the remainder of
the Daily Series Collections to Transferor.
If, on any day, the amount of Daily Series Collections that is then
allocated to the Carrying Cost Account is less than the amount of Daily Series
Collections that is then required to be allocated to the Carrying Cost Account,
Servicer shall reallocate such Daily Series Collections on such day first to the
Monthly Trustee Payment Amount and Transition Costs, if any, and then to one or
more of the obligations contemplated by priority first of the second preceding
sentence.
In addition, if, on any day, funds on deposit in the Master Collection
Account and available for allocation under priority fourth are less than the
amount of the obligations described therein, then the available Collections
shall be allocated by Servicer to the holders of such obligations pro rata
according to the respective amounts of such obligations held by them.
SECTION 4.4 Allocations of Daily Series Collections During an
Amortization Period. On each Business Day falling in an Amortization Period, (a)
Servicer shall allocate to Series 1998-4 (i) the Daily Series Collections and
(ii) the amount of funds then available on account of a Distribution Shortfall
(with respect to Series 1998-4) pursuant to the Supplements for any other Series
(other than Series 1998-1) for the following purposes, in the priority indicated
(and to the extent of Daily Series Collections and such other funds available),
(b) Servicer shall indicate such allocation in the Daily Report delivered on
such Business Day, and (c) in accordance with such Daily Report, Trustee shall
remit or hold funds as follows:
first, to the Carrying Cost Account to the extent that the
balance therein is less than the amount of Current Carrying Costs
(other than any Servicing Fee payable to any
page 22
<PAGE> 26
AmeriServe Person) payable on the Distribution Date relating to the
Calculation Period during which such Business Day falls;
second, to the Principal Funding Account, an amount equal to
the excess of the Daily Series Collections over the amount allocated on
that Business Day pursuant to priority first, provided that the
aggregate amount so deposited shall in no event exceed the Aggregate
Invested Amount for Series 1998-4;
third, to move from the Master Collection Account, into a
separate administrative subaccount, the amount necessary to pay on the
next Distribution Date all amounts payable in respect of Additional
Amounts;
fourth, to the Carrying Cost Account to the extent that the
balance therein is less than the amount of Current Carrying Costs
(including any Servicing Fee payable to any AmeriServe Person);
fifth, if there is a Distribution Shortfall with respect to
any Series (other than Series 1998-1 and Series 1998-4) on such
Business Day, to Trustee, for distribution to the applicable accounts
or Persons specified in the Supplement with respect to such Series, the
lesser of (x) the amount of such Distribution Shortfall and (y) the
amount of funds available pursuant to this clause fifth, it being
understood that if the Distribution Shortfalls for all Series (other
than Series 1998-1 and Series 1998-4) exceed the amount of funds
available pursuant to this clause fifth, then such funds shall be
allocated to such Series pro rata based on their respective Series
Collection Allocation Percentages; and
sixth, the balance to Transferor.
If, on any day, funds on deposit in the Master Collection Account and
available for allocation under priority third are less than the amount of the
obligations described therein, then the available Collections shall be allocated
by Servicer to the holders of such obligations pro rata according to the
respective amounts of such obligations held by them.
SECTION 4.5 Withdrawals from the Equalization Account.
(a) On any Business Day during the Revolving Period on which no Early
Amortization Event (or Unmatured Early Amortization Event) exists, Servicer may
instruct Trustee in writing to withdraw (and upon receipt of such instruction
Trustee shall withdraw) funds from the Equalization Account with respect to
Series 1998-4 and apply such funds as Daily Series Collections, so long as the
Net Invested Amount would not exceed the Base Amount after giving effect to such
transfer and application.
(b) On any Business Day falling on or after the delivery of a notice
pursuant to Section 3.1 of the Certificate Purchase Agreement (and before the
next Distribution Date),
page 23
<PAGE> 27
Servicer may instruct Trustee to transfer, and upon receipt of such instruction
Trustee shall transfer, the entire balance of the Equalization Account to the
Principal Funding Account.
(c) On the first day of the Amortization Period Servicer shall instruct
Trustee to transfer, and upon receipt of such instruction Trustee shall
transfer, the entire balance of the Equalization Account to the Principal
Funding Account.
SECTION 4.6 [Reserved]
SECTION 4.7 Write-Offs and Recoveries. The allocation of Write-Offs and
Dilutions referred to in Section 4.3(b) of the Pooling Agreement shall not apply
to Series 1998-4.
SECTION 4.8 [Reserved]
SECTION 4.9 Tax Opinion. If any "Tax Opinion" is required to be
delivered in connection with the Series 1998-4 Certificates, the term "Tax
Opinion" shall have the meaning specified below:
"Tax Opinion" means, with respect to any action, an Opinion of
Counsel to the effect that, for Federal income tax and applicable state
income and franchise tax purposes, (a) such action shall not adversely
affect the characterization of the Series 1998-4 Certificates as debt,
(b) following such action the Trust would not be treated as an
association (or publicly traded partnership) taxable as a corporation,
(c) such action would not be treated as a taxable event to any Series
1998-4 Investor Certificateholder or Certificate Owner.
ARTICLE V DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions. On each Distribution Date and (with respect
to clause sixth below) each Principal Payment Date, Trustee shall, in accordance
with instructions set out in the applicable Daily Report and to the extent funds
are available for such payment in the Carrying Cost Account (and, in the case of
clause sixth, in the Principal Funding Account, and in the case of clause
eighth, in the Master Collection Account), distribute such funds in the
following priority:
first, to itself, the Monthly Trustee Payment Amount;
second, to the Servicer, so long as the Servicer is not an
AmeriServe Person, the Servicing Fee for the preceding Distribution
Period and to any Successor Servicer, the amount of any Transition
Costs;
third, to the Series 1998-4 Certificateholders, accrued and
unpaid interest on each Tranche (other than amounts referred to in
clause fourth below);
page 24
<PAGE> 28
fourth, to the Series 1998-4 Certificateholders, any
additional interest payable pursuant to Section 4.1;
fifth, to the Series 1998-4 Certificateholders, an amount
equal to any Commitment Fee then payable in accordance with Section 4.2
of the Certificate Purchase Agreement;
sixth, (i) on each Principal Payment Date on which the
Aggregate Invested Amount is to be reduced pursuant to Section 3.1 of
the Certificate Purchase Agreement, all funds deposited in the
Principal Funding Account on or prior to the date on which the
applicable notice was delivered pursuant to such Section 3.1, subject
to compliance with such Section 3.1 (but in no event in excess of the
lesser of the Aggregate Invested Amount and the amount of such
reduction), shall be distributed to the Series 1998-4
Certificateholders in reduction of the Aggregate Invested Amount, and
(ii) on each Principal Payment Date falling in an Amortization Period
with respect to Series 1998-4, all funds on deposit in the Principal
Funding Account on such Principal Payment Date shall be distributed to
the Series 1998-4 Certificateholders in reduction of the Aggregate
Invested Amount;
seventh, if on any Principal Payment Date, the funds on
deposit in the Carrying Cost Account (less any Servicing Fee payable on
that day to any Person other than an AmeriServe Person) shall be equal
to or greater than the Aggregate Invested Amount (after giving effect
to the distribution required by clause sixth), then an amount equal to
such remaining Aggregate Invested Amount shall be withdrawn from the
Carrying Cost Account and distributed to the Series 1998-4
Certificateholders in reduction of the Aggregate Invested Amount;
eighth, to the Persons entitled thereto, any Additional
Amounts then payable to the extent that funds have been allocated for
those Additional Amounts pursuant to priority fourth of Section 4.3 or
priority third of Section 4.4;
ninth, to the Rating Agencies, any fees owing by Transferor or
Servicer to the Rating Agencies for rating or monitoring Series 1998-4;
tenth, to the Servicer (if the Servicer is an AmeriServe
Person), the Servicing Fee for the preceding Distribution Period; and
eleventh, the balance (if any) to the Transferor.
All amounts payable to any Series 1998-4 Certificateholder hereunder or
with respect to its Series 1998-4 Certificate shall be made by wire transfer of
immediately available funds in Dollars not later than 2:00 p.m., New York City
time, on the date due, to a bank account designated by such Series 1998-4
Certificateholder (or in the case of QCC, designated by the Agent) from time to
time to the Trustee, provided that such Holder notified the Trustee in writing
page 25
<PAGE> 29
as to such account at least five Business Days prior to such Distribution Date
(such notice to remain effective with respect to a Holder until different
instructions are received by the Trustee), and provided, further, that the
Trustee shall promptly notify the Servicer and the Transferor as to any such
designation or instructions. Any funds received after that 2:00 p.m. time shall
be deemed to have been received on the next Business Day. For purposes of
distributions to Series 1998-4 Certificateholders on a Distribution Date, the
status of a Person as a Series 1998-4 Certificateholder shall be determined as
of the preceding Record Date.
Notwithstanding any other provision of this Supplement, if any Person
other than a Holder shall be entitled to receive Additional Amounts, such Person
shall not be prejudiced in its ability to recover such Additional Amounts in
accordance with the terms of the Transaction Documents on account of references
in this Supplement to Additional Amounts being distributed to the Holders (it
being understood that Holders shall not retain Additional Amounts beyond those
to which such Holders are entitled).
SECTION 5.2 Payments in Respect of Transferor Certificate. On each day
on which funds are allocated for this purpose pursuant to Sections 4.3 and 4.4,
Trustee shall, in accordance with instructions set out in the applicable Daily
Report, distribute to Transferor all funds allocated for that purpose in
accordance with those Sections. In addition, upon termination of this Supplement
in accordance with Section 8.10, any additional funds on deposit in the Carrying
Cost Account, the Equalization Account or the Principal Funding Account shall
similarly be paid to Transferor in respect of the Transferor Certificate.
SECTION 5.3 Daily Reports and Monthly Reports. (a) Each Daily Report
and Monthly Report shall be substantially in the applicable form set out in
Exhibit B or C or in such other form as may be satisfactory to both Servicer and
the Agent and consistent with the terms of this Supplement and the Pooling
Agreement. Copies of each Monthly Report shall be provided free of charge on
each Report Date by the Servicer to the Holders of Series 1998-4 Certificates.
Each Daily Report shall report the required information for all outstanding
Series. In addition, such reports shall provide information with respect to (i)
accrued interest on each Tranche and (ii) the Commitment Fee Reserve Amount.
(b) Notwithstanding any other provision of this Supplement:
(i) In the event that a calculation or determination to be
made with respect to periods prior to the Closing Date refers to a
Daily Report or Monthly Report, such calculation or determination shall
be made even though Daily Reports and Monthly Reports were not required
to be delivered pursuant to this Supplement prior to the Closing Date.
By way of example, the "ADR" referred to in the definition of Dilution
Reserve Ratio shall be calculated for purposes of periods prior to the
Closing Date even though the definition of Dilution Ratio refers to a
calculation in a Monthly Report.
page 26
<PAGE> 30
(ii) Any calculation or determination which relates to a
Cut-Off Date and which is to be made with respect to periods or dates
prior to the Cut-Off Date occurring in September 1997 (with respect to
AmeriServe) or February 1998 (with respect to ProSource) shall be made
instead with respect to Unmodified End Dates relating to such periods
or dates. "Unmodified End Date" means the end of a fiscal month of a
Seller and, to the extent relevant, the end of "Periods" historically
used by PFS in connection with its servicing operations.
(iii) Servicer at all times shall use its best efforts to
estimate the items described in clause (b) of the definition of Net
Eligible Receivables; provided that the fact that Servicer is permitted
to make such estimates shall not limit the effect of any
indemnification or other provision in any Transaction Document.
This Section 5.3 shall not limit the obligation of Servicer to make the
allocations and calculations required by this Supplement on a daily basis.
SECTION 5.4 Annual Tax Information. During January (and on or before
January 31) of each calendar year, Servicer, on behalf of Trustee, shall furnish
or cause to be furnished to each Person who at any time during the preceding
calendar year was a Holder the information for the preceding calendar year, or
the applicable portion thereof during which the Person was a Holder, as is
required to be provided by an issuer of indebtedness under the Internal Revenue
Code to the holders of the issuer's indebtedness and such other customary
information as is necessary to enable such Holders to prepare their federal
income tax returns. Notwithstanding anything to the contrary contained in this
Agreement, Trustee shall, to the extent required by applicable law, from time to
time furnish to the appropriate Persons, at least five Business Days prior to
the end of the period required by applicable law, the information required to
complete a Form 1099-INT.
SECTION 5.5 Periodic Perfection Certificate. (a) During December (and
on or before December 31) of each calendar year, Servicer, on behalf of Trustee,
shall furnish or cause to be furnished to Trustee and the Agent an Officer's
Certificate setting forth a list of all changes in (i) the name, identity or
corporate structure of Transferor or any Seller and (ii) the chief executive
office of Transferor or any Seller (or in the place of business of Transferor or
any Seller that has only one place of business) that have taken place since the
date of the Officer's Certificate most recently delivered pursuant to this
Section 5.5, or indicating that no such events have taken place, and stating in
each case what filings of UCC financing statements, or amendments thereto,
relating to the Transaction Documents have been made in connection with each
such event (identifying the date and filing index numbers for each). Any
financing statement identified in such an Officer's Certificate delivered to
Trustee shall be deemed to have been identified to Trustee in writing for
purposes of subsection 11.1(c)(v) of the Pooling Agreement. If any such new UCC
financing statements are filed, Servicer shall cause Trustee to be named as
secured party (in the case of any filing against Transferor) or assignee of the
secured party (in the case of any filing against a Seller).
page 27
<PAGE> 31
(b) Notwithstanding the foregoing, if any "Default" or "Event of
Default" under (and as defined in) the AmeriServe Credit Agreement occurs,
Servicer shall deliver an Officer's Certificate covering the matters described
in clause (a) above to Trustee and Agent not later than 10 days after the
occurrence of such "Default" or "Event of Default" and for so long as any such
"Default" or "Event of Default" remains outstanding Servicer shall deliver such
an Officer's Certificate on the last Business Day falling in each of March,
June, September and December.
ARTICLE VI EARLY AMORTIZATION EVENTS
SECTION 6.1 Early Amortization Events. Each of the following shall
constitute an "Early Amortization Event":
(a)(i) failure of any interest, Commitment Fee or principal
payable to the Series 1998-4 Certificateholders on any date to be paid
to the Series 1998-4 Certificateholders on such date; or (ii) failure
on the part of Transferor or Servicer to make any deposit or any other
payment required by the terms of any Transaction Document on or before
one Business Day after the date such deposit or payment is required to
be made; or (iii) failure on the part of any Seller to duly observe or
perform Section 6.1(f), 6.1(h), 6.1(i), 6.1(j), 6.2, 6.3(a), 6.3(b),
6.3(c) or 6.3(e) of the Purchase Agreement or Transferor to duly
observe or perform Section 7.2(c), 7.2(d), 7.2(e), 7.2(f), 7.2(g),
7.2(h), 7.2(i), 7.2(j), 7.2(k), 7.2(m), 7.2(n), 7.2(q) or 7.2(r) of the
Pooling Agreement, which failure continues unremedied for a period of
five Business Days; or (iv) failure on the part of Transferor,
Servicer, any Seller or Guarantor duly to observe or perform any other
covenant or agreement set forth in any Transaction Document, which
failure continues unremedied for a period of 30 days; or (v) Guarantor
gives notice of termination of the Seller Guaranty (or otherwise
purports to disaffirm or contest the Seller Guaranty);
(b) any representation or warranty made by a Seller in Section
5.1(d), 5.1(k), 5.1(o) or 5.1(r) of the Purchase Agreement or by
Transferor in Section 2.3(a)(i), 2.3(a)(ii) or 7.1(i) of the Pooling
Agreement shall prove to have been incorrect in any material respect
when made, and continues to be incorrect in any material respect for a
period of five Business Days, or any other representation or warranty
made by Transferor, Servicer, any Seller or Guarantor in any
Transaction Document shall prove to have been incorrect in any material
respect when made, and continues to be incorrect in any material
respect for a period of 30 days; provided that a representation and
warranty with respect to a Receivable set forth in Section 5.1(k),
5.1(l) or 5.3(b) of the Purchase Agreement shall not constitute an
Early Amortization Event unless and until the applicable Seller has
failed to make the cash payments (if any) owed under Sections 3.1 and
3.5 of the Purchase Agreement in respect of such mistake or breach (it
being understood that certain of such mistakes or breaches may result
in a non-cash adjustment under the Purchase Agreement);
(c) a Bankruptcy Event shall occur with respect to Transferor,
Servicer, Guarantor or any Seller, or Transferor shall become unable,
for any reason, to transfer
page 28
<PAGE> 32
Receivables or other Transferred Assets to Trustee in accordance with
the provisions of this Supplement and the Pooling Agreement; provided
that if, at the time any event that would, with the passage of time,
become a Bankruptcy Event occurs as a result of a bankruptcy proceeding
being filed against Transferor or any Seller, then, on and after the
day on which the bankruptcy proceeding is filed until the earlier to
occur of the dismissal of the proceeding and the Early Amortization
Commencement Date, Transferor shall not purchase Receivables and
Related Assets from the affected Seller or, if Transferor is the
subject of the proceeding, transfer Receivables and Related Transferred
Assets to the Trustee;
(d) the Trust or Transferor shall become an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(e) the Net Invested Amount exceeds the Base Amount for a
period of two or more consecutive Business Days;
(f) a Servicer Default shall occur (whether or not
contemplated by clause (c) above or by any other language in this
Section 6.1), or AmeriServe shall resign, be removed or not be the
Servicer for any reason;
(g) AmeriServe shall cease to directly own 100% of the issued
and outstanding capital stock of Transferor;
(h) the Internal Revenue Service or the PBGC shall have filed
a notice of one or more Tax or ERISA Liens against the assets of
Transferor, any Seller or the Trust (including Receivables);
(i) the cessation of, or the failure to create, a valid
first-priority perfected ownership or security interest in favor of
Trustee in the Receivables or the rights of Transferor under the
Purchase Agreement;
(j) the Aggregate Invested Amount is not paid in full on the
Expected Revolving Period Termination Date;
(k) the Transferor Net Worth shall be less than the greater of
(i) 10% of the aggregate Unpaid Balance of the Receivables owned by the
Transferor and the Trust and (ii) $25,000,000, and in either case such
condition shall continue for more than five consecutive Business Days;
(l) any foreclosure or similar proceeding in respect of any
Adverse Claim on any Buyer Note or the Transferor's common stock shall
have been commenced; or title to any Buyer Note or Transferor's common
stock shall pass to the holders of such Adverse Claim, it being
understood that the grant of a security interest in the stock of
Transferor or
page 29
<PAGE> 33
any Buyer Note pursuant to the AmeriServe Credit Agreement to a
creditor of a Seller that is party to an Intercreditor Agreement shall
not be an Early Amortization Event;
(m) the Intercreditor Provisions shall be amended, waived,
modified or breached without (i) the prior written consent of the Agent
and (ii) satisfaction of the Modification Condition with respect
thereto;
(n) NEHC, AmeriServe, or any Subsidiary (other than a
Receivables Subsidiary) (i) fails to make any payment (including any
mandatory prepayment or redemption) in respect of any Indebtedness or
Contingent Obligation having an aggregate principal amount (including
undrawn committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit arrangement) of
more than $1,000,000 when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) or (ii) fails to perform
or observe any other condition or covenant, or any other event shall
occur or condition exist, under any agreement or instrument relating to
any such Indebtedness or Contingent Obligation, and, in the case of
each of clause (i) or clause (ii), as the case may be, such failure
continues after the applicable grace or notice period, if any,
specified in the relevant document on the date of such failure if the
effect of such failure, event or condition is to cause such
Indebtedness to be declared to be due and payable prior to its stated
maturity, or such Contingent Obligation to become payable or cash
collateral in respect thereof to be demanded (capitalized terms (other
than AmeriServe) used in this clause (n) shall have the meanings set
forth in the AmeriServe Credit Agreement);
(o) the Series 1998-4 Certificates shall cease to be rated by
either S&P or DCR for any reason;
(p) any of the Series 1998-3 Certificates (regardless of
whether Class A Term Certificates, Class B Term Certificates or Class C
Term Certificates) shall cease to be rated by either S&P or DCR for any
reason; or
(q) the Series 1998-1 Certificates shall cease to be rated by
either S&P or DCR for any reason.
SECTION 6.2 Early Amortization Period. Upon the occurrence and
continuance of any Early Amortization Event described in subsection 6.1(c), (d),
(e), (i), (j), or (k), an Early Amortization Period shall commence immediately
on the date of such occurrence without any notice or other action on the part of
any Person. Upon the occurrence and during the continuance of any other Early
Amortization Event, if so directed in writing by the Agent (acting on behalf of
Series 1998-4 Certificateholders), Trustee shall, by notice given in writing to
Transferor and Servicer as soon as possible after Trustee's receipt of such
written direction from the Agent (acting on behalf of Series 1998-4
Certificateholders), declare that an Early Amortization Period has commenced
(and the Early Amortization Period shall commence immediately as of the date
page 30
<PAGE> 34
Trustee sends such notice). On the date such notice is sent by Trustee, Trustee
shall provide the Agent with a copy of such notice in accordance with Section
10.7 of the Certificate Purchase Agreement.
ARTICLE VII OPTIONAL REDEMPTION; INDEMNITIES
SECTION 7.1 Optional Redemption of Investor Interests. On any
Distribution Date occurring during the Amortization Period with respect to the
Series 1998-4 Certificates on or after the date that the Aggregate Invested
Amount is reduced to ten percent (10%) or less of the Aggregate Invested Amount
as of the commencement of the Amortization Period, Transferor shall have the
option to redeem the Series 1998-4 Series Interest; provided that on or prior to
such Distribution Date, Transferor shall have furnished to Trustee, the Agent
and the Rating Agencies a legal opinion, in form and substance satisfactory to
Trustee, the Agent and the Rating Agencies, to the effect that the payment of
such redemption price does not constitute a fraudulent conveyance. The
redemption price shall be an amount equal to the sum of (a) the Aggregate
Invested Amount, plus (b) accrued and unpaid interest on the Series 1998-4
Certificates (and accrued and unpaid interest with respect to interest that was
due but not paid on any prior Distribution Date) through the day preceding such
Distribution Date in accordance with Section 4.1, plus (c) any Additional
Amounts then due. Upon the tender of the outstanding Series 1998-4 Certificates,
Trustee shall distribute such amounts, together with all funds on deposit in the
Principal Funding Account that are allocable to the Series 1998-4 Certificates,
to the Series 1998-4 Certificateholders on the next Distribution Date in
repayment of the principal amount and accrued and unpaid interest owing to the
Series 1998-4 Certificateholders. Following any redemption, the Series 1998-4
Certificateholders shall have no further rights with respect to the Receivables,
subject to Section 8.10. In the event that Transferor fails for any reason to
deposit such redemption price in the Principal Funding Account, payments shall
continue to be made to the Series 1998-4 Certificateholders in accordance with
the terms of the Pooling Agreement and this Supplement.
SECTION 7.2 Indemnification by Transferor. Transferor hereby agrees to
indemnify the Trust, Trustee, the Agent, each Holder of a Series 1998-4
Certificate and each of the successors, permitted transferees and assigns of any
such Person and all officers, directors, shareholders, controlling Persons,
employees, affiliates and agents of any of the foregoing (each of the foregoing
Persons (other than the Transferor) individually being called a "Transferor
Indemnified Party"), forthwith on demand, from and against any and all damages,
losses, claims (whether on account of settlements or otherwise, and whether or
not the relevant Transferor Indemnified Party is a party to any action or
proceeding that gives rise to any Transferor Indemnified Losses (as defined
below)), judgments, liabilities and related reasonable costs and expenses
(including reasonable Attorney Costs) (all of the foregoing collectively being
called "Transferor Indemnified Losses") awarded against or incurred by any of
them that arise out of or relate to this Agreement, any other Transaction
Document or any of the transactions contemplated herein or therein or the use of
proceeds herefrom or therefrom (including without limitation any Transferor
Indemnified
page 31
<PAGE> 35
Losses relating to any Adverse Claim, without regard to whether such Adverse
Claim was a Permitted Adverse Claim).
Notwithstanding the foregoing, in no event shall any Transferor
Indemnified Party be indemnified for any Transferor Indemnified Losses (i)
resulting from gross negligence or willful misconduct on the part of such
Transferor Indemnified Party (or the gross negligence or willful misconduct on
the part of any of its officers, directors, employees, affiliates or agents),
(ii) to the extent they include Transferor Indemnified Losses in respect of
Receivables and reimbursement therefor that would constitute credit recourse to
Transferor for the amount of any Receivable or Related Transferred Asset not
paid by the related Obligor, or (iii) to the extent they are or result from
taxes (including interest and penalties thereon) asserted with respect to (A)
distributions on the Series 1998-4 Certificates, (B) franchise or withholding
taxes imposed on any Transferor Indemnified Party other than the Trust or
Trustee in its capacity as Trustee, or (C) federal or other income taxes on or
measured by the net income of such Transferor Indemnified Party and costs and
expenses in defending against the same.
If for any reason the indemnification provided in this section is
unavailable to a Transferor Indemnified Party or is insufficient to hold a
Transferor Indemnified Party harmless, then Transferor shall contribute to the
amount paid by the Transferor Indemnified Party as a result of any loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the Transferor Indemnified Party on the one hand
and Transferor on the other hand, but also the relative fault (if any) of the
Transferor Indemnified Party and Transferor and any other relevant equitable
considerations.
Notwithstanding any provisions contained in any Transaction Document to
the contrary, Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section unless funds are allocated for such payment
pursuant to Article IV of this Supplement. Any amount which Transferor does not
pay pursuant to the operation of the preceding sentence shall not constitute a
claim (as defined in Section 101 of the Bankruptcy Code) against or corporate
obligation of Transferor for any such insufficiency.
SECTION 7.3 Indemnification by Servicer. Servicer agrees that each of
the Agent, each Holder of a Series 1998-4 Certificate and each other Transferor
Indemnified Party shall be an "Indemnified Party" for purposes of the Pooling
Agreement.
ARTICLE VIII MISCELLANEOUS
SECTION 8.1 Amendment, Waiver, Etc. (a) Neither this Supplement nor any
other Transaction Document shall be amended, modified or waived except in
accordance with Section 10.1 of the Certificate Purchase Agreement and, to the
extent applicable, Section 13.1 of the Pooling Agreement, and the terms of those
sections shall apply to any such amendment, modification or waiver.
page 32
<PAGE> 36
(b) No reference to the AmeriServe Credit Agreement in the Transaction
Documents shall include any amendments, amendments and restatements or other
modifications of the AmeriServe Credit Agreement unless the Pooling Agreement
and this Supplement, if applicable, have been amended to reflect the same, and
all references to the AmeriServe Credit Agreement in the Transaction Documents
shall survive termination of the AmeriServe Credit Agreement. Without limiting
the foregoing, any amendment of the Pooling Agreement contemplated by the
preceding sentence shall be subject to Section 10.1 of the Certificate Purchase
Agreement.
SECTION 8.2 Trustee. Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplement
or for or in respect of the recitals contained herein, all of which recitals are
made solely by Transferor and Servicer.
SECTION 8.3 Instructions in Writing. All instructions given by Servicer
to Trustee pursuant to this Supplement shall be in writing, and may be included
in a Daily Report or Monthly Report.
SECTION 8.4 Rule 144A. So long as any of the Series 1998-4 Certificates
are "restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, Transferor shall, unless it becomes subject to and complies with
the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, or rule 12g3-2(b) thereunder, provide to any Holder of such
restricted securities, or to any prospective purchaser of such restricted
securities designated by a Holder, upon the request of such Holder or
prospective purchaser, any information required to be provided by Rule
144A(d)(4) under the Securities Act.
SECTION 8.5 Supplemental Ratings Requirement. (a) So long as any of the
Series 1998-4 Certificates are outstanding, if any provision of the Purchase
Agreement, the Pooling Agreement, this Supplement or the Certificate Purchase
Agreement requires a Person or investment to have a certain rating from S&P, and
such Person or investment is also rated by DCR, then, unless the context
otherwise requires, such provision shall be read to also require a rating from
DCR that is equivalent to the required rating from S&P.
(b) With respect to the definitions of Tier-1 Obligor, Tier-2 Obligor,
Tier-3 Obligor, Tier-4 Obligor and Tier-5 Obligor (the "Tier Definitions"), if
an Obligor has no short-term or long-term unsecured debt rating from S&P, and
such Obligor does have a short-term or long-term unsecured debt rating from
Moody's, then: (x) Moody's shall be deemed to be a Rating Agency with respect to
such Obligor for purposes of the short-term and long-term unsecured debt ratings
set forth in the Tier Definitions, (y) (1) if the short-term unsecured
indebtedness of such Obligor is rated "P-1" by Moody's, then the short-term
unsecured debt rating category relating to S&P set forth in the Tier Definitions
shall be deemed to be not less than "A-1" by S&P, and (2) except as provided in
clause (1), any short-term or long-term unsecured debt rating category relating
to S&P set forth in the Tier Definitions shall be deemed to be a corresponding
rating from Moody's which is one subcategory below the applicable short-term or
long-term unsecured rating category relating to S&P, and (z) such Obligor shall
in no case be considered to be a Tier-1 Obligor.
page 33
<PAGE> 37
SECTION 8.6 Waiver. Each of Trustee, the Certificateholders and the
Certificate Owners agrees and acknowledges that Mayer, Brown & Platt represents
Bank of America and Affiliates of Bank of America in connection with the
Transaction Documents and waives any conflict of interest relating thereto.
Mayer, Brown & Platt is entitled to rely on this Section 8.6.
SECTION 8.7 Negotiations. This Supplement and the other Transaction
Documents are the result of negotiations among and have been reviewed by counsel
to the Transferor, the AmeriServe Persons and the other parties, and are the
products of all parties. Accordingly, they shall not be construed against the
Agent or the Series 1998-4 Certificateholders merely because of the Agent's or
the Series 1998-4 Certificateholders' involvement in their preparation.
SECTION 8.8 Transfers of Series 1998-4 Certificates. Section 6.3 of the
Pooling Agreement shall be subject to Section 10.3 of the Certificate Purchase
Agreement.
SECTION 8.9 Incorporation by Reference. Without limiting the effect of
other provisions of the Pooling Agreement that otherwise apply to Series 1998-4,
and without limiting the fact that this Supplement is a Transaction Document,
Sections 13.5, 13.6, 13.7, 13.9, 13.10, 13.11, 13.17 and 13.18 of the Pooling
Agreement are hereby incorporated into this Supplement by this reference, with
the references in such provisions to the Pooling Agreement or any other
Transaction Documents applying instead with equal force to this Supplement.
SECTION 8.10 Survival of Agreement. All covenants, agreements,
representations and warranties made herein and in the Series 1998-4 Certificates
delivered pursuant hereto shall survive the making and the repayment of
increases in the Aggregate Invested Amount and the execution and delivery of
this Supplement and the Series 1998-4 Certificates and shall continue in full
force and effect, and this Supplement shall not terminate, until the Aggregate
Invested Amount shall have been reduced to zero, all accrued interest thereon
shall have been paid in full, and all other obligations owed to the Agent or the
Series 1998-4 Certificateholders or otherwise in respect of the Series 1998-4
Certificates have been paid and performed in full (including all obligations
under this Supplement and under the Certificate Purchase Agreement) and all
commitments of the Series 1998-4 Certificateholders under the Certificate
Purchase Agreement have been terminated. In addition, this Section 8.10 and
Sections 7.2, 7.3, 8.6, 8.7, 8.8, 8.9 and 8.11 shall survive termination of this
Supplement.
SECTION 8.11 Agent. References in this Supplement to the Agent or to
the Agent acting on behalf of Series 1998-4 Certificateholders shall not be
deemed to amend or otherwise modify the Certificate Purchase Agreement.
SECTION 8.12 Lockbox Accounts. Notwithstanding Section 3.3(c)(iii) of
the Pooling Agreement, Transferor and Servicer shall not establish alternative
collection procedures contemplated by such Section 3.3(c)(iii).
page 34
<PAGE> 38
SECTION 8.13 Servicing in Florida. In addition to the provisions of
Section 8.6 of the Pooling Agreement, Servicer hereby agrees not to utilize any
Sub-Servicer (including ProSource) that would subject the Receivables or the
Trust to any intangibles tax under Florida law.
[SIGNATURES FOLLOW]
page 35
<PAGE> 39
IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
AMERISERVE FUNDING CORPORATION,
as Transferor
By:
Name:
Title:
AMERISERVE FOOD DISTRIBUTION, INC.,
as initial Servicer
By:
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Bruce C. Wandersee
Assistant Vice President
<PAGE> 40
EXHIBIT A
to the Series 1998-4 Supplement
FORM OF SERIES 1998-4 CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN CONTRAVENTION OF THAT
ACT. THIS CERTIFICATE SHALL BE NOT ACCEPTED FOR REGISTRATION OF TRANSFER EXCEPT
UPON PRESENTATION OF EVIDENCE SATISFACTORY TO THE REGISTRAR AND TRANSFER AGENT
THAT THE RESTRICTIONS ON TRANSFER SET FORTH IN THE POOLING AGREEMENT HAVE BEEN
COMPLIED WITH.
EACH SERIES 1998-4 CERTIFICATEHOLDER REPRESENTS AND WARRANTS FOR THE BENEFIT OF
AMERISERVE FUNDING CORPORATION THAT SUCH SERIES 1998-4 CERTIFICATEHOLDER IS NOT
AND SHALL NOT BECOME A PARTNERSHIP, SUBCHAPTER S CORPORATION OR GRANTOR TRUST
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. [IF THIS REPRESENTATION CANNOT BE
MADE, TRANSFEROR, SERVICER OR THE TRUSTEE MAY REQUIRE THE LEGEND TO CONTAIN
ADDITIONAL REPRESENTATIONS.]
AMERISERVE RECEIVABLES MASTER TRUST
FLOATING RATE VARIABLE FUNDING CERTIFICATE,
SERIES 1998-4
Maximum Principal Amount: $_______________
Certificate Number:
THIS CERTIFIES THAT _________________ is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in certain assets of
the AmeriServe Receivables Master Trust (the "Trust") that was created pursuant
to (a) the Pooling and Servicing Agreement, dated as of July 1, 1997 (as amended
and restated as of July 28, 1998, and as the same may be further amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Pooling Agreement"), among AMERISERVE FUNDING CORPORATION, a Delaware
corporation ("Transferor"), AMERISERVE FOOD DISTRIBUTION, INC., a Delaware
corporation ("Servicer"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as trustee (together with its successors and
assigns in such capacity, "Trustee") and (b) the Series 1998-4 Supplement dated
as of December 18, 1998 relating to the
<PAGE> 41
Series 1998-4 Certificates (as the same may be amended, amended and restated or
otherwise modified from time to time, the "Supplement"). This Certificate is one
of the duly authorized Series 1998-4 Certificates designated and issued under
the Pooling Agreement and the Supplement. Except as otherwise defined herein or
in the Supplement, terms defined in Appendix A to the Pooling Agreement have the
meanings which such Appendix A assigns to them. This Certificate is subject to
the terms, provisions and conditions of, and is entitled to the benefits
afforded by, the Pooling Agreement and the Supplement, to which terms,
provisions and conditions the Holder of this Certificate by virtue of the
acceptance hereof assents and by which the Holder is bound.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly authorized
signatory, this Certificate shall not entitle the Holder hereof to any benefit
under the Transaction Documents or be valid for any purpose.
This Certificate does not represent a recourse obligation of, or an
interest in, Transferor, any Seller, Servicer, Trustee or any Affiliate of any
of them.
By its acceptance of this Certificate, each Holder hereof (a)
acknowledges that it is the intent of Transferor, and agrees that it is the
intent of the Holder that, for Federal, state and local income and franchise tax
purposes and other taxes measured by or imposed on income, the Series 1998-4
Certificates (including this Certificate) shall be treated as evidence of
indebtedness secured by the Transferred Assets and the Trust not be
characterized as an association taxable as a corporation, (b) agrees to treat
this Certificate for Federal, state and local income and franchise tax purposes
and other taxes measured by or imposed on income as indebtedness and (c) agrees
that the provisions of the Transaction Documents shall be construed to further
these intentions of the parties.
This Certificate shall be construed in accordance with the laws of the
State of Delaware, without regard to its conflict of laws principles, and all
obligations, rights and remedies under or arising in connection with this
Certificate shall be determined in accordance with the laws of the State of
Delaware.
page 2
<PAGE> 42
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
AMERISERVE FUNDING CORPORATION
By:
Title:
<PAGE> 43
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series 1998-4 Certificates referred to in the
Pooling Agreement, as supplemented by the Supplement.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Title:
Dated:
<PAGE> 44
INCREASES AND DECREASES
<TABLE>
<CAPTION>
Amount of Increase Amount of Decrease Outstanding Stated
in Invested Amount in Invested Amount Invested Amount Amount
------------------ ------------------ --------------- ------
ABR CP Eurodollar ABR CP Eurodollar ABR CP Eurodollar
Tranche Tranche Tranche Tranche Tranche Tranche Tranche Tranche Tranche
- ------- ------- ---------- ------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 45
EXHIBIT B
to the Series 1998-4 Supplement
FORM OF DAILY REPORT
<PAGE> 46
EXHIBIT C
to the Series 1998-4 Supplement
FORM OF MONTHLY REPORT
<PAGE> 1
Exhibit 21
Subsidiaries of AmeriServe Food Distribution, Inc.
Name of Entity
Jurisdiction of
Name of Entity Organization
AmeriServe of Canada Ltd. Ontario
AmeriServe Funding Corporation Delaware
AmeriServe Transportation, Inc. Nebraska
Chicago Consolidated Corporation Illinois
Delta Transportation, Ltd. Wisconsin
Northland Transportation Services, Inc. Nebraska
PFS de Mexico, S.A. de C.V. Mexico
Servicios AmeriServe S.A. de C.V. Mexico
ASNC, Inc. Delaware
ProSource Investments, Inc. Delaware
ProSource Mexico Holdings, Inc. Delaware
PSC Services of Florida, Inc. Delaware
ProSource Distribution Services Limited Canada
PSD Transportation Services, Inc. Nevada
Vantix Logistics Ltd. Texas
NAVC Corp. Nevada
North American Vantix Corp. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> DEC-26-1998
<CASH> 37,646
<SECURITIES> 0
<RECEIVABLES> 55,402
<ALLOWANCES> 23,852
<INVENTORY> 292,255
<CURRENT-ASSETS> 584,098
<PP&E> 292,726
<DEPRECIATION> 57,300
<TOTAL-ASSETS> 1,935,812
<CURRENT-LIABILITIES> 892,637
<BONDS> 850,000
0
2,350
<COMMON> 82
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,935,812
<SALES> 7,420,951
<TOTAL-REVENUES> 7,420,951
<CGS> 6,740,926
<TOTAL-COSTS> 6,740,926
<OTHER-EXPENSES> 716,357
<LOSS-PROVISION> 4,746
<INTEREST-EXPENSE> 90,824
<INCOME-PRETAX> (150,727)
<INCOME-TAX> 1,563
<INCOME-CONTINUING> (152,290)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (152,290)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
FOR IMMEDIATE RELEASE
Contact: Stan Szlauderbach
VP, Investor Relations and Chief Accounting Officer
(972) 364-2238
AMERISERVE ANNOUNCES FOURTH QUARTER
AND FULL YEAR OPERATING RESULTS
DALLAS, March 24, 1999 - AmeriServe Food Distribution, Inc., the
nation's largest foodservice distributor specializing in chain restaurants,
today announced fourth quarter 1998 net sales of $2.4 billion, about even with
pro forma net sales in 1997. Fourth quarter EBITDA (as defined below) was $34.3
million in 1998 and $38.0 million on a pro forma basis in 1997. The sales
performance reflected growth in the existing customer base and the addition of
new business, offset by the previously disclosed discontinuance of the Wendy's
business in the third quarter of 1998. Adjusting for the discontinued business,
net sales would have increased by about $130 million or 5.3% over 1997.
For the 1998 year, pro forma net sales were $9.1 billion, an increase
of $173.4 million or 1.9% over 1997. Pro forma EBITDA was $149.4 million in
both 1998 and in 1997.
"We are very encouraged by the financial results for the year and the
strategic customer and restructuring activities we have completed," said John
V. Holten, AmeriServe's Chairman and Chief Executive Officer. "We now have over
75% of our business under long-term contracts. We have converted 50% of our
quick service business to the JDEdwards software platform and with our newly
constructed and reconfigured centers, 25% of the quick service business sales
volume has now been fully consolidated."
- more -
<PAGE> 2
-2-
"Consolidating the AmeriServe, PFS and ProSource operations will yield
significant operating efficiencies by increasing both the sales per
distribution center and the density of customers' restaurants within a center's
delivery range. We will also realize cost savings as we consolidate
administrative and other support processes. Despite an aggressive schedule, we
continue to hit the targets set in our restructuring plan, and we remain on
track to achieve a run rate of $100 million in annual cost savings beginning
mid-2000," Mr. Holten continued.
The following restructuring and other efficiency initiatives have been
completed to date:
o Seventeen distribution centers, including seven ProSource centers, have
been closed and the business transferred to new or existing facilities.
Another 20 closures are planned for the balance of 1999.
o Operations have commenced at three new state-of-the art distribution
centers in Orlando, FL, Denver, CO and Memphis, TN. The remaining four
additional new centers planned for completion in 1999 are under
construction and on schedule.
o Five centers have been expanded and/or reconfigured, and four of the
remaining five planned for completion in 1999 are in process and on
schedule.
o As a result of the above activities, centers that are complete with
respect to consolidation of business represent approximately 25% of quick
service net sales. Integration of delivery routes from these centers is
now in process.
o Twelve centers (of a final 21 planned) are operating with the new
JDEdwards integrated applications software platform, with the remaining
nine scheduled to be converted by the third quarter of 1999.
o Plans have been finalized for the integration of ProSource's casual
dining operations.
o Administrative support activities continue to be centralized at the new
Dallas headquarters facility, including information technology, product
supply and finance. The transfer of the majority of support activities
from the former ProSource headquarters is scheduled to be completed by
the first quarter of 2000.
- more -
<PAGE> 3
-3-
Commenting further on AmeriServe's accomplishments, Mr. Holten said,
"Concurrent with the restructuring activities, we have been working hard to
strengthen relationships with our customers. The new or revised contracts we
have secured not only help to ensure long-term partnerships, but also provide
incentives to boost efficiency and profitability for both parties. These
alliances reflect a commitment to work together to drive costs out of the
supply chain and improve service to our respective customers.
Key customer activities have included the following:
o In September 1998, the distribution agreement with Tricon was revised and
extended to January 2005, with an option to July 2007. Service to Tricon
under this agreement represents $1.7 billion in annual sales.
o During the second half of 1998, long-term (largely five-year)
distribution agreements were secured with a substantial majority of
franchisees in the Taco Bell system.
o In February 1999, a new replacement distribution agreement was entered
into with Arby's Cooperative Purchasing. The contract, which expires
December 2003, covers a substantial majority of restaurants in the Arby's
system and represents $400 million in annual sales.
o Of our Burger King customer base, almost 80% is now under long-term
contracts.
o As a result of the above actions, 75% of AmeriServe's total business is
under long-term contracts compared to 45% in mid-1997. About 70% of
AmeriServe's total business is currently under contracts with three or
more years of remaining term.
o In conjunction with the above actions, AmeriServe now has about 70% of
its total business under fixed-fee per case pricing as opposed to
percentage mark-up (over cost) pricing. This compares to 25% in mid-1997.
This change more closely aligns AmeriServe's profitability to its ability
to control distribution costs, and insulates the Company from product
cost and mix variability.
o In the course of revising or entering into new contracts, AmeriServe in
cooperation with customers has identified supply chain efficiency
opportunities benefiting both parties. These include reduced deliveries
per week, after-hours delivery, electronic ordering and increasing the
time from order to delivery. Also, AmeriServe provides value-added
services to customers such as consolidating purchases of low volume
- more -
<PAGE> 4
-4-
items to reduce the cost of these products, and management of freight
costs in transporting products from vendors to AmeriServe centers, which
reduces the freight component of product costs.
"Looking ahead, 1999 will be another year of intense restructuring
activity, but we are energized by the successes to date. With the ramping-up of
network efficiencies and other profitability enhancing initiatives in the third
and fourth quarters of 1999, EBITDA growth for the year is expected to
approximate 10-15% over 1998. Sales growth should approximate 2%. As the
Company implements the value-added services described above, gross margin for
the year should approximate 9.0%. As we anticipate the turn of the century, we
believe the strategies we have put into motion will allow us to strengthen our
leadership position and participate fully in the exciting growth prospects for
the chain restaurant industry," concluded Mr. Holten.
The pro forma results presented in this announcement represent the total
combined historical operating results of AmeriServe, the PFS Division of
PepsiCo, Inc. (acquired effective June 1997) and ProSource, Inc. (acquired May
1998) for all periods discussed as if the acquisitions had occurred at the
beginning of fiscal 1997. Actual results reported on Forms 10-Q and 10-K filed
with the Securities and Exchange Commission include the results of the acquired
businesses only from their respective acquisition dates as required by the
purchase method of accounting.
EBITDA as discussed in this announcement excludes the impact of
restructuring costs associated with the consolidation and integration of the
acquired businesses, management fees assessed by an affiliated company and
certain operating cost inefficiencies.
- more -
<PAGE> 5
-5-
AmeriServe, headquartered in Dallas, employs approximately 8,000
people. It serves approximately 36,000 quick-service and casual dining
restaurants in the United States, Canada and Mexico, including Applebee's,
Arby's, Burger King, Chick-fil-A, Chili's, Dairy Queen, KFC, Lone Star
Steakhouse, Long John Silver's, Olive Garden, Pizza Hut, Red Lobster, Sonic,
Taco Bell, TCBY and TGI Friday's. AmeriServe is a subsidiary of Holberg
Industries, Inc., a diversified service company located in Greenwich, CT., with
1998 pro forma sales of more than $10 billion and 20,000 employees.
AmeriServe's 1998 Annual Report on Form 10-K to be filed on March 25,
1999 will be available on the Internet at www.sec.gov. If you wish to receive a
printed copy of the 10-K, please call (972) 364-2238. More information about
AmeriServe is available at www.ameriserve.com.
This press release contains certain forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934 and Section
27A of the Securities Act of 1933. Actual results could differ materially from
those projected in such forward-looking statements. Readers are cautioned not
to place undue reliance on the forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to update these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence or nonoccurrence of anticipated events.
Certain factors that could cause actual results to differ materially from
projected results can be found in the Management's Discussion and Analysis
section in the Company's 1998 Annual Report on Form 10-K, as well as other
documents referenced to therein.
- more -
<PAGE> 6
AmeriServe Food Distribution, Inc.
Results of Operations on a Pro Forma Basis
(in millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
-------------------------------------------- ---------------------------------------------
December 26, December 27, December 26, December 27,
1998 % 1997 % 1998 % 1997 %
------------ ----- ------------ ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......................... $2,433.6 100.0 $2,440.1 100.0 $9,081.0 100.0 $8,907.6 100.0
Cost of goods sold................. 2,223.4(b) 91.4 2,217.2 90.9 8,269.6(b) 91.1 8,093.4 90.9
-------- ----- -------- ----- -------- ----- -------- -----
Gross profit....................... 210.2 8.6 222.9 9.1 811.4 8.9 814.2 9.1
Distribution, selling and
administrative expenses........ 184.3 7.6 190.7 7.8 684.9 7.5 675.2 7.6
-------- ----- -------- ----- -------- ----- -------- -----
Operating income before
depreciation, amortization
and restructuring and other
unusual costs.................. 25.9 1.1 32.2 1.3 126.5 1.4 139.0 1.6
Cost inefficiencies (a) and
management fees to Holberg..... 8.4 5.8 22.9 10.4
-------- -------- -------- --------
EBITDA as reported................. $ 34.3 1.4 $ 38.0 1.6 $ 149.4 1.6 $ 149.4 1.7
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
(a) Cost inefficiencies represent management's estimate of operating cost
reductions that could be achieved within the distribution networks of
AmeriServe (pre-acquisitions) and ProSource, even before savings from the
integration of the AmeriServe, PFS and ProSource networks. No amounts
were estimated for ProSource for the periods prior to its acquisition,
and no amounts were estimated for the PFS network as it was assumed to be
reasonably efficient.
(b) Includes $4.0 million in unusual, one-time charges.
